Remittances: Background and Issues for the 118th Congress

Remittances: Background and Issues for the
May 10, 2023
118th Congress
Martin A. Weiss
This report focuses on remittances, the transfers of money and capital sent by migrants and
Specialist in International
foreign immigrant communities to their home countries. At over $626 billion annually,
Trade and Finance
remittances sent home by international migrants to developing countries are larger than official

development assistance (ODA) and more stable than private capital flows to these countries. The
Andrew P. Scott
United States is the destination for the most international migrants and, according to the
Analyst in Financial
International Monetary Fund and World Bank, the largest global source of remittances, sending
Economics
$72.7 billion in 2021.

As remittances have grown, banks, traditional money transfer companies, and entrepreneurs have

responded to increased demand by increasing the remittance channels available to migrants; these
now include mobile, Internet, and card-based options.
The rise in the importance of remittances to global capital flows has also led to greater interest from Congress and other
policymakers. Key remittance issues for Congress include:
Costs associated with Remittances: In recent Congresses, Members have sought legislative efforts to reduce the cost of
remittance services. A number of factors affect the transfer fee charged, including the regulatory and administrative costs, the
volume sent, the transfer mechanism, the receiving country’s financial infrastructure, and the level of market competition (in
both the sending and receiving country). In addition, the exchange rate used in the transaction can significantly affect the
amount actually delivered to the recipient.
Regulation of Remittances. Members may want to review the regulatory landscape for remittance providers. Effective
regulation of remittances can help reduce corruption, enhance transparency, and facilitate a more robust business
environment. At the same time, additional regulatory requirements, such as consumer protection requirements included in the
Dodd-Frank Wall Street Consumer Protection Act, may raise concerns about the compliance costs for remittance providers
and consumers. Congress may also want to consider whether current federal and state regulation are appropriate for new and
emerging payment methods such as mobile and digital payment options, which are starting to capture part of the remittance
market. Members may also want to review recent efforts to improve foreign regulatory and supervisory mechanisms.
Remittances are often sent to recipients in developing countries with weak regulatory systems, increasing the risk of money
laundering and possible financing of terrorism.
Remittances and Cryptocurrency. Cryptocurrencies are a relatively new technology-based payment tool that can facilitate
cross-border transactions without the need for banks and centralized intermediaries. To the extent money transmitters,
particularly large ones such as PayPal that offer peer-to-peer (P2P) digital options for sending remittances, find ways to
facilitate cryptocurrency transactions, the role of cryptocurrencies in remittance markets has the potential to grow. Given this
growth, Congress may examine what role cryptocurrencies will play in remittance markets in the future, and consider
whether the existing financial regulatory framework is sufficiently authorized to manage the risks of using cryptocurrency in
light of other more traditional financial services, such as banking or money transmitters.

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Contents
Overview of the Global and U.S. Remittance Market ..................................................................... 1
Key Institutions in the Domestic Market .................................................................................. 2
Money Service Businesses (MSBs) .................................................................................... 3
Traditional Depository Institutions ..................................................................................... 4
U.S. Remittance Flows .............................................................................................................. 5
Regulation of Remittances .............................................................................................................. 5
U.S. Anti-Money Laundering/Combating the Financing of Terrorism Efforts ................... 6
Federal Consumer Protection Provisions ............................................................................ 6
ACH and FedGlobal Services ............................................................................................. 7
International Standards and Principles ...................................................................................... 8
Issues for Congress .......................................................................................................................... 8
Costs Associated with Remittances ........................................................................................... 9
Regulatory Issues and De-Risking .......................................................................................... 10
Remittances and Cryptocurrencies .......................................................................................... 12

Figures
Figure 1. Remittances, Foreign Direct Investment, and Official Development Assistance
Flows to Low- and Middle-Income Countries ............................................................................. 2
Figure 2. Overview of Remittance Channels................................................................................... 3
Figure 3. Estimated Remittances from the United States (2021) .................................................... 5
Figure 4. Global Cost of Sending $200 ........................................................................................... 9
Figure 5. Total Average Cost of Sending Remittances by Traditional and Digital Money
Transfer Operators (MTOs) ........................................................................................................ 10

Contacts
Author Information ........................................................................................................................ 14

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Remittances: Background and Issues for Congress

