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Money remitter shut out by banks due to AML concerns claims it has no choice but to physically ship cash around the world

Money remitter shut out by banks due to AML concerns claims it has no choice but to physically ship cash around the world

By Jenée Tibshraeny

Anti-money laundering and countering the financing of terrorism (AML/CFT) laws have sparked a major New Zealand money transfer operator to consider going back to the dark ages of shipping cash around the world.

KlickEx, which also processes transactions for a number of other remitters in New Zealand, is planning to transport what could be hundreds of millions of dollars of cash, mainly between New Zealand and the Pacific Islands, each year.

Its founder and chief executive, Rob Bell, wants to use 130 foot “high speed vessels” to transfer funds KlickEx can’t balance using its currency clearing system.

He claims the company’s being forced to use an archaic system to stay in business, due to banks’ “de-risking” policies.

The (unintended) consequences of AML/CFT

Banks around the world have systemically been ditching their remittance clients, in fear of being held responsible for soliciting any illegal transactions under tough AML/CFT rules. 

The issue is that if a remitter gathers funds from a number of people in New Zealand, puts these in a bank account, and then transfers the funds to recipients overseas, their bank doesn’t necessarily know where the money is coming from and who it’s being sent to. It could therefore be breaching AML/CFT rules.

Yet if remitters go out of business, consumers will pay the price. Migrants in particular rely on remitters to transfer money to their homelands, paying much lower fees than what the banks charge.

While the Reserve Bank has spoken out against banks’ blanket de-risking, Finance Minister Bill English has ruled out “radical” policy changes to shield money remitters from banks' blanket de-risking policies.

A High Court judge in May also set a precedent by clearing Kiwibank of any wrong-doing in closing the accounts of one of its remaining few remittance clients, E-Trans International.

KlickEx has since backed away from the legal action it threatened Kiwibank with, and has had its accounts with the bank closed.

While some banks still service remitters, Kiwibank had been considered the “last bank standing” in New Zealand.

Replicating the international banking system

Speaking to in a Double Shot Interview, Bell explains that in the absence of a bank account, KlickEx is emulating the cash clearing system banks use to balance payments coming and going between countries.  

“What we try to do is balance the number of payments coming in to New Zealand with the ones going out,” he says.

“Generally when someone sends money to Tonga or Samoa, we have someone on the other side wanting to bring money out. So you have lots of people sending money home for food. Then you have lots of the purchasers of food, the importers there, needing to pay for that food back in New Zealand. So we just manually manage that.”

Without being able to tap into the economies of scale of a banking system, Bell says it’s “kind of ridiculous the lengths that we’re going to”.

“When we had banks, we could actually go to the banks and offset that ourselves and just purchase from the wholesale market. But as the banks are shutting out our access to first of all the wholesale market, we then approach the commercial clients and say, ‘Hey do you want free FX?’.”

Bell says KlickEx’s “commercial clients” include “every business you can imagine. Just regular businesses… Supermarkets, importers, just normal, everyday, very low risk people”.

It collects cash from around 80 locations in New Zealand, including shops offering remittance services. Due to commercial sensitivity, Bell won’t reveal which remittance brands use KlickEx’s netting system, but says it’s a large bulk of those operating in New Zealand.

While KlickEx has been using its own cash clearing system in a limited capacity since 2007, it has this year rolled it out across the business more broadly.

Using boats to become a 'necessity'

Bell recognises it can be difficult for the company to balance the funds going in and out of a country, as the quantities don’t always match up.

This is where the boat idea comes in.

“If you can’t use a monetary exchange or an arrangement with a bank, you have to go to physical shipping.

“We need to be able to move collateral. If we have a surplus of say New Zealand dollars, we need to be able to get some sort of collateral up to say Tonga to do payouts, and that might mean shifting pallets of cash, which is crazy.”

KlickEx’s financial results aren’t publicly available, but Bell says the company transferred $400 million during its “peak year”.

Asked how much of this may be considered “collateral” and could therefore be moved on boats, he says: “A very small percentage of the total daily movement would need to be exposed to this.”

Bell says he can’t go into more detail. “I can’t tell you what’s going to be sitting on ships - that’s too dangerous.

“Everything that we don’t net, has to move eventually, or wait. We have synthetic liquidity systems that can bridge those shortfalls.”

