The Monetary Authority of Singapore (MAS) has suspended the use of non-bank or non-card third-party channels for remitting money to China, in response to cases of remittances being frozen by China’s law enforcement agencies.

The suspension applies to licensed remittance companies between Jan 1 and Mar 31, 2024. Based on MAS’ list, 193 licensed entities offer cross-border money transfer services in Singapore.

The Business Times looks into Singapore’s remittance industry, the third-party channels in use, and why the suspension is necessary.

How do most Chinese remit money?

Most China nationals working in Singapore use online banking apps to remit money. These apps include the apps of the three local banks, and China-based apps such as Alipay and WeChat Pay.

Exchanging money with friends who have extra renminbi is another common way for Chinese to remit money at better exchange rates while avoiding fees.

Kelsey Xue, who has been working in Singapore for over 10 years, did this for many years before discovering a “safer” alternative with good exchange rates.

She now prefers Panda Remit, a platform that accepts PayNow transfers in Singapore dollars and deposits renminbi into China accounts.

Chinese entrepreneur Li Yuanji, who downloaded the app because of a friend’s endorsement, said: “It works together with a mini-app that can do immediate money transfers in Alipay, and the transaction can be completed almost within minutes.”

Based on checks by BT, the money transfer platform’s parent company WOTransfer was incorporated in Singapore in 2019. It was first incorporated in Hangzhou, China, in 2018.

For those who are not as tech-savvy or are less fluent in English, a popular option is remittance companies in Chinatown.

These are licensed by MAS to provide cross-border money transfer services, but might use a third-party agent, instead of a bank, to complete the remittance. This keeps transaction costs low for their customers, and allows them to offer more favourable exchange rates.

Banking apps may still beat other third-party channels on safety concerns, though. “I chose banking apps because I heard of the news that remittances sent via the third-party agents in Chinatown were frozen,” said Joy Yao, who remits money to China in tranches of about 50,000 yuan (S$9,500) via DBS.

What are the non-bank and non-card options suspended?

The suspended channels are the third-party agents that remittance companies in Singapore may engage to keep costs low.

MAS’ announcement did not specify who these agents are, but it said the Singapore Police Force (SPF) has received more than 670 reports of remittances being frozen by Chinese authorities as at Dec 15. The total affected amount reached S$13 million.

Of the 670 reports, about 430 were against Samlit Moneychanger at People’s Park Complex.

“The cases affected make up a small minority of total remittance transactions through remittance companies,” the agencies said.

News reports have emerged recently of China freezing remitted monies for breaches of regulations. A recent Bloomberg report spotlighted an unregulated system called hawala.

It operates through a global network of individuals and companies that use their own accounts to send money on behalf of others. The hawala system is to banks what Airbnb is to hotels – distributed banking. Except, Chinese regulations make it illegal.

Why the need for suspension?

China has strict capital controls. Mainland China residents can transfer a maximum of US$50,000 per annum out of the country, for instance. The inward transfer limit is the same. The hawala system is sometimes used to get around these limits.

The Embassy of China has issued several notices warning Chinese citizens in Singapore to use official banking channels to remit funds to China.

In a notice published on Oct 24, the embassy highlighted that remittance companies might exempt themselves from any liabilities by making customers sign waivers.

If remitted funds are frozen, customers have no way to hold the remittance companies accountable.

Both MAS and SPF said they have been in close contact with Chinese authorities on the information needed to facilitate the unfreezing of accounts.

The temporary suspension against all other channels will be reviewed after the three-month period.

“This is necessary for the immediate protection of consumers, and to stem the number of reported new cases of beneficiaries’ accounts in China being frozen,” said the agencies.

Source: Business Times © SPH Media Limited. Permission required for reproduction.

ADV: [Seminar+Printed Book] Legal Professional Privilege (29 Jan 2024)

Man given lifetime driving ban for third drink-driving conviction fails in appeal

1918