Le corridor de transfert de fonds Canada-Caraïbes : Promouvoir les transferts de fonds formels vers Haïti et la Jamaïque grâce à une réglementation efficace

THE WORLD BANK Emiko Todoroki Matteo Vaccani Wameek Noor W O R L D B A N K W O R K I N G P A P E R N O . 1 6 3 The Canada-Caribbean Remittance Corridor Fostering Formal Remittances to Haiti and Jamaica through Effective Regulation 48459 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized W O R L D B A N K W O R K I N G P A P E R N O . 1 6 3 The Canada-Caribbean Remittance Corridor Fostering Formal Remittances to Haiti and Jamaica through Effective Regulation Emiko Todoroki Matteo Vaccani Wameek Noor THE WORLD BANK Washington, D.C. Copyright © 2009 The International Bank for Reconstruction and Development/The World Bank 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA, Fax: 202-522-2422, email: pubrights@worldbank.org. ISBN-13: 978-0-8213-7919-6 eISBN: 978-0-8213-7923-3 ISSN: 1726-5878 DOI: 10.1596/978-0-8213-7919-6 Library of Congress Cataloging-in-Publication Data The Canada-Caribbean remittance corridor : fostering formal remittances to Haiti and Jamaica through effective regulation. p. cm. ISBN 978-0-8213-7919-6 -- ISBN 978-0-8213-7923-3 1. Migrant remittances--Canada. 2. Migrant remittances--Haiti. 3. Migrant remittances-- Jamaica. 4. Alien labor, Haitian--Canada. 5. Alien labor, Jamaican--Canada. 6. Alien labor-- Legal status, laws, etc.--Canada. I. World Bank. HC120.F55C363 2009 332'.042--dc22 2008056022 Contents Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi Abbreviations and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii Description of Terms and Key Business Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii Key Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxv Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Bilateral Remittance Corridor Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 About the Canada-Caribbean Remittance Corridor . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Methodology and Outline of the Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1. Migration and Remittance Patterns in the Caribbean . . . . . . . . . . . . . . . . . . . . . . . . 5 Migration and the Caribbean . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 The Caribbean as a Remittance Recipient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Main Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2. Canada as a Country of Remitters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Migrating to Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Remitting from Canada. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Legal and Regulatory Framework for Remittance Service Providers in Canada . . . 37 Main Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 3. The Canada-Haiti Remittance Corridor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Haitians in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Remittance Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Legal and Regulatory Framework Applicable to Maisons de Transfert in Haiti . . . 70 Main Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 4. The Canada-Jamaica Remittance Corridor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Jamaicans in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Remittance Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Legal and Regulatory Framework Applicable to Remittance Companies and Agents in Jamaica . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 Main Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 iii 5. Findings and Policy Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 Haiti: Policy Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 Jamaica: Policy Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 Canada: Policy Recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 Appendixes A. The Caribbean: Main Historical Features and Migrant Destinations . . . . . . . . 137 B. Historical Features of Early 20th Century Migration to Canada (1901–61) . . 141 C. Focus Group Discussion: Haiti. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 D. Focus Group Discussion: Haitian Diaspora . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 E. Focus Group Discussion: Jamaica. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 L IST OF T ABLES 1. World Bank’s Bilateral Remittance Corridor Analyses, 2008 . . . . . . . . . . . . . . . . . . . . 2 2. Percentage of Total Expatriates, Highly-skilled Aged 15+. . . . . . . . . . . . . . . . . . . . . . 12 3. Point System Evolution, 1967–2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4. Canada: Immigration as Percent of Population, 1967–2006. . . . . . . . . . . . . . . . . . . . 24 5. Top 10 Country of Origin of Recent Immigrants, 2001–06 . . . . . . . . . . . . . . . . . . . . 28 6. Remittances and Immigrant Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 7: Summary of STRs Received by FINTRAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 8. Canada: On-site Visits to MSBs by FINTRAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 9. Summary of AML/CFT and Other Requirements for RSPs in Canada . . . . . . . . . . . 46 10. Haiti: Legal Permanent Resident Flow to the United States . . . . . . . . . . . . . . . . . . . . 