Asked how seriously he is taking this proposal, Bell says: “It will become a necessity.

“We need options because we can’t be seen, or known to put large amounts of value transit onto Air New Zealand or Virgin flights.”

Going into more detail on the boats he wants to use, Bell says: “We need a couple of them, because you can’t have one because everyone will know that might be the one that has cash on it. You have to run decoys.

“It sounds a little crazy, but… we spend more money on our cyber security than it would cost to run a big diesel engine like that, so it’s not actually a big cost increase.”

Bell concludes: “It doesn’t really increase the risk that much.”

Department of Internal Affairs 'not responsible for ensuring the safe transportation of the cash'

The Department of Internal Affairs - the supervisor responsible for monitoring remitters’ compliance with the AML/CFT Act - says: "The DIA is aware that KlickEx has proposed using boats to transport cash as part of their money remittance services. 

"The Department is not responsible for ensuring the safe transportation of the cash. That would be a business decision for and responsibility of KlickEx.

"As with any reporting entity, KlickEx must maintain an adequate and effective AML/CFT programme. This includes the requirement to update their AML/CFT risk assessment and procedures to address any changes to their business model.

"The AML/CFT Act also has specific reporting requirements (sections 68-71) relating to the transportation of cash into or out of New Zealand."

It also confirms: “We do not have any current or previous investigations relating to KlickEx. In 2014, we completed a desk-based review of Klickex’s written risk assessment and AML/CFT programme and were satisfied with the level of compliance of these documents."

KlickEx: 'Everyone knows what we're doing is not the solution'

Bell says there’s a requirement for KlickEx to undergo an external audit every two years. While it had bank accounts, banks also did “quarterly reviews” of its business.

Since using all its own systems, KlickEx has not been audited.

“I feel for the regulators… they want a solution. Everyone knows what we’re doing is not the solution,” Bell says.

He maintains being ditched by banks is an unintended consequence of the AML/CFT legislation.

“Because there’s this ambiguity [around the legislation], you’re forcing peripheral people like us… to go to these really archaic systems. We’re stepping back in process, but applying wonderful technology to it.

“And the regulators are looking at us going, ‘You’re buying ships - this is crazy, but solve the problem. It is better to do this than it is to see the prices [consumers pay] go up’.”

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I genuinely thought this was a wind up; shipping cash around the world by boat does sound a bit odd you have to admit. What sort of quantities are we talking? Wouldn't a small twin engine aircraft be cheaper, quicker and safer!
I'm sure they could do a very profitable run up to China!

... yeah , I was thinking along similar lines .... it had occurred to me that April 1'st still rolls around just once a year , doesn't it ( years containing a general election are the exception ; they have two April Fools days ) ...

And then I thought , hang on a mo' , Gummy ... think outside the square buddy , we could pay Somali pirates to teach us their craft ... and then launch a new career , intercepting the Cash Boats ...

We looked into aircraft. Ships are much more practical for the Pacific - and are better suited to our humanitarian efforts, when natural emergency situations arise. When Cyclone Winston hit (Tonga first) - the NZ government responded with USD 38,000 immediate funding. By the time that was announced (within hours) more than 10 times that had flooded into Tonga - on a Sunday - via our real-time services.

It is both archaic and modern. Many names for it. Hawala is one. Ancient form of money transfer that actually transfers only the net amount not offset. (The speed boats full of cash is the tiny fraction, good for media, the real deal is the offsetting). Traditionally a simple ledger system based on trust. Fell away as banks became the provider of choice, but as banks apply blanket derisking, plus modern technology, it may see a resurgence.

In the medium term, does it show a short-term compliance mindset potentially creating a much bigger business risk for banks? Combine that with eroding trust in banks, and technologies where trust is in-built eg as blockchain evolves, will modern-ancient methods begin to expand? 

"Everyone knows what we’re doing is not the solution". Indeed, not for Klickex. Or banks? (short term derisking seeding bigger problems later?) And policymakers? (Ignoring it could potentially place some new methods outside the system entirely).

Take note, aspiring pirates.

Genuine Somali remittances were first cut by banks. Somali pirates amongst the best in the world. A marriage made in heaven.

