In today’s interconnected world, international money remittances play a vital role in supporting families and economies, especially in developing countries. However, the cost of sending and receiving these funds remains a significant concern for millions of migrants and their families. Recent groundbreaking research sheds new light on the complex interplay between anti-money laundering (AML) regulations, frontier technological readiness, and remittance costs, revealing intricate dynamics that challenge prevailing assumptions. This study, led by Thakur, Yadav, Mankame, and colleagues, meticulously investigates how these factors converge differently across remittance-sending and remittance-receiving countries, offering nuanced insights with far-reaching implications for policymakers, financial service providers, and international regulators.
One of the most striking revelations from this research is the unexpected disconnect between the volume of remittances paid by sending countries and the associated remittance costs. Contrary to what conventional economic theory might predict, the study finds no significant direct relationship between the amount of money sent and the fees charged. This suggests that current cost structures could be rigid, potentially due to fixed fee schemes imposed by regulations or inefficiencies entrenched within the financial ecosystem in sending countries. Such inflexibility risks stifling the outward flow of remittances and prevents volume-driven cost reductions that could benefit millions relying on affordable money transfers.
Digging deeper into the role of technological advancement, the researchers evaluated the Frontier Technology Readiness Index (FTRI) — a benchmark for how prepared a country is to adopt cutting-edge financial services technology. Surprisingly, in sending countries, higher FTRI scores alone did not translate to lower remittance sending costs when considered without other variables. Equally, stringent AML policies by themselves were not consistently linked to cost improvements, indicating that neither technological sophistication nor regulation in isolation sufficiently influences fee structures. This highlights that simple adoption of new tools or enforcement of laws will not inherently address remittance affordability on their own.
However, the interaction between these variables reveals greater complexity. The analysis demonstrated that when frontier technology adoption is combined with lower AML Index scores — indicating less burdensome compliance requirements — remittance costs in sending countries are significantly reduced. This interaction effect suggests that while technology alone may be neutral, its effective deployment alongside streamlined AML frameworks can create efficiencies that lower costs. This insight challenges fintech developers and regulators alike to consider the operational regulatory environment and its compatibility with technological infrastructure to unlock cost savings.
The scenario in remittance-receiving countries paints a different, but equally compelling, picture. Here, the interaction between frontier technology readiness and AML regulation exerts a contrasting influence on costs. Higher AML Index scores typically signal more stringent anti-money laundering practices, which, when paired with high technological readiness, tend to elevate remittance receiving costs. The findings reveal that costs rise sharply with increased AML stringency in technologically advanced receiving nations, suggesting that the regulatory burden might overwhelm technological benefits, potentially through more complex compliance requirements or duplicated efforts across institutions. This dynamic underscores the delicate balance between ensuring financial security and maintaining cost efficiency for remittance beneficiaries.
Quantifying these interactions further, the study reports that in sending countries, a unit increase in both FTRI and AML Index correlates with increases in remittance costs by 23.26 and 1.79 units respectively, highlighting the pronounced role of technology moderated by regulatory looseness. Conversely, in receiving countries, the same unit increases lead to costs reductions of 19.28 and 0.94 units, respectively. This dichotomy reveals systemic asymmetries between the sending and receiving ends of remittance corridors, compelling stakeholders to tailor strategies according to their country’s specific context rather than pursuing uniform interventions.
The research methodology’s robustness was reinforced through fixed effects models addressing country-specific heterogeneity to ensure findings were not merely artifacts of data variability. This methodological rigor lends confidence to policy recommendations that emerge, particularly the suggestion that remittance flows are opaque when financial inclusion is low — a prevalent reality in many developing countries. Migrants without access to formal banking systems often circumvent AML controls entirely, routing money through informal channels where costs are hidden, and risks increase, signaling an urgent need to foster inclusive financial ecosystems.
In receiving countries, empirical results aligned closely with the economies of scale theory, showing that increased volume of remittance inflows tends to reduce per-unit remittance costs. This relationship further reinforces the idea that enabling higher technological adoption — which promotes financial inclusion and streamlines transaction processes — facilitates greater remittance volumes and thus lower relative transfer costs. Yet, stringent AML regulations impose countervailing pressures that elevate costs, reflecting the need for balanced regulatory frameworks that maintain security without suppressing affordability.
