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Looking the other way report


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Looking the other way report

  1. 1. Looking the Other Way: The Absence of Remittance RegulationPast Time? In December 2010, ACORN International released our report, Past Time for Remittance Reform(, in the cities where we work around the globe. The report painstakinglydocumented the real costs incurred by migrant workers and immigrant families in sending remittances from thecountry where they are residing, receiving remittances by their family members in their home countries, andpaying the assorted fees that banks and money transfer organizations (MTOs) charge for currency exchange. Remittances are the monies transferred usually from family members or migrant workers back to otherfamily members and home communities. Such money transfers are well known as critical components of theGNP for many developing countries around the globe and total close to $400 Billion USD in latest estimatescosting more than $44 Billion USD in estimated charges. Despite the claims of the G-8 supported by World Bank research that the average costs of sending isnow around 10%, ACORN International found the all-inclusive costs to be at or above 20% for each transactionof $100 remitted. In our report though we joined the call for a 5% cap on costs for remittances since it wouldmove more than $20 billion USD in increased support from developed to developing countries and its citizenswere the costs cut in half. Past Time for Remittance Reform was sent to the key MTOs (MoneyGram and Western Union) and thetop twenty banks in North America (including HSBC, Bank of America, Citi, Scotiabank, BMO, and others)asking for both response and meetings with leaders of ACORN International to discuss ways of achieving costefficiency reforms and reductions. The response was underwhelming. We were very disappointed. Of the banks that did respond, we received an answer from HSBC, Wells Fargo, Scotiabank, and BMO.Unfortunately most of the responses were in the vein of the public complaint of the Canadian Bankers’Association quibbling not about our data or conclusions but about our selection of $100 as the base amount forthe survey. Many of the institutions offered bulk discounts for transmitting higher sums and chafed at the $100even though it is the usual remittance level sent regularly by both members of ACORN International affiliatedorganizations and research published by the Inter-American Development Bank and the World Bank. OnlyWells Fargo offered claims that a special program for their account holders was much, much less expensive to26 countries and in fact in many cases they waived the fees (see their letter at Mostly in responding to this critical issue for immigrants and migrant workers, there was deafeningsilence. We asked ourselves, “Why?” Then we turned to look for the reasons that MTOs and banks could replyand respond with such impunity. How could they be so arrogant about their predatory pricing of remittances?How could their governmental regulators be allowing such practices?Who’s on First? What’s on Second? ACORN International researchers went back country-by-country to review who was in charge ofregulating the remittance practices for banks and MTOs. Our researchers looked in all of our countries in LatinAmerica (Honduras, Dominican Republic, Peru, Argentina, and Mexico) and we found nada, nothing at all. Welooked in Kenya and elsewhere in Africa. Nothing! We looked in India. The same! The answer had to be that“sending” countries, like Canada and the United States, had a grip on something this important and involvingsuch large amounts of money. Wrong! Oh, there were regulations in a number of countries, especially North America and India about transfersthat might not be fully documented and therefore arguably support potential terrorism. This is decidedly againstthe law. Getting a better understanding of the hawala system of informal money transfers that we barelytouched on in Past Time, our researchers and organizers in India confirmed and clarified that such systems
  2. 2. might be popular and might involve significant sums, but were definitely illegal for all of these reasons sincethey lacked any paper trail for the transactions. All of this is not to say that the responsibility for regulating such enterprise is not clear. We found itwell documented that national banks in each country have the full responsibility for regulating the banksdomiciled in their countries on all matters of transactions within their businesses, including thereforeremittances. In fact the World Bank responded aggressively to one of our partners in January 2011 concerningthe ACORN International report because they did not want to be misunderstood as having usurped a G-8 goal orthe prerogatives and prerequisites of national banks in the various countries who were responsible for regulatingin this area. Nonetheless, looking closely even at the Federal Reserve, as the United States banking regulator, and theNational Bank of Canada, as the principal Canadian banking overseer, we could find no specific regulation ofremittances and absolutely nothing that addressed the issues of cost in relation to remittances. The “who’s onfirst, what’s on second” style of absent minded blindness in this area seemed global, not regional. We did find that late in 2010 the Canadian province of Quebec legislated in this area and at leastspecifically mentioned remittances in the statute therefore asserting jurisdiction in this area of MTO activity.Though this provincial legislation was silent on the issues of cost in general or any fees in specific, at least itseemed clear in Canada that