My understanding is that WorldRemit - the company feaured in the Reuters article, whose CEO I interviewed here - also uses KlickEx's platforms. 

That's lots of cash then. KlickEx getting fast boats. The pirates already have fast boats. What next? Commissioner Mike Bush and suave sidekick Assistant Commissioner Andy Coster, resplendent in t-shirt and suit, designer stubble, and a bigger and better Miami Vice-like fizzboat ready to dash out from the Waitemata harbour in hot pursuit, destination palm-fringed...

Oh, please please please.

WorldRemit has just clarified it doesn't deal in cash and won't use the type of arrangement being proposed by KlickEx.

It has access to bank accounts and therefore has no intention of changing the way it settles with its correspondents.

It's strange. All banks use cash porting services between branches. Any bank compliance officer that thinks electronic payments can happen without some form of cash being involved somewhere isn't looking at a 360'degree picture. New Zealand is one of the societies closest to cash-less transactions - but the banks here are some of the most blinkered, as the Somali CEO of the above UK based company has directly complained about, on the website. We'll keep monitoring this space for sure.

Hahahaha. Sad day for you KlickEx. Good luck with the boat idea. Have you considered unicorns?

Where do I apply? I have started growing the stubble already. Dodging the bullets and the odd nuclear test, my trusty parrot perched on my shoulder. kwark kwark pieces o' eight

It is just not possible to ship that amount of cash on a consistant and reliable basis
Two, perhaps three times. Yeah
But it is an escape strategy, not a business model.

My guess moa man is that it's a media-friendly way for KlickEx to make a serious point. After all, done well, and depending on flow directions, cross-offsetting capabilities, scale, and the timeframes they allow for holding open positions, the amount of cash physically transferred could be a tiny proportion, and harnessing all of that with really smart technology, maybe none at all.

The core issues I guess he's trying to highlight are more serious. I expect also that Professor Louis de Koker, an expert in this area, might not term such undesirable results an "unintended consequence", when they were foreseeable. Just because the legislation and actions taken to advance AML objectives may have the opposite effect, when that effect is expected and observed, arguably doesn't make them unintended. This remains a vexed issue between FATF, UN, G20, World Bank, and far smarter brains than mine.

Firms have been working on solutions too. It's possible that blockchain and other technologies and business models will create alternatives for legitimate businesses that are more secure than the banking systems for which AML controls have been developed. So it's not all about gaps in the system (as Bitcoin was first feared), but emerging things that might actually be better at achieving AML objectives than the current binary thinking. The issue then is the 'meantime' space in which we currently reside. So, bring on the boats!

The government should now add pirate (with recent experience) to the essential skills list and secondly encourage a private educational institute to run a course "Sea Piracy 101" - good for a few more international students.

We'll probably be needing it ourselves, Aaargh

Awesome, a new way to get more illegal money into NZ property

From KlickEx: Thanks team for the encouragement. We're a bit different from most of the remaining players in the industry, as we have a social mission to provide support to families who are being cut out of banking.

There are thousands and thousands of examples of individuals already legally, but inefficiently taking cash across boarders by their own initiative, as a response to "de-risking". As low cost operators are forced out, the service prices in the past three month have risen by about 400% (for cash services) to 900% (for bank services) for families wanting to send on average $150 to $250 per month, home - as the low cost options get taken off the table.

This kind of fee equates to more than $900 per year for a family in countries (according to 2016 UN estimates of families impacted) where GDP per capita is only around $5,500 per year - and this is very very meaningful money. In a climate where families in NZ are themselves under tremendous pressure due to sharply increased living costs.... every dollar counts. Putting all those $900 fees together - it's more than $100 million per year - or about 30% of the entire NZ Aid budget to the Pacific, which is, itself, only half the amount of private direct investment - or "remittances" sent by families each year.

At a granular level, the problem is that family support payments like these STILL fall into the 'red-zone' of the Bank's comparably blunt compliance systems' profiling, which were set to "OMG-NIMBY" status in response to the criminal breaches of intentionally aiding drug trafficking and/or intentionally breaking/blurring sanctions by American and European banks over the past decade, or ethical shortfalls relating to overcharging for services (LIBOR, PPI, etc, etc) - and these compliance settings have hardly changed since.

