Pardee-CFLP-Remittances-TF-Report

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2. Dodd-Frank Act and Remittances toPost-Conflict Countries: The Law of UnintendedConsequences Strikes AgainRaymond Natter*The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-FrankAct” or “Act”) was enacted in the United States in response to the financial crisisthat began in 2007. There are many reasons that have been identified as asignificant cause of the crisis, 1 and, in response, the Dodd-Frank Act mandatesa wide array of changes in the regulation of financial institutions and financialproducts. The Act is an omnibus legislative document that contains hundredsof sections and more than 800 pages of text. Many of those sections relate toconsumer protection. As such, the Act established a new agency, the ConsumerFinancial Protection Bureau (CFPB), which received almost all of the consumerprotection powers of the federal banking agencies. 2Among them is the power to implement and enforce most sections of the ElectronicFunds Transfer Act (EFTA). 3 In addition, section 1073 of the Dodd-FrankAct amended the EFTA to provide a new regulatory framework for remittancetransfers made from the United States to a foreign country. 4 The regulatoryframework includes detailed disclosure requirements and error resolution procedures,and establishes significant civil liability (both fines and potential classaction suits) for violation of these requirements. 5This section will discuss the regulatory implementation of section 1073, andfocus on the impact this new regulatory regime will have on remittance transfersto post-conflict countries. The section concludes that the proposed regulatory* Barnett Sivon & Natter, P.C. represents financial institutions, including companies that engage in remittancetransfer activities. However, the views expressed in this article are solely those of the author. I wish to thank KatieWechsler, Associate at Barnett Sivon & Natter, P.C. for her invaluable assistance in preparing this article. Anearlier version of this article appears at 25 Loyola University Consumer Law Review 101 (Spring 2013).1 See, e.g., Financial Crisis Inquiry Commission, Financial Crisis Inquiry Report (Jan. 2011); Gary Gorton, Questionsand Answers about the Financial Crisis Prepared for the U.S. Financial Crisis Inquiry Commission (Feb. 20,2010), available at http://tinyurl.com/financial-inquiry.2 12 U.S.C. §§ 5581-5583.3 Dodd-Frank Act § 1084.4 15 U.S.C. § 1693o-1.5 Id.Remittance Flows to Post-Conflict States: Perspectives on Human Security and Development 39
treatment may have the unintended consequence of impeding the use of regulatedremittance transfer providers for sending funds to these countries.THE IMPORTANCE OF REMITTANCES FOR POST-CONFLICT COUNTRIESPost-Conflict CountriesA post-conflict country is typically defined as a nation that is emerging from asevere conflict. In these countries, open warfare has ended, but a potential forviolence remains. 6 Studies have shown that post-conflict situations are characterizedby human loss, destruction of infrastructure and means of production,as well as adverse economic and political consequences. 7 The main goals ofpost-conflict transition and recovery are achieving peace, sustaining economicgrowth, and reducing poverty. 8 The establishment of sustainable institutions isoften the most important step in achieving security and growth in post-conflictsituations. 9In post-conflict situations, there is an absence of war, but not necessarily realpeace. The end of fighting offers an opportunity to work towards lasting peace,but that requires the establishment of viable institutions, capable of sustaininglasting security for the entire population. 10 Extended conflict leads to thecollapse of the systems and institutions that make a stable society function andthese are the systems that need to be resurrected. 11 The instability common inpost-conflict countries constrains investment. 12 The collapse in law and order isdisruptive to political and economic governance, thereby increasing uncertaintyand making contract enforcement difficult. 13 Dramatic changes in financialrules and practices may be common in these nations, financial infrastructureis damaged, and financial conduits may not function properly. Business normsmay change dramatically due to changes in economic conditions or government6 Peter Wallensteen, Understanding Conflict Resolution: War, Peace and the Global System (SAGE Publications2007).7 Paul Collier, Doing Well out of War (The World Bank 1999).8 U.S. Agency for International Development (USAID), Understanding the Post-Conflict Country at 3 (2009).9 Lakhdar Brahimi, State Building in Crisis and Post-Conflict Countries at 3-4 (United Nations 2007).10 Id.11 Id.12 Janvier Nkurunziza, Civil War and Post-Conflict Reconstruction in Africa at 23 (United Nations Conference onTrade and Development 2008).13 Id.40 A Pardee Center Task Force Report | October 2013
