
U.S. Banks Curtail International Money Transfers - 001sky
http://dealbook.nytimes.com/2014/07/06/immigrants-from-latin-america-and-africa-squeezed-as-banks-curtail-international-money-transfers/
======
sschueller
The 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.

~~~
gcb0
hsbc charges zero dollars to transfer money between countries you have account
with them.

and recently they had to pay a billion because they facilitated drug money
laundry, even city bank being mentioned in the same report facilitating larger
amounts and getting no penalty for whatever reason. im almost sure the system
is corrupt to the core.

anyway, back on topic, this move is to remove power form migrants because now
that the US is past its little depression, we don't want them sticking around.
and if you don't understand this, I'm happy for you. keep the good live going
in affluent san francisco. only neighborhood problems are buses driving
property prices down or some other shenanigan.

~~~
crdoconnor
>hsbc charges zero dollars to transfer money between countries you have
account with them.

Only if you have one of their "rich people" accounts. You have to have
something like $100k in your current account or a half million dollar
mortgage. Something like that.

Needless to say, agricultural day laborers sending remittances don't qualify.
They have to pay up.

------
FatalLogic
This 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.

~~~
noinsight
All you need is the Hawala network:
[http://en.wikipedia.org/wiki/Hawala](http://en.wikipedia.org/wiki/Hawala)

~~~
gcb0
money transfer based on honor?

thats even more fragile than bitcoin

~~~
cubancigar11
Honor is what honorable people call it. Others call it gang.

~~~
TeMPOraL
I 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
Thanks 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
*passport not password!

------
panarky
Making 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.

~~~
alexeisadeski3
>That means less transparency, less control, less tax revenue, reduced
government influence.

That doesn't sound good to you??

~~~
panarky
That 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
I thought ISIS _is_ the state now? The Taliban certainly were, and they did
similar things.

Not to mention 15th C Spain.

~~~
dragonwriter
> 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.

~~~
alexeisadeski3
Agreed :)

------
contingencies
While 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-ba...](http://arstechnica.com/tech-
policy/2011/05/how-the-robber-barons-hijacked-the-victorian-internet/2/) )

For an impressively useful World Bank resource on typical remittance prices,
see
[http://remittanceprices.worldbank.org/en](http://remittanceprices.worldbank.org/en)

------
legutierr
I 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.

~~~
VMG
One important distinction is that Bitcoin wallets are free where bank accounts
aren't. Phones that can display QR codes have become cheap now.

Ignoring fees for a moment, if there are Bitcoin ATMs on both ends of the
remittance transaction, it's pretty easy for the participants. Probably even
competitive.

~~~
alexeisadeski3
>Ignoring fees for a moment, if there are Bitcoin ATMs on both ends of the
remittance transaction, it's pretty easy for the participants.

Why wouldn't international BTC transfers be regulated the same as
international currency transfers?

~~~
mifreewil
Decentralized P2P bitcoin transfers are not easily regulated; It would be like
regulating other P2P technologies like BitTorrent or encryption software. Of
course, if a centralized business is in the middle, you can regulate that, but
it's not a necessary piece of the solution.

~~~
jdong
Such centralized businesses will be swiftly shut down by legislation if
bitcoin cannot be regulated. If shutting down the centralized businesses isn't
enough, bitcoin will be outlawed. Identifying users is easy enough due to the
nature of the network.

~~~
VMG
That is not the direction the government is currently going.

A ban of the technology would pretty bad and unprecedented, but if push came
to shove, Bitcoin traffic could be disguised as other traffic.

~~~
battani
What will the government do with Bitcoin the day a report comes out that
American citizens have been killed in a terrorist operation financed by
bitcoin?

~~~
VMG
What did the government do the day evil things happened over the internet
using encrypted communication?

~~~
scott_karana
It banned the export of cryptography.

~~~
VMG
And yet a little "https" logo smiles at me in the address bar as we speak.

Point being that the government can't and doesn't ban everything that can be
used for evil, be it from incompetence or rationality. Bitcoin will probably
be heavily monitored though, as it is very suitable for that purpose.