the provinces had authority and regulatory responsibility in this area, or at leastthought that they did, and were unchallenged in their assertions at this time. The same thing turned out to be the case in the United States where state banking commissions and otherbodies had jurisdiction over MTOs. ACORN International’s researcher painstakingly reviewed thirty-two (32)different states and found a plethora of evidence that the states were very interested in fees, but this interest onlytranslated into a commitment to collect licensing fees to allow such MTOs to do business within the state. Thelack of transparency and difficulty of comparing every single state on the same terms leaves the possibility thatthere may be a “Quebec” somewhere in the USA that has begun to assert regulatory authority over MTOs, butACORN International’s researcher has not been able to find it yet. From what ACORN International’s researchshows now, states have the authority, promulgate rules for licensing, collect the fees, but have not doneanything to legislate the behavior of MTOs in the area of costs and fees to immigrant consumers. As theattached report from the research in the United States establishes, this is a cash cow for the state’s where MTOsdo business, but the states are taking no responsibility for the predatory leeching of immigrants within theirboundaries. Licenses run most normally in the range of $1000 up to $6000 per company with a number ofstates bunched in at $4000 per company. The payments to the state for handling the remittances can be hefty.New Jersey charges $25,000 for a “foreign money transmitter” and $100,000 for a “money transmitter.” Texasrequires $300,000 as minimum security for MTOs. Oregon sets $150,000 as the maximum. All of the statesrequire various significant levels of surety bonds to warrant the transfers and prevent fly-by-night operations tosome degree and provide a limited recourse to such takeoffs and landings. In short it is not that USA state levellegislators and banking commissioners and agencies have not taken MTOs seriously, because they clearly have.Unfortunately to date states have seen their mission as enablers of such enterprises and felt no compunction, norexercised any responsibility, to assure that the immigrant consumer of such services was protected by eithertransparency or regulations against predatory practices. For remittance users the United States and Canada areremittance deserts!Two and Two Equals? Additional research has produced a clearer picture and a better understanding of the resistance of theindustry to reform. Essentially, the World Bank is not exactly wrong when it impotently describes the process of drivingcosts from its faulty 10% estimate currently to the G-8 proscriptive number of 5% by 2014 as being achieved by
  3. 3. “competition,” since both the responses received by ACORN International and the impunity expressed bybanking and money transfer organizations on these issues indicate that may be virtually no governmentalagency anywhere in the world taking as its core mission protecting immigrant consumers from predatorypractices and pricing. By default the only thing that would lower prices would be competition in themarketplace in the absence of any regulation whatsoever. It is no wonder that the responses received byACORN International touted each institution’s competitive pricing, since without any incentive towards fairpricing an informal cabal of self-interested institutional pricing has become the order of the day. The institutional response to the call for reform boils down to either “Why bother, the money is good;we’re all in it together,” or in the alternative, “Make me!” Without any real stick bandied about by any nationalbank system or state or provincial level authorities in the cause of regulation, institutions facilitating remittancescan continue to engage in something that ranges between monopoly pricing within its own customer base orwhere they enjoy exclusive agreements and simple predation of immigrant families and migrant workers tryingto send desperate dollars back home. To achieve the G-8 5% goal by 2014 (Canada and the USA are both members of the G-8 along withother highly industrialized and large powerhouse economies), ACORN International and its memberorganizations and families are clear will take regulation both at the national level for banks in this area and atthe state and provincial level for money transfer organizations. Working with various legislators we are nowalready at work in various countries trying to determine the best legislative response. ACORN Canada hastaken the lead in both Ottawa at the federal level and in Ontario and British Columbia at the provincial level towork with various members of Parliament from all sides of the political aisles to draft legislation that wouldfinally protect immigrants and achieve just and fair pricing and fees for remittances. Their effort could shapethe debate around the world in coming months as they begin to take aggressive action in this area now. Under any terms two plus two for remittances justice and the immigrant families who use the systemand depend on the system can no longer equal zero. Nor when applied to pricing and fees can it be allowed toequal ten or higher. A proper balance of real costs and fair fees will have to restore a just math to theseenterprises making two plus two something closer to the neighborhood of four, rather than the distortion thathas come to dominate the remittance industry as billions are taken in predatory profits better spent developingfamilies and fueling community improvements in emerging countries. ACORN International is united in demanding regulation of remittances at every level now.
