Despotic regimes like North Korea have controlled financial systems that are constantly watched for unusual transactions.
Despotic regimes like North Korea have controlled financial systems that are constantly watched for unusual transactions. Remittance of funds to such countries may pose a challenge due to their nature of governance. The sanctions imposed on North Korea by the United Nations Security Council has made it virtually impossible to send money in and out of this country’s borders. The sanctions go as far as forbidding North Korea from setting up financial services firms overseas. The idea by the countries elite to channel funds through their state-owned banks that are in China has also suffered a major blow. This is after the international community piled pressure on Beijing: China’s capital, to block such transactions. The situation is so dire that North Koreans have reverted to moving money physically by road into china through their shared border. Towns like Dandong which is a border town has seen increased activity as a result of these restrictions. All these sanctions are due to North Korea’s nuclear ambitions with frequent tests that are deemed to be militarily provocative and that the US on many occasions has termed an act of aggression, especially against South Korea.
The financial infrastructure in South Korea, on the other hand, is extremely robust. Transfer of money can be done from anywhere in the world into its economy. Migrant workers working in various capitals can easily remit money to their families for daily use. Money can be transferred through a bank into an account in Korea or better still one could opt for money transfer bureaus in case the recipient can’t access a bank. The rates offered as transaction fees, however, be too costly for this mode of remittance.
Regulated economic markets like China also experience challenges in cash transfers. In 2015, china’s economy attained a 6.9% growth despite stunted growth experienced in most economies. The government’s urge for better economic performance made it impose barriers and limitations on cash transfers overseas. Government directives for banks to be more stringent to individuals and corporations sending money out of China had a direct impact on demand for property overseas. Individuals looking to send money out of China had to seek non-formal channels to send money out in order to beat the restrictions imposed by our government. Countries like Australia that heavily rely on China for real estate and agricultural developments faced serious challenges. The government restrictions went as far as capping the amount of cash that could be withdrawn from foreign ATMs to an equivalent of 100,000yuans annually. Economic experts attribute the tight regulations to fear by the Chinese central bank, of a sudden cash crunch and reduced liquidity in the market which could have a dire impact on the economy and a knock on effect on emerging markets.
Regulation has an effect on market forces; where a liberalised economy, on the other hand, will find equilibrium in various sectors including financial services and by extension currency transfers. In as much as regulation may be prudent for some economic zones, experts advocate for free market forces.