Japanese mega bank MUFG has announced it will end all over-the-counter money transfer services in June of this year in an effort to avert money laundering.
MUFG, the world’s largest non-Chinese bank by some measures, announced on Thursday it would end all over-the-counter cash remittance services on June-1 as part of its crackdown on money laundering.
Unlike online transfer services provided by the likes of TransferWise, WorldFirst and OFX, among others, physical remittances involve little in the way of compliance or customer identity checks. In many countries, physical transfers can usually be completed in branches with nothing more than cash and a set of overseas account details, and sometimes a (potentially fake) driving license or passport, which opens up the possibility of untraceable funds being used for illegal practices.
MUFG is the first of Japan’s major commercial lenders to make the decision to discontinue cash remittances, though others are expected to follow suit as Japan’s remittance industry begins a process of being overhauled. As part of this process, a longstanding ¥1 million (US$9,000) cap on cross-border payments handled by non-banking entities will be scrapped, paving the way for smaller money transfer specialists to gain a level of market traction that has so far eluded them.
Japanese banks have been under pressure from the country’s banking regulator, the Financial Services Agency, to step up anti-money laundering measures ahead of inspections this year by the Financial Action Task Force—an international watchdog aimed at tackling money laundering that has been highly critical of Japan’s “inadequate” safeguards.
For MUFG customers, from June onwards, funds sent overseas will need to come directly from an MUFG bank account. Whether those customers should be using MUFG at all (for payments less than ¥1 million) given the unparalleled savings that fintech payment processors offer on overseas transactions is another matter entirely.
For many currency routes, FX costs have been slashed in recent years by a number of industry-disrupting fintechs, allowing such firms to slice great chunks from the banking sector’s lucrative remittance markets. Banks are fighting back, though, by developing low-cost, digital offerings of their own.
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