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U.S. Banks Curtail International Money Transfers
- FatalLogic 12y agoThis attempt to control the flow of money seems like another unwinnable war, like the war on drugs. The money will find other paths, which may well include informal or underground banking services, which are even further away from government oversight. Many recent immigrants want to send money home - this is non-negotiable, because it's one of the main reasons that they emigrated. So they will find ways to send money.
- mmsimanga 12y agoI agree, I am an immigrant in South Africa and over the last few years I have noticed increased regulatory requirements to send money through official channels. The other day I stepped out of a foreign exchange and was approached by an individual asking me if I wanted to buy some forex. This was the first time in over six years I had been approached and I think it is because many immigrants do not have all the official documents to to meet the requirements to get forex. IMHO some regulation is good but over regulation is an enabler for black markets.
- noinsight 12y agoAll you need is the Hawala network: http://en.wikipedia.org/wiki/Hawala http://en.wikipedia.org/wiki/Hawala
- gcb0 12y agomoney transfer based on honor? thats even more fragile than bitcoin
- cubancigar11 12y agoHonor is what honorable people call it. Others call it gang.
- TeMPOraL 12y agoI don't think it deserves downvotes, OP is right. Honor can function both in a group of honest citizens and in a group of obdurate criminals. It's a game-theoretic trick raised to the level of virtue and it's independent of group morality.
- cubancigar11 12y agoThanks for saying that. I guess I should have explained further. Hawala is originally from middle-east and has distinct Islamic flavor to it. So I can understand why someone can find my comment offensive. Hawala has a history of being used in nefarious activities in India so I know better. Black-marketing gold, traceless transfer of money for terrorist activities etc. Gangs have spawned over it and gangs have survived over it. Since it is also used for sending remittance from Saudi to South-Asia by labor/slaves who have their password taken away from them, it is still tolerated socially though not legally.
- cubancigar11 12y ago*passport not password!
- jeangenie 12y agoActually it's used quite successfully in many parts of the world [1]. [1] http://www.johnfwilson.net/resources/Hawala+Occasional+Paper+_3.24.03_.pdf http://www.johnfwilson.net/resources/Hawala+Occasional+Paper...
- kordless 12y agoActually, Ripple sorta works this way.
- chiph 12y agoIt's how it worked in the 16th century when the Italian merchants began issuing Bills of Exchange which meant you no longer had to transport large chests of coins across dangerous territory. The Dutch later picked up on the idea and ran with it. http://en.wikipedia.org/wiki/Financial_history_of_the_Dutch_Republic#The_Wisselbanken http://en.wikipedia.org/wiki/Financial_history_of_the_Dutch_...
- anu_gupta 12y agoTransferwise (http://transferwise.com http://transferwise.com) is sort of based on this - it matches up parties to massively reduce the cost of transferring money. I've used it a couple of times, and it worked very well, and saved me a significant amount of money.
- beagle3 12y agoThere's a huge difference, which makes flow of money controllable: The US Government (with the fed) can change the value and availability of money, and they do it constantly. The US can decide, tomorrow, to inflate or deflate the USD, and by fiat, it will happen. Willing drugs in or our of existence cannot be similarly done. Attempting to control the flow of "value store" might be unwinnable - but if you look you'll see gold is actually very tightly controlled, so maybe it is winnable. Just try to get a gold bar delivered - you're in for a big surprise about how free the market is (or isn't)
- TeMPOraL 12y agoExactly. I expect a Hawala network to pop up / vastly expand there, with potential side effect of getting more people closer to the world of crime (I'd expect at least some of the Hawala network nodes to be criminals with money).
- mike_hearn 12y agoThe USA has been cracking down on Hawaladars for a long time now. Unlicensed money transmitters, you know. It can cost vast sums to become a licensed MT in America, varying by state.
- a3voices 12y agoInsert long comment about the virtues of Bitcoin here.
- adrianwaj 12y agoGovernment fiat is to snail mail what bitcoin is to email. And it's all very well to move to a cashless society, but even so, much of the bureaucratic overhead, premine (ie instamine), trusted systems and centralization would still remain, right?
- jackgavigan 12y agoI think you meant to say "Government fiat is to bitcoin as snail mail is to email."
- adrianwaj 12y agoYep. I stand corrected, thanks, although on second thought, both versions might work if you're receiving a government cheque by post, versus some email that declares some funds have been sent to a bitcoin address. I think the centralization of fiat is the real problem when you have the dregs of society attracted to it in order to manage or control it. Furthermore, government in general affords power that could not otherwise be obtained so easily by such dregs, thus leading to siphoning and general corruption, eventually causing blowback into society.
- deleted 12y ago[deleted]
- panarky 12y agoMaking it more difficult to transact in the official economy will drive more volume and sophistication to the black market, cryptocurrencies, criminal syndicates, System D. That means less transparency, less control, less tax revenue, reduced government influence. Seems counterproductive.
- wereHamster 12y ago.. or exactly what the us gov wants. So it can send its military a certain way. The haven't had any success lately, so they are looking for new scapegoats.
- alexeisadeski3 12y ago>That means less transparency, less control, less tax revenue, reduced government influence. That doesn't sound good to you??
- panarky 12y agoThat used to sound good to me, when I believed that Government Is The Source Of All Bad Things. But then I grew up, got some life experience, and learned that there are even worse things than taxes and regulation. I'm pretty sure I don't want my community ruled by a local chieftain with rampant gang and tribal warfare, organized crime syndicates, protection rackets and an official religion. You can see it happening right now when a state loses its monopoly on violence. https://www.youtube.com/watch?v=s1aPWH0_crU https://www.youtube.com/watch?v=s1aPWH0_crU
- alexeisadeski3 12y agoI thought ISIS is the state now? The Taliban certainly were, and they did similar things. Not to mention 15th C Spain.
- dragonwriter 12y ago> I thought ISIS is the state now? ISIS was a non-state actor that had the goal of creating a new state on the territory administered by some existing states, and has to some extent managed to do so as those existing states failed. The failure of a state in maintaining its "monopoly on violence" is almost inevitably followed by another state-like actor displacing it in that role -- there is no shortage of actors wishing to impose their will and no shortage of actors willing to use violence to do so in the absence of an actor with the resources and will to prevent them from doing so.
- ihsw 12y ago$51B leaves the US in the form of remittance -- imagine all of that being USD->BTC->USD instead. The daily trade volume would be astronomical compared to today's. Where remittance ends, forex begins.
- objclxt 12y agoAlthough the problem right now is that for remittance to work you need to be very certain that the amount you're sending is going to be equivalent to the amount being received. It wouldn't be unusual for BTC to have periods of extreme volatility (compared to regular currency exchange). You'd also hit issues because the IRS won't classify BTC as a currency, so there's a whole world of tax pain waiting to be uncovered.
- vidarh 12y agoHow the IRS classifies BTC is irrelevant for people sending BTC out of the US, unless they make a huge paper profit in the window from buying the BTC and sending it. But that can be done minutes apart. Extreme volatility is also irrelevant if the alternative is for your money-less family in some other country to receive no money, or once the hoops you have to jump through to do it legally with USD gets too difficult.
- skybrian 12y agoThe risk of volatility, legal hassles, and so on is a cost. You can price it by asking how much people would be willing to pay to avoid it. There will be some price where it's a wash. I don't know what that price is, but if it's higher than what banks and money transfer companies are charging, Bitcoin is the more expensive alternative.
- jackgavigan 12y ago> The risk of volatility, legal hassles, and so on is a cost. You can price it by asking how much people would be willing to pay to avoid it. Actually, to price it, you need to find out how much you would need to pay someone to take on that risk (i.e. the cost of hedging the risk). If people's willingness to pay to avoid the risk is higher than the cost of hedging it, then you have a profit opportunity.
- plinkplonk 12y agoCan someone summarize the article? NYTimes not letting me read without logging in. Thanks in advance. What are the new limits?
- mooism2 12y agoPut your browser into porn mode and NYT will let you read without registering.
- chatmasta 12y agoAnd delete the query string at the end of the URL ("?...").
- Gustomaximus 12y agoSummary: Banks are; 1) Afraid of getting hit with fines because of the crack-down on transferring money to shut down terrorist financing. 2) When they do monitor transfer activity closely it makes it unprofitable to run low cost transfer services. 1) & 2) are hitting peoples ability (largely immigrants sending money home) to send money to many countries cheaply and getting occasional blockages. IMO seems like a short term issue. Larger players are stepping back as the profits are not worth the risk/effort, so smaller players have the opportunity to step in. I recently put a small amount into the fund raising of a company doing just this as I see it as a great area for disruption. I don't want to be seen as commenting for a plug so won't mention the name.
- loourr 12y agoThis is how failing nations pay the bills. Print a bunch of money, and then stop letting people take it out of the country on bogus national security claims.
- icpmacdo 12y ago>and then stop letting people take it out of the country on bogus national security claims. What is the motive for keeping the money in the country? I'm not disagreeing I'm just unsure why that is a stipulation.
- mappu 12y agoEncourages you to spend it locally instead, supporting the nation's economy.
- rtpg 12y agoMakes it a lot easier to manipulate the value (especially if you aren't importing a lot) of the money.
- alexscheelmeyer 12y agoAlso discourages its citizens from leaving the country.
- rtpg 12y agoFor some reason I don't think those $50 billion are what is the main concern of the federal gov't
- Yunk 12y agoYes, in fact this could hurt them more significantly. The assets 7.6 million expats are mostly in the US since the US is preventing 'US persons' from investing abroad with the same kind of regulatory interference, that amounts to a lot more than the $50 billion in remittances. Adding further difficulties to international transfers may encourage expats to recalculate their positions. Then there will be further network damages. I would rank the average US Diaspora as less positive about getting involved with a US based business partner than the average European due to familiarity with the US' regulatory style and its chaotic results.
- droopyEyelids 12y agoIs it possible to use paypal for this? It seems like both parties could just sign up for a paypal account, and a bankless immigrant could load their account with cash, right?
- ars 12y agoAnd do what with it? How will they spend it locally? They can basically only spend the money with US merchants - that doesn't help them very much.
- kylebrown 12y agoA search for "paypal mexico" yielded this result on the first page: > I opened a bank account easily with Banco Azteca and they gave a me a debit card. It has been impossible to verify. Paypal says I need the bank to authorize international transactions. Yesterday another bank clerk told me that Mexican cards cannot be used as debit and credit cards, that I´m going to have the same issue with any bank.
- JumpCrisscross 12y ago> Some Latin American immigrants say they regularly send three remittances a week to pay for last-minute school supplies or rent. One solution is making up for rising transaction costs with lending. Someone reliably transferring money can just as reliably service a loan. Suppose an American is sending $100 three times a week to Mexico. You lend the American $1 200 at the beginning of the month. This is sent to a Mexican bank with instructions to disburse, in $100 installments three times a week, to a beneficiary. The American, instead of sending money to Mexico, services the domestic loan. You retain a lien on the funds deposited in the Mexican bank, which would revert to you in the event the American defaults on their loan. Similar cash flows, one international wire.
- Daishiman 12y agoI'm guessing we'll start seeing more competetion for similar services from Hong Kong, Singapore, and some of the newer Easter European banks with pretty innovative and low-cost financial services. I'm not sure this bodes well for the American banking system in the long term; today's migrant workers are the parents of tomorrow's entrepreneurial children.
- ddeck 12y agoForeign banks operating in the US are still going to be subject to the same restrictions, but I'm surprised this isn't already handled by non-bank remittance services. Here in Hong Kong where around 1 in 20 people is foreign domestic helper, there are are an enormous number of services competing for the remittance business [1]. [1] http://www.bbc.com/news/business-26284493 http://www.bbc.com/news/business-26284493
- fauigerzigerk 12y agoThat's unlikely. U.S regulations are enforced worldwide when in comes to "national security".
- lclarkmichalek 12y agoThey're not particularly. But if a bank deals in dollars, then they'll often be routed through New York, exposing the bank to US regulation, as BNP recently learnt. It's not a case of the US going after foreign banks so much as it is the US banking system being so big that it is hard to avoid if you are an international bank.
- fauigerzigerk 12y agoIt's not the size of the U.S banking system at all. It's the role of the dollar as the world's reserve and trade currency that gives U.S authorities a special gatekeeper role as most of these transactions have to technically touch New York. Linking national security to this role and levying completely disproportionate fines as in the BNP case is clearly an abuse of the special powers the U.S has.
- callmeed 12y agoIsn't this a good thing for Bitcoin?
- saraid216 12y agoYup. I am convinced this is another move by the NSA to increase the usage of Bitcoin.
- contingencies 12y agoWhile financial remittance regulation is held up as a save-the-children, anti-terrorist poster child, in reality it's primarily a political, surveillance and profiteering tool. This move will directly benefit businesses such as Western Union, criticized by consumer protection groups for preying upon immigrants and other disempowered groups. (Western Union has an extremely long history of abusing and maintaining monopoly... see http://arstechnica.com/tech-policy/2011/05/how-the-robber-barons-hijacked-the-victorian-internet/2/ http://arstechnica.com/tech-policy/2011/05/how-the-robber-ba... ) For an impressively useful World Bank resource on typical remittance prices, see http://remittanceprices.worldbank.org/en http://remittanceprices.worldbank.org/en
- sschueller 12y agoThe US has a 3rd world banking system and I had just about enough of it. These mega mergers and deregulations don't help. - Some banks charge more than $60 USD for an international wire which is beyond reasonable. Plus you have to go into the bank fill out a form. Why can't I do this online? - The US does not use IBAN instead it uses a system which is setup for middle banks to take a stake out of transfers. - Core of US banking is done with paper checks like in the middle ages. Sending money to someone in many cases actually gets a check printed (the check printer is another 3rd party taking their stake out of the system). - Bank employees are underpaid and under-skilled workers who don't give a damn (why would they?). Don't expect good service unless you are at a expensive private bank. - You constantly have to check your accounts to make sure there isn't all of a sudden a large amount missing because a check was cleared wrong or some new fee has been added. The system is so broken that even people who want to fix it (e.g. Bank Simple) where unable and are now just another online bank.
- aianus 12y agoDon't forget how ACH doesn't work on weekends. The bank computers must have a good union.
- hackerboos 12y agoUsed to be like this in the UK. Now you can make transfers on a bank holiday and they reach the other account in seconds. For free! I don't know why it took so long for us to get the Faster Payment Service.
- frandroid 12y ago"Even if banks invested in new software to screen for worrisome transactions, they would still have to manually investigate many suspicious activities and report them to regulators. Banks fear that a single mistake could lead to costly penalties like the $1.9 billion settlement that the British bank HSBC agreed to pay over money laundering issues in 2012. HSBC has stopped paying out remittances at its Mexican branches." Huh, no. HSBC has paid a $1.9B fine not because of a single mistake, but because it knowingly let drug lords launder money through its counters.
- cynicalkane 12y agoThis is a popular misconception, but the article is right and the popular misconception is wrong. HSBC was fined for insufficient oversight of risky transactions. They did not "knowingly" launder money in the sense no executives were knowingly and provably involved in laundering money.
- x0x0 12y agoNo. That's at best incorrect and at worse a lie. They knowingly laundered money in the sense that the only way they could not know they where laundering money was to hold their hands over their eyes. Even a trivial google query brings up articles like this [1] The committee is concerned that HSBC cleared large amounts of travellers' checks over a number of years, without proper anti-money laundering controls, despite evidence of suspicious activity. Between 2005 and 2008, HBUS cleared $290m worth of US dollar travellers' cheques which were being presented at a Japanese bank. The daily transactions were worth up to half a million dollars, with large blocks of sequentially numbered cheques being handed over. After prompting from US regulators, HBUS found out that the travellers' cheques were being bought in Russia - a country at high-risk of money laundering. so they where moving hundreds of thousands of dollars daily from Russia to Japan to the US. I get the problem with international wire fees for small amounts of money, but if you're moving tens of thousands or hundreds of thousands, the $60 fee should be no obstacle. You can't characterize HSBC's actions in this, and in many other situations that a google query will find for you, as anything but willful ignorance. [1] http://www.bbc.com/news/business-18880269 http://www.bbc.com/news/business-18880269
- legutierr 12y agoI used to work in the money transfer industry. Years ago, my team and I built many of the systems that Banorte uses to link the organizations mentioned in the article to paying locations in Mexico (and other regions). I left the industry shortly after we sold our company to Banorte in 2007. I left the industry for the same reason that we sold the company: a nearly intollerable level of regulatory risk. It got to the point in 2006 where a number of our profitable and otherwise-healthy competitors went out of business just because they couldn't keep their bank accounts open. Their bank would get a visit from an OCC examiner, or would ask the FDIC to approve a merger, and instructions would be issued to close all of the money transmitter accounts. In other words, much of what this article talks about is not new. Here's a very similar article from nearly a decade ago (some of the same people being quoted): http://www.nytimes.com/2005/03/16/nyregion/16remittance.html http://www.nytimes.com/2005/03/16/nyregion/16remittance.html What is new here--what's interesting--is the fact that the banks themselves seem to be shutting down their own remittance services. I had always attributed previous "crackdowns" to regulatory capture: certain banks saw a wealthy, highly-fractured niche, and used their connections in DC to turn up the heat on the non-bank players in order to weaken them and take market share. One of the most infuriating things about what we saw happening in 2005-2007 was that while banks were closing the accounts of non-bank service providers, the banks themselves began offering the same services to their own customers, often through the same networks that the non-bank financial institutions were using. Bank of America was the most prominent actor in this regard; but now, even they have stopped offering money transfer service. Go figure. It's really unfortunate that such a cool area of tech (international remittances) draws such negative attention from regulators. If it weren't for that regulatory risk--existential in nature, really--I would still be working in the space. Ironically, this is also why I don't think that Bitcoin is a solution for international remittances. See, the problem here is cash. No one is complaining about the lack of availability of SWIFT-based wire transfers between bank accounts. The transactions being discussed here transit through a secondary banking network that sits atop SWIFT; it is faster (seconds vs. hours), cheaper ($5-$10 per wire vs. $30-$50) and more available (24x7 vs bank hours) than SWIFT, but most significantly, because most of its payouts are made using cash, its participants don't need bank accounts. Cash payouts are made out of necessity. The majority of international remittance recipiants don't have bank accounts, and the cash they receive from their emmigrant relatives goes to immediate consumtion needs (as mentioned in the article). Unless those recipients, many of whom live in rual areas, were able to cash out their bitcoins on the spot, a bitcoin transfer would be worthless to them. And the bitcoin ecosystem faces the same challenges with regards to bank access as the remittance industry does. If you want an explanation as to what is driving this "crackdown", I would attribute it to some desire to significantly curtail the use of cash in these kinds of transactions. The low-income people who depend on remittances are collateral damage in service of that objective.
- NicoJuicy 12y agoWhat about WireTransfer ?
- fauigerzigerk 12y agoHere's an idea: Let's close down our road network. It's being exploited by drug lords, murderers, rapists and terrorists every day!
- crdoconnor 12y agoBetter yet, privatize it and hand it to an oligopoly to run. That way even with a light touch regulation they'll just shut off portions of it and tell us to get off their roads until we've learned not to inconvenience them with laws.
- DogeDogeDoge 12y agoIt looks in my opinion like opening for BTC and "crypto coin" markets and also simple Paypal transfers. "Why learn about crypto currencies" if people can simply use Paypal to transfer money. Anyway they will have to pay something for the transfer. I personally see it as a positive thing because it opens market for new solutions.
- madaxe_again 12y agoInteresting. Export controls of currency are usually a symptom of a failing economy and an attempt to prop up the value of the currency by increasing scarcity. It's also something that nations who are planning war do.
- wil421 12y agoMost Latinos I worked with in the Restaurant industry didnt even use a big bank becuase there was no way to get a bank account from them. Most of the time they used western union or some other money transfer. There are actually smaller banks that cater to latino immigrants but apparently the fees are higher and it is very tough to get started. I believe they had to deposit a big chunk of money to get started.
- subhro 12y agoWhile, I completely agree with the fact that the Government is trying to deal with financing terrorists and anti social elements, I think what will now happen is services like xoom.com is going to bloom. It would just shift the transactions from one place to the other. Also, someone can always use a US debit card to withdraw money in local currency from Mexico, no?
- Bangladesh1 12y agoBad decision
- crapshoot101 12y agoThere's a real opportunity for startups to solve real-world problems, not the "We are Dropbox meets Quora for AirBnB" type ones. Transferwise has a neat approach, which involves the currency never actually leaving the country, albeit at the cost of a couple of days of delay (essentially, they do peer to peer matching of needed cash flows); Remitly is slightly more traditional, but is still way cheaper than Xoom or Western Union. There's a lot of money to be made here while solving a major pain point.
- nagoll 12y agoYou're very correct! Regarding online: Transferwise is interesting but a little cumbersome to based on business model. Remitly is cool, but for now only servicing the Philippines (very competitive). Xoom also does great stuff, and will continue to grow. Western Union and MoneyGram both have online offerings but have substantial room for improvement. Look for additional players to enter. We're soon launching WireCash, essentially "Expedia for Money Transfer". We've partnered with many of the existing players to offer their services online in one central location for consumers. Want to empower consumers with choice, freedom, and options, as well as great/competitive service.