51 11. Canada: Permanent Resident Applications from Haiti . . . . . . . . . . . . . . . . . . . . . . . 54 12. Canada-Haiti: Bilateral Remittance Flow Size Estimates . . . . . . . . . . . . . . . . . . . . . . 63 13. Amounts Transferred to Haiti, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 14. Canada-Haiti: Main MTOs Fee Structure, March 2008 . . . . . . . . . . . . . . . . . . . . . . . 66 15. Summary of AML/CFT and Other Requirements for Maisons de Transfert in Haiti . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 16. Selected Ethnic Groups in Canada, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 17. Percentage of Population Employed, By Gender and Age, 2001. . . . . . . . . . . . . . . . . 90 18. Average Income Level of Jamaican and Canadian Population, By Age, 2000 . . . . . . 93 19. Education, Employment and Income Statistics, Jamaicans vs. Overall Canadian Population, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 20. Households Receiving Remittances, By Region, 2001–06 . . . . . . . . . . . . . . . . . . . . . . 96 iv Contents 21. Households Receiving Remittances, By Quintile, 2001–06 . . . . . . . . . . . . . . . . . . . . . 96 22. Per Capita Remittances by Quintile, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 23. Remittances as a Share of Adult Equivalent Expenditure, By Quintile, 2006 . . . . . . 97 24. Canada-Jamaica: Main MTOs Fee Structure, July 2008 . . . . . . . . . . . . . . . . . . . . . . 100 25. Summary of AML/CFT and Other Requirements for Remittance Companies in Jamaica . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 B1. Canada: Composition of Population Growth, 1901–2006 . . . . . . . . . . . . . . . . . . . . 142 E1. Summary of Survey Results: Jamaican Returnees and Remittance Recipients . . . . . . . . . . . 156 L IST OF F IGURES 1. Regional Comparison: Net Migration Rate, 1970–2015. . . . . . . . . . . . . . . . . . . . . . . . 6 2. Caribbean: National Net Migration, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3. Haiti and Jamaica: Net Migration Rate per 1000 people, 1970–2010 . . . . . . . . . . . . . 8 4. GNI Per Capita, By Region, 1980–2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5. Per Capita GDP Growth Rates, By Region, 1980–2006 . . . . . . . . . . . . . . . . . . . . . . . . . 9 6. Net Migration Rate and Per Capita GDP, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 7. Regional Comparison: Breakdown of Global Inward Remittances, 2007 . . . . . . . . . 13 8. Caribbean: Remittance inflow, 1991–2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 9. Regional Comparison: Remittances as a Percent of GDP, 1991–2006 . . . . . . . . . . . . 14 10. Caribbean (Selected Economies): Remittance Inflows, 2006 . . . . . . . . . . . . . . . . . . . 15 11. Per Capita GNI and Remittances (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 12. Haiti and Jamaica: Official Development Assistance, FDI, and Remittances (as a percent of GDP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 13. Caribbean: Official Development Aid, FDI, and Remittances, 1980–2005 . . . . . . . . 17 14. Canada: Composition of Permanent Immigration, 1980–2006 . . . . . . . . . . . . . . . . . 23 15. Canada: Permanent Migration and GDP Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 16. Canada: Composition of Population, 1911–2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 17. Region of Origin of Recent Immigrants to Canada, 1971–2006 . . . . . . . . . . . . . . . . 25 18. Caribbean-born Immigrants in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 19. Canada: Percent of Recent Immigrants Remitting . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 20. Percentage of Respondents who Remitted, By Selected Countries of Birth . . . . . . . 30 21. Canada: Average Annual Amount Remitted by Recent Migrants. . . . . . . . . . . . . . . . 31 22. Average Annual Amount Sent by Respondents who Remitted, By Selected Countries of Birth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 23. Canada: Breakdown of Senders, By Amount Sent Annually. . . . . . . . . . . . . . . . . . . . 32 24. Bilateral Remittance Estimates using Migrant Stocks, Host Country Incomes, and Origin Country Incomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 25. Canada: Admitted Permanent Immigrants from Haiti, 1966–2006 . . . . . . . . . . . . . . 51 Contents v 26. Haiti: Permanent Resident Flow to the United States and Canada, 1960–2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 27. Canada: Permanent Residents from Haiti, By Category, 1980–2006 . . . . . . . . . . . . . 53 28. Canada: Permanent Resident Inflow from Haiti, 1980–2006 . . . . . . . . . . . . . . . . . . . 54 29. Canada: Temporary Workers and Permanent Economic Visa Applications from Haitian Nationals, 2000–06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 30. Canada: Composition of the Haitian community, 2006 . . . . . . . . . . . . . . . . . . . . . . . 56 31. Breakdown of Haitian Population in Canada, By Main Provinces, 2006 . . . . . . . . . 57 32. Canada: Composition of the Haitian Diaspora, By Period of Entry . . . . . . . . . . . . . 57 33. Canada: Composition of the Haitian Diaspora, By Age Group, 2006 . . . . . . . . . . . . 