KARACHI: Tightening the money laundering rules has controlled illegal transactions but it has also disrupted the flow of remittances, said monetary experts and currency dealers on Saturday.

There are fears in the currency market that tighter rules may also hurt remittance inflows during Ramazan, when they are double the normal level.

Experts said that the loss of Pakistani jobs in the Gulf countries was not the only reason behind the slowdown in inflows; the sending of remittances has itself become difficult, particularly for bigger amounts.

Under the new stricter regulations, the senders of money need to answer a number of questions, some of which are sensitive and may put them in trouble.

Some experts say the impact of a strict money laundering regime on remittances was not visible as the inflows coming through the banking channel fell 2.5 per cent year-on-year in the nine months through March.

However, stricter policies have prevented the flow of illegal transactions. “Money changers are afraid of even talking about hundi or hawala,” said Anwar Jamal, a money changer. “The government’s strict policy has stopped almost all illegal transactions in and out of the country.”

Against the general discontent, Mr Jamal hoped that the remittance inflows during Ramazan would double just like they have for the last many years.

Higher inflows during Ramazan, which also happens to be the last month of this fiscal year, would also help turn a year-on-year decline in remittances into a growth, he said.

Tight anti-money laundering regulations due to increasing terrorism have slowed down money movement the world over.

Hundreds of thousands of Pakistanis working overseas send a higher amount of money to their families for Ramazan- and Eid-related spending and charity, especially zakat.

A large number of Pakistanis also visit their homes, collectively bringing millions of dollars to local open currency market which results in depreciation of the dollar for a brief period.

Currency dealers and analysts say the price difference of dollar in the open and inter-bank markets is not too big to attract channels other than banking to send money to Pakistan.

Around four months ago, the dollar traded at Rs108 in the kerb market compared to Rs104.85 in the inter-bank market, triggering a rise in illegal transactions.

However, the price difference between the two markets has now reduced to Re1 to Rs1.20 on a dollar.

Published in Dawn, April 30th, 2017