Opportunities to increase the development impact of remittances have also focused attention on remittances that are now flowing through informal channels. In balancing these considerations, efforts are being made to bring these informal systems closer to formal financial systems – especially by increasing transparency – but without altering their inherent advantages. We don’t always get the balance right. De-risking by banks has been a clear case of market failure in which left to their own devices, different parties acted in their own legitimate interests – 1/4  BIS central bankers' speeches  but with adverse social and economic consequences, including for communities and countries that depend on remittance to raise resources for development. We are seeing positive moves to redress this. In particular, it is critical that continued priority be given to providing clear guidance on risk-based approaches for implementing AML/CFT measures, improving the quality of supervision of remittance providers, and achieving more consistency in supervision across borders. Confronting the changing nature of competition The nature of competition has also changed profoundly. Competition used to be more predictable. You knew who your closest competitors were. And you probably also understood enough about their comparative advantages and constraints to be able to compete effectively. This is no longer the case. Competition has become much more unpredictable, and can come from unlikely sources with the advent of peer-to-peer currency exchange platforms, e-commerce and blockchain solutions created by fintech companies. It is also not just about who your competitors are, or even what they offer.

The Regulatory Sandbox which we introduced last year – itself an innovation in regulatory approaches – helps us 3/4  BIS central bankers' speeches  to achieve this in a way that contains the external risks that can come with innovation, while allowing the opportunity for great new ideas to unfold and take root. As regulators, we are also continuously learning ourselves about the best way to deal sensibly and proportionately with risks associated with innovation. In this regard, I am pleased to announce that the Bank will shortly be issuing proposed regulatory parameters for the conduct of electronic Know-Your-Customer or e-KYC processes for remittance transactions. We expect to finalise the standards for e-KYC by October after receiving industry comments. Following this, the existing requirement for face-to-face verifications for onboarding new customers will be removed for companies that have received approval to conduct e-KYC. It goes without saying that the Bank fully expects MSB companies licensed in Malaysia to ensure that innovation is not pursued at the expense of obligations to comply with applicable laws and regulations, and to safeguard legitimate interests of customers. Having worked hard to build confidence and trust in the industry and to avert the damaging effects of de-risking that continues to a key challenge in more than a few jurisdictions, actions by any firm to undermine the integrity of the financial system will be met with a strong regulatory response from the Bank.