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U.S. Banks Curtail International Money Transfers (nytimes.com)
182 points by 001sky on July 7, 2014 | hide | past | web | favorite | 159 comments



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.


Just a note: Don't format your posts that way. It's too hard to read.

Here it is reformatted:

- 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.


> Plus you have to go into the bank fill out a form. Why can't I do this online?

Because then it'd be super easy for thieves to empty out your account into some bank in Eastern Europe.


Come on, pretty much everyone in EU can send money abroad from their internetbank. It does offer one more opportunity for thieves to launder your money if your account is breached (aside from, say, withdrawing in an ATM or buying stuff online), but this is not a meaningful reason to make someone come to a bank physically.

Do people go to banks in USA regularly? I have been to my bank 3 times in the last 3 years, and two of those were because I was getting a mortgage. A physical visit is expensive both to you and the bank, so everyone has a motivation to reduce them to absolute minimum - everything can be done online, except for verifying identity at account opening or large amount/notarized realestate transactions.


They could introduce hardware authentication, same as banks outside the USA (and now with the TREZOR, also Bitcoin).


I can log into my bank (Santander PB) and fill out a form. They use human inspection along with other security to avoid the thieves.


Thanks, sadly I can't edit my post anymore.


Don't forget how ACH doesn't work on weekends. The bank computers must have a good union.


Used 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.


the reason it took so long is that a high percentage of UK banks do their transaction processing in COBOL on ancient mainframes

(not joking)


I think the reason it took a while in the UK and has not happened in the US is that there is no incentive for the banking system to introduce such a system - as a business why would you want to provide a free instant service when you could provide an expensive one? The change has to be forced by the government at it was in the UK.


Actually the mainframes are quite new - it is just the code that is ancient. IBM sells a ton of zOS hardware every year still.


Indeed.

Also a lot of "mainframes" are actually virtual machines running on modern physical hardware. I've also seen companies who have the console output sent to a webapp and commands returned the same way, thus making these 1980s relics seem almost "modern" (as, for example, you can utilise them from an iPad/Smartphone without an app).


COBOL isn't a slow language.


No, but mainframes can be extremely slow.

I remember being very surprised when I discovered that mainframe capacity is sold in units of MIPS (millions of instructions per second). Like, you literally buy capacity off IBM by the megahertz. They don't really get faster because there are so few suppliers of this kind of exotic hardware nowadays, and it's hard for the banks to port it all to more modern platforms because the original code is often so obscure and only understood by people who are retired/laid off.

And that's the best case. I've heard of at least one bank that has a job running on their mainframe where nobody can find the source and nobody knows what it does, but they're too afraid to shut it down in case it breaks something.


but finding developers that know it isn't easy or fast


"Deregulation" is the opposite of the word you're looking for. What the article describes is due entirely to overregulation.


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.


>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.


But the fee is baked into a worse forex rate on the transfer. They always find a way to get you.


>recently they had to pay a billion because they facilitated drug money laundry

I wouldn't mind betting that's the main reason "many big banks are abandoning the business of transferring money from the United States to other countries"

I mean if you were running a low cost service would you want to risk that?


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.


I 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.


All you need is the Hawala network: http://en.wikipedia.org/wiki/Hawala


Transferwise (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.


money transfer based on honor?

thats even more fragile than bitcoin


Actually it's used quite successfully in many parts of the world [1].

[1] http://www.johnfwilson.net/resources/Hawala+Occasional+Paper...


It'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_...


Actually, Ripple sorta works this way.


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


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.


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.


*passport not password!


Exactly. 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).


The 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.


There'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)


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.


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

That doesn't sound good to you??


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


I thought ISIS is the state now? The Taliban certainly were, and they did similar things.

Not to mention 15th C Spain.


> 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.


Agreed :)


.. 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.


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... )

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


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

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.


Very insightful. Even with the gov't/bank crackdowns and manipulation, I can see this being an excellent area for tech development. I'm thinking about "low-income people who depend on remittances," you mentioned.

Obviously, avoiding regulatory bullying would be paramount and that might be possible by using bitcoin. Just off the top of my head, I can picture a PayPal-ish website that money changers could use. (Money changers are everywhere!) They could open an account on the website to monitor, track, and verify transfers and payout cash to the receiver. And just like PayPal, if there were issues like fraud or laundering, the money changer would be accountable.

This idea is so obvious, I wonder if it's already being done.


One thing I don't understand, SWIFT you say is $5-$10 per wire, how is this cost justified in any way?


SWIFT is not $5-$10 per wire - it's $30 to $60 in my experience (apart from Interactive Brokers who give you one free one per month). The costs are partly because that is a fixed fee whether you are wiring $1000 or $10m. Also it is still a semi manual process often involving humans at both the receiving and sending banks. This is partly because it is an old system dating from 1973 and also with the $10m transfers there is some fraud / cock up risk and so they check things out a bit. It also allows you to send money from say Jersey CI to the Bank of Bhutan who may not have compatible computer systems. I did that one and got my money stuck in Bank of Bhutan a bit rather with the travel agent I intended it for due to a cock up on my part. Also they do provide human customer support when you do such things. Also now they have to deal with a bunch of anti money laundering bureaucracy. Apparently in the EU the regulations are stack of paper about a foot high so no one has actually read it all so they kind of wing it. There are costs.

In fact thinking about it on a typical $50,000 transfer I imagine a $30 fee would actually be a loss leader if you imagine how much you'd have to pay for a compliance officer to read the laundering regs and file paperwork illustrating the transfer is kosher. Against this they typically try to overcharge you on FX (.5% is possible) and also give you 0 interest on your money when they are getting say 5%pa on it so they may make typically 2%*50k on that = $1000 which would cover costs but I'm not sure $30 would.


SWIFT refers to the network used in sending standard international bank wires, which I am contrasting to the family remittance network, an ad hoc network that links entities that facilitate the capture and delivery of international family remittances.

Sending a standard international bank wire will cost $30-$50 typically, not $5-$10. I don't really know how that price is "justified" as such, except to say that any bank account that is sending international wires increases the AML compliance cost of that account for a bank, and because surprising aspects of the bank wire transfer system are manual, a human being will frequently need to get involved. I would imagine that the incremental cost of sending a bank wire is frequently tiny compared to the cost, but it probably varies significantly from bank to bank (for some, it might even be a loss-leader).

The fees associated with sending a wire via the more ad hoc family remittance network are determined by a competitive marketplace, and are typically $5-$10. Providers are not all banks (although banks do get involved in a large percentage of transactions) and include non-bank companies like Western Union, MoneyGram and Xoom, and smaller players like ViaAmericas (mentioned in the article). People who send money will shop around for the best deal (often, different services are offered within the same retail agent location), and senders will from one month to the next switch providers if the FX rate is better, or if the fees are lower. The bank oligopoly holds no sway here, and if prices could be lower, they would be lower.

Your reaction is a typical one, and one that I remember encountering repeatedly: "why do these transactions cost anything at all?" The truth is, there are significant costs that underlie a family remittance transaction. At least half of transaction fees, and often 80%, are claimed by the retail agents that capture or pay out the remittance. There, you have all of the costs associated with retail, combined with the costs of handling large amounts of cash. On the capture side, many banks will charge retail locations a percentage fee for processing the cash they deposit, and if armored car services are used, they will also change fees for handling. On the payment side, logistical challenges may be even greater, given local conditions.

The amount of money that remains goes to pay for secure and highly-available computer systems, AML compliance processes (which require a significant amount of human involvement), other regulatory compliance costs (security, bonding, record-keeping, reporting, examination fees and assessments), fraud coverage, customer service costs (a call center must be maintained), marketing, and general corporate overhead. Really, what you would imagine it would take to run a remittance network if you thought about it.