Overview of the Global and U.S. Remittance Market
Remittances are a prominent type of cross-border financial transfer.1 Often these payments are
made between migrant families. The United States has more immigrants than any other country in
the world: immigrants account for 14.1% of the U.S. population and are the largest global source
of remittances.2
Remittance transactions typically involve a sender from one country, a recipient in another
country, financial intermediaries in both countries, and a payment system used by the
intermediaries. The financial institutions involved in the $540 billion remittances market can be
banks or credit unions,3 but they are often money transmitters, such as MoneyGram, Western
Union, or PayPal.
Remittances have increased steadily over the past three decades and are the largest source of
external finance for low- and middle-income countries (Figure 1), exceeding foreign direct
investment (FDI), portfolio investment, and official development assistance (ODA).4 In 2022,
remittances to low- and middle-income countries are estimated at $626 billion, an increase from
$597 billion in 2021 levels and up from about $75 billion in 1990. The World Bank notes that in
2022, India was the largest remittance-receiving country ($100 billion), followed by Mexico ($60
billion), China ($51 billion) and the Philippines ($38 billion).
The World Bank had expected the combined impact of travel bans and the Coronavirus Disease
2019-related global economic downturn to have a much larger negative impact on remittance
flows; however, recent research found that an impact of the pandemic’s border closures shifted
remittances from informal to formal channels.5
Official remittance figures do not include informal remittance flows (discussed in the next
section). Estimates of informal remittance flows vary greatly, from between 50% and 250% of
total remittance flows.6 The dramatic rise in the importance of remittances to global capital flows
has also led to greater interest from Congress and other policymakers. Members may want to
review the regulatory landscape for remittance providers. Effective regulation of remittances can
help reduce corruption, enhance transparency, and facilitate a more robust business environment.
At the same time, additional regulatory requirements, such as consumer protection requirements
included in the Dodd-Frank Wall Street Consumer Protection Act, or new regulation on digital
remittances may raise concerns about the compliance costs for remittance providers and
consumers. Congress may also want to consider whether current federal and state regulation are

1 The term “remittance” can be used in a few different contexts. Generally, a remittance is money sent somewhere to
pay for something. This report discusses a type of remittance that consists of cross-border payments, where money is
sent by someone in a country to someone outside that country.
2 Miriam Jordan and Robert Gebeloff, “Amid Slowdown, Immigration Is Driving U.S. Population Growth,” New
York Times
, February 5, 2022. : World Bank, Migration and Development Brief 37, Figure 1.1b, November 2022,
https://www.knomad.org/sites/default/files/publication-doc/migration_and_development_brief_37_nov_2022.pdf.
3 World Bank, “Low- and Middle-Income Countries Received $540 billion in 2020, $8 Billion Less Than in 2019,”
May 12, 2021, at https://www.worldbank.org/en/news/press-release/2021/05/12/defying-predictions-remittance-flows-
remain-strong-during-covid-19-crisis.
4 For 2021, low- and middle-income countries include those with a gross national income per capita below $12,695,
https://blogs.worldbank.org/opendata/new-world-bank-country-classifications-income-level-2021-2022.
5 5 Kangni Kpodar et al., “Defying the Odds: Remittances During the COVID-19 Pandemic,” International Monetary
Fund Working Paper 21/186, July 2021, https://www.imf.org/-
/media/Files/Publications/WP/2021/English/wpiea2021186-print-pdf.ashx.
6 Ibid.
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Remittances: Background and Issues for Congress

appropriate for new and emerging payment methods such as mobile and digital payment options.
Members may also want to review recent efforts to improve foreign regulatory and supervisory
mechanisms. Remittances are often sent to recipients in developing countries with weak
regulatory systems, increasing the risk of money laundering and possible financing of terrorism.
Figure 1. Remittances, Foreign Direct Investment, and Official Development
Assistance Flows to Low- and Middle-Income Countries

Source: World Bank, Migration and Development Brief 37, Figure 1.1b, November 2022,
https://www.knomad.org/sites/default/files/publication-doc/migration_and_development_brief_37_nov_2022.pdf.
Note: (e): estimated; (f): forecast; (FDI): Foreign Direct Investment; (ODA): Official Development Assistance.
Key Institutions in the Domestic Market
Migrants/customers can send remittances through informal or formal channels (Figure 2).7
Analysts have labeled the informal channels with various terms, including “alternative remittance
systems,” “underground banks,” and “informal value transfer systems.” These services are less
expensive than formal banking or money-transfer arrangements and can reach countries where
there is no formal banking sector, in some cases even arranging for hand delivery of the cash. The
most well-known is hawala (hawala means “transfer” in Arabic), which originated in India and
has been in use in South Asia and the Middle East for several hundred years.8 While most
remittance customers use these arrangements for legitimate purposes, these systems’ lack of
documentation and their anonymity and informality can make them attractive for money
laundering, terrorist financing, or other illegal purposes.