  4. 4. State Licensing Fees & Bond Requirements Reporting requirements Regulations of FeesMaryland Initial License (application submitted in even numbered year) $4,000.00Department of Financial Institutions Initial License (application submitted in odd numbered year): $2,000.00 Investigation Fee: $1000.00 States the number and aggregate dollar amount of payment instruments issued License Renewal: $4,000.00 or sold and the aggregate number and dollar amount of money transmissions Surety Bond Minimum $150,000 Maximum $1,000000 during the previous calendar year. NoneNew Yorkhttp://www.banking.state.ny.usNew Hampshire $500 for each principle owner $25 for each agent up to $4000 --each year None Surety Bond of at least $250,000 w/ max of $2,000,000 NoneColorado banking Board The dollar volume of money transmitted for New Jersey clients onlyNew Jersey Base Assessment (Volume and Amount) and a complexity factor (up to $300) The dollar volume of payment instruments sold to New Jersey consumers NoneNew Jersey Department of Banking and Licensing fee S 700.00 The dollar volume of third party bills paid for New Jersey consumers $ 25,000 foreign money transmitter $100,000 money transmitter The dollar volume of store value cards Surety Bond requirement & Financial StatementsDelewareDeleware Office of State Bank Commissioner Can charge only 2% of the value - Must report transactions of more than $10,000 check for payday lenders--not sure if applies to mto but I think soTexas The amount of the required security is the greater of $300,000 or an amount equal to NoneTexas Department of Bankinghttp://www.banking.state.usGeorgia Money transmitters license $1000 NoneDepartment of Banking and Finance Bond required -- amount ?http://dbf.georgia.govCalifornia A licensee that engages in receiving money for transmission NoneCalifornia Department of Financial Institutions shall maintain securities on deposit or a bond of a surety company in an amount greater than the average daily outstanding obligations for money received for transmission in California, provided that such amount shall not be less than two hundred fifty thousand dollars ($250,000) nor more than seven million dollars ($7,000,000). License fee $5,000Louisiana Application for License fee $350Louisiana Office of Financial Institutions Annual report of all transactionsm, amounts with % in VA, US, and ForeignVirginia a surety bond in the principal amount as determined by the Commission but not less NoneVirginia Bureau of Financial Institutions License fee $1000 main location $ 100 / additional Max $ 5,000 NoneWashington Department of Financial Institutions Bond based on previous 12 month activity $10,000 to $ 550,000http://www.dfi.wa.govUtahUtah Department of Financial Institutions 42 annually licensed agencies -- cant find licensing 1. A copy of the most recent audited consolidated annual financial statement, 2. The number of payment instruments sold in Minnesota, the dollar amountMinnesotaMinnesota Department of Commerce Surety Bond - Each licensee must provide a surety bond, irrevocable letter of credit, 3. A list of permissible investments. License fee -- $4000 Yearly renewal fee $ 2,500 4. A list of all locations in Minnesota at which licensed business is being 5. Any material changes to the original application that have not been Filing bankruptcy or reorganization Any revocation or suspension against the licensee by any state or Any felony indictment or felony conviction of the licensee or any key Any changes in control or controlling person Notification of authorized delegate(s) contract terminationNorth CarolinaNorth Carolina Office of Commissioner of Banks Licensed industry - cant locate regulations-- Department of Finance and Corporate License $1,000 Renewal $500 $25,000 security device, $5,000 per additional location; maximum of $150,000 NoneFlorida Listed as a Regulated industry - cans find regsConnecticut $300,000 to $ 1,000,000 bond -- depending on level of activityConnecticut Department of Banking $2,875 - Application filed between 10/1/2009 and 9/30/2010 $1,875 - Application filed between 10/1/2010 and 9/30/2011Pennsylvania License $ 1,000 Renewal $ 300 Bond Required $ 1,000,000 A Licensee shall, annually on or before January 31, file an annual report with thePennsylvania Department of Banking (1) financial statements, as of December 31 of the preceding year, signed under (2) aggregate and other information on the amount of funds transmitted abroad (3) any other information which the Commissioner may require from time to timeMassachusetts regulated but cant find license or bond amounts reports not required except as requested by CommissionerMassachusetts Division of Banks Department of Banking and Finance License $ 1,000 Bond $100,000 min $250,000 max ($ 100 G base + $ 5000 for each agent in state) Quarterly Reports and Annual reports required containing: transaction date;VermontVermont Department of Banking Insurance Money Transmitter - $100,000.00, minimum amount (the bond amount increases by Office of Financial & Insurance Services Listed as regulated but cant find info Department of Commerce-Financial Cant find bond amounts License $ 6,000ArkansasArkansas State Bank Department Cant find anything MexicoNew Mexico Regulationa nd Licensing Have info on payday lending - nothing on mtos Department of Financial Institutions no info on website DakotaSouth Dakota Division of Banking • $500 initial application fee. The fee is nonrefundable. • $1,000 license fee. This fee will be refunded if the application is denied. Surety bond of $ 100,000North Dakota Investigation fee $ 450 License Fee $ 400North Dakota Department of Financial Institutions Bond $ 150,000 min to max of $ 550,000 Department of Bankins Site not working Department of Financial Institutions <4 locations $50.00 / location -- 5 or more locations $500 + $12 / location Bond required -cant find required amountKentuckyKentucky Department of Financial Institutions Application fee $ 500 License fee $500 $ 500,000 to $ 5,000,000 requiredHawaiiHawaii Department of Commerce and Consumer License $ 2000 + $300 per location Application fee -- same Bond $ 1,000 to $ 500,000 depending on net worth of companyWyomingWyoming Department of App Fee $ 3000 Annual License Renewal $2000 - $7000 depending on # of Bond $ 10,000 to $500,000 depending on net worth of company