Page 1 and 2: Pardee Center TASK FORCE Report oct
Page 3 and 4: This series of papers, Pardee Cente
Page 5 and 6: AcknowledgementsThis Task Force on
Page 7 and 8: ITU International Telecommunication
Page 9 and 10: networks and migrant associations i
Page 11 and 12: to developing countries than other
Page 13 and 14: But most importantly, remittances a
Page 15 and 16: often mix in the countries of desti
Page 17 and 18: According to the World Bank estimat
Page 19 and 20: Because of its focus on the multidi
Page 21 and 22: eceiving remittances provides an en
Page 23 and 24: associations for post-conflict inst
Page 25 and 26: are proposed to avoid the associate
Page 27 and 28: Terry, D. 2005. Remittances as a De
Page 29 and 30: oader approach to post-conflict rem
Page 31 and 32: networks can be seen as “homogeno
Page 33 and 34: That personalized nature of hawala
Page 35 and 36: Customary law (xeer) and other trad
Page 37 and 38: the world (Lindley 2009, 531). Much
Page 40 and 41: ize the informal equal efforts to a
Page 42 and 43: struction and development. Means sh
Page 44 and 45: opportunities should focus on exist
Page 48 and 49: leadership. Formal payments systems
Page 50 and 51: and financial institutions. 26 Reso
Page 52 and 53: closures should be both in English
Page 54 and 55: issued a new proposed regulation De
Page 56 and 57: “closed network,” in which all
Page 58 and 59: Some guidance may be found in the p
Page 60 and 61: the use of mobile devices for money
Page 62 and 63: Foreign TaxesUnder the 2012 regulat
Page 64 and 65: will be available in all cases. CFP
Page 66 and 67: Section II: Remittances in Post-Con
Page 68 and 69: Sri Lanka. The conflict also result
Page 70 and 71: Figure 2: Current Account, Trade Ba
Page 72 and 73: flows came from migrant workers in
Page 74 and 75: Informal Remittance Channels in Sri
Page 76 and 77: tory authorities, with some calls f
Page 78 and 79: 4. The Role of Remittances in Post-
Page 80 and 81: Figure 1: Liberia Per Capita Income
Page 82 and 83: associations, women’s groups, alu
Page 84 and 85: Remittances to LiberiaValue of Remi
Page 86 and 87: credit because of the need to be li
Page 88 and 89: Remittance Transfers in Sierra Leon
Page 90 and 91: Knowledge RemittanceThe Liberian di
Page 92 and 93: process furthermore was a pioneerin
Page 94 and 95: Levitt, Peggy and Deepak Lamba-Niev
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Section III: Diaspora Networks andC
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Post-Conflict Development,” this
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One of the main challenges for mobi
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6. Transnational Remittances and De
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The Salvadoran Diaspora is very sig
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annually during the 1990s to less t
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Figure 2: Transnational Vicious Cyc
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The transnational vicious cycle not
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emittance flows is mixed, as initia
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individuals, communities, and famil
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areas. This issue can potentially b
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This is a breakthrough moment: afte
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Edwards, Sebastian and I. Igal Mage
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y La Distribucion Del Ingreso, 1st
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7. Remittances and Community Resili
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For quantitative data collection, a
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Remittances are perceived as playin
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the affected population. Internatio
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ReferencesAddleton, J. 1984. The im
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8. Filling the Gap in Health Staffi
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The alternative is for donors to se
Page 138 and 139:
cians in the U.S. in 2000 (Clemens
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1. Remittances, Financial Inclusion
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networks, and communities. The role
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• In the present era of heightene
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the island of Kosrae, in the Federa
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and Sweden and has held visiting pr
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he organized a number of workshops
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