7 International Transactions in Remittances: Guide for Compilers and Users. Washington, DC: International Monetary
Fund, 2009, at https://www.imf.org/external/np/sta/bop/2008/rcg/pdf/guide.pdf.
8 Often regionally based, alternative remittance systems date back hundreds of years and were originally used to
finance trade in regions where traveling with gold or other forms of payment was not safe. These systems go by various
names including Hue (Vietnam), Fei-Ch’ien (China) Phei Kwan (Thailand) Hundi (South Asia), or Hui Kuan (Hong
Kong).
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Formal channels involve intermediaries that are officially licensed to operate money-transfer
businesses. These formal channels consist of banks, nonbank financial institutions (including post
offices), and money service businesses such as Western Union or MoneyGram. Increased use of
technology in developing countries has also facilitated the use of mobile-phone-based and other
electronic payment methods (such as PayPal), through both formal and informal mechanisms.
Figure 2. Overview of Remittance Channels

Source: International Transactions in Remittances: Guide for Compilers and Users, International Monetary Fund,
2009.
Notes: Not all transactions sent through these channels are remittances.
Money Service Businesses (MSBs)
The U.S. foreign remittance market is dominated by MSBs, a category of nonbank financial
institutions that generally own proprietary, so-called “closed-loop” payment systems, and operate
largely outside of conventional banks.9 A reason remittance customers may use MSBs is that the
customers are often “unbanked”; that is, they do not have an account with a depository financial
institution. MSBs issue money orders and traveler’s checks, transmit money, cash checks,
exchange currency, and store value.10 MSBs cover a broad variety of enterprises ranging from
small and simple operations to large firms. MSBs typically are private enterprises.11
Money Transmitters
One of the more common types of MSBs in the United States is called a money transmitter.
Americans use money transmitters to pay bills, purchase items online, or send funds to family
members and friends domestically and abroad. Although some prominent companies, such as
Western Union, MoneyGram, and PayPal, belong to this group of financial institutions, thousands
of money transmitters in the United States operate in the background of financial services.
Traditional money transmitters like Western Union and MoneyGram are often located in a wide

9 For example, a remittance-sender goes to a Western Union (a type of money service business called a money
transmitter) agent in Chicago to send money to her uncle in Brazil, who collects the funds from one of the more than
10,000 Western Union agents in Brazil. Since there are Western Union agents on both ends of the transaction, the
transaction occurs outside the conventional banking system.
10 Stored value is funds or monetary value represented in digital electronic format and stored or capable of storage on
electronic media in such a way as to be retrievable and transferable electronically, such as a prepaid Visa gift card.
11 Within the context of remittances, the U.S. Postal Service also acts as an MSB, because it issues money orders.
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variety of other businesses, including supermarkets, check cashing agents, gas stations, liquor
stores, convenience stores, and currency exchange offices. Hence, money transmission services
may be an ancillary service: the remittance customer may be able to cash a paycheck, send money
to family in their home country, and shop for groceries at the same location. Alternatively, many
peer-to-peer (P2P) platforms, such as PayPal and Venmo, operate through mobile apps and web
browsers, and so are not ancillary to another business sharing a physical location. While
remittances traditionally have been channeled through brick-and-mortar MSBs, the advent of
mobile apps and cryptocurrencies has facilitated a new channel for remittance flows.
Traditional Depository Institutions
Small amount remittance transactions are not a service banks and credit unions traditionally
provide. More often, those institutions transfer fewer remittances with larger, average dollar value
than money-services businesses.12 International money-transfer services provided by banks are
marketed primarily to corporate clients who send larger amounts than a typical migrant remitter.
One constraint for bank provision of remittances is the underdeveloped financial systems in many
of the largest remittance-receiving countries. Since many recipients lack a bank account, they
may prefer to collect remittance money in cash. International wire transfer, however, is only an
option when both the sender and receiver have access to deposit accounts at depository
institutions. Unlike the “closed loop” payment system used by MSBs, banks and credit unions
generally use “open loop” payment systems, such as wire-transfer systems and correspondent
banking channels. Because MSBs often act through retail store locations such as grocery stores,
they tend to have more extensive distribution networks in their countries of operation than
traditional depositories do.
As consumer demand for remittances has grown over the past two decades, banks and credit
unions have shown a greater interest in providing remittance services directly to consumers.
Remittance services can be a way to bring low-income migrants into the financial mainstream and
introduce them to other financial products and services, such as interest-bearing savings accounts,
checking accounts for paying bills, free and secure check cashing services, and small-dollar loans,
among other services. Further, a credit union network for international money transfers called the
World Council of Credit Unions’ International Remittance Network has facilitated credit union
participation.
U.S. depository institutions have the option of using the Automated Clearing House (ACH)
payments system, which can batch and process financial transfers at a lower price than traditional
international wire transfers. (The Federal Reserve is one of two ACH payment system
operators—this is discussed in more detail in the Regulation of Remittances section below.)
Participation in the remittance market by banks and credit unions, while growing, is still limited.
The Federal Reserve does not collect precise statistics on remittance transfers, but the latest
available data from the Federal Reserve suggest that in 2018, the two U.S. ACH operators
handled a total of 22.9 billion ACH transactions, of which 83.8 million (less than 1%) were
international ACH transactions.13

