Regulation of Informal Value Transfer Systems

The study examines the tension between combating financial crimes—such as money laundering and terrorist financing—and maintaining the speed, low cost, and accessibility of informal remittance systems like Hawala. It contrasts 'registration' regimes (UK, Sweden) with 'licensing' regimes (Germany, Netherlands, Norway), finding that more lenient registration frameworks generally lead to lower consumer prices and higher market accessibility. The paper also analyzes the impact of the EU Payment Services Directive (PSD) and argues that IVTS are highly integrated with the formal economy, suggesting that a 'light touch' regulatory approach is most effective for bringing these systems into the formal sphere.

• Informal Value Transfer Systems (IVTS), such as Hawala, persist because they offer significant advantages over regulated competitors, including lower transaction costs (typically 2-5% compared to over 20% for mainstream operators), greater speed (6-12 hours between major cities), and accessibility in regions with poor infrastructure or no banking systems.
• National regulatory approaches are divided into registration regimes, which focus on basic record-keeping and AML-CFT compliance (UK and Sweden), and licensing regimes, which impose stricter ex-ante requirements such as capital guarantees and professional experience (Germany, the Netherlands, and Norway).
• The UK's 'light touch' registration approach resulted in a significantly higher number of registered money transfer operators (MTOs) and lower remittance prices compared to the more stringent licensing regimes in Germany and the Netherlands.
• Strict licensing requirements in countries like Norway and Germany create high barriers to entry, which often push remittance activities underground and lead to a higher proportion of unrecorded flows.
• The EU Payment Services Directive (PSD), implemented in 2009/2010, led to a convergence of national policies by introducing a waiver clause for 'microbusinesses' (turnover under €3 million per month), which allowed countries like Norway to lower entry barriers for IVTS.
• IVTS are not separate from the formal economy but are highly intertwined with it, often using formal bank accounts to settle balances between operators or partnering with licensed firms.
• The study concludes that a registration-based 'light touch' approach is the most viable method for bringing IVTS under government control, as it encourages formalization without destroying the social capital and efficiency that make these systems attractive to migrants.

APA

Wang, J. R. (2010). Regulation of Informal Value Transfer Systems. Peace Research Institute Oslo. https://cdn.cloud.prio.org/files/9ab83e26-b40e-47c9-b6ce-83731eab6056/Wang 2010 Regulation of Informal Value Transfer Systems PRIO Paper.pdf?inline=true

Chicago

Wang, Jonas Rusten. Regulation of Informal Value Transfer Systems. Peace Research Institute Oslo, 2010. https://cdn.cloud.prio.org/files/9ab83e26-b40e-47c9-b6ce-83731eab6056/Wang 2010 Regulation of Informal Value Transfer Systems PRIO Paper.pdf?inline=true.

Wikipedia

{{cite report |last1=Wang |first1=Jonas Rusten |title=Regulation of Informal Value Transfer Systems |publisher=Peace Research Institute Oslo |date=September 2010 |url=https://cdn.cloud.prio.org/files/9ab83e26-b40e-47c9-b6ce-83731eab6056/Wang 2010 Regulation of Informal Value Transfer Systems PRIO Paper.pdf?inline=true |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{wang2010regulation, author = {Wang, Jonas Rusten}, title = {{Regulation of Informal Value Transfer Systems}}, institution = {Peace Research Institute Oslo}, year = {2010}, month = sep, url = {https://cdn.cloud.prio.org/files/9ab83e26-b40e-47c9-b6ce-83731eab6056/Wang 2010 Regulation of Informal Value Transfer Systems PRIO Paper.pdf?inline=true}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }