REGULATORY FRAMEWORKS IN EUROPE

• “Fragmented payments landscape” in which each member country has its own Standards
and regulations when it comes to cross-border payments.
• UK and Sweden have among the most flexible regulatory environments in Europe.
Money transfer operators (MTOs) have to register and apply standard security
assessments in both of these countries.

THE UNITED KINGDOM

• Less regulation governing remittance transfers than other European countries.

• Remittances not considered being a ‘regulated’ activity in the UK as defined by the
Financial Services and Markets Act of 2000.
• UK does not require MTOs to hold a banking license in order to conduct business.
• Two regulatory authorities oversee companies sending remittances in the UK. The
Financial Services Authority (FSA) provides regulations for banks and Her Majesty’s
Revenue and Customs (HMRC) supervise MTOs.
• HMRC regulations require [MTOs] to undergo a fairly simple registration process, to
comply with basic anti-money laundering procedures and to pay a moderate annual fee
• Although customer identification is widely recognized as a central element in fighting
money laundering, there is no legal requirement for how firms in the UK must verify
their new customers’ identities
• Must have a registered office: one shareholder, one director who may not necessarily be a
national

FACTS:

• Total Remittance flow from UK to Developing countries: Pound 2.3 billion

• The service providers include Chequepoint, Coinstar Money Transfer, MoneyGram, Post
Office, Ria Envia and many smaller businesses represented by the UK Money
Transmitters’ Association

AMERICA

• Compliance with federal and state (and sometimes municipal) regulations regarding
money laundering, suspicious activities, and day-to-day operations.
• Must possess license, an insurance bond and conduct regular audits, as well as making
information available about the transfers and the agents with whom the company operates
• Regulated as non-bank financial institutions
• Federally, regulated by the Treasury Department through the Office of the Comptroller
of the Currency, the Financial Crimes Enforcement Network (FinCEN), and the Office of
Foreign Assets Control (OFAC) agencies that ensure compliance with the Bank Secrecy
Act and the USA Patriot Act.
• Requires preparation of written compliance handbook, the services of a compliance
officer and implementation of an anti-money laundering training program for staff.
FACTS:
o MTOs and financial institutions often have to devote as much as 65 percent of
their time and personnel to compliance issues.
o In addition to compliance pressures, within this post 9/11 context U.S. Treasury
Department regulators have pressed banking institutions to perceive MTOs as
high-risk businesses and have encouraged them to close MTOs bank accounts
o The net worth requirements range from $35,000 to $ 1,000,000, while bond
obligations range from $25,000 to $2,000,000
o Present Cost of Transaction: Western Union US - between $12-25
 MoneyGram: US – between $8-10

o Available Money Transfer Options: Online money transfer :(PayPal, Ikobo,

Moneybookers), Cell Phone Companies, Postal Service Money Orders and
Money Transfer Services

AUSTRALIA
• Should act according to the Specifications of Australian Transaction Reports and
Analysis Centre (AUSTRAC).
• When registering, providers of registrable designated remittance services are required to
provide to AUSTRAC registrable details in relation to their identity as service providers
and must comply with reporting obligations imposed on ‘reporting entities’ under the
AML/CTF Act.
• Costs, and registration periods, vary from state to state. Cost of Registration ranges from
nil (in the Northern Territory) to around $200 for a two or three year registration period,
with the most common cost being around $120, and the most common registration period
being two or three years.
• In contrast, registration of an Australian company is an Australia-wide 'thing' and
commonly costs around $650 to $750 through a 'shelf company provider' or 'company
formation agent' and around $1200 or $1500 through an accountant.
• There are around 6500 remittance dealers operating in Australia

JAPAN

• Supervised Under the Payment Services Act of Japan 2009

• It is exclusively up to banks to make wire transfers

• All transmitting companies must receive banking licenses

• Remittances are considered to be ‘exchange transactions’ under the law

o One exception: Post Office also has the right to transmit money abroad
 • Money transfer companies, have to enter into partnerships with licensed banks.

• MTOS, require Know Your Customer information for any international money transfer
no matter how small

• Japan’s Foreign Currency and Foreign Trade Law requires banks to declare their
customers’ transfers of more than JPY2million and when more than JPY30million is sent,
it has to be reported to the Bank of Japan (for the purposes of compiling the data for its
balance of payments)

• Require current and valid passports as a means for non-nationals and non-citizens to set
up accounts and transfer money to their home country

• Japan does not allow bulk remittances

HONGKONG
• Supervised by Hong Kong Monetary Authority (HKMA): The central Bank

• Central banks have jurisdiction over MTOs and other companies involved in the
remittance business

• Police register MTOs and related business entities

• Remittance agents (RAs) do not even need to possess a minimum level of capital.

• There are strict inspections for any remittances of HK 20,000 and higher.

• Non-Hong Kong residents may incorporate a local limited company in Hong Kong

o Companies Registry at 14th floor, Queensway Government Offices, 66

Queensway, Hong Kong

o The fees for incorporating a local limited company having a share capital include
the application fee of HK$1,720 and the capital fee of HK$1 for every or part of
HK$1,000 of the nominal share capital (this capital fee is subject to a maximum
of HK$30,000 per case

o The registration fee for incorporating a local limited company not having a share
capital is calculated according to the number of members stated in the Articles of
Association of the company. The registration fee is HK$170 (for 25 or less
members), HK$340 (for more than 25 but not exceeding 100 members), and an
additional HK$20 for every 50 members or less after the first 100 members. This
registration fee is subject to a maximum fee of HK$1,025.
 o There is no requirement on the minimum amount of a company's paid-up capital
under the Companies Ordinance

o The registered office must be situated in Hong Kong

• Certificate of Incorporation of a company limited by shares will be issued in 4 working

days after the date of submission while the certificate of a company limited by guarantee
will be issued in about 3 weeks.