58 34. Canada: Composition of the Haitian Population, By Education Profile . . . . . . . . . . 59 35. Haitian Community: Selected economic indicators comparison. . . . . . . . . . . . . . . . 60 36. Canada: Permanent Residents from Haiti by Occupation, 1980–2006 . . . . . . . . . . . 61 37. Haiti: Remittance Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 38. Haiti: Market Shares of Maisons de Transfert October 2006–July 2007 . . . . . . . . . . 68 39. Canada: Admitted Permanent Residents from Jamaica, 1966–2006 . . . . . . . . . . . . . 80 40. Canada: Composition of the Jamaican Diaspora By Period of Entry . . . . . . . . . . . . 81 41. Canada: Permanent Resident Inflow from Jamaica, 1980–2006. . . . . . . . . . . . . . . . . 82 42. Canada: Permanent Resident Inflow from Jamaica, By Category, 1980–2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 43. Temporary Visas Issued, By Category, 2000–07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 44. Visa Applications and Acceptance Rate Comparison, Jamaica . . . . . . . . . . . . . . . . . . 85 45. Canada: Composition of the Jamaican Community, 2006 . . . . . . . . . . . . . . . . . . . . . 87 46. Breakdown of the Jamaican Population in Canada, By Province, 2006. . . . . . . . . . . 88 47. Canada: Composition of Jamaican Population, By Age Group, 2006 . . . . . . . . . . . . 88 48. Composition of the Jamaican Population, By Education Profile, 2006 . . . . . . . . . . . 89 49. Percentage of Jamaicans Employed in Canada Relative to Overall Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 50. Canada—Permanent Residents from Jamaica by Stated Occupation . . . . . . . . . . . . 92 51. Per Capita Income Levels of Jamaicans and the Overall Canadian Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 52. Jamaica: Breakdown of Remittance Inflows, By Country of Origin, 2007 . . . . . . . . 95 53. Jamaica: Breakdown of Formal Remittance Inflows, By Channel Type, 1994–2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 54. Jamaica: Breakdown of Formal Remittance Inflows, By Channel Type, 2007. . . . . . 99 55. Remittance Company Typically Used by Jamaicans . . . . . . . . . . . . . . . . . . . . . . . . . 101 56. Number of Locations per MTO in Jamaica, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 57. Share of Locations per MTO, By Parish, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 vi Contents L IST OF B OXES 1. Focus: Haiti and Jamaica . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2. Immigration to Quebec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 3. Money Laundering Threat to RSPs for Funds Going to/from the Caribbean. . . . . . 39 4. Regulating RSPs at the Provincial Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 5. Role of the Exchange Rate in Overall Remittance Transfer Costs . . . . . . . . . . . . . . . 67 6. Drug Trafficking in Haiti . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 7: Canadian Seasonal Agricultural Workers Program (CSAWP) . . . . . . . . . . . . . . . . . . 85 8: Addressing Unemployment among Jamaicans at Home and Abroad: The HEART Trust/ National Training Agency (NTA) of Jamaica . . . . . . . . . . . . . . . 91 9: Obtaining a License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 10: Excerpts of the General Principles for International Remittance Services . . . . . . . 118 11. The Creation of Migration and Remittances “Working Groups”. . . . . . . . . . . . . . . 119 12. Relationship between Transparency and Reduction in Remittance Transfer Costs: Case of Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 13. Indonesia: Official Policies and Programs to Regulate Indonesian Worker Migration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 14. Canadian Programs to Implement Immigrants into the Labor Market . . . . . . . . . 133 B1. Race and Immigration Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 B2. Setting the Course: The Mackenzie King Statement (1947) . . . . . . . . . . . . . . . . . . . 143 Contents vii Foreword T he World Bank has been at the global forefront in research on remittances. Studying over 12 bilateral remittance corridors thus far, the Financial Market Integrity Unit has focused its research on remittance market integrity issues and the specific incentives influ- encing the choices of channels to send money home. Initially conducted at the request of Department of Finance, Canada, this corridor, Canada-Caribbean, has clearly distin- guished itself from other bilateral remittance corridors studied in the past. At the originating end of this corridor, these distinguishing features include a country that, throughout its history, has made immigration one of its primary social and economic building blocks. At the receiving end is a region historically characterized by many small economies heavily dependent on remittance inflows and significant migration outflows. This corridor focuses on Jamaica and Haiti, two of the Caribbean’s primary labor exporters and also the countries with the two largest Caribbean communities in Canada. Given the importance of remittances in the region, there is a need for effective, yet pro- portionate regulation. Risk must be effectively mitigated along potentially vulnerable