12 Consumer Financial Protection Bureau, Remittance Rule Assessment Report, pp. 63-64, October 2018, at
https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/bcfp_remittance-rule-assessment_report.pdf.
13 Board of Governors of the Federal Reserve System, Report to the Congress on the Use of the ACH System and Other
Payment Mechanisms for Remittance Transfers to Foreign Countries,
May 2019, at
https://www.federalreserve.gov/publications/2019-may-ach-report-other-payment-mechanisms.htm.
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U.S. Remittance Flows
The primary source for international remittances data is the International Monetary Fund (IMF),
which compiles statistics submitted by its member countries. Using IMF statistics, the World
Bank publishes migration and remittances data on a dedicated website.14
The IMF, World Bank, and the U.S. government do not compile and publish remittance flows
from the United States (or other countries) to individual countries or regions. The World Bank
estimates bilateral remittance flows between its member countries based on migration figures and
historical trends.15 Figure 3 presents the World Bank’s most recent estimates for the largest
recipients of remittances from the United States. The United States is consistently the largest
sending jurisdiction, accounting for 26% of all remittances sent in 2021. Mexico is by far the
largest recipient of remittances from the United States.
Figure 3. Estimated Remittances from the United States (2021)

Source: World Bank Bilateral Remittance Database.
Regulation of Remittances
As stated above, remittances can be made through different types of financial institutions, and
these institutions are subject to different regulatory frameworks. In the United States, the
operations of banks and credit unions are closely regulated and supervised at both the state and
federal level. Foreign bank branches and agencies operating in the United States are also
governed by a combination of state and federal statutes, the provisions of which include licensing
requirements and permissible activities. State regulators also oversee other types of financial

14 https://www.knomad.org/data/remittances.
15 The World Bank’s bilateral remittances matrices are available at https://www.knomad.org/data/remittances. The
World Bank uses two datasets to construct the Bilateral Remittance Matrix. The first is UN Population Division
estimates of migrant stock by country of origin and destination, also used by this tool. The second dataset is remittance
inflows data, constructed as the sum of three components in the IMF’s Balance of Payments Statistics: (i) compensation
of employees, (ii) workers’ remittances, and (iii) migrants’ transfers. A country’s total remittance inflows in a given
year are allocated to its emigrant stocks, adjusting for the migrant sending and receiving countries’ per capita income.
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companies like MSBs.16 Regulatory efforts at the state level focus primarily on licensing and
consumer protection. Currently, 49 states have legal frameworks for MSBs.17
Though the various financial institutions are subject to different frameworks, the primary focus of
federal remittance regulation is generally on anti-money laundering (AML) and combating the
financing of terrorism (CFT). In addition, the Consumer Financial Protection Bureau (CFPB)
promulgates certain consumer protection rules implementing provisions set forth in Section 1073
of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank, P.L. 111-203),
which have included cross-border payments regulations.18 Additionally, the Federal Reserve
operates a major payments network over which banks can process remittances. These efforts are
discussed in the following sections.
U.S. Anti-Money Laundering/Combating the Financing of Terrorism Efforts
In the United States, remittance providers (including banks and MSBs), are required to take
certain steps to identify, assess, design, and implement controls to comply with their obligations
under the Bank Secrecy Act (BSA, P.L. 91-508). The BSA is the primary AML law in the United
States.19 Congress has amended the BSA a number of times, most notably by Title III of the USA
PATRIOT Act (P.L. 107-56) in 2001, which expanded the BSA framework beyond AML to also
fight terrorist financing. The BSA requires financial institutions to maintain appropriate records
and file reports that can be used in criminal, tax, or regulatory investigations or proceedings. The
Treasury Department’s Financial Crimes Enforcement Network (FinCEN) administers the BSA.20
With limited exceptions, MSBs are subject to the full range of BSA regulatory controls, including
requirements for maintaining financial records, conducting customer identification procedures, in
particular for larger transfers, and filing reports for large or suspicious transactions.21
Remittances to certain foreign countries may also be subject to sanctions under various federal
statutes administered by the Treasury Department’s Office of Foreign Assets Control (OFAC).
The U.S. government restricts remittances to countries, individuals, or companies that are subject
to U.S. sanctions and embargoes.
Federal Consumer Protection Provisions
Section 1073 of the Dodd-Frank Act amended the Electronic Fund Transfer Act (EFTA, P.L. 95-
630) to create a consumer protection regime for remittance transfers sent by consumers in the

