Posted on February 26, 2007

Immigrants Who Wire Money Get Help From The Fed

Molly Hennessy-Fiske, Los Angeles Times, Feb. 26, 2007

Even as the federal government is starting to crack down on companies that hire illegal immigrants, it’s been helping those same workers send money home, cheap.

Dubbed Directo a Mexico, the Federal Reserve-sponsored service allows customers without Social Security numbers to wire money through the Fed system to Mexico’s central bank at little cost. In September, the Fed expanded the remittance program by allowing immigrants, legal or not, to open accounts at participating banks and credit unions in the U.S. or Mexico. About 27,000 transfers are made through the program each month.

The program has attracted the attention of conservative immigration activists and members of Congress, who say financial institutions shouldn’t cater to illegal immigrants.

Rep. Brian P. Bilbray (R-Solana Beach), who leads the congressional Immigration Reform Caucus, said Directo a Mexico and programs like it should be stopped and that participating banks were “profiteering from illegal immigration.”


Bilbray said legislators were working on proposals that would prevent financial institutions such as the Fed and Bank of America from catering to illegal immigrants, and are calling on the Bush administration to address the issue.

Elizabeth McQuerry, an Atlanta-based assistant vice president for the Fed’s retail payments office, said Directo a Mexico wasn’t breaking any laws. She said the program complied with the Patriot Act, the Bank Secrecy Act and other laws against money laundering. Customers must provide identification—a consular identification card or other picture ID—and banks regularly check the documents’ authenticity, she said.


Only immigrants who are in the U.S. legally can get a Social Security number, but any Mexican national can get a consular ID, regardless of legal status.

Rep. Tom Tancredo (R-Colo.), an advocate of increased border security who has talked in the past of taxing illegal immigrants’ remittances, said the Fed program might not be breaking any financial laws, but “there is a law against aiding and abetting illegal aliens in this country.”


His group—which supports enforcement of immigration laws and reports 100,000 members, about 35,000 in California—says the U.S. government should better regulate wire transfer companies rather than offer an alternative that “makes it easier and more attractive for people to come here and break the law.”

Economists and Directo a Mexico supporters dispute claims that the program harms the U.S. economy, and say it will actually help fight crime by encouraging people to use a legal, regulated money transfer service. They also say it may stem illegal immigration by making it easier and cheaper to wire money home, lessening the need for the sender’s relatives to cross the border to earn a living.

Philip Martin, chairman of the Comparative Immigration and Integration Program at UC Davis, said remittances sent to Mexico last year were just a fraction of the U.S. economy, $23 billion out of a gross domestic product of more than $13 trillion. And as businesses increasingly serve illegal immigrant customers, he said, it’s in the country’s best interest to monitor their activity through programs like the Fed’s.


The Fed offers a competitive exchange rate and charges banks 67 cents for each wire transfer to Mexico. After banks add their own fees, it usually costs customers $2 to $5 per transfer, regardless of the amount sent.

Private wire services usually charge more and add fees for larger transfers and for claiming the money in Mexico. The average cost of wiring $300 to Mexico from the U.S. was $10.40 last year, when 65.8 million of the transfers were made, according to a Bank of Mexico report.

McQuerry estimates Directo a Mexico saves its customers about $3.7 million annually.

Directo a Mexico proved popular at Mitchell Bank in Milwaukee, which remade itself as “Wisconsin’s immigrant bank” during the last seven years to cater to an increasingly Mexican customer base. The bank offers the first two wire transfers free, then charges $2.50 for each additional wire—$4 for customers without accounts at the bank.

Monthly wire transfers average about 200, totaling $200,000, said bank Chairman James Maloney. He credits Directo a Mexico with attracting 10% to 15% more customers a month.