# Presentation: 242713

## Presentation Prepared for the 
FDIC Advisory Committee on Economic Inclusion

Providing Access to Financial Services:  The Roles of Banks and Money Transfer Organizations

Washington, DC, October 24, 2007

**FDIC Advisory Committee on Economic Inclusion**
*Providing Access to Financial Services:  The Roles of Banks and Money Transfer Organizations*
*Washington, DC, October 24, 2007*

**Notes:**
SLIDE 1 - 	SLIDE: 20 SECONDS	MARK: 0:00 START –  0:20 END

Viamericas is a leading money transfer company serving the $4 billion Latin American market. 

We provide a low cost, high value service through an efficient technological platform and superior distribution network.

## Summary

- Remittances are radically different international payment flows.
- Licensed Remittance Companies (LRCs) play a critical role in channeling remittance payments.
- LRCs face a crisis due to lack of access to US bank accounts
- Money Transfer Operators are in a unique position to serve transnational families.

## Remittances are Different

- Source: World Bank (Dilip Ratha). 2003. “Workers’ Remittances—An Important and Stable Source of External Development Finance.” In Global Development Finance 2003 (chapter 7). Washington, D.C.: World Bank.

- US billion,
-  worldwide figures

- A steady, non-volatile, growing source of balance of payments support

## Remittances are Different

- FDI, Capital Market Flows

- Official Flows

## Account Discontinuance

- Access to Bank accounts for Licensed Remittance Companies (LRCs) is extremely limited
- Most large national banks are completely closed to the industry
-  No case by case review, no due process:  banks are simply closed to the sector
-  Zero account access in some geographic areas; problem is nationwide in scope
- The largest, publicly traded LRCs are able to maintain corporate accounts: This is a significant competitive issue.

## MTOs are easy targets

- The combination of historical regulatory hostility and some banks’ desire to enter the market makes it tough to be a competitive LRC with an account at a large bank.

## The Emperor Has No Clothes

| Fallacy: | Fact: |
| --- | --- |
| It is good bank supervisory policy to encourage banks to provide money transfer services directly, and to do nothing to stem the tide of LRC account closures, because:
 Consumers benefit by having their transfers made through banks.
 Bank-based transfer programs are more secure against money laundering operations. |  LRCs are faster, cheaper and better through specialization.  Highly technical bank programs have floundered.  Banks have not been competitive, are adopting MTO models.
 Banks require a face-to-face meeting once (or never, with card programs); thereafter the service can be totally remote and is wide open for abuse.  LRCs see customers every time.
 Account closures drive customers to unlicensed operators, thwarting all control. |
| 
Providing accounts to LRCs presents great risk to banks. |  Bank AML sanctions have been based on bank misconduct, on continued control failures and on banking UNLICENSED remittance operations.  
 Not one bank fine has been based on alleged misconduct of a client that is a LICENSED REMITTANCE COMPANY.  |

- Accounts are closing left and right.  Why?

## Competition

- Competition drives down prices, increases innovation
- Role of Government to assure competitive landscape
- Examples of other subsidized/regulated networks where governmental intervention in favor of competition had a huge impact on development and innovation: Railroads and Telephony
- Account discontinuance impedes competition, and is therefore bad for the consumer.

## Closing accounts: bad policy

- The trend toward account discontinuance is bad regulatory policy on several levels
- Impedes competition:  **bad for consumers** (senders and recipients)
- Drives money transfer activity underground:  **bad for law enforcement**
- Encourages marginal players to disguise accounts at banks:  **bad for banks**

## Money  Transfer Services

- Cost
- Convenience
- Speed
- Safety / security
- Financial democracy
- Empowering options for the use of funds

**How do LRCs stack up?**

**The Factors:**

## Example:  Health Care

- Public and private health care systems in developing countries can come under severe pressure from non-participation or from premium payment arrears.
- Remittance senders effectively self-insure against sickness of their families.
- Offering remittance senders the option of directing partial payment to ensure that their recipient is up to date on health care premiums is a win-win-win proposition:
-  Senders win; no major bills as a self-insurer
-  Recipients win; medical care when they need it
-  System wins; greater participation
**LRCs, with sender/receiver relationships, are in a unique position to offer this specialized payments service.**

## Calls to Action

| Needs: | Call to Action: |
| --- | --- |
| 
The myth of extreme risk for banks offering accounts to LRCs needs to be dispelled.
 | FDIC should publicize the fact that no bank has been fined for alleged illicit activities of a client LRC.
Legislative solutions seeking to mitigate banks’ risk (or perception of risk) should be supported. |
| Line level bank examiners need to be more friendly to LRC accounts. | Permit LRC industry to address examiners’ training sessions, in order to show that we are regulated, controlled and disciplined. |
| Banks need specific incentives to serve LRCs | Extend CRA credit to banks that serve remittance customers indirectly, by serving LRCs. |

## Unique Joint Opportunity

- Licensed Remittance Companies are in a unique position to serve transnational families, and should be permitted to do so in partnership with US banks.
- This Committee is in a unique position to help assure that competition in the remittance industry survives.
**Together, we can make sure that remittance customers are well served, and that the massive capital flows that remittances represent can have the greatest poverty alleviation and development impact possible.**

## 

CONTACT INFORMATION

Paul Dwyer, CEO

 pdwyer@viamericas.com
(301) 215-9294 ext 102

- CONTACT INFORMATION
- Paul Dwyer, CEO
-  _[pdwyer@viamericas.com](mailto:pdwyer@viamericas.com)_
- (301) 215-9294 ext 102

**Notes:**
SLIDE 1 - 	SLIDE: 20 SECONDS	MARK: 0:00 START –  0:20 END

Viamericas is a leading money transfer company serving the $4 billion Latin American market. 

We provide a low cost, high value service through an efficient technological platform and superior distribution network.