16 For more on the regulation of MSBs, see CRS Report R46486, Telegraphs, Steamships, and Virtual Currency: An
Analysis of Money Transmitter Regulation
, by Andrew P. Scott.
17 According to the CSBS, Montana is the sole state without an MSB legal framework. For more, see CSBS, “Chapter
Four: Overview of Money Services Business,” 2019, p. 4, at https://www.csbs.org/system/files/2020-
08/Chapter%204%20-%20MSB%20Final%20FINAL.pdf.
18 For example, see Remittances: Access, Transparency, and Market Efficiency: A Progress Report, hearing, House
Committee on Financial Services, Subcommittee on Domestic and International Monetary Policy, Trade, and
Technology, 110th Congress, May 17, 2007; and Remittances: Regulation and Disclosure in a New Economic
Environment
, hearing, House Committee on Financial Services, Subcommittee on Financial Institutions and Consumer
Credit, 111th Congress, June 3, 2009.
19 Office of the Comptroller of the Currency, “Bank Secrecy Act (BSA) & Related Regulations,” accessed January 15,
2020, at https://www.occ.treas.gov/topics/supervision-and-examination/bsa/bsa-related-regulations/index-bsa-and-
related-regulations.html.
20 For more on FinCEN, see https://www.fincen.gov/resources/statutes-regulations/fincens-mandate-congress.
21 U.S. Department of the Treasury, Report to Congress in Accordance with Section 359 of the USA PATRIOT Act,
November 2002, p. 8, at https://www.fincen.gov/sites/default/files/shared/hawalarptfinal11222002.pdf.
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United States to individuals and businesses abroad. In 2012 and 2013, the CFPB implemented
Section 1073 through its Remittance Transfer Rule.
The rule requires companies that offer remittances to provide consistent, reliable disclosure of the
price of a transfer, the amount of currency to be delivered to the recipient, and the date of
availability prior to the consumer making any payment. The rule also aims to increase consumer
protections by requiring remittance providers to investigate disputes and remedy errors related to
the transaction, and to provide disclosures that explain the impact fees and taxes will have on the
transfer amount.22
In May 2020, the CFPB issued a final rulemaking to amend the Remittance Transfer Rule to
impose requirements on entities that send international money transfers, or remittance transfers,
on behalf of consumers.23 Under the rule, remittance transfer providers generally must disclose
the exact exchange rate, the amount of certain fees, and the amount expected to be delivered to
the recipient (accounting for fees and exchange rate). The final rule also increases the threshold
that determines whether an entity makes remittance transfers covered under the rule: entities
making 500 or fewer transfers annually in the current and prior calendar years would not be
subject to the rule. According to the CFPB, the rulemaking impacts over 400 banks and almost
250 credit unions that send a relatively small number of remittances—less than 0.06% of all
remittances.
ACH and FedGlobal Services
U.S. depository institutions have the option of transmitting remittances through the ACH system.
The ACH system clears and settles batched electronic transfers for participating depository
institutions. Since financial transfers are batched together and sent on a fixed schedule, banks can
charge a lower price than for traditional international wire transfers, which are sent individually.
The originating institution combines the payment instructions from its various customers and
sends them in a batch to an ACH operator—the Federal Reserve’s FedGlobal Payments Service
or the Clearing House’s Electronic Payments Network—for processing. In addition to
remittances, international ACH transfers are used for various small, recurring, cross-border
payments, such as Social Security and other benefit payments; business transactions, such as
vendor payments; and consumer transactions, such as bill payments and remittance transfers.
Since 2001, the Federal Reserve has provided so-called “account-to-receiver” FedGlobal services
that allow funds from accounts at a U.S. depository financial institution to be sent to unbanked
receivers for retrieval at either a bank location or a trusted, third-party provider. FedGlobal
services are available to several countries in Europe and Latin America.24

22 Consumer Financial Protection Bureau (CFPB), “Electronic Fund Transfers (Regulation E),” 78 Federal Register
30661, 2013.
23 CFPB, “Consumer Financial Protection Bureau Issues Final Remittance Rule,” May 11, 2020, at
https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-final-remittance-rule/.
24 The European service includes Austria, Belgium, Cyprus, Czech Republic, Denmark, Finland, France, Germany,
Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden,
Switzerland, and the United Kingdom. The Latin American service includes Argentina, Brazil, Columbia, Costa Rica,
El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Peru, and Uruguay. The Latin American service, which only
involves account-to-receiver ACH transfers, is in addition to the account-to-account service for Mexico.
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International Standards and Principles
Global standards for remittances have emerged over the past decade, largely due to concerns
about unregulated money transfer services and their use in planning the September 11, 2001,
terrorist attacks. International efforts have been negotiated at the Financial Action Task Force, an
inter-governmental body comprising 34 countries, including the United States, and two regional
organizations, that develops and promotes policies and standards to combat money laundering
and terrorist financing.25 FATF was established in 1989 by the G-7 countries to implement the
Vienna Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, the
first international agreement to criminalize money laundering. FATF is housed at the Organization
for Economic Cooperation and Development (OECD) in Paris, France.
FATF sets minimum standards and makes recommendations for its member countries. Each
country must implement the recommendations according to its particular laws and constitutional
frameworks. In 2001, FATF issued nine special recommendations to counter terrorist financing.
For example, FATF Special Recommendation VI required FATF member countries to regulate all
MSBs. In 2012, FATF substantively revised its recommendations and Special Recommendation
VI became FATF Recommendation 14 on Money or Value Transfer Services.26 Several other
recommendations are relevant for remittance providers, including recommendations 10 and 16 on
wire transfers, recommendation 11 on record keeping, recommendation 18 on internal controls
and foreign branches and subsidiaries, and recommendation 20 on suspicious transaction
reporting.27
International efforts have also focused on improving the operational aspects of remittance
transfers. In 2007, the BIS and the World Bank jointly issued General Principles for International
Remittance Services
, to “help to achieve the public policy objectives of having safe and efficient
international remittance services, which require the markets for the services to be contestable,
transparent, accessible and sound.”28 General Principle 3 states that “Remittance services should
be supported by a sound, predictable, nondiscriminatory and proportionate legal and regulatory
framework in relevant jurisdictions,” and affirms the FATF recommendations advocating that
remittance providers comply with all relevant FATF recommendations. FATF maintains a mutual
evaluation system and provides oversight of nonmember countries’ AML/CFT regimes.
Issues for Congress
Key issues that Congress may consider regarding remittances include:

25 Members of FATF are Argentina, Australia, Austria, Belgium, Brazil, Canada, China, Denmark, the European
Commission, Finland, France, Germany, Greece, the Gulf Cooperation Council, Hong Kong, Iceland, India, Ireland,
Italy, Japan, Korea, the Netherlands, Luxembourg, Mexico, New Zealand, Norway, Portugal, Russia, Singapore, South
Africa, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. On February 24, 2023, Russia
was suspended from FATF. See CRS Report RS21904, The Financial Action Task Force: An Overview, by James K.
Jackson.
26 The Financial Action Task Force, The FATF Recommendations: International Standards on Combating Money
Laundering and the Financing of Terrorism and Proliferation
, February 2012.
27 Ibid.
28 Bank for International Settlements and the World Bank, General Principles for International Remittance Services,
January 2007.
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Costs Associated with Remittances
In recent Congresses, Members have sought legislative efforts to reduce the cost of remittance
services. A number of factors affect the transfer fee charged, including the regulatory and
administrative costs, the volume sent, the transfer mechanism, the receiving country’s financial
infrastructure, and the level of market competition (in both the sending and receiving country). In
addition, the exchange rate used in the transaction can significantly affect the amount actually
delivered to the recipient.
In 2009, the G8 set a target, later adopted by the G20, to reduce the average cost of a $200
international remittance from 10% of the remittance amount to 5% within five years. The target
was dubbed the “5x5 Objective.” The 2030 Agenda for Sustainable Development, adopted in
September 2015, included a target to reduce to less than 3% the transaction costs of migrant
remittances and eliminate remittance corridors with costs higher than 5%.29
According to the World Bank, the global average cost for sending $200 in remittances was 6.30%
in Q3 2022 (Figure 4); the global average for digital remittances was recorded at 5.21%, while
the global average for non-digital remittances was 6.82%. According to the World Bank, “A
digital remittance must be sent via a payment instrument in an online or self-assisted manner, and
received into a transaction account, i.e. bank account, transaction account maintained at a non-
bank deposit taking institution (say a post office), mobile money or e-money account.”30
Figure 4. Global Cost of Sending $200

Source: World Bank Remittance Prices Worldwide Quarterly, September 2022.
Notes: SDGs: United Nation’s Sustainable Development Goals.

29 Gloria M. Grandolini, “Getting SmaRT about Reducing Remittances Costs,” World Bank, June 16, 2015,
https://blogs.worldbank.org/voices/getting-smart-about-reducing-remittances-costs. Historically, the World Bank has
used the cost of sending $200 as the baseline for its remittance cost data. Supplemental statistics for higher transaction
amounts ($500) show that the cost is lower as a percentage of the total than the cost of $200, but follows the same
overall trend.
30 World Bank Remittance Prices Worldwide Quarterly, September 2022.
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The 2021 G20 Rome Leaders Declaration called for the monitoring of National Remittance Plans,
the gathering of more granular data, and continuing facilitation of the flow of remittances and
reduction of average remittance transfer costs.31 Among the major economies, the United States is
among the least costly from which to send money.32
The World Bank also tracks the cost of sending remittances from the main remittance service
providers. Recent data show that banks continue to be the most expensive providers, followed by
post offices. The data show a substantial cost difference between traditional MTOs (Money
Transfer Operators, such as Western Union and Moneygram) and digital mobile operators and
MTOs such as Transferwise (Wise), Remitly, WorldRemit, InstaReM and Xoom. In Q3 2022, the
World Bank’s International MTO Index recorded a decrease to 5.93% from the previous value of
6.17% in Q2 2022. The cost of digital remittances, on the other hand, has increased in recent
years. In Q3 2022, the World Bank’s digital-only MTO Index was recorded at 4.38% (Figure 5).
Figure 5. Total Average Cost of Sending Remittances by Traditional and Digital
Money Transfer Operators (MTOs)