routes, while innovation, competition and transparency in the remittance markets must be encouraged. Regulatory frameworks that reflect local conditions and are proportionate to the risks involved will facilitate the provision of services of the highest quality to migrants and their families. It is hoped that research provided from this study will generate policy dialogues among all relevant stakeholders, and assist national authorities in their efforts to effectively regu- late and supervise the remittance markets. National authorities should continue to encour- age the use of formal transfers and develop more reliable and competitive remittance channels. These channels must efficiently meet the varied needs of Caribbean migrant workers and their families in the safest and most secure environment possible. Latifah Merican Cheong Program Director Financial Market Integrity Financial and Private Sector Development The World Bank ix Acknowledgments T his publication was written by Emiko Todoroki (Task Team Leader), Matteo Vaccani and Wameek Noor of the World Bank. The authors are especially grateful to Latifah Merican-Cheong, Director, Financial Market Integrity, World Bank, for her guidance and comments in producing this working paper. The internal peer reviewers of this study were Mario Guadamillas, Massimo Cirasino, Carlo Corazza, and Paloma Monroy of the World Bank. Comments were also received from Isaku Endo and Jean Pesme of the World Bank. The study benefited from consultations with David Sevigny, Antoine Brunelle-Côte, Malcolm Wakefield and other representatives of the Department of Finance, Canada. The suggestions of Terence Francis Winsor, Senior Advisor to the Canadian Executive Director at the World Bank are also appreciated. The study also benefited from the input of Lily Chu, Marco A. Arena Duffoo, Pablo Fajnzylber, Muhammad Badrul Haque, Mathurin Gbetibouo, Yira J. Mascaro and Raul Hernandez Coss of the World Bank. Denis J.R. Fortin of Royal Canadian Mounted Police, Brigett Wilks and Elaine Weir of Ministry of Finance and Planning, Jamaica, Berthony Joseph of Banque de la République d’Haïti and Alfred Metellus of the Haitian Ministère de l’Economie et des Finances also provided comments. In addition, we are grateful for comments received from private sec- tor representatives in Canada, including Western Union and CIBC. We express our sincerest gratitude to Anne Hastings at Fonkoze (Haiti), Joseé St- Hilaire at Development International Desjardins (Quebec) and Natacha Kay Mortley at the University of West Indies (Jamaica) for their assistance in organizing focus group meetings with remittance senders and recipients. The logistical support of Maryse Calixte and Pollyanna Marie McHargh-Scott was critical to successfully conduct fieldwork. The help of our editor, Peter Maitland, is also appreciated. Finally, we would like to thank all those individuals who spent time speaking with us during fieldwork in Canada, Haiti and Jamaica. Listings of the institutions visited are as follows: Canada: Western Union, Scotiabank, Office of the Superintendent of Financial Insti- tutions (OSFI), Canadian Bankers’ Association, TD Bank, Canada Imperial Bank of Commerce (CIBC), Royal Bank of Canada (RBC), Bank of Montreal, Jamaica National Overseas (JNO)/Jamaica National Building Society (JNBS), VMBS/ VMMT, Royal Canadian Mounted Police (RCMP), FOCAL, Jamaican High Com- mission, Canadian Border Services Agency (CBSA), Finances Canada, Statistics Canada, Citizenship and Immigration Canada (CIC), Canadian International Development Agency (CIDA), Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), Development International DeJardins (DID), Consulate of Haiti to Montreal, Interagency Regulatory Committee on MSBs (Quebec), CAM Transfer, Jamaican Association Montreal, Unitransfer, Haitian remittance senders. Haiti: Embassy of Canada to Haiti, Banque de la République d’Haïti (BRH), Ministère de l’Economie et des Finances, National Statistics Bureau (NSB), Ministry of Haitians abroad, Unité de Renseignements Financiers (UCREF), Fonkoze, Scotia- bank, Sogebank/SogeXpress, C.A. M. Transfer, Rapid Transfé, UNIBANK/ xi Unitransfer, Acra Financial Services (AFS), Association nationale des institutions de Microfinance d’Haïti (ANIMH), Haitian remittance recipients. Jamaica: Bank of Jamaica, Ministry of Finance and Planning, Private Sector Organi- zation of Jamaica, Financial Services Commission, Jamaica Customs, Western Union/Grace Kennedy Remittances, Lasco MoneyGram, JN Money Services, Financial Investigations Division (FID), Scotiabank, Statistical Institute of Jamaica (STATIN), University of West Indies, Association for the Resettlement of Return- ing Residents, National Commercial Bank Jamaica, First Financial Caribbean, Planning Institute of Jamaica, City of Kingston Cooperative Credit Union, Canadian High Commission in Jamaica, the HEART trust/ National Training Agency, Capital and Credit Remittance, Jamaican remittance recipients. xii Acknowledgments Abbreviations and Acronyms AE Adult Equivalent AML/CFT Anti-Money Laundering/Combatting the Financing of Terrorism AMLA Anti-Money Laundering Act ATM Automated teller machine BPM Balance of Payment Manual BOJ Bank of Jamaica (Jamaican Central Bank) BoP