When Western Union–part of Jamaican conglomerate GraceKennedy–announced in February that it was placing restrictions on the amount of foreign exchange it would be able to remit to countries abroad, it was only natural to reason that the money transfer business was now experiencing the adverse effects of a contraction in the available supply of foreign exchange.
Fast forward to May and those initial restrictions have been fully removed.
In an exclusive interview with the Business Guardian, Donald Edwards, country manager for GraceKennedy T&T, and Noel Greenland, vice president, marketing and operations for GraceKennedy Money Services (based in Jamaica), discussed the current situation in the local and global remittance business, how Western Union is treating with the domestic foreign exchange situation, and the impact of technology on the money transfer business.
The remittance business plays a critical role in supporting the financial needs of many people throughout the Caribbean region and, more specifically, in this country.
Thus, when Western Union instituted limits on the amount of foreign exchange it would be able to remit abroad (US$200 to be exact) additional burden appeared to be placed on those who needed remittances to sustain their businesses, education or livelihood.
Asked why the restriction was introduced in February, Edwards said: "We have always operated in an open market where we would have been able to transfer any amount of money up to US$7,500 in the past.
"Coming along the period of February into March, we began to experience real challenges in the supply of foreign exchange as is a well known situation that obtains in T&T today. As a result, we had no choice but to limit the transaction values that we would send abroad."
Edwards pointed out, however, that the restriction was not as some may have thought it to be.
"To be clear, it seems as though there was some confusion as to what the US$200 limit meant.
"The limit on the transaction was really a limit on the TT-dollar equivalent of that amount. Persons who had US dollars that they wished to remit could bring it in and we would send it up to our US$7,500 maximum. But, for individuals converting their TT dollars to US to transfer abroad, the US$200 dollar limited was put in place."
In what appeared to be an about-turn, in May, all restrictions on the amount of money that could be remitted was removed. This begged the question as to why the US-dollar limit was reduced to US$200 in the first place and what caused Western Union's apparent reversal.
Edwards said: "When the limit was instituted, it was as a result of us having a problem in sourcing foreign exchange to meet our obligations to our parent company (GraceKennedy Money Services). We would have been able to send money and go on the market and purchase foreign currency from commercial banks. As a result of the economic situation and, in particular, the challenges faced by the banks vis-�-vis foreign exchange, we weren't able to do so (settle our obligations to the parent company). As a result, transaction limits had to be put in place.
"What subsequently happened was the money we would have been short on to fulfill our obligations, we were able to settle those amounts and that is what has allowed us the ability to offer the restriction-free service to the customers."
Greenland added that despite the institution of the limit, at no point did Western Union stop sending money abroad.
He said: "When one looks at the remittance business in Trinidad where there is a shortage of foreign exchange, limits had to be put in place. However while others restricted and prevented the sending of money in any amount, Western Union did not do that. We continued sending.
"So, while the economics of the day drove certain decisions, most importantly our business was still open to send and receive money."
Asked about any future occurrence of restrictions on remittance amounts, Edwards said they have configured their operations to ensure the inflows and outflows of foreign exchange are sufficiently managed.
"As of today, the way in which the business is now managed, we have put measures in place to reduce our dependency on the commercial banks to meet our obligations and, as a result, ease any possible future burdens on our customers," said Edwards.
One element that stood out in Western Union's decision to place restrictions (and then remove them) on the funds that could be sent abroad was its treatment of China and Colombia.
For the period when the limits were instituted, remittances to China and Colombia were restricted whereby Western Union would only accept US dollars to cater to those remittances. (Initially, persons could bring TT dollars that would be converted to US dollars to remit to China and Colombia).
Questioned about its position with respect to China and Colombia, Edwards said: "We always transferred money to China and Colombia using US dollars. They would have been able to bring US into our locations for remittance purposes.
"What we restricted was the acceptance of local currency (TT dollars) for the purpose of sending abroad because of changes we were making to our system to facilitate the ease of transactions to cater to these countries."
Going further he said: "It was really a function of creating some adjustments in our software to manage the flow of funds in our local currency. We always allowed for them to continue sending in US dollars."
When asked if the flow of funds to China and Colombia were larger than any of the other remittance corridors, Greenland said, "The China and Colombia corridor is not unusual in behaviour to any of the other remittance corridors we deal with. All that took place was just us providing an upgrade to our system to fully cater to both the TT and US dollars for remittance purposes."
In recent years, the introduction of compliance standards around the globe to treat with money laundering and terrorism financing has seen a marked change in the way financial institutions treat with customer information and data collection. Undoubtedly, the remittance business has been affected by such weighty regulatory changes.
Asked about this, Edwards said: "We believe that the various forms of anti-money laundering regulations have affected the business in a positive way. We work hand in hand with the Central Bank and the Financial Intelligence Unit (FIU) in putting together a robust compliance programme and applying this programme to our customers."
Edwards said Western Union has invested in technology to create additional levels of security and efficiency to make the compliance process for customers easier.
"We have invested in technology that captures customer information–so they don't have to be repetitive in providing the same information–and validates it at the point of engagement when doing transactions."
As long as there is migration the remittance business will continue to serve a critical role in transferring money.
Of note, according to Edwards, is that the remittance business tends to track economic activity.
"Economic activity tends to be aligned to the remittance business. When an economy is as healthy as Trinidad's was, say, five years ago, you find more money being sent abroad.
"Similarly, when economic contraction sets in, you find more money coming in from family and loved ones abroad. There is really a huge interplay between economic activity–domestically and internationally–and the flow of funds in the remittance business. For example, over a five-year period we moved from a decline of four per cent year-on-year to one per cent ahead for 2015 over 2014. Our tracking projects four per cent ahead for 2016 over 2015 in terms of money being remitted to T&T."
Asked to comment on the developments taking place and direction the industry is heading in, both Edwards and Greenland said that Internet and mobile technology are really creating new opportunities in advancing different areas of the business.
Greenland said: "Globally, what we're seeing are two basic trends taking place.
"We're seeing more digital activity in the space. We're seeing newer players coming into the market who will, no doubt, have an impact in the digital realm of remittances.
"Also, there is a trend now where we're seeing newer types of transfers using mobile technology. We believe that mobile transfer is going to become the norm within the next five to ten years. There will always be a need to send or receive money. The only thing that will change or evolve is the method of transmission."
GraceKennedy Money Services and Western Union operate under the following legislations:
�2 Proceeds of Crime Act (POCA)
�2 Financial Obligations Regulations 2014 (Amended)
�2 Central Bank of T&T Guidelines on Combating Money Laundering and Terrorist Financing 2011
�2 Anti-Terrorism Act (Amended)
�2 Financial Intelligence Unit Act (Amended)
ANDRE WORRELL