Source: World Bank Remittance Prices Worldwide Quarterly, September 2022.
Notes: SDG: United Nation’s Sustainable Development Goals.
Regulatory Issues and De-Risking
Some industry observers assert that the current regulatory framework is generally effective and
comprised of proportional regulation of remittances and reduces corruption, enhances
transparency, and facilitates a more robust business environment. However, other observers raise
concerns about the costs for remittance providers (and subsequently consumers) of navigating the
patchwork of banking and anti-money laundering regulation, and ask whether these costs are
unnecessarily high, resulting in an undue reduction in the provision of legitimate remittances.33

31 G20 Rome Leaders Declaration, https://www.g20.org/wp-content/uploads/2021/10/G20-ROME-LEADERS-
DECLARATION.pdf.
32 World Bank Remittance Prices Worldwide Quarterly, September 2022.
33 See CRS Report R46486, Telegraphs, Steamships, and Virtual Currency: An Analysis of Money Transmitter
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In the past decade, legislation has sought to improve the efficiency of remittance regulation. The
Money Remittances Improvement Act of 2014 (P.L. 113-156) allows federal regulators, including
FinCEN and the IRS, to rely on examinations conducted by state financial supervisory agencies if
(1) the category is required to comply with federal requirements, or (2) the state supervisory
agency examines the category for compliance with federal requirements. To date, state
supervisory regimes for MBS are varied, and the framework for examining these institutions is
likely less robust than, say, the existing supervisory regime for banking organizations.
Other proposals focus on prioritizing access to remittance services for communities with specific
needs. This may mean more money for technical assistance to boost the capacity of poorly
regulated foreign jurisdictions. One such example would be Somalia. In this case, the U.S.
Treasury Department could help integrate Somali American MSBs into an ACH payment system;
help improve training of MSBs to improve monitoring of their agents; and/or help Somalia
regulate its payment systems.34
Congress may examine the impact of the current regulatory regime on the development of
emerging payments systems for sending remittances, such as mobile, card, or other systems like
cryptocurrency. Some observers have argued that current federal and state money transmission
laws may be inappropriate for new and emerging payments systems.35 Remittance payments
already touch multiple regulatory agencies, and as mobile remittances services increase, the
Federal Communications Commission (FCC) and the Federal Trade Commission (FTC) could
play an increasing role in regulating parts of the market, particularly as mobile payments increase
in popularity.36
Some large international banks have opted to shed their correspondent banking relationships with
some smaller banks in emerging markets viewed as “high-risk” for AML reasons (or “from an
AML perspective”), citing concerns about regulatory compliance with AML and customer due
diligence (CDD) requirements.37 According to the Federal Reserve:
[R]eports suggest that large depository institutions may be reducing or restricting
correspondent banking relationships, which in turn may limit the ability of smaller
depository institutions to provide remittance transfer services. Reports also suggest that
depository institutions may be terminating the accounts of some nonbank payment
providers that offer financial services to consumers, such as money services businesses.
Without accounts at depository institutions, some nonbank payment providers may be
unable to access the financial system and therefore may be unable to continue providing
services, including remittance transfer services.38
This activity is frequently referred to as de-risking.39 Banks cite rising costs and uncertainty about
how far CDD should go in order to avoid regulatory sanction as among the main reasons for