Balance of Payment BRCA Bilateral Remittance Corridor Analysis BRH Banque de la République d’Haïti (Haitian Central Bank) Can$ Canadian Dollar CBSA Canadian Border Services Agency CDD Costumer Due Diligence CERLAC Centre for Research on Latin America and the Caribbean CGAP Consultative Group to Assist the Poor CIC Citizenship and Immigration Canada CIN Carte d’Identité Nationale CIDA Canada International Development Agency CIMB Commerce International Merchant Bankers CSAWP Canada’s Seasonal Agricultural Workers Program DEC Development Economics FATF Financial Action Task Force FDI Foreign direct investments FID Financial Investigation Division (Jamaican FIU) FINTRAC Financial Transactions Reports Analysis Centre of Canada (Canadian FIU) FIU Financial Intelligence Unit FOCAL Canadian Foundation for the Americas FRD Financial Regulation Division (Jamaica) GDP Gross Domestic Product GNI Gross National Income GK The Grace Kennedy group HDI Human Development Index HEART Human Employment and Resource Training HTA Hometown Association ID Identification IMF International Monetary Fund INS U.S. Immigration and Naturalization Service IT Information technology JNBS Jamaica National Building Society JNO Jamaican Nationals Overseas JSLC Jamaica Survey of Living Conditions LAC Latin America and Caribbean MEF Ministère de l’Economie et des Finances MENA Middle East and North Africa xiii MFI Microfinance Institution ML Money Laundering MSB Money Service Business MTO Money Transfer Operator NTA National Training Agency ODA Official Development Assistance OECD Organization for Economic Cooperation and Development OSFI Office of the Superintendent of Financial Institutions (Canada) PCMLTFA Proceeds of Crime (Money Laundering) Terrorism Financing Act (Canada) POCA Proceeds Of Crime Act (Jamaica) PPP Purchasing Power Parity PTR Professional, Technical, and Related workers RCMP Royal Canadian Mounted Police RSP Remittance Service Provider STR Suspicious Transaction Report SWIFT Society for Worldwide Interbank Financial Telecommunication TF Terrorist Financing TRN Taxpayer Registration Number TTR Threshold Transaction Reports UCREF Unité Centrale des Renseignements Financiers (Haitian FIU) UK United Kingdom UNDESA United Nations Department of Economic and Social Affairs US$ United States dollar WDI World Development Indicators WU Western union WW II World War II Exchange Rates The exchange rate conversions for all amounts used in this report are as follow, as of July 30, 2008: US$1 (United States dollar)
Can$1.0232 (Canadian Dollar) US$1 (United States dollar)
J$71.750 (Jamaican Dollar) US$1 (United States dollar)
G36.150 (Haitian Gourde) While a US$ or Can$ equivalent has been usually provided for Jamaican Dollar and Hait- ian Gourde, no conversion was provided for and between US$ and Can$ because of the almost par exchange rate. xiv Abbreviations and Acronyms Description of Terms and Key Business Models T he market for remittance services can see the participation of a wide range of actors, who can compete independently or partner with each other to form several business models. Throughout this report, frequent references will be made to these definitions relating to the relevant market players. These definitions, in quotation, are based on the General Principles for International Remittance Services 1 :
Remittance Services Provider (RSP): “An entity, operating as a business, that provides a remittance service for a price to end users, either directly or through agents.” Thus, RSPs are business entities conducting cross-border or domestic money/value trans- fer services on behalf of senders and recipients. RSP includes banks, (generally competing in the market by offering wire transfer products, or providing remittances through a part- nership with a money transfer operator), money transfer operators (as described below) and their agents (as described below). This is the broadest term applied to reference actors of the remittance market players.
Money Transfers Operator (MTO): “A non deposit taking payment service provider where the service involves payment per transfer (or possibly payment for a set of series of transfers) by the sender to the pay- ment service provider (for example, by cash or bank transfer)—i.e. as opposed to a situa- tion where the payment service provider debits an account held by the sender at the payment service provider.” Thus, a money transfer company or remittance service company provides money/value transfer services using agents. Broadly speaking, there are two types of MTO. One is an international (or multinational) MTO where the MTO establishes its own network of agents on both sending and receiving ends. Another is a local MTO where the MTO is set up as a local remittance company. The local MTO can offer remittance services by partnering with either international MTOs or local MTO at the same or corresponding end of the corridor. The local MTO develops a network of agents in the local market. In Haiti, “maison de transfert” is the term equivalent to MTO. In Jamaican, “money transfer agency” or “primary agent” is the terms equivalent to MTO. Jamaican authorities probably use the term “primary agent” in consideration of a local MTO acting as an agent of an international MTO.