~~~
scott_karana
I was referring to a mainly historic, very strict export ban that categorizes
cryptographic software as munitions:

[http://en.wikipedia.org/wiki/Export_of_cryptography_in_the_U...](http://en.wikipedia.org/wiki/Export_of_cryptography_in_the_United_States)

HTTPS _was_ crippled, since Netscape shipped only 40-bit RC4
internationally.[1]

PGP's source code was printed so it would fall under First Amendment
protections, since binaries weren't legal for export.[2] (See also DJB's
_Bernstein v. United States_ )[3]

OpenBSD/OpenSSH is still based in Canada to avoid being subject to the laws.

\--------------

1
[http://en.wikipedia.org/wiki/Export_of_cryptography_in_the_U...](http://en.wikipedia.org/wiki/Export_of_cryptography_in_the_United_States#PC_era)

2
[http://en.wikipedia.org/wiki/Pretty_Good_Privacy#Criminal_in...](http://en.wikipedia.org/wiki/Pretty_Good_Privacy#Criminal_investigation)
and
[http://www.pgpi.org/pgpi/project/scanning/](http://www.pgpi.org/pgpi/project/scanning/)

3
[http://en.wikipedia.org/wiki/Bernstein_v._United_States](http://en.wikipedia.org/wiki/Bernstein_v._United_States)

4 [http://www.openbsd.org/crypto.html](http://www.openbsd.org/crypto.html)

~~~
VMG
I know, but in the end they couldn't keep it that way forever.

~~~
scott_karana
Yes, of course.

Isn't it conceivable that the government would implement a similarly short-
sighted (and ineffectual) policy if Bitcoins were seriously used to harm the
US? :-P

------
frandroid
"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
This 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.

~~~
justincormack
So the Chair of the Senate Investigation committee was a liar? "HSBC’s chief
compliance officer and other senior executives in London knew what was going
on but allowed the deceptive conduct to continue".

~~~
cynicalkane
Things that congresscritters say are not held to the highest standard of
proof, but it might behoove you to look up what 'deceptive conduct' means in
the context of this quote.

Actually, I'll save you the effort that you didn't bother to spend yourself,
and tell you what it means, to the best of my understanding.

HSBC affiliates (not HSBC itself) in some countries were processing certain
transactions that were exempt from a certain regulatory requirement concerning
transferring money to people designated to be terroists. HSBC built a computer
system to enforce this regulatory requirement. The affiliates omitted
information in internal reports to avoid triggering the computer filter for
these transactions, and HSBC was like "can you include this information?" and
the affiliates were like "no, these transactions are exempt". This is what the
quote refers to.

So this quote is blaming HSBC for not demanding other banks file transactions
internally in a way they weren't required to so as to not automatically
trigger a computer system they weren't required to automatically trigger. It
is this practice that Congress is calling 'deceptive'. The committee doesn't
identify to what extent this is a crime, probably because none of the
transactions were identified by the committee as violating the regulation that
nobody--not HSBC, not Congress--was requiring them to follow.

~~~
mike_hearn
To boil it down more simply, the USA had sanctions on Iran long before other
parts of the world did. Thus someone wishing to send money from the UK to
Iran, for example, could do so through HSBC in London. Those transactions
might well end up interfacing with US controlled infrastructure in some way
and the US parts of HSBC were then routinely interfering with those payments,
because America doesn't believe in sovereign independence. So now these local
HSBC affiliates or divisions have a problem: their customers want to make
perfectly legal transactions (legal in those areas) and the American computer
systems are getting in the way. Simple solution: don't use any keywords that
the USA doesn't like.

Years later this practice would be described as "money laundering" and
"sanctions evasion". However it was in reality just a reasonable way to tackle
an unreasonable problem.

~~~
justincormack
HSBC was about Mexican drug money largely. "“These traffickers didn’t have to
try very hard,” Breuer said at a press conference in Brooklyn. “They would
sometimes deposit hundreds of thousands of dollars in cash in a single day
into a single account using boxes designed to fit the precise dimension of the
tellers’ windows in HSBC’s Mexico branches.”[1]

[1] [http://www.bloomberg.com/news/2012-12-12/hsbc-mexican-
branch...](http://www.bloomberg.com/news/2012-12-12/hsbc-mexican-branches-
said-to-be-traffickers-favorites.html)

------
Daishiman
I'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.

~~~
fauigerzigerk
That's unlikely. U.S regulations are enforced worldwide when in comes to
"national security".

~~~
lclarkmichalek
They'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
It'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.

~~~
lclarkmichalek
The role of the dollar is a function of the size of the US banking system.

And the BNP fine is kinda light for funding genocide, if you ask me.

~~~
mike_hearn
There are double standards at work here. If BNP is guilty of funding genocide,
then what happens when Somalians stop being able to afford food because the
last banks stop routing money there? This is already about to happen in the UK
where the last bank is trying to lose their Somalian remittance business and
being blocked by a lawsuit filed by immigrants.

Not to mention that the government handing out these fines is responsible for
far more devastation than any bank.

------
fauigerzigerk
Here's an idea: Let's close down our road network. It's being exploited by
drug lords, murderers, rapists and terrorists every day!

~~~
crdoconnor
Better 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.

------
crapshoot101
There'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
You'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.

------
droopyEyelids
Is 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
And 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.

~~~
frandroid
You can withdraw money from a PayPal account.

~~~
ars
Isn't that precisely the point of the article? That it's becoming hard to do
exactly that?

Paypal is not immune from the same problems the other banks are having.

------
wil421
Most 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
While, 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?

------
plinkplonk
Can someone summarize the article? NYTimes not letting me read without logging
in. Thanks in advance. What are the new limits?

~~~
mooism2
Put your browser into porn mode and NYT will let you read without registering.

~~~
chatmasta
And delete the query string at the end of the URL ("?...").

------
DogeDogeDoge
It 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.

------
loourr
This 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
>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.

~~~
rtpg
Makes it a lot easier to manipulate the value (especially if you aren't
importing a lot) of the money.

------
callmeed
Isn't this a good thing for Bitcoin?

~~~
saraid216
Yup. I am convinced this is another move by the NSA to increase the usage of
Bitcoin.

------
madaxe_again
Interesting. 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.

------
NicoJuicy
What about WireTransfer ?

------
Bangladesh1
Bad decision

------
ihsw
$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.

~~~
FatalLogic
I see some problems with this. Okay, moving bitcoin is effortless* and almost
free. That part works great, but what happens at each end?

Exchanging between bitcoin and local currency is somewhat difficult and incurs
fees. In fact, in the US one of the key reasons it is difficult is that
government is naturally trying to close off this potential loophole, because
that's what organizations of this nature do -- really this brings us back to
the issues of control that are raised by the original link.

It would be interesting if this kind of increasing pressure on financial
gateways led immigrants to start demanding payment in bitcoin, but there's no
sign of that happening yet. They need to be familiar with it first.

Immigrants have an extremely limited selection of places to spend bitcoin in
their home countries. Though if the demand existed, then the market would
grow. Ironically, the most developed bitcoin economies are the US and Europe.
In the US, there is a pretty wide selection of goods available, thanks to big
retailers like Overstock and Newegg, but even there, one is still limited to a
small subset of stores.

* edit: I should add that, with the current state of the software, it's not the safest way for an average person to handle large amounts of money. Obviously, there's lots of potential for improvement there.

~~~
WildUtah
Three years ago, smartphones were rare in Mexico. I had to go to a specialty
dealer who unlocked AT&T iPhones to get mine.

This year, I've been shopping for phones again in Mexico. Every network and
every shop is full of nothing but smartphones. Almost all monthly plans come
with data. Accessory shops with cases and covers and headphones and stuff
exist in every town.

Mexico's bitcoin infrastructure is ready to take over the money transfer
business if the government and the banks make it hard or expensive to go
through official channels. All it will take is enough expense to make it worth
learning to use bitcoin. The network of small entrepreneurs that would do the
actual cash exchange already exists: Mexico is a land of small shops and
informal businesses.

Erecting arbitrary barriers is more likely than ever to create a black market.

------
a3voices
Insert long comment about the virtues of Bitcoin here.

~~~
adrianwaj
Government 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
I think you meant to say "Government fiat is to bitcoin as snail mail is to
email."

~~~
adrianwaj
Yep. 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.

------
JumpCrisscross
> _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.

~~~
ams6110
Or you just put a $100 bill in an envelope and put a stamp on it.

~~~
chrisBob
I had always heard this was illegal, but it turns out it is ok as long as you
are conducting a legal transaction. It is discouraged, but legal.