Regulation, by Andrew P. Scott. See also, Clay Lowery and Vijaya Ramachandran, Unintended Consequences of Anti-
Money Laundering Policies for Poor Countries
, Center for Global Development, Washington, DC, 2015.
34 Orozco, Manuel and Julia Yansura, “Keeping the Lifeline Open: Remittances and Markets in Somalia,” Oxfam
America, African Development Solutions, and the Inter-American Dialogue
, July 2013.
35 Tu, Kevin, “Regulating the New Cashless World,” Alabama Law Review, vol. 65, issue 1, 2013.
36 Mark E. Budnitz, The Legal Framework of Mobile Payments: Gaps, ambiguities, and overlap, Pew Charitable Trust,
Washington, DC, February 10, 2016.
37 The term customer due diligence (CDD) in broad terms refers to a bank’s legal requirement under anti-money
laundering rules to verify the identities of those holding customer accounts.
38 Board of Governors of the Federal Reserve System, Report to the Congress on the Use of the ACH System and Other
Payment Mechanisms for Remittance Transfers to Foreign Countries,
May 2015.
39 As the IMF notes in a 2016 report, derisking covers, at one extreme, a set of actions on the part of banks, with respect
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cutting back their correspondent relationships, according to the Bank for International Settlements
(BIS).40 Banks may choose to close an account rather than manage the risks of the business
relationship. 41
While de-risking is not a new concept for banks, it has increased as a policy concern over the past
several years. In December 2019, the Government Accountability Office (GAO) reported to
Congress on BSA examinations and how compliance controls impact money-transmitter
accounts. This report found that from 2014 to 2015, almost 40 of 86 financial institutions
surveyed by GAO had money-transmitter accounts and had terminated at least one account for
money-laundering concerns.42 In April 2023, Treasury released the 2023 Derisking Strategy,
mandated by Congress in the Anti-Money Laundering Act of 2020. The Strategy noted that
Treasury has limited authority to address many of the private sector drivers of derisking, the
report recommends, among other things, that policymakers:
 Promote consistent supervisory expectations, including through training to
federal examiners, that consider the effects of de-risking;
 Expand international cooperation and consider creative options, such as regional
consolidation projects, with international counterparts to address the decline in
correspondent banking relationships, especially for small foreign banks;
 Support efforts by institutions, including the IMF and the MDBs, to address de-
risking through related projects and technical assistance.43
Remittances and Cryptocurrencies
Cryptocurrencies are a relatively new technology-based payment tool that can facilitate cross-
border transactions without the need for banks and centralized intermediaries. There is potential
for increased use of cryptocurrency in the future. One study found that over half of consumers
making these payments held cryptocurrency, compared to 12% of the general population. Another
showed that nearly a quarter of consumers who sent remittances used a cryptocurrency and one in
10 preferred to use cryptocurrency for their remittance transactions. Further, in October 2020, the
State of New York, which issues charters to a range of money transmitters and virtual currency
firms, announced its conditional approval of a partnership between PayPal and Paxos Trust to
engage in virtual currency business activity.44 To the extent money transmitters, particularly large

to correspondent banking relationships (CBRs), to effectively avoid the business and reputational risks altogether. This
risk avoidance would typically occur on a wholesale basis, without a case-by-case assessment of the risk associated
with individuals or countries and/or analysis of the profitability of CBRs. At the other extreme, this term has been used
more broadly to refer to any form of withdrawal of financial services. For more information, see Michaela Erbenova,
Yan Liu, Nadim Kyriakos-Saad, et al., The Withdrawal of Correspondent Banking Relationships: A Case for Policy
Action
, International Monetary Fund, SDN/16/06, Washington, DC, June 2016.
40 Bank for International Settlements (BIS), Committee on Payments and Market Infrastructures, Correspondent
Banking
, July 2016, p. 1, at http://www.bis.org/cpmi/publ/d147.pdf. In order to avoid AML penalties and related
reputational damage, some correspondent banks have cut back on such banking relationships particularly for
jurisdictions perceived as risky from an AML/CFT (“countering the financing of terrorism”) standpoint; or for
customers that pose high risks of money laundering or terrorism financing; or when transaction volumes are insufficient
to cover compliance costs.
41 Department of the Treasury, 2023 Derisking Strategy, April 25, 2023.
42 Government Accountability Office, Bank Secrecy Act: Examiners Need More Information on How to Assess Banks’
Compliance Controls for Money Transmitter Accounts
, December 3, 2019, https://www.gao.gov/products/gao-20-46.
43 Department of the Treasury, 2023 Derisking Strategy, April 25, 2023.
44 New York Department of Financial Services, “Superintendent Linda A. Lacewell Announces PayPal to be the First
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Approved Entity for DFS Conditional BitLicense,” October 21, 2020, at
https://www.dfs.ny.gov/reports_and_publications/press_releases/pr202010211.
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Remittances: Background and Issues for Congress

ones such as PayPal that offer P2P digital options for sending remittances, find ways to facilitate
cryptocurrency transactions, the role of cryptocurrencies in remittance markets has the potential
to grow.
Given this growth, Congress may examine what role cryptocurrencies will play in remittance
markets in the future, and consider whether existing the financial regulatory framework is
sufficiently authorized to manage the risks of using cryptocurrency in light of other more
traditional financial services, such as banking or money transmitters. One general concern is that
transacting with cryptocurrencies may carry higher fees, services charges, and an array of
transaction costs.
In addition, the volatility of cryptocurrency poses a significant amount of risk to the parties
involved in the remittance. While the advent of stablecoins,45 which peg their value to a fiat
currency (such as the U.S. dollar) or a basket of assets, may provide a more stable value for some
cryptocurrencies, there remains the issue of how cryptocurrency remittance could be regulated,
and whether the consumers and businesses holding cryptocurrency can put their money in a bank
for safekeeping.




Author Information

Martin A. Weiss
Andrew P. Scott
Specialist in International Trade and Finance
Analyst in Financial Economics




Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.


45 For more on stablecoins, see CRS In Focus IF11968, Stablecoins: Background and Policy Issues, by Eva Su.
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R43217 · VERSION 15 · UPDATED
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