• A non-Hong Kong resident can be appointed as a director of a local limited company.

The secretary, if an individual, should ordinarily reside in Hong Kong

• Links with payment systems and debt securities systems in other economies have been
developed to provide an easily accessible payment and settlement platform for cross-
border economic transactions and financial intermediation

o Links with Guangdong (including Shenzhen) – Launched in phases since January

1998, these links cover cross-border RTGS payments in Hong Kong dollars and
US dollars, and cheque clearing in Hong Kong dollars, US dollars and renminbi,
with Guangdong Province including Shenzhen.
o Cross-border payment arrangements with Mainland : The cross-border payment
arrangements currently cover four currencies — the Hong Kong dollar, US dollar,
euro and British pound.
o Link with Macau
o Link with Malaysia – A link between the Ringgit clearing system in Malaysia (the
RENTAS system) and the US dollar clearing system in Hong
o Link with Indonesia – The HKMA and Bank Indonesia signed a Memorandum of
Understanding in October 2008 for the establishment of a PvP link between the
US dollar RTGS system in Hong Kong and Indonesian rupiah RTGS system in
Indonesia.
o Link with the Continuous Linked Settlement (CLS) System – The CLS system,
operated by CLS Bank International, is a global clearing and settlement system
for cross-border foreign exchange transactions. It removes settlement risk in these
transactions by settling them on a PvP basis. The CLS system covered 17
currencies at the end of 2008, with the Hong Kong dollar joining in 2004.
o Regional CHATS – This is an extension of the RTGS systems in Hong Kong in
the regional context. Regional payments in Hong Kong dollars, US dollars, euros
and trade settlements in renminbi can use the RTGS platform in Hong Kong to
facilitate cross border/cross bank transfers in those currencies.

ISRAEL
 • A company incorporated overseas may establish a branch or local office in Israel as long
as it is registered as a foreign company with the Registrar of Companies (Ministry of
Justice) and the Tax Authorities (Ministry of Finance) within a month of its
establishment.

• It is necessary to open a commercial bank account through which all company finances
will be conducted

• In order to register a business as a company with the Registrar of Companies the

following documents must be submitted:

 Form No.1 of the Company Registrar – an application form to register a company.

 Memorandum of Association, which establishes the corporate identity and

principal objectives of the company, shareholders' responsibility and shares
issued.

 Articles of Association, which set forth rules of conduct for the company. Should
a company not submit its own articles of association, then the standard articles
which are listed in the Companies Ordinance will be in force for this company.

 The fee for registering a company which is currently 2,244 NIS.(=Rs 46322)

• Register with the ‘currency service provider registrar’ - the Supervisor of Capital
Markets, Insurance and Savings and compliance with Anti-Money Laundering act.

Note:
 An Israeli lawyer is required to verify the company documents. Usually a lawyer will
handle the process for most requests and represent the company at the Companies
Registrar Office as well
 A foreign entity or person that starts to conduct any part of business in Israel must also
appoint a local VAT representative whose permanent place of residence is in Israel, and
who assumes the responsibility for handling all VAT matters

 Currently, Israel has tax treaties with 44 countries. The treaties function to prevent
double taxation by guaranteeing that the investor’s state of residence will provide either
a tax credit for tax which has been paid in Israel or, alternatively, that the Israel source
income will be exempt from tax in Israel or in the country of residence of the foreign
investor.

 According to Israeli law, employers are responsible for withholding employees'

contributions from salaries and remitting these together with the employers' own
contributions, to the National Insurance Institute.
  Foreign investors can open shekel accounts that allow them to invest freely in Israeli
companies and securities. These shekel accounts are fully convertible into foreign
exchange.

 All international money transfers larger than 80,000 shekels must be reported to
Customs using form 84. This form is available at all Customs Houses and Customs Units

 Franchising in Israel
The Israel Franchise Promotion Center (IFPC), is a non-profit organization (NPO), set
up jointly by the Israel Small and Medium Enterprises Authority (ISMEA) and MATI –
the Jerusalem Business Development Center.
The IFPC offers a wide variety of services for potential franchisees, including:
chain location, negotiation assistance, economic feasibility assessment, access to
premium business databases, financing assistance and professional business mentoring.

MALAYSIA

Carrying on remittance business

i. The entity carrying out remittance business must be a company incorporated

under the Companies Act 1965.

ii. A written notification shall be obtained from Bank Negara Malaysia under section
5(3) of the Payment Systems Act 2003 in operating a remittance business.

iii. A written permission shall be obtained from the Controller of Foreign Exchange
(the Controller) under section 10 of the Exchange Control Act 1953 in respect of
remittance business:

a. The permission is valid for a specified period stated in the permission

letter;

b. Application for renewal of the permission should be submitted to the

Controller at least two (2) months before the expiry of the permission; and

c. The Controller reserves the right to impose and vary terms, or revoke the
permission in the event that the remittance service provider fails to comply
with any terms and conditions issued from time to time.