THE WORLD BANK AFRICA-ASIA GROUP MEETING Federal Reserve Bank of New York 25 September 2014

Transcription

1 THE WORLD BANK AFRICA-ASIA GROUP MEETING Federal Reserve Bank of New York 25 September 214 PRINCIPAL-AGENTS FOR MONEY SERVICES BUSINESS Yusoff Sulong Money Services Business Regulation Department 1

2 Money services business industry landscape There are 445 MSB licensees as at Sept 214 (end-213: 531) reflecting mainly continuous mergers between licensees and licensees opting to become full agents Class B: Remittance (5%) Class C: Money changing business (92%) (8%) Class A: Remittance & money changing (2%) Class D+A: Wholesale currency, remittance & money changing: (1%) Class D+C: Wholesale currency & money changing: Total MSB agents appointed by the respective principal licensees Approved Commenced Hybrid agents Full agents Total

3 Evolution of MSB Regulatory Framework Pre Dec 211 Only banks provide remittance services: Limited access to remittance services Higher remittance cost & long delivery time Prevalence of illegal/informal channel for remittance services Governed under Exchange Control Act 1953 (ECA) Governed under the ECA Only banks provide wholesale currency services Remittance business Money changing business Wholesale currency business 2 non-bank currency wholesalers Qualified non-bank remittance service providers (RSPs) allowed to provide remittance Governed under the Payments System Act 23 & the ECA Banks were allowed to appoint remittance agents 39 non-bank RSPs Introduction of Money Changing Act 1998 to regulate the industry More than 8 money end-211 Special Taskforce established to review regulatory framework for MSB industry Further strengthening of regulatory framework Enactment of the Money Services Business Act 211 Strengthened supervision & surveillance capabilities Greater business flexibility for efficient & competitive industry Increased customer protection 3

4 Continuous growth in MSB activities to meet demand for money services Turnover of: Money changing (RM bil) (RM bil) Outward remittance Wholesale currency business (RM mil) Jan Jul Jan Jul Jan Jul Turnover in money changing business sustained mainly by retail demand Rising outward remittance mainly on account of growing demand & increased authorised access points via expansion of branch & agent networks Impressive turnover as a result of the increasing presence of wholesalers to meet demand from money changers 4

5 Regulatory Approach Comprehensive legislative and regulatory requirements Rule-based regulation and prudential requirements Clarity of regulatory expectations Robust supervisory and enforcement framework On-going supervisory oversight Intensified enforcement action Credible and capable players Comprehensive entry requirements Capability to conduct business in prudent and professional manner Capacity building initiatives to develop more capable and professional conduct of MSB activities Introduction of principal-agent arrangement 5

6 Principal-Agent Framework in Malaysia Objectives: Raising industry standards and strengthening safeguards against risks by leveraging on more established money service providers Additional layer of oversight Elements of the principal-agent framework Principals are accountable for the conduct and compliance of their agents Principals have a direct role in supporting and implementing effective systems and controls on their agents 6

7 MSB Principal-Agent Arrangement: Policy Evolutions & Developments Pre-211 End & beyond No MSB principal-agent arrangement 3 separate laws governed MSB activities i.e. money changing, remittance and wholesale currency i.e. MCA 1998, ECA 1953 & PSA 23 Banking Institutions (BIs) allowed to appoint qualified non-bank entities as remittance agents as part of the BNM s liberalisation efforts Policy intent: To widen outreach & offer after banking service hours to customers MSBA 211 enacted with the objective to modernise, elevate professionalism, raise integrity & strengthen safeguards of the MSB industry Industry players were re-licensed to ensure that those remain in the industry are credible and capable Phase 1 & 2: ex-msb licensees can opt to become MSB agents Policy intent: Preserve access points with stricter risk management Raise industry standards and strengthen safeguards against risks among smaller MSB companies Issuance of Guidelines on Agent Oversight Framework for the MSB Industry aimed to ensure: Effective agent oversight that promotes professional & prudent conduct of agents Protection of customers Phase 3: Hotels and former agents of BIs Phase 4: Non-MSB licensees Policy intent: Increase in access points of authorised channels, with special focus on under-served areas Policy intent: Provision of reliable and convenient access to money services for customers Starting 212: Qualified licensees are allowed to become agents of the different line of MSB Policy intent: Increase access points to authorised channels, in particular to facilitate the migration of remittances from informal to formal channels Total MSB agents (% growth) 42 (baseline) 27 (393%) 277 (34%) 7

8 Key Aspects of Principal-Agent Arrangement Principal Robust agent oversight framework Expectations: Robust assessment for agent on-boarding focusing on fit and proper Fair terms of agreement Adequate resources with clear governance and accountability Robust operational and compliance level Adequate policies and procedures with robust system for monitoring and consolidation Effective monitoring and control, e.g. off and on-site surveillance of agents to ensure compliance Provision of adequate training and support Agent Standards in operations and regulations Benefits: Better governance and documentation (operations and AML/CFT) Reliable and robust system to facilitate counter operations Wider revenue base and improved business performance Higher level of compliance to regulatory requirement Higher level of professionalism Customer service delivery Business image (effective planogram, ambience for business) 8

9 Increased usage of MSB formal channels through wider accessibility Preserve and increase access points for remittance services Total access points* 2,5 2, 15 Increase outward remittance RM bil Outward Remittance for MSB indusry % market share 6 Increase in money changing turnover Money changing turnover for MSB indusry RM bil % market share 6 3 1, , H 214 Agents' outlets * Includes Development Financial Institutions and Pos Malaysia s outlets H214 Total outward remittance (RM bil) Principals' market share (%) Agents' market share (%) H214 Total money changing turnover (RM bil) Principals' market share (%) Agents' market share (%) 38% increase in total access points for remittance services (21 to 1H 214) From 1,555 access points to 2,145 access points Number of remittance agents premises increased significantly i.e. from only 28 (212) to 344 (1H 214) In tandem with increase in access points for remittance services 31% growth in outward remittance for MSB industry ( ) expected to grow further in 214 Recorded USD3.4 bil (RM1.8 bil) in 212 and USD4.4 bil (RM14.1 bil) in 213 Remittance agents market share increased from 4.4% (212) to 11.2% (1H 214). 24% growth in money changing turnover for MSB industry ( ). Market share for principals increased from.3% to 2.8% (212-1H 214) Agents market share increased from.6% to 2.1% (212-1 H 214) 9

10 Improved Compliance, Professionalism & Integrity of the Industry Principals assessment on agents compliance BNM s assessment on principals agent oversight No. of principals Improved agent oversight mechanism Dedicated team to oversee agents SOP and systems are in place Actions taken on agents for non-compliances 1 Improved agents operational arrangements and Minimal improvement Minimal improvement Significant improvement Acceptable improvement Significant improvement Acceptable improvement compliance Comprehensive policy and procedures Robust system Proper record keeping 1