info@businessghana.com
Data from the United Nations Capital Development Fund (UNCDF) suggests that Ghana is the second-largest remittance recipient in Sub-Saharan Africa. In 2021 alone, remittances amounted to US $ 4.5 billion, representing 5.9 percent of the country’s GDP. This is indicative of how remittances continue to boost Ghana’s socio-economic growth and serve as a source of external financing, with many Ghanaian families depending on them for expenses such as medical, education, rent, and general upkeep. Remittances are typically local or international transfers from an individual or family member to another individual or household. Ghanaians receive remittances via formal and informal channels. The formal channels include banks, money transfer operators (MTOs), and digital platforms, while the informal ones come through friends and relatives traveling back to the country.
Remittances routed through a bank incur transaction costs, which are typically the sender's responsibility. In addition, they incur a currency conversion fee for providing local currency to the beneficiary. The cost of sending remittances to Ghana varies depending on the service provider and the transfer mode chosen. However, it is imperative to note that in Ghana, the Bank of Ghana, which regulates the remittance industry, prohibits using debit cards to send remittances outside the country. Doing this, in fact, means you are engaged in what banks call 'cross-border funds transfers,' and these attract different charges. Circumventing the remittance procedures to send money outside Ghana's borders is money laundering. Perpetrators could be liable for a minimum of 5,000 penalty units as per the provisions of the Anti-Money Laundering Act 2008 (Act 749) as amended, AML Regulations, 2011 (LI 1987).
A typical formal remittance transaction involves three steps:
The Government of Ghana, realizing the vital role remittances play in developing the local economy, has implemented several policies and regulations over the years to regulate remittance inflows. Innovations in the financial sector and fintech activities keep expanding the remittance landscape in Ghana and across the world. This, coupled with the proliferation of smartphones, improved internet connectivity, and the availability of agent networks, has significantly contributed to making remittance transactions more accessible to many Ghanaians. For the purposes of this article, I will focus on banking agents, as they have been the target of suspected fraudsters.
Per the Bank of Ghana’s Guidelines for Inward Remittance Services, banks are required to:
These guidelines have become even more important in recent years due to the spate of remittance fraud in the country. According to the Bank of Ghana’s 2020 Banking Industry Fraud Report, remittance fraud recorded a 64.3% success rate compared to a 32.4% success rate in 2019 (see Figure 1 below).
Figure 1: Banking Fraud Success Rate
Source: Bank of Ghana 2020 Banking Industry Fraud Report. Available at https://www.bog.gov.gh/wp-content/uploads/2021/08/THE-2020-BANKING-INDUSTRY-FRAUD-REPORT.pdf
The issue is that over the past couple of years, some individuals have found a way of skirting the formal remittance procedure by sending remittances out of the country using debit cards on merchant payment platforms. Intentionally or otherwise, these individuals move large sums of money, hoping to attract regular remittance transaction costs. These capital flight activities have become quite common, especially among young people across the country. The Bank of Ghana and the Financial Forensic Unit of the Ghana Police Service have been investigating these activities and prosecuting them where necessary. However, the activity persists in various shapes and forms. While it is critical that money senders have in place a comprehensive anti-fraud program and agent monitoring program to periodically review, monitor, and test the effectiveness of these programs, the public must also be aware of the repercussions of these activities. After all, ignorance is no excuse under the law.
Finally, because the usage of payment cards is gaining traction among Ghanaians, when using a card on a third-party app, it important to note the following:
