The junta has frozen the bank accounts of 39 people it accuses of providing unlicensed “hundi” cash transfer services and is warning that it will intensify its crackdown on the service widely used by migrant workers to send money home.
The 39 people whose accounts have been frozen are also being investigated for manipulating the foreign exchange market, an announcement by the information ministry on Tuesday evening said.
The accounts were frozen over the past two weeks, it said.
The crackdown on hundi services is occurring as Myanmar’s currency, the kyat, crashes and the price of gold surges to an all-time high following more than three years of economic and financial mismanagement by the junta. The junta is responding to the crisis it created by arresting currency traders, gold dealers and realtors.
Its intensifying crackdown on the hundi system could also backfire by making it more difficult for migrant workers to remit money. The hundi system is the preferred method for transferring money back to Myanmar from other countries in Southeast Asia. It is cheaper, easier to access and faster than the formal banking system, migrant workers say.
Economist Sean Turnell told a press conference on Monday that the junta’s earlier moves to force migrant workers to convert their remittances into kyat and impose a higher rate of taxation of their income encouraged greater use of hundi services.
A Myanmar national working at a factory in Thailand said it is getting more difficult to send money home because junta officials are cracking down on the hundi system. “We are now having trouble transferring money home,” she said.
Tuesday’s announcement followed a May 24 statement from the junta-controlled Central Bank of Myanmar saying it would take action against those involved in unlicensed digital money exchanges as well as the hundi system. It also said it is targeting currency manipulators.
The 39 alleged hundi traders face hefty fines and lengthy prison sentences. Tuesday’s announcement said all of their accounts for financial services, including bank accounts, have been frozen. They face charges under two pieces of legislation: The Money Laundering Eradication Law and the Financial Institutions Law.
Hundi services rely on agents operating both domestically and internationally. Research by the International Labour Organization found that about 40 percent of Myanmar migrant workers in Thailand use the hundi system for remitting money and only about 2 percent use the formal banking system. Thailand is one of the main destinations for Myanmar migrant workers, with almost 2.1 million registered to work there as of January this year, according to the Foreign Workers Administration Office of the Thai Ministry of Labor.
Hundi services are also used for cash transfers within Myanmar.
In January, the central bank said it had cracked down on at least 20 hundi service providers.
Turnell said that the junta has only one use for foreign currency: to buy weapons.
“The main plank of SAC [the State Administration Council] economic policy is now very simple – to secure as much foreign exchange as possible to allow it to buy the weaponry and munitions it needs to survive,” he explained.