These findings resonate with, and expand on, existing literature. The study corroborates research by Avgouleas (2015) and Esoimeme (2020), who emphasized the nuanced impacts of AML measures on financial transaction costs. Yet, it challenges the conclusions of Kpodar and Imam (2022), whose investigation did not identify transparency — a core AML index component — as a decisive factor in remittance pricing. This divergence illustrates the evolving nature of remittance ecosystems as technology and regulatory landscapes advance, calling for continued inquiry and dynamic policy adjustments.
Importantly, the study critiques optimistic narratives surrounding blockchain technology and Central Bank Digital Currencies (CBDCs) as singular solutions for remittance cost reduction. Echoing cautionary views expressed by SWIFT (2023) and Habib et al. (2022), the researchers argue that while these technologies offer potential, they cannot independently overcome the cost challenges posed by complex AML regimes and infrastructure inefficiencies. This perspective counters more enthusiastic claims such as those made by Christodoulou et al. (2024), underscoring the necessity for an integrated approach combining technology, regulation, and operational reform.
From a practical standpoint, the research offers clear governance guidance. For remittance service providers in receiving nations, optimizing the balance between adopting frontier technologies and complying with streamlined AML protocols is paramount. Overemphasis on compliance without adequate technological support risks escalating costs, whereas unchecked technology use without robust AML frameworks could increase illicit flows and financial risks. Policymakers, therefore, bear the responsibility to foster regulatory environments conducive to innovation while safeguarding against financial crime through efficient, digitized processes.
Further recommendations emphasize the role of digitalization in enhancing the efficiency of core compliance mechanisms, such as sanctions screening, Know Your Customer (KYC) procedures, and identity management. Encouraging fintech enterprises — which often operate under less stringent AML regimes — may facilitate the transfer of remittance flows from informal to formal channels, increasing transparency and reducing hidden costs. Moreover, harmonizing compliance standards internationally can reduce redundancy, a critical contributor to inflated costs.
At the system level, collaboration between central and commercial banks is advocated to implement interoperable payment systems based on internationally accepted standards like ISO 20022, facilitating seamless cross-border payments. Additional integration of emerging technologies such as the Internet of Things (IoT) and machine learning offers promising avenues to automate and optimize AML screening, lowering operational burdens. These technological-enablers, combined with regulatory harmonization, could revolutionize remittance cost structures, making financial support more accessible to migrants’ families worldwide.
Beyond remittances, the implications of this research reverberate across all forms of cross-border financial transactions. Given the similar challenges of AML compliance, regulatory fragmentation, and heterogeneous technological adoption, findings here provide a valuable foundation for broader financial services reforms. Policymakers and industry leaders are thus urged to consider cross-sectoral strategies integrating technological readiness with smart AML enforcement to achieve scalable cost reductions and enhance global financial inclusion.
In conclusion, this seminal study penetrates the complexities underlying remittance cost dynamics, revealing that neither technological readiness nor AML regulations alone suffice to drive affordability improvements. Instead, the interface between these forces dictates cost trajectories differently in sending versus receiving countries. As global remittance volumes continue to grow, unraveling these interdependencies is critical to designing policies and technologies that balance financial integrity with economic accessibility. Stakeholders who heed these insights will be better equipped to forge resilient, efficient, and inclusive remittance corridors that uplift millions worldwide.
Subject of Research: The impact of anti-money laundering measures on remittance costs and the moderating role of frontier technology.
Article Title: The impact of anti-money laundering measures on remittance costs: moderating role of frontier technology.
Article References:
Thakur, S.Y., Yadav, P.D., Mankame, Y.S. et al. The impact of anti-money laundering measures on remittance costs: moderating role of frontier technology. Humanit Soc Sci Commun 12, 724 (2025). https://doi.org/10.1057/s41599-025-05047-9
Image Credits: AI Generated
