Many of these people rely on small sums of money sent through money transfer companies, but the banks are closing the accounts of the transfer companies... leaving people without money for hospital visits, school fees and even food.
The banks say rules hoping to stamp out money laundering and the financing of terrorism are forcing their hand, but experts say the risk of accounts being used for these aims are low.
Presenter: Jemima Garrett
Speaker: Jonathan Capal, Manager, SendMoneyPacific, SendMoneyAsia and Remittance Specialist, Developing Markets Associates Asia Pacific; Rev Jason Kioa, Tongan Co-ordinator, Uniting Church, Melbourne; Carlo Corazza, Senior Payments Systems Specialist, World Bank
GARRETT: Australian banks have a big footprint in the Pacific but to send small amounts of money such as a weekly $200-payment to relatives, they are very expensive. More than $30 each payment is not unusual. So Pacific Islanders have turned to a proliferating number of small money transfer companies. The Australian government is helping by providing a website which compares the costs of different money transfer options.
Jonathan Capal, from the London-based company Developing Markets Associates, manages the website. He says Australian banks, including all of the big four, are closing the accounts of money transfer companies.
CAPAL: We are aware that there has been a number of account closures by various banks across the Pacific Islands so that is the money transfer agents receiving money from Australia. Increasingly, thought, there also appears to be a situation where money transfer bank accounts have been closed within Australia too, so at both ends this is making it potentially harder for migrants to send money back home.
GARRETT: The vast majority of Pacific Islanders living in Australia send money home to their realtives each week or fortnight from their pay packet. That money goes on basics such as school fees, health care and shelter.
Melbourne-based Reverend Jason Kioa, says if the money sent by members of his congregation does not arrive in Tonga, it creates problems.
KIOA: People will start to borrow money from their neighbours, and this is very common in a communal lifestyle. You borrow money from your neighbour but then if you don't get your money, or it is delayed, then your neighbour is also in trouble. So, yeah, It affects the whole community really.
GARRETT: Could it even leave people without enough money for food?
KIOA: Yes, absolutely.
GARRETT: The Banks say the small money transfer companies pose a money laundering risk. A claim rejected by the World Bank's Senior Payments Systems Specialist, Carlo Corazza.
CORAZZA: No there is no evidence of money laundering-laundering activities from Australia to the Pacific islands through the remittances channels.
GARRETT: International drug cartels are using the Pacific to get access to Australia and terrorist organisations seek out countries with weak governance. But Mr Corazza says it is simply not feasible for criminals to use small money transfers.
CORAZZA: Money laundering a huge amount of money with transfers of $200, $300 and $400 each, it is basically impossible. It would cost a huge amount of money to any criminal organisation.
GARRETT: Money transfer companies have to undergo strict checks before they are registered and comply with anti-money-laundering and counterfinancing of terorrism legislation.
Jonathan Capal says any attempts at money laundering are likely to be picked up.
CAPAL: Austrac is the regulatory authority in Australia and they have very tight automated procedures with the idea being that any erroneous transaction gets captured in the system very easily. So there are plenty of checks and balances in place but it is something that appears to be causing more of an issue with banks.
GARRETT: Pacific islanders in Australia, New Zealand and the United States send around $500 million to their relatives each year. The banks are in competition with the small money transfer companies for that business so they have little incentive to solve issues they see with anti-money laundering rules. Most of the payments go to the poorest families.
The World Bank's Carlo Corazza says action is needed to bring the banks and the regulatory authorities together.
CORAZZA: The best thing is to review the anti-money laudering and counter-financing of terrorism compliance rules. Discuss it with the legislature and the banking sector and money transfer operators, they have to sit together and start applying a risk-based approach to this business. Probably identifying a threshold below which these payments are not considered as risky, to which the rules are applied in a bit more loosen way than for transfer of high value.