Under this framework, small payments overseas under $50 are still be seen as more likely than a $100,000 payment to be used to make a bomb or launder money - even in the Pacific - and being involved in that nort of nefarious risk, COULD potentially further damage a bank's reputation (or ability to retain a bank license) by it being seen to further harm, or not have prevented 'western' interests overseas. Even for NZ banks, if they were (according to existing conventions) to support low cost payments for the Pacific...

By that framework - all small payments - particularly those to people who don't have bank accounts - fall into this lingering category of "high risk of financing terrorism" - even if these payments are coming from bank accounts in NZ.... from bank customers. Using a low cost system (as per below) is somehow "high risk" - vs doing the exact same payment with exorbitant fees attached, even despite strong legal protections for banks to be indemnified by the low cost operators who are required by law to take this compliance burden themselves, in full, and indemnify the banks....

Despite this, the information gap, and a general lack of sophistication in this field, no bank (as yet) is willing to acknowledge that not all payments of this sort are "potentially evil with incomprehensible probability"... nor have they been able to recognise that in the Pacific - due to the enormous uptake of digital banking (where nearly 100% of households in some countries have received money via low cost digital banking channels) every single payment can now be traced to funerals, birthdays, utility bills, schools, concrete/construction material, domestic appliances, supermarkets, car parts, or other highly legitimate causes.

Or have they? Strangely - both ANZ and Westpac have launched new services recently - trying to attract this same business. So is it risky - or is it not? It's either a market failure. Or some other unseen force is at play.

In a well functioning market, the actions of a few banks, responding to recent F.U.D. around bank fines, etc, would not cause a structural market failure/collapse. But in NZ and Australia - there are only a handful of senior compliance officers at a handful of banks - and banks all move as banks do, in herd formation - so it really only takes one of the banks to not have enough time to consider the situation fully - and retain inappropriate policies - and all the other banks will follow suit - which is what has happened in the past 4 years.

NZ now has full alignment across all the banks that small payments that go across international boarders, have a "very high risk" because "reasons" - and research says that small payments may be attached to money laundering/terrorism financing/proliferation of WMD - (but before low cost operators, nobody would try and send a $20 bill payment due to bank fees - there just wasn't that data to mark out that market segment).... because previously, those same people had refused to use the banking system to make payments, because of the crazy high fees.

Rather than responding to his - it has been our experience historically - but much less recently - that banks fear making these policy changes quickly (big ships turn slowly - despite AML/KYC legally requiring high levels of response!), so they instead respond by loudly setting rumours in play, that low cost services 'can only exist by cutting regulatory corners' - because bank fees 'are surely a result of high regulation and controls' (which banks love to complain about - but don't hesitate to use when it suits their interests!)- and the only way non-banks can lower costs, is to take 'regulatory arbitrage' short-cuts and be 'less compliant'. Which we work hard to counter with data, and proof.

The issue is that dialogue has been vey low - or has been before now... Access to the Payment system is governed by private companies - and when those companies don't put enough resources towards understanding decisions - and don't have an appeal process - excluded people - and the organisations who exist to support them, need to do practical things to comply with the law - and to keep costs down. And so we have, by plane, train or sea - companies like KlickEx find ways to re-create the payment system (even at a national level) - in ways that are calibrated to the end user, the law, and the ability of the lowest income families in the Pacific to pay.... which is something our team, is very very proud of!

Thanks for engaging in the discussion KlickEx (and thanks Jenee for updating).

This is a very real issue for many Pacific peoples (and others, often unbanked, as the poorest of people often are, yet completely legitimate, just trying to get along, who bear the brunt of 'one-size-fits-all').

The banks' response is understandable too. To them it's a risk balancing exercise and business decision.

Governments and individual agencies say they wish banks would apply a more nuanced, risk-based approach. Yet the only reason banks do what they do is in response to policy settings and a regulatory environment that forces 'compliance' irrespective of (and sometimes perversely counter-productive to) underlying policy objectives.

In short, banks are judged on having processes in places, not whether the processes help achieve policy objectives, and banks being logical creatures respond accordingly.

It's possible to get better outcomes, but governments telling banks to 'do the right thing' doesn't cut it when government actions speak louder, requiring banks to prefer form over substance.

The inconvenient truth is that the solution lies solely in the hands of policymakers. Pretending otherwise is an exercise in futility.

