Cost of remitting money rising

Sending money to the Pacific from New Zealand is becoming more expensive, despite Government efforts to lower the costs.

Several Pacific countries will report on the issue to the United Nations in New York this week, as part of a huge meeting on the complex Sustainable Development Goals.

Remittances – money sent home to families in the Pacific from workers in Australia and New Zealand – make up a substantial part of small Pacific island economies. Over a quarter (27 per cent) of Tonga’s economy is made up of remittances, and over a fifth (21 per cent) of Samoa’s. Both countries have overseas emigrant populations about half the size of their resident populations.

New Zealand workers made up about a third of remittance payments in the region, alongside Australia and the United States.

But the cost of sending money to small Pacific states is among the highest in the world, averaging 8-12 per cent of the amount sent. In Vanuatu, known as a tax haven, costs can get even higher – up to 15 per cent for payments from New Zealand.

The UN goal for 2030 is to get these costs down to 3 per cent but currently the costs are actually growing as money transfer operators shut up shop and commercial banks ‘‘de-risk’’ to meet strict banking regulations following the global financial crisis.

Many of the goals set by the UN in 2015 for ‘‘Agenda 2030’’ are losing ground.

A report from the International Monetary Fund found the rises often came as banks faced tighter regulations and ‘‘know-your-client’’ rules.

Compliance with New Zealand’s Anti-Money Laundering and Countering Financing of Terrorism law of 2009 is specifically singled out. The relative smallness of the market and the amount of money transferred has meant international banks have not seen much reward for risk.

Reducing remittance costs has been a priority for international forums and technology companies for several years but have remained stubbornly high.

The Reserve Bank, which regulates banks in New Zealand, is currently working on a new proposal with the Ministry of Foreign Affairs and Trade (MFAT) to bring down the costs, a spokesman said. ‘‘Currently, some remittance transactions in the Pacific region are relatively expensive due to structural reasons such as size, remoteness, and limited infrastructure. International financial regulations and associated concerns about AML/CFT compliance are now compounding this problem as Pacific-based institutions struggle to access global financial services,’’ the spokesman said.

He noted that reducing costs would actually help fight moneylaundering as it would reduce reliance on informal channels.

MFAT also funds several initiatives to reduce transaction costs via its aid contributions.

This reporter’s attendance at the UN was supported by the Pacific Islands Forum Secretariat and UNDP Pacific Office.