Data from the Bangko Sentral ng Pilipinas (BSP) revealed that the decline in April remittances from overseas Filipino workers (OFWs) resulted in a corresponding slowdown in the growth of remittances from January to April.
According to the BSP, dollar remittances in the first four months decelerated to a 1.6 percent growth, compared to 4.4 percent growth rate in January to March 2004.
The BSP explained that Saudi Arabia had began the strict implementation of its anti-money laundering law which imposed tight examination of fund transfers and compliance to certain documents by overseas workers prior to remittance.
"Consequently, OFW remittance from Saudi Arabia dropped by 7.6 percent," the BSP reported. This was an indication that Filipinos working in Saudi Arabia have not been able to present the proper documentations required by Saudi law.
Deployment statistics from the Philippine Overseas Employment Authority (POEA) showed that Saudi Arabia accounted for about 20 percent of Filipino workers overseas.
The BSP added that the depreciation of the peso in April could have contributed to the decline in remittances since it allowed OFWs to remit less dollars and still get the same peso equivalent.
The BSP expressed optimism that OFW remittances would pick up again in May and June in time for the school enrollment and opening of the academic year.
"By that time, we also expect that OFWs in Saudi Arabia would have adjusted to the documentation requirements for fund transfers,"the BSP said.
The international financial community has been picking on the country’s remittance system, expressing fears that the channel is being used by terrorist groups to siphon funds to and from their Asian counterparts.
The Anti-Money Laundering Council (AMLC) itself is already considering the possibility of legalizing the so-called "hawala" system of dollar remittance, a cheap and unregulated but unsecured system often preferred by OFWs.
According to the AMLC, the recent meeting of the FATF’s Asia Pacific Group (APG) had singled out the "hawala" system in ways to curb the flow of money through its unmonitored channels.
AMLC executive director Victor Aquino said there is no clear estimate of how much funds go through the "hawala" system but he said the common that "hundreds of million of dollars worth of transactions" are being coursed through "hawala".
"The APG thinks that the frequency of transaction is staggering,"said Aquino. "This isn’t surprising because hawala is cheaper, there is no processing, is unrecorded and is totally untaxed."
According to Aquino, legislation is needed to deal with hawala and others in formal remittance system but the ultimate goal, if it could not be stopped, is to legalize hawala.