Agent: “Agent (capturing or disbursing agent). An entity that captures or distributes remittance transfers on behalf of a remittance service provider. ‘Capturing’ means receiving the money and instructions from the sender. ‘Disbursing’ means giving the money to the receiver.” xv 1. The work on developing General Principles for International Remittance Services was led by the World Bank and the Committee on Payment and Settlement Systems under the Bank for International Settlement. Representatives from international financial institutions involved in remittances and central banks in both remittance sender and receiving countries were involved in developing these principles. Thus, agent is any business entity (whether of financial nature or not) or an individual acting as originating or disbursement points for remittance transactions, on behalf of the MTO. Sev- eral layers of agents can be combined to form a remittance service network. At times, a local MTO partners with an international MTO and acts as an agent of the international MTO. In Jamaican, “subagent” is the equivalent term.
Money Services Business (MSB): Money service business is a broad term that cov- ers more than remittance services. The main use of this term in this report relates to the MSB sector in Canada. Thus the exact definition of MSB in Canada can be referenced to Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and its website 2 states that: “A money services business means an individual or an entity that is engaged in the busi- ness of any of the following activities:
foreign exchange dealing;
remitting or transmitting funds by any means or through any individual, entity or electronic funds transfer network; or
issuing or redeeming money orders, traveler’s checks or other similar negotiable instruments. This does not include redeeming checks payable to a named individual or entity. In other words, cashing checks made out to a particular individual or entity is not included. Money services businesses include alternative money remittance systems (such as Hawala, Hundi or Chitti), etc.” xvi Description of Terms and Key Business Models 2. See http://www.fintrac-canafe.gc.ca/re-ed/msb-eng.asp Sources: Author’s representation. Concept of Remittance Service Providers BANKS RSPs MSBs MTOs Agent Agent Agent Agent Agent Agent Partnership xvii Executive Summary T he primary objective of this report is to make a contribution to policymakers as they work to improve the integrity and safety of the Canadian and Caribbean remittance markets. In doing so, the report takes into account immigration and other issues as they affect remittances, and recognizes the important role remittances play in economic devel- opment and poverty alleviation in Caribbean countries. The report particularly focuses on the remittance corridor between Canada-Haiti and Canada-Jamaica given the size of their respective diaspora communities in Canada and their role as major remittance recipient economies in the Caribbean region. This report analyzes the following issues: 1. The role of remittance flows to Caribbean economies; 2. The features of Canada as a host of Caribbean communities and originator of remittances; 3. The landscape of remittance markets in Canada, Jamaica, and Haiti; and 4. The regulatory framework faced by remittance service providers in Canada, Jamaica, and Haiti. Based on the findings of this study, the authors provide specific policy avenues to govern- ment authorities in all three countries. These are aimed at enhancing their knowledge of remittance flows and remittance market features, increasing the transparency of these flows, and creating an enabling remittance market environment through effective regula- tions and oversight. The Role of Remittance Flows to Caribbean Economies Seeking avenues to improve competition in the remittance market and the reliability and integrity of transfer channels is a fundamental element in fostering the development poten- tial of such flows. This is particularly true in the Caribbean, where remittance inflows have been an important external source for financing to local economies. The Caribbean region, characterized by the small size of its economies, continues to significantly depend on remittances resulting from intense migration patterns, an element traditionally deeply-embedded in the Caribbean culture and history. Throughout the last half of the 20th century, the net migration rate in the Caribbean stood as the highest in the world, with flows targeting an increasingly wide range of destination countries, including Canada. In 2007, Latin America and the Caribbean (LAC) as a whole received US$60 billion in formal remittances, accounting for almost 19 percent of global remittance flows to developing and developed economies—totaling US$317 billion (Ratha and Mohapatra 2007). This has made the region the single largest recipient of remittance transfers among developing countries. The Caribbean represented more than one tenth of LAC remittances. In the last 15 years, the combined flows of workers’ remittances, payment of employees and migrants’ transfers reaching the Caribbean have seen a 900 percent increase, passing US$6 billion in 2005. These financial flows have surpassed both Official Development Aid (ODA) and Foreign Direct Investment (FDI) entering the Caribbean since the early 1990s. At the individual country level, remittances in some cases represented more than 20 percent of the gross domestic product (GDP) of the local economy, and have played a significant role in lessening both balance of payment deficits and the impact of natural disasters, to which the region is particularly vulnerable. Remittances to Jamaica and Haiti represented 19 and 21 percent of GDP respectively in 2006. At the individual household level, remittance inflows have been equally significant in importance. The Features of Canada as a Host of Caribbean Communities and Originator of Remittances Since the late 1960s, Canada has been an attractive destination for migration from the Caribbean region due to its relatively open immigration policy and geographic proximity. Immigrant inflows into Canada have helped sustain economic growth, with the foreign- born population strongly contributing to the demands of the Canadian labor market. In 2006, there were an estimated 580,000 individuals of Caribbean descent in Canada, with immigrants from the region accounting for approximately 3 percent of the overall foreign workers reaching Canada. The Haitian and Jamaican communities (respectively numbered 102,000 and 231,110 in 2006) represented the two largest immigrant groups among Caribbean residents. Migration from the Caribbean to Canada has been decreasing relative to other inflows, due to the rapid growth of landings from Asia to Canada. As in the case of other minori- ties, Caribbean migrants seem to face challenges in successfully integrating into the local job market. In this regard, the Canadian Government has launched several initiatives to ease the access of skilled migrants into the country’s economic fabric. As in many other host economies, immigrants to Canada often send money home. The growing weight of immigrants in the population in Canada might be reasonably expected to push for more intense remittance outflows. However, remittances from Canada cur- rently constitute an area where substantial information gaps remain, especially when it comes to official estimates. Recent estimates put total Canadian remittance outflows between approximately US$12 and US$17 billion in 2006. Jamaica and Haiti, the two countries on which this report has focused, were estimated in 2006 to have received respectively between US$135–200 million and US$70–80 million from Canada. While the receiving ends of the two corridors have been periodically capturing the size of formal inflows, estimates of the size of informal flows may be improved using survey-based instruments on both sides of the corridor. It is a common practice among immigrants from the Caribbean to send money home. Surveys conducted among recent immigrants confirm that foreign workers from the region are among those with the highest propensity to remit, with small-volume (Can$150–200), high-frequency transactions (generally monthly or by-monthly). Both informal and formal remittance channels are currently in use along the Canada- Caribbean corridor. Informal transfers through cash couriers or pocket transfers— whether by friends, relatives, or “professional” smugglers—are still part of the picture, although much less so than within the Caribbean, or between the United States and the region. The extent of the use of unregistered remittance service providers in Canada is not xviii Executive Summary well known at this point, due to the relatively new registration requirement which came into force in June 2008 (however, the initially estimated number of service providers and that of entities later registered with the financial intelligence unit of Canada are signifi- cantly close). The shipment of food and other goods in barrels through specialized com- panies is still a well used practice although at a decreasing pace. Development of the remittance market and increased competition are in fact providing significant incentives to switch from informal to formal channels. The Landscape of the Remittance Market in Canada, Jamaica and Haiti The remittance market in Canada is dominated by Money Transfer Operators (MTOs), endowed with extensive networks of agents throughout Canada, meeting the needs of migrant workers to send money home. The perception by the banking industry of remit- tance services as an unprofitable business can explain the minor role played by banks in this segment. Due to the nature of the average client (usually walk-in customers) and type of transactions (usually cross-borders), it is considered a high-risk business line requiring potentially very costly compliance programs, not offset by the profits made through typi- cally low transaction volumes. However, exploratory partnerships between Canadian banks and major international MTOs have been launched recently. Some credit unions also have entered the market in recent years, tapping into its growth. MTOs are the channel of choice for most remitters, not only because of their domi- nant market presence but also thanks to their faster and cheaper transactions. Field research by the BRCA team, and previous studies have shown that speed, reliability, and security of transactions are the main factors shaping the choice of remittance channels and service providers: customers are willing to pay a premium if such elements are guaranteed by the provider. In recent years, rising competition among MTOs has led to lower transfer fees to Caribbean destinations, as the incumbent multinational MTOs are facing the entry of smaller, aggressive ethnic operators into the market. For example, along the Canada- Jamaica corridor low flat fees have been introduced for transfers of up to Can$1,000–2,000. In major Canadian metropolitan areas, concentration of service providers is high, espe- cially within ethnic communities. The Jamaican remittance service market has become increasingly transparent and competitive over the years. Remittance transfer costs from Canada to Jamaica were approx- imately 10-15 percent of the transfer amount for a typical remittance transfer only a few