International Payments Post Dodd-Frank: A Game Changer |


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  • Current technology may be non-compliant with Dodd-Frank Current international remittance technologies may not support compliance with upcoming regulations of Dodd-Frank. EVAN INTRODUCES BRIFFINI  
  • Jorge first
  • Back to Evan for today’s takeaways
  • 8/3/2010 Copyright 2010, The 2010 RDC Summit
  • International Payments Post Dodd-Frank: A Game Changer |

    1. 1. International Payments Post Dodd-Frank: A Game Changer Presented by Evan Shelan, CEO, eZforex Breffni McGuire, Vice President, NEACH Jorge Jimenez, FedGlobal Director, Federal Reserve Bank of Atlanta
    2. 2. Outline of Today’s Presentation • The Problem • Explanation of Reg E • Federal Reserve System’s ACH Approach to Reg E • Q & A
    3. 3. The Problem • Anxiety within the financial community due to Dodd-Frank • Many CU’s have or will discontinue International Payments • Section 1073 Reg E Mandates… • Pre-payment disclosures of: –Exchange rates –Estimated Fees –Date of funds availability • Error resolution support • 30-minute consumer opt-out
    4. 4. Breffni McGuire, Vice President, NEACH
    5. 5. Dodd-Frank 1073, Final Reg E Remittance Transfer Rule • Background & highlights • Evolving requirements in “final” rules • Status going into the October 28th deadline • Current industry issues
    6. 6. How we got here • Dodd-Frank Wall Street Reform & Consumer Protection Act – Section 1073 – Expands Reg E (subpart B) to all consumer-initiated cross-border transfers • Consumer Financial Protection Bureau (CFPB) charged with implementation – Remittance Transfer Rule
    7. 7. Definition of a remittance transfer • “A‘remittance transfer’is defined broadly to include all electronic transfers of funds to designated recipients located in foreign countries that are initiated by a consumer in the United States utilizing a remittance transfer provider’s services” – Designated recipients may be consumers, businesses, your member
    8. 8. Further Definition • Consumer-initiated international transfers for personal, household, or family purposes – Cross-border wire transfers – International ACH Transactions (IATs) – Online bill pay – Loads onto certain credit cards Credit/debit card payments to foreign merchants are not covered • Limited exceptions – Transfers of $15 or less – Payments arising from securities trading
    9. 9. Definition of a Remittance Transfer Provider • An entity providing remittance transfer services in the normal course of business – Credit unions and banks – Money transmitters – Broker/dealers • Normal course of business defined to be more than 100 transfers a year • Does not have to hold the consumer’s account (e.g., Western Union)
    10. 10. Safe Harbor Provision • Credit unions with 100 or fewer remittance transfers a year are granted safe harbor under the Rule – Credit union is not a remittance transfer provider if it did not exceed 100 remittance transfers in the prior calendar year and provides 100 or fewer remittance transfers in current calendar year – Credit union exceeding the 100-transfer limit has “a reasonable time period, not to exceed six months” grace period in which to comply
    11. 11. Senders and Recipients • Sender (your member) must be a consumer (“natural person”) in a State – Focus on the account location (for transfers made from an account) • Recipient is a person, business, etc. located in a foreign country – Focus on location of recipient account (for transfers made to an account) • May be the same member
    12. 12. Rule Provides Three Consumer Protections Under Reg E • Disclosures – Credit union’s responsibility – Prepayment disclosure to your member – Receipt discloser to your member; may be combined into single disclosure w/above • Cancellation – Consumer’s choice • Error resolution – Credit union’s responsibility
    13. 13. Disclosure Requirements - Must be: (1) written; (2) in English and in any foreign language used by the remittance transfer provider to advertise, solicit or market; (3) accurate at the time payment is made
    14. 14. Ability to Use Estimates • 5 exceptions allow estimates: – Temporary exception: Insured depository credit union / bank – Permanent exceptions • Transfers sent via FedGlobal ACH Payments • Preauthorized and recurring transfers • Transfers to (5) nations with laws affecting foreign exchange rates (“safe harbor”) • Disclosure of foreign taxes and ‘non-covered’ third party fees* – optional to provide * Non-covered third-party fees are not required to be calculated and disclosed under Reg E, subpart B
    15. 15. Cancellation Right • Consumer has 30 minutes to cancel a remittance transfer – From time of making / authorizing the transfer • Refunds must be made in full w/in 3 days • Specific rules for pre-scheduled transfers – 3 or more days in advance of transfer date – Uncommon in credit unions
    16. 16. Error Resolution • Sender has 180 days to report error(s) • Error types include: – Amount – Delay – Documentation • Credit union must investigate and resolve within 90 days
    17. 17. Evolution of the Final Rule
    18. 18. Key Changes in April Final Rule • Credit union is not liable if a member provides an incorrect account number or incorrect identifier for recipient’s institution • Five conditions must be met – CU gave member notice before payment that incorrect data could cause member to lose the transfer amount – CU can show that member provided incorrect information – The incorrect data caused the transfer to be credited to the wrong account – CU used reasonably-available efforts to verify that the recipient institution’s identifier corresponded to its name – CU “promptly used reasonable efforts’ to recover the funds Extends compliance effective date to Oct. 28, 2013
    19. 19. Key Changes in April Final Rule • Lifts mandate for credit union to provide disclosure of fees charged by non-covered 3rd party (e.g. bene bank) to the recipient – Unless the foreign institution is acting as an agent on behalf of the provider • Lifts mandate for credit union to disclose foreign taxes other than national taxes But, a credit union must include a disclaimer that such fees and taxes may apply Extends compliance effective date to Oct. 28, 2013
    20. 20. Current Issues to Consider • Are the April 30th changes enough for your credit union to provide remittance services? • Are you on the verge of losing‘safe harbor’ protections under the 100 transfer threshold? • If you use a correspondent, what is the process for disclosure, cancellation ‘wait time,’ error investigation/resolution? • If you use a correspondent, ensure you’ve identified international wire transfers • Does shifting to ACH make sense?