If you compare remittance fees as a percentage of a typical US-Mexico transaction ($5 to send $350), they are comparable to other retail payment transactions that involve similar levels of risk and require similar infrastructure. However, volumes are much, much lower than ATM or credit card transactions, so economies of scale yield a much lower benefit, which also adds to the cost.


Are there any kind of odds that the U.S. will join a fully-automated transfer network with at least other western countries? I recently did my first EU->US money transfer and was amazed at how much worse the experience & cost was compared to doing a Denmark->Germany transfer. Within Europe, even across borders and currencies, the transfers are now cheap and fully automated: you just identify the destination account by IBAN, and it's routed automatically. It doesn't seem like it would be impossible to link up U.S. accounts to allow IBAN-identified fully electronic transfers too, versus the current really primitive system where you enter a bunch of information and some humans eventually enact the transfer. But afaict there's no movement in that direction. There's talk about an EU/US free trade area, but why not a rationalized transactions treaty?


The US banking industry has shown no interest in even setting up a more modern intra-country wire transfer system. It's pretty unlikely they would support a better international system anytime soon.


It's not a cost, it's a price and it reflects what the market supports, not how much the bank actually spends for the service.


Isn't it incredibly naive to assume that this price is somehow driven by supply/demand driven market when the reality is banking is monopolistic and riddled with fraud?

If the cost of the transfer actually was determined in a competitive environment I'm sure it would be considerably lower. Unfortunately on such fees it's not in the banking industries interest to act competitively with one another.


> [...] assume that this price is somehow driven by supply/demand driven market

I didn't say that. Intelligent actors tend to avoid any real competition. The price is what enough clients are willing to pay to make the whole scheme profitable. There doesn't need to be any fairness for this to happen.


Going back to the original point, the price is set in a non competitive environment with the chance of the introduction of new competition is basically nil.

This is monopolistic, anti-competitive and wrong, and the less wealthy sections of the population suffer the most (as per usual).


>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 consumption needs

Are (US) dollar bills a workable substitute for pesos at the receiving end? I mean, can a rural Mexican without a bank account buy what he or she needs with dollars? Or does her or she need pesos?

(Not rhetorical: I really don't know.)

In other words, sure, I understand that BTC are not useful in rural Mexico because many have not heard of them, and most who have heard of them do not trust them, but surely everyone in Mexico knows that US dollar bills retain their value.


In every case I'm familiar with, the receiving bank can convert the cash to another currency. For example, if I'm visiting Mexico and withdraw money from my own American account, then the entry is shown in US Dollars on my account records, but the ATM will dispense Pesos. There are rates for these conversions (https://duckduckgo.com/?q=international+currency+converter) for example, using today's GO currency rate, $100 US would be equal to 1296.75 Mexican Pesos. There are frequently fees for this service.


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.


The problem with Bitcoin ATMs is the logistics of cash.

A Bitcoin ATM network that operates at a scale large enough to displace or even compete with the remittance networks in Mexico (and other beneficiary countries) would by necessity draw on the banking system to supply it with cash. This is because all of the cash being withdrawn would have as its ultimate (albeit intermediated) source Bitcoin purchases in the US (or other sending countries).

Think of it like this: the Bitcoins being sold in Mexico in exchange for pesos at these ATMs are being purchased by the ATM owner, who will then need to sell them in order to resupply the ATMs with pesos. Who does she sell them to? Without a massive (i.e. hundreds of millions of pesos per day) local demand for Bitcoins in Mexico, her buyers are going to have to be foreign--most likely the the immigrants in the US who are sending money home.

So, she sells those Bitcoins to Mexican immigrants in the US, for dollars. And now she needs to buy pesos, in the form of bills/notes, in exchange for dollars--at which point she is in the exact same situation as any standard remittance provider today!

Everywhere in the world, one of the primary roles of banks is to manage cash logistics, and to act as the retail face of the central bank, which acts as the ultimate sink for excess cash, and as the ultimate source of cash in the event of a shortage. As a result, the banks, and then ultimately the central banks, regulators, and governments generally, act as gatekeepers for any large-scale financial enterprise requiring the disposal and generation of physical cash.

What's more, when you are talking about billions of dollars exiting the US in favor of Mexico, there is only one way that money can move, which is through the central bank, via the banking system.

The only way that Bitcoin can displace the current remittance providers is if a large local demand for Bitcoins already exists in beneficiary countries, such that the inflow of Bitcoin could be absorbed locally, or used by recipients without being cashed in. Either that, or central banks and regulators will have to embrace it--or at minimum tolerate it.

That's not to say it can't happen. It just can't happen without official sanction first, before a local bitcoin market has established itself.


Potential demand for Bitcoin in these countries could be companies that buy from the US and receive a discount for paying with Bitcoin. An intermediary buys Bitcoin for the receiver of remittances and sells to those companies.

Edit: please leave a comment when downvoting


That could work. Some guy with a shop in Mexico selling say used iphones could provide a cash sevice giving people pesos in exchange for payment in bitcoin and then use the bitcoins to purchase iphones from the US. Assuming there are sellers in the US who will ship goods to Mexico for bitcoin.


Why would you ignore fees? Fees are the core factor of any payment/remittance business. The possibility of such an 'Bit-ATM' network doesn't depend on any technical issues, but on the amount of fees that can be extracted; only the volume and rate of fees determine if it's realistic or not.

Bank accounts also are generally free or near-free worldwide, it makes sense for every minimum wage earners to have a bank account, around here they do unless they're working illegally. If they're unaffordable in some places, then maybe that's the thing to solve - it doesn't actually cost much money to keep a "account" & some digital records; and the clerk-face-time of making such a record is comparable to the clerk-face-time of current money remittance services.


>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?


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.


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.


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.


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?


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


It banned the export of cryptography.


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.


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...

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...

2 http://en.wikipedia.org/wiki/Pretty_Good_Privacy#Criminal_in... and http://www.pgpi.org/pgpi/project/scanning/

3 http://en.wikipedia.org/wiki/Bernstein_v._United_States

4 http://www.openbsd.org/crypto.html


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


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


Give it time.


>A ban of the technology would pretty... unprecedented

It would not.


I'm not sure identifying users of the network is quite as easy as you may think it is. If by users you mean those sending or receiving bitcoin transactions. It'd be an interesting challenge to identify the IP address originating even a single Bitcoin transaction. How can you tell whether a node is the originator or simply a relayer of a transaction? For added privacy, run Bitcoin over Tor.


By users I mean anyone participating in the network.


>Of course, if a centralized business is in the middle, you can regulate that

Who else will run the BTC ATM on each end of the transaction?


You're not completely wrong. But without Bitcoin being accepted everywhere for everything, dollars will always be involved, and that's when're the regulation can and will live.


It'd be like trying to regulate 500 million independent banks. You could make a law about it, but it'd be impossible to enforce.


Absolutely insightful. Just today I discussed the BTC and other cryptocurrencies usability as remittance medium and felt that it is not globally feasible because of national regulatory risks. You just showed me the magnitude of the problem. For that I thank you.


Does Bitpesa pay out in cash?


"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.


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.


No. 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


I assure you your downvote and your knee-jerk sanctimony doesn't go unappreciated, but what you described is exactly what I said was happening, not what you say is happening.

We're not talking about a fine for executives laundering money, we're talking about fines about 'a lack of proper anti-money laundering controls, despite evidence of suspicious activity'. This is weasel-speak for 'we found something suspicious but can't prove anyone important was involved.'

The decision-makers who would have seen this 'evidence' would probably be layers removed from HSBC top management. That executives are being blamed for this in the court of public opinion is part of the reason why companies are turning to massive Orwellian computer systems to monitor all financial activity.


Yep. If you dig into that story (big news at community banks in Japan), the "bombshell" is that Russians like paying Japanese used car dealers for cars, and that Japanese used car dealers are happy to oblige them, especially with regards to cars that are uneconomic to continue driving in Japan [+]. The US leaned on HSBC which followed up with a local Japanese bank. The local Japanese bank was disinclined to pry into its customers businesses all that much on behalf of a foreign regulator, relaying to HSBC a sentiment which probably wasn't literally "They're customers of long standing and are, legitimately, car dealers. Please give our regards to the Americans and tell them that the Occupation is over." but likely came close. The US told HSBC this was unacceptable and HSBC followed up with its customers (the Japanese regional banks), who said "Which part did you not understand the first time?"

[+] There exists a tax on automobiles which increases with age and which, fairly quickly, causes the tax to cost more than the residual value of the automobile. It is justified as a public safety measure, since you get an inspection when paying the tax, but is actually a straight-out subsidy to domestic car manufacturers, since it essentially mandates "Despite the fact that your products work for decades, customers are required to buy a new model every 6 years."

[Edit: I should add that while Hokuriku doesn't give one the impression of being impressively well-organized from the notes in the Senate investigation that my tiny bank in central Japan believes in KYC so much that their manager-at-the-time both successfully intuited "Patrick is seeing someone." and "Patrick has broken up with his girlfriend." from changes in my cash withdraw patterns and wrote these observations down in their log just in case the next manager needed them. I have many fun anecdotes from working with them, like the time my gym botched a withdraw request and received a blisteringly polite note in Japanese saying that no one with the specified name had an account at the bank and if, hypothetically speaking, the gym had business with one of the bank's customers then it should, hypothetically speaking, extend him the common courtesy of spelling his name right.]


The gym misspelled your name and your bank told them off? I'd love for some amount of the infamous Japanese formality to become more commonplace here...


"For example, HBUS carried out 28,000 undisclosed sensitive transactions between 2001 and 2007, an internal audit commissioned by the bank found. The vast majority of those transactions - worth $19.7bn - involved Iran."

Seems like they got fined for being super shady.


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".


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.


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.


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...


From my reading it looked like the computer system was an internal HSBC one, mandated by regulations. Correct me if I'm wrong.


"So [politician] was a liar?"

Yes.


Whereas the bankers on the other side of the issue are known for their honesty and integrity...


I'm pretty sure they knew they were making money dealing with sketchy people and were happy to look the other way while they were making money.


That paragraph deeply annoys me.


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.


Foreign 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


I live in Singapore. Innovative and low cost is not exactly how I'd describe the services available to me.

I can do money transfers but they're very expensive using the regular banks. Currencyfair.com, which is innovative (and cheap!), is also prohibited in Singapore for outbound transactions, but it's available in the US.


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


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.


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.


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.


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.


The role of the dollar is not simply a function of the size of the U.S banking system. It has many historical and structural reasons. But be that as it may, my point is that the U.S has that special role and shouldn't abuse it for political purposes.

And about genocide: I think we both know that the set of countries against which the U.S has imposed sanctions is not equivalent to the set of countries that have committed genocide. It's a list of political enemies of the U.S.

Not all countries on the list have comitted genocide and there are quite a few U.S allies and trading partners that have committed genocide or other brutal human rights violations. They are not on the list because it's politically convenient or very lucrative.


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


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.


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.


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.


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?


A 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.


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.


You can withdraw money from a PayPal account.


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.


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.


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?


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


Summary: 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.


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


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


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.


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.


Capital controls are slowly but surely coming back, it seems.

We're basically in a state of surveillance of nearly all financial transactions.

This is, of course, always a state security goal. Computers make it a lot more scary to me though. Monitoring can be a lot more personal. More individuals can be watched than ever before, with records kept accessible for longer than ever, with better software for reporting than ever before. And it's never been easier to lose control of large quantities of information now that gigabytes can be copied in seconds.


