Asale left her home in Malawi in 2006 at the age of twenty.1 She found work as a housekeeper and nanny in Durban, South Africa, where she receives room, board, and a small salary as her compensation. Since her living expenses are minimal, she is able to save a portion of her income each month to send back to her family living in Malawi. The money that she sends helps to provide for her parents and younger siblings, and they have been able to save enough to expand their small farm. Asale's older brother left home to work in the mines in South Africa, and he also sends home a portion of his earnings to support their family.
Asale has not been able to get proper South African identification, and she does not have a South African bank account. As a result, she cannot use a bank to send money to her parents in Malawi. South African currency regulations require a person to use an authorized bank if a person wants to transfer money across borders.2 Moreover, even if Asale could obtain a South African bank account, the cost of using a bank to transfer money is so expensive that Asale would not have much money left over for her parents to receive. Instead, once a month Asale gives cash and any other gifts that she wants sent to her parents to a taxi driver who delivers them in Malawi. The money usually arrives, but not always, and Asale simply accepts this as a necessary transfer cost.
The transfers that Asale makes from South Africa to her family in Malawi are remittances. The term "remittances" has become a staple in development conversation, but its precise meaning is less concrete.3 In general, remittances means personal and capital transfers in cash or in kind made, or received, by resident households to or from other non-resident households.4 Remittance transfers may be made entirely within a country or from residents in one country to residents of another,5 as with Asale and her family.
Remittances are an important part of income support in many developing nations.6 For instance, in Lesotho, a small nation surrounded entirely by South Africa, the share of remittances as a portion of gross domestic product (GDP) exceeds 25%.7 Unfortunately, it is expensive for migrants to send money from South Africa.8 Because of the high cost of sending remittances home, a large portion of remittances coming out of South Africa flow through informal channels,9 such as giving money to taxi drivers to carry it across the border. Informal channels are less desirable methods of transfer than formal channels: they are less secure, they take money out of the financial system, they sustain other "black market" activity-such as fraud and money laundering-and they impose unknown and unpredictable costs and dangers to the remitters and the recipients.10
Two of the causes for the high cost of transferring money out of South Africa are the South African exchange control regulations and the country's anti-money laundering identity requirements, both of which impose arduous barriers, especially for migrants and the poor. Therefore, reducing the high costs and other barriers which hinder the ability of immigrants to send remittances back to their home countries through formal channels will require changes to the South African exchange control regulations and Anti-Money Laundering Act's identity requirements.
The issue of moving more remittances into the formal sector raises a multitude of concerns: macroeconomic fiscal policy,11 illegal immigration,12 national security,13 detecting and punishing money laundering,14 and requiring better information in order to determine the real impact of remittances on sending and receiving states.15 Each of these issues is inevitably political, meaning that any real intra-state modifications to the regulatory system and related laws will likely be mired by internal conflict. In particular, this Note does not focus on illegal immigration, which, while an important aspect of the discussion of migration, cross-border remittances, and reforms to the remittance market, is simply too large a topic to be adequately addressed here. …