Until policymakers engage effectively, remitters will struggle, more will go to the wall, and millions of ordinary people will continue to pay a high price for just trying to survive and help their families.

The irony is that smarter policy settings will deliver more value to many of the nations we say we care about. To use a common analogy, by handing them a 'fishing line' to help themselves, rather than just the 'bread and fish' we hand out in aid money every year for immediate sustenance.

Terror financing is real, but settings that better focus on the intended target without spraying millions of people with friendly fire might be a better use of resources. And respect for our neighbours and fellow peoples.

Outstanding perspective, Ron - you're right on the money in all regards (we think). We just wish we, and the people we're mandated to support - weren't being ejected so bluntly from existing systems. There has been huge work towards 'getting people banked' - and as you so perfectly describe it;

"Banks are judged by having processes in place - not whether the processes help achieve policy objectives".

Everyone wants an efficient, regulated, transparent solution. We think the solution is technologically proven, extremely low risk, and academically straight forward - but we've yet to get the green light to make it happen in NZ.

Squeaky wheels get the oil... reluctantly... all the wheels in this market are squeaking - and nobody with the can seems to know where to put the oil!

Thank you. A quick test to see if remitters have a chance is what the pollies do about tranche 2. If they steam ahead as planned, or redesign for effectiveness.

If the latter, then you, your customers, all tranche 2 businesses, banks, the New Zealand economy and society, actually, pretty much everyone except crims, will be better off, and NZ a world leader. 

My subs to that effect (and any others I'm aware who've made theirs available) are at the "consultations" heading at if you're interested. 

My PhD research is in Political Science though, so I'm a realist about political processes and not expecting it to cause even pause for reflection. (Happy to eat humble pie if wrong).

Ironically, an excellent IGPS/ANZSOG session with a world leader on designing policies better, for policy effectiveness and better economic and societal outcomes, was packed to capacity with policy analysts in Wellington yesterday. The Minister of Finance is also the biggest proponent of better outcomes. And most politicians and public servants entered government to create better outcomes for NZ society. One day, someone might just join the dots. Or, as someone above said, unicorns...

Having worked at KlickEx I know Rob and the situation well.
Kiwibank closed their Bank account becuase of the concerns they had with Klickex, not blanket derisking.

I left Klickex due to my concerns with the way the company was being run. Ask KlickEx previous employers 3 CTO, 2 CEO, 3 Ex Bankers will say the same. All staff members left concerned with the way KlickEx was being run.

I notice KlickEx now has a Westpac account, I am sure they didnt disclose to westpac. .


We've not had anyone resign or leave for a long time - certainly not since we became the last MTO Kiwibank supported. We're grateful for the support we've had from Kiwibank - they did their best.

Other than some pretty hard feelings that naturally occurred when we went from 30+ staff/contractors to 6 staff in 2015/16 - we've had good staff relations.

Presently - we don't have a Westpac account unfortunately. Sorry - I don't know who you are - but we wish you the best in your ongoing career.


It's sounds crazy what they are doing.. and even crazier that they are making it public?

It's because we're super up-front.

The physical movement of value is a last resort. There are plenty of much more sensible options available - but at the moment the industry is being blocked.

And as a result - it's the customers that are suffering. This is particular to just our retail business. And it's heart breaking to turn away people who need the service (to not contain so many fees) so much.

The reason it's become public, is because we let the World Bank know that we would find a way to keep online despite the 'de-risking' - even if it meant returning banking to the proven methodologies of the Spanish Galleon days of the 1400s - albeit with modern security systems! - and of course... this is one tangible way of showing the physical impact of some policies.

It's still curious to me, why it's how we're responding to the "crisis" - and not the 'impact' on the people we are mandated to serve, is the bigger issue... but it's hard... millions of poor people affected by 20% of their income - or one ship full of cash... but this is the world we live in - and we're just trying to make it better...!

It's rather disappointing that these globally enforced AML schemes end up hurting the hard working diaspora who send money back to help their families in poorer countries (my partner is one such who does this back to her home country) when the real money laundering crooks are those who use the services of ....GM Sachs (& Co. including dark pool funds/hedge funds) and reside in palatial digs in Dubai, Monaco et. al and will always find a way to usurp these 'global' controls...