In 2015, the amount of money being sent overseas as remittances dropped by US$10 million over the year before. Many expats, especially low-wage workers, were shocked when they no longer had easy access to send cash home. However, the situation has improved, with Western Union and the other cash transfer companies back open and accepting local currency.
Many expat workers rely on cash transfer companies like MoneyGram and Western Union to send money home to support their families. The value of remittance payments had been trending higher through the first six months of the year but dropped sharply when banks in Cayman stopped offering services to the cash transfer companies.
In 2014, people in Cayman sent almost US$180 million overseas via cash transfers, according to data recently released by the Cayman Islands Monetary Authority. That number dropped to less than US$170 million last year. Most of that money went to Jamaica: US$110 million in 2014 and US$101 million last year.
For the first two quarters of last year, workers in Cayman sent more than US$90 million, up almost 4 percent from the year before, according to the CIMA data. But then the total amount of remittances dropped sharply, from almost US$46 million in the second quarter down to about US$37 million in the final quarter of the year.
While cash transfer services may have returned to normal for consumers, government, banks and the transfer companies are still working to figure out the issues with correspondent banking that caused the problems in the first place.
Angela Piercy, spokeswoman with the Ministry of Financial Services, responded by email to several questions put recently to the minister. She wrote, “The Ministry continues to engage with stakeholders on this matter, specifically CIMA and Cayman Finance. The Minister is a member of a working group established by Cayman Finance which is also considering the matter.”
In July, Western Union suddenly shuttered its windows in Cayman. Fidelity Bank, which operated the cash transfer franchise locally, decided to close the operation overnight, citing increasing international regulation and slim profit margins.
“It’s getting harder and harder to bank this business,” Brett Hill, CEO of Fidelity Bank’s Cayman operations, said at the time. “Banks are trying to de-risk,” he said. He explained that cash-transfer services posed a greater and greater risk to the bank as international regulators, particularly in the United States, increased rules on the transfers in an attempt to prevent the services from being used to move money for terrorism and the international drug trade.
Jamaica National, which operated MoneyGram and several other cash transfer brands in Cayman, lost its own bank in late August when negotiations failed with Cayman National Bank. Cayman National had previously given bank accounts, needed to access international currency markets, to JN and other remittance companies.
Instead of closing when the company lost its bank account, JN decided to accept only U.S. currency and fly the cash directly to a bank overseas for deposit. For three months, from late August until late November, the only option for cash transfers was through JN or one of its related companies like MoneyGram, using U.S. cash.
The unusual situation led to a shortage of U.S. currency in the Cayman Islands, causing banks to restrict giving U.S. cash to only their customers, or charging fees of up to $50 to exchange limited amounts of cash. The police and the Ministry of Financial Services sent out warnings against using underground currency exchanges and counterfeit U.S. notes.
On Nov. 25, Financial Services Minister Wayne Panton, joined by representatives from Scotiabank, Western Union and GraceKennedy Remittance Services gathered to announce an end to the crisis. A deal between the three companies reopened Western Union in the Cayman Islands, based on the model of GraceKennedy’s Western Union operations in Jamaica and several other countries.
“This was a commercial problem and required a commercial solution,” said Financial Services Minister Wayne Panton at the press conference. “We are at an end of a very difficult period,” he said.
“We had to be able to deliver this service to restore normalcy,” Mr. Panton said.
He went on to praise Jamaica National for staying open through the crisis. “Were it not for their ability to adapt and change their business model,” he said, people in the Cayman Islands may have lost all ability to send remittances.
The deal left Jamaica National out of the new banking arrangement, and they were not able to start accepting Cayman currency for another month.
Robert Hamaty, board member for Jamaica National, said at the time, “Nobody knew the fix was just going to be for Western Union.”
“The biggest player has been left out,” he said.
Jamaica National was able to once again start accepting Cayman currency along with U.S. dollars before Christmas. JN has been silent on how they are exchanging the cash and getting it into the international financial system. But at least for consumers the cash transfer services have been restored after a difficult three months.