Regulation and supervision of Money Services Business (MSB) sector: countries perspectives

Core facilitator: Bank Negara Malaysia

The remittance market is fraught with challenges for the public sector. While regulators are traditionally concerned with promoting market development and consumer protection, the surge in technological innovations present them with new challenges, But along with the challenges comes increased opportunity for expanding financial inclusion and leveraging remittance money to public and private investments.


Highlights

The session featured the comparative experience of three regulatory authorities in regulating and supervising the MSB sector:

Malaysia (Bank Negara Malaysia -BNM): The MSB Act of 2011 created a single regulatory framework governing remittances, money changing, and wholesale currency businesses. In implementing the Act, BNM has adopted regulatory approach based on five pillars namely: i) emphasis on effective control by competent management and board; ii) strong focus on AML/CFT compliance and consumer protection; iii) enabled, greater business flexibility and promotion of principle-agent arrangements; iv) enhanced supervision surveillance; and v) strengthened enforcement power to deal with infringement of laws and regulations.

Australia (AUSTRAC): Since Australia implements registration regime for supervision of MSB sector (remittance dealers and foreign exchange dealers), the barriers to entry in Australia are considered low in comparison to other countries implementing licensing regime. MSB players in Australia are screened for: i) potential risks for money laundering or other serious crimes; ii) prior offenses iii) compliance with AML/CTF obligations or any other laws; and iv) legal and beneficial ownership and control. As of December 2017, AUSTRAC has registered 88 network providers, 616 independent remitters, and 4,965 affiliates. Other key requirements imposed on registered businesses include compliance with AML/CFT programme, as well as regular reporting of international funds transfers, suspicious matters, and cross-border movements. AUSTRAC’s regulation activities include on-site assessments, collaboration, and partnership initiatives, and enforcement actions on non-compliances.

uropean Union: The Revised Payment Services Directive (PSD2) built on the earlier PSD to address the regulatory gaps and fragmentation within the market. It sought to encourage competition and innovation, improve security, and develop new payment services. PSD2 implements an enhanced consumer protection framework that includes, among others, safeguarding of accounts, review of unauthorized transactions, complaints-handling lines, and financial ombudsmen services.


Conclusions

While consumer protection should be the goal of the public sector, regulators can help develop a stronger and dynamic remittance market by:

  • Establishing strong collaboration between regulators, law enforcement agencies, and industry players in order to strengthen industry safeguards against risks.
  • Continuously enhancing the regulatory framework to ensure its relevance amidst various development in the remittance market.
  • Collecting and analyzing data on remittance transactions for a better understanding of consumer behavior and to foster data-driven regulations.
  • Mitigating barriers to entry.
  • Focusing on financial education as a mechanism to promote greater use of regulated remittance channels.

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