The sudden closure of money-transfer services in the Cayman Islands threatens to render thousands of people here, and thousands more of their family members across the world, in immediate and intractable financial straits.
Last Thursday, the board of directors of Bahamas-based Fidelity Bank decided to stop all Western Union money transfers in Cayman. On Friday, customers wishing to send remittances at any of the eight Western Union branches in Cayman encountered empty kiosks and “closed” signs.
Now, our reporters have been hearing rumblings that other remittance companies in Cayman may soon have to follow suit.
Please note that the Compass does not find fault with the business decisions being made by Fidelity or anyone else. As we reported in the August 2014 edition of The Cayman Islands Journal, a series of money laundering scandals and increasingly onerous U.S. regulations have, over a period of years, escalated the risk and eroded already razor-thin profit margins of the remittance business in general.
At the time, a number of major U.S. banks had pulled out of remittances, or were looking to divest themselves of their money-transfer operations.
In addition to downward pressure from fines and regulations, the remittance industry is also facing outside threats from alternative services enabled by new technology, such as online- or cellphone–based payment systems.
The abrupt closure of money-transfer services in Cayman has stranded thousands of workers and their dependents with no clear alternative solutions. Many of those erstwhile loyal customers will, no doubt, suffer real personal financial consequences as a result of not knowing how to get money from Point A (Cayman) to Point B (Jamaica, the Philippines, Honduras, etc.) in a manner that is reliable, secure, swift and reasonably priced.
While the individual transfer amounts are, as a rule, relatively small — more than 90 percent of the 682,000 remittances sent from Cayman last year were for $500 or less — in the aggregate the amount is quite large: In 2014, nearly US$180 million in remittances was sent from Cayman, with US$110 million going to Jamaica, US$24 million to the Philippines, US$13 million to Honduras and US$12 million to the U.S., for example.
For those who would seize this opportunity to castigate Cayman’s work permit holders for sending money out of this country in the first place, we remind them that our territory’s status as an international financial center is predicated upon the mobility and fungibility of currency. In other words, “easy come, easy go.” Looking at the balance sheet, and weighing expatriates’ internal contributions to Cayman (even in the barest measures of work permit fees, duties paid and living expenses) against the amount of outbound remittances, it is readily apparent that these workers have a net positive, even vital, place in our country.
It remains to be seen how quickly and effectively new players or alternative methods will fill the vacuum created by the departure of cash-only remittances, whose chief advantage is they require neither sender nor receiver to have a bank account. However, if the new transfer services are less convenient or more expensive, they will constitute in effect a further increase in Cayman’s sky-high “cost of living and doing business,” and make our country a less attractive destination for the expatriates upon whom so much in Cayman depends.
Ultimately, in economic terms, the market will decide. However, in human terms, our empathy extends to those who may suffer as a result of these developments.