years ago, but are now as low as 2.5 to 5 percent of the transfer amount. Jamaican banks and building societies have shown increasing interest in entering the remittance business, often establishing a subsidiary to specialize in such services. However, the competitiveness of the Jamaican remittance market might be further enhanced by discouraging the use of exclusivity agreements. The Haitian remittance service market also has seen increasing competition in the past years, with the entry of new service providers in the market. However, fees have not seen a dramatic fall such as is the case of Jamaica. The security situation on the ground in Haiti is certainly one of the key elements for the higher cost of operations. Another element may be a lack of market transparency, which can shield operators from aggres- sive price competition. Executive Summary xix Regulatory Framework of Remittance Service Providers in Canada, Jamaica, and Haiti MTOs and their agents in Canada are regulated only under the AML/CFT regime, based on the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and have been made subject to registration at the federal level since June 2008. Currently, provincial authorities in Quebec are exploring the possibility of introducing a licensing regime for money service businesses, including MTOs. As far as AML/CFT requirements are concerned, MTOs and their agents—as part of MSBs—are required to register with FINTRAC (the Canadian FIU and PCMLTFA enforcer on MSBs). MTOs and their agents exhibit willingness to cooperate and comply with the reg- ulation, and have a good understanding of basic compliance obligations. There are chal- lenges, however, when it comes to implementation (such as acceptance of specific IDs under customer due diligence (CDD) requirements, internal compliance policy, and employee training). The recent AML/CFT reform (which introduced the registration regime for MSBs) also equipped FINTRAC with sanctioning power for non-compliance. Central Banks in Haiti and Jamaica are the designated regulators for MTOs, and are responsible for monitoring and supervision of the industry. Both countries instituted a licensing requirement for operators, including subagents in the case of Jamaica. MTOs are subject to full AML/CFT requirements and report suspicious transactions and large cash transactions to the local FIUs. Jamaica has a rigorous licensing regime in place, and Bank of Jamaica (BOJ) has issued a comprehensive guidance note to MTOs describing regulatory obligations in detail. The local remittance market is growing rapidly, signaling that no fundamental regulatory obsta- cles are in place against new entries. However, this same growth might be accelerated if the relatively slow and expensive licensing process could be further streamlined. Haiti has made positive progress in bringing MTOs under the regulatory regime, yet monitoring and supervision of MTOs still present significant challenges. Clearer guidance for the industry is urgently required, as knowledge of regulatory requirements varies con- siderably among operators. The lack of an effective identification system also poses a chal- lenge both in terms of integrity of the system and access to financial services by users. Finally, reporting of transaction volumes to the central bank at the time of the study team’s visit was not yet harmonized, although the BRH has been planning to address this issue in the near future. Policy Recommendations Based upon the study team’s findings, a set of policy recommendations are suggested with reference to the following objectives (see table below):
Enhancing knowledge of remittance flows and their size for policy design purposes;
Strengthening the regulatory framework governing remittances;
Ensuring effective implementation of regulatory requirements;
Fostering competition and transparency in remittance markets; and
Promoting sound policies for migration and migrant integration. xx Executive Summary Executive Summary xxi Recommendations Haiti Jamaica Canada
Offer clarification and guid- ance on transaction report- ing format and frequency.
Estimate informal remittance transfers via survey-based research.
Enhance interagency (BRH, MEF, NSB) cooperation on data collection.
Coordinate with sending countries in matching remittance flow data.
Integrate JSLC survey data to enhance remittance inflow estimation.
Estimate informal transfers by comparing overall flow estimates with the reported formal figure.
Make policy decisions based on the probable size and type of informal transfers.
Coordinate with sending countries in matching remittance flows data.
Consider requiring MTOs to periodically report transaction volumes.
Draw upon global best practices to capture remittance data accu- rately and effectively.
Coordinate with receiving countries in matching remittance flows data. Enhancing knowledge of remittance flows and their size for policy design purposes
Remove the obsolete provi- sions in the 1989 MdT decree.
Consider providing MEF with power to sanction MdTs engaging in non-permitted activities or operating with no license.
Consolidate MdT regulation into a single code for operators.
Lower the customer identifi- cation threshold for wire transfers to US$1,000.
Introduce CDD requirement for non-cash form of remit- tances.
Speed up the work to bring the MFIs under the regula- tory regime.
Ensure MFIs engaging in remittances are subject to the same requirements— tailored accordingly when required—as MdTs.
Consider removing the ban on physical cross-border cash transfers above 200,000 gourdes.
Introduce a currency decla- ration or disclosure system at the border.
Identify the source of the back-log in the proces