>We're basically in a state of surveillance of nearly all financial transactions.

I am absolutely convinced this is the reason. I'm reading a lot of theories that racist or anti-immigrant motivations lie behind this, but I think it simply is that the priority has shifted between the conflicting motivations of the government to spy on everything and away from facilitating illegal labor for the benefit of large businesses. I have wondered for a while now when this was going to happen because it seemed unreasonable for a surveillance state to leave such a gaping hole in its vision.


> failing nations pay the bills ... stop letting people take it out of the country

No it's not. You have it completely backwards!

Failing nations are delighted for the local currency to leave.

Failing countries won't let foreign currency in.


Almost: failing countries let foreign currency in, then try to prevent it being used for internal transactions or being sent out again. Attempts are made to restrict spending the country's limited supply of forex to fuel.

America's ability to pump its own oil is far more important than its ability to print currency. You can't print oil, and having to import it in large quantities would make the economy unviable.


You do know that the US still imports 1/2 of it's oil, right? (about 6 million barrels per day in imports, http://www.eia.gov/dnav/pet/pet_move_neti_a_ep00_IMN_mbblpd_...)

However, all countries in the world without oil have to buy their oil in USD ... so they first convert their local-currency to USD, and then purchase oil, driving USD currency demand.


For some reason I don't think those $50 billion are what is the main concern of the federal gov't


Yes, 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.


>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.


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


Encourages you to spend it locally instead, supporting the nation's economy.


Also discourages its citizens from leaving the country.


Isn't this a good thing for Bitcoin?


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


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.


What about WireTransfer ?


Bad decision


$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.


You can issue your own assets on the blockchain now, tie them to fiat and make a p2p money transfer startup. Mastercoin, Counterpartyd, counterwallet.co are an example of what you could create and hire competent crypto engineers so you aren't cleaned out (counterwallet.co makes bold client side security claims yet don't offer browser extensions). Make your asset issuing company as transparent as possible, holding reserves as insurance in bitcoin or with a trusted 3rd party http://www.coindesk.com/new-hong-kong-bitcoin-exchange-offer...

Sell and redeem your asset for local peso deposits in Mexico. The vast diaspora will use their accounts at home to buy the asset then sell them p2p in the US to their community network. Traders all over Mexico can change the asset to cash p2p using your business as guarantee the assets are worth something. No correspondent banks to worry about. Now somebody in the US can load up your version of counterwallet.co, click on p2p trade and buy your asset from somebody local either for cash or bitcoins to send to their family back home or directly to a cash out service in Mexico that just delivers money.


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.


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.


Money transfers internationally incurs fees too. And if the US banks close the opportunity to do it at all, that incurs an even higher cost for people who need to support their family for example (forcing them to e.g. take trips to hand over cash).

It's not going to happen overnight, but if USD transfers gets too expensive and difficult, it's a natural outlet. And I'm sure illegal money transfer services will spring up to (have a pile of drug money in Mexico and want to move it into the US without the complexity of moving the cash? Sell money transfer from the US to Mexico)


Although 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.


How 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.


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. 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.


> 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.


Lately the volatility is not that bad really. There are some price corrections upwards at times, but most people don't mind to be there. They are accompanied by downwards swings too, but it's not an orders of magnitude thing. In fact Bitcoin stayed in the $400-$700 price band since months moving quite slowly.


Actually that's normal. People overestimate BTC volatility because the price goes wild during periods of intense press interest, and so of course there's a big population of people who are only paying attention to Bitcoin during these times. In quieter times when the media spotlight is elsewhere the price usually settles into a somewhat specific band and stays there until the next press cycle.


I find it interesting how people talk about markets: increases are "price corrections" and decreases are "downward swings" implying that that they are temporary and will come back up.

This isn't Bitcoin specific but getting both in two adjacent sentences was a good opportunity to comment on it.


Insert long comment about the virtues of Bitcoin here.


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?


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


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.


> 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.


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


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.




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