    21. 21. Jorge Jimenez, Director Federal Reserve Bank of Atlanta
    22. 22. Federal Reserve’s ACH Approach
    23. 23. The need today 23 • How do your members make international payments?
    24. 24. International Payments Today Traditionally only offered by the largest global banks High fees compared to domestic Beneficiaries paying beneficiary deductions
    25. 25. Remittances Today Traditionally offered by Money Transfer Providers in non banking channels Today many senders have bank accounts International Consumer Wires are now considered remittances too
    26. 26. ACH International Expanding ACH
    27. 27. International ACH benefits No Beneficiary Deductions Lower Costs True Innovation in BankingConsistent Delivery Times Best Foreign Exchanges International Offering Accessible to all institutions regardless of size FI can also handle own exchange ACH International Improves transparency for customers
    28. 28. Fixed-to-Variable (FV) (USD to Pesos) Example: Fixed-to-Variable payment to Mexico 28 ODFI FedGlobal Gateway Operator RDFIBANXICO Gateway Operator IAT IAT Local USD USD MXN F X 02:15 a.m. ET Day 0 Day 1
    29. 29. Domestic vs International ACH In domestic transactions you can use US ABA# and Account number, but what about International transactions? Image Source Page:
    30. 30. International ACH features • It offers payment delivery options both for • Account-to-Account (A2A) • The standard option of distributing payments between two deposit accounts. • Account-to-Receiver (A2R) [Outbound Credits Only] • This option allows funds from accounts at a U.S. depository financial institution to be retrieved by any receiver at either a participating bank location or at a trusted, third-party provider in certain receiving countries.
    31. 31. International A2A Gateway RT and Canada: CPA # and Account number Panama: RT# and Account number Mexico: ABM# and CLABE (18 digits) Europe: BIC# and IBAN
    32. 32. International A2R Gateway RT and Mexico: 647R (ABM) Password (acc#) Latin America: CO00212336750000023642 (table from 525565656511 (phone number)
    33. 33. How does the IAT Work? Account number abroad
    34. 34. All Consumer originated transactions are now considered Remittances and fall under Reg.E. Consumers need to be provided with the following disclosures at time of origination among other provision • Exact Foreign Exchange (or Estimated in some FedGlobal® cases) • Exact fees and taxes applied at origination • Exact intermediary fees applied at receipt (optional) • Exact day of funds availability to beneficiary While Industry impact still uncertain, your Regional Payments Association can help you stay updated Dodd-Frank’s Impact
    35. 35. FedGlobal®Features
    36. 36. Transaction Information 37 Default: Current Date Total Charge to Customer Driven by Menu Page Amount Transferred Estimate of Exchange Rate Date Funds are Available to Receiver Estimate After FX Estimate of Foreign Fees and Taxes Estimate of Amount to be Received
    37. 37. Working past the Silos When thinking of implementing FedGlobal we suggest you include representatives from… YOU have the solution, it is YOUR responsibility Treasury Product Office Compliance Community Development International Desk (if present) Retail Banking ACH Operations
    38. 38. Today’s Takeaways • Any credit union providing international payment services must determine what obligations it has under the Dodd-Frank 1073, CFPB Final Remittance Rule. • There is less than 4 months to determine what your credit union will do by the October 28th effective date. • Resources and Model Forms are available on the CFPB website and NACHA has a 1073 Solutions Center ( • The final, Final Rule eases some major industry pain points but only FedGlobal ACH Payments offers a permanently compliant solution. • Instead of dismantling your CU’s existing international payment program, consider viable alternatives that provide benefits to both your CU and the members.
    39. 39. Questions?
    40. 40. Contact Information: Evan Shelan, CEO Jorge Jimenez, FedGlobal Director, Federal Reserve Bank of Atlanta Breffni McGuire, Vice President, NEACH