5.6.2. Money Service Businesses (MSBs) and Money Transfer Organisations (MTOs)

The withdrawal of correspondent banking results in derisking and directly affects MSBs, MTOs and other remittance institutions. With regards to MSBs, even if they are in full compliance with the regulations of the sending jurisdictions, transactions may still present a risk. This is not only because the jurisdictions receiving the funds sometimes have inadequate frameworks related to AML/CFT, but also due to the fact that their bordering jurisdictions may be subject to certain sanctions or have a conflict that is undergoing (Durner and Shetret 2015).

MSBs have loyal clients that regularly utilise their services. However, the amount associated with an average transaction is small. Regulatory frameworks are complex and varied, and there are additional operational and compliance burdens involved with processing a high volume of transactions. Thus, the extra costs associated with providing banking services to particular customer bases may not be offset even if there is a considerable volume of transactions (Durner and Shetret 2015).

Derisking of MTOs results in the loss of remittance services, and this can have harmful ramifications on the poor living in small countries that are not so developed when it comes to financial regulation. Examples include African, Latin American and Caribbean countries. This is because people in these countries are highly dependent on cash flows coming from abroad (Haley 2017).

This loss of income for individuals living in these countries has a negative impact on global efforts for poverty alleviation. Additionally, an increase in costs incurred to transfer money may lead to a decrease in export earnings. This results in lower investment and countries being unable to meet certain growth and development targets (Haley 2017).

### 5.6.3. Nonprofit Organisations (NPOs)

Derisking inhibits the ability of NPOs to keep on providing essential services in countries going through a humanitarian crisis, to affect aid and relief worldwide, and to campaign for changes within political and social spheres on a global scale (Goswami 2017; Durner and Shetret 2015). This especially applies to those NPOs that operate in zones experiencing conflict or instability (Durner and Shetret 2015). NPOs are perceived as being quite risky due to the nature of the work they conduct, such as transferring of money on an international level, or because the areas they operate from or both these reasons (Durner and Shetret 2015).

Although the derisking practice threatens the implementation of the mandates of humanitarian organisations and human right activists (Van Broekhoven et al. 2014), most prominent NPOs remain hesitant to speak out about the negative impacts of such practice. This is because they are afraid of even greater financial exclusion and suffering damage to their reputation (Keatinge 2014).
