Immigrants from Latin America and Africa Squeezed as Banks Curtail International Money Transfers

Michael Corkery, New York Times, July 6, 2014

As government regulators crack down on the financing of terrorists and drug traffickers, many big banks are abandoning the business of transferring money from the United States to other countries, moves that are expected to reverse years of declines in the cost of immigrants sending money home to their families.

While Mexico may be most affected–nearly half of the $51.1 billion in remittances sent from the United States in 2012 ended up in that country–the banks’ broad retreat over the last year is affecting other countries in Latin America and parts of Africa as well. The banks are being held accountable not only for the customers who directly use their money transfer services but also for their role in collecting remittances from money transmitting companies and wiring them abroad.

“This is transforming the business and may increase the costs of international money transfers,” said Manuel Orozco, a senior fellow at the Inter-American Dialogue, a research group in Washington.

JPMorgan Chase and Bank of America have scrapped low-cost services that allowed Mexican immigrants to send money to their families across the border. The Spanish bank BBVA is reportedly exploring the sale of its unit that wires money to Mexico and across Latin America. And in perhaps the deepest retrenchment by a bank, Citigroup’s Banamex USA unit has now closed many of its branches in Texas, California and Arizona that catered to Mexicans living in the United States and stopped most remittances to Mexico as it faces a federal investigation related to money laundering controls.

Regulators say the banking system was being exploited by terrorists and drug lords seeking to launder money. While they have not banned banks from engaging in higher-risk businesses like money transfers to certain countries, they acknowledge that banks must now invest significantly more to monitor the money moving through their systems or face substantial penalties.

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A World Bank report on remittances found that the costs had been steadily falling over the last five years. But industry experts are expecting that trend to reverse.

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Many banks had considered remittances an attractive business because they generated steady fees and required little capital. In some cases, remittances could satisfy Community Reinvestment Act requirements to serve a certain percentage of low-income customers.

But the regulatory pressures and increased costs of compliance have started to outweigh the potential profits.

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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.

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In reality, it may be nearly impossible to fully monitor money flowing through some parts of the world. Regulators worry, in particular, about remittances to Somalia, a haven for terrorist groups with no formal banking system. Banks in the United States have had to wire money to banks in Dubai. Much of the money is then moved into Somalia through a network of traders.

One of the few banks willing to take that risk is Merchants Bank of California. But in the face of scrutiny from regulators, the bank has told some money transfer companies in cities with large Somali enclaves like Minneapolis that it may no longer be able to provide them with banking services.

Merchants Bank’s exit could be a big blow to Somalia, where remittances are a major source of income for a country that has suffered from recent famine, according to the antipoverty group Oxfam.

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  • JackKrak

    Normal people look at this and wonder how so many “poor” immigrants have so much money to send home on their way back from the welfare office or after picking up their new EBT card.

    The NYT looks at this and worries that sending money abroad isn’t as easy as it should be for the black and brown hordes.

  • What to do, what to do? We have a car wreck at the intersectionality of being sensitive to immigrants and the plight of their impoverished back in the old countries, and stopping funding of terrorism and drug cartels.

    Not so hard of a problem for me to solve. No Mexicans or Somalians here.

    Why do I get the feeling that Western Union is involved in this somehow, and that if I look hard enough, I’ll find that Western Union execs just might turn out to be big Democrat party bundlers? If they can’t do remittances with banks, they’re going to go back to WU.

    • Pro_Whitey

      And don’t forget Carlos Slim, a major minority owner of the NYT. I think he gets a piece of every remittance that goes to Mexico.

  • ncpride

    Eric ‘my people’ Holder will no doubt sue (shake-down) these banks because it ‘hurts’ the poor, suffering black/brown people. He’s just coerced a ‘historic’ 7 billion from Citigroup, with his sights set on other banks, who only did what the government forced them to do in the first place: Give any and ALL brown-skinned people loans no matter what, knowing they couldn’t pay them back. When will anyone fight back? Ever?

  • Einsatzgrenadier

    If the west really wanted to help the third world, they would stop this massive human trafficking operation, otherwise known as “immigration”, and focus on alleviating the underlying migratory pressures that drive these people to immigrate in the first place. Instead of wasting money on genocidal third world immigration policies, which are either a serious net fiscal drain or contribute absolutely nothing to the economies of both Europe and North America, they should invest money in building schools to educate the women of the third world. Western elites should also make contraceptives and abortion services more freely available in third world countries. However, they do not do this. These mad plutocrats do not care for the third world or their own western world. They only care about accomplishing the complete nihilist destruction of the west in the shortest amount of time possible.

    • MBlanc46

      “Western elites should also make contraceptives and abortion services more freely available in third world countries.”

      I’m skeptical, but it’s worth a try. Although it might sound cruel to many, I’d also start ratcheting back on fighting infectious diseases in order to reduce the populations of Africa and Latin America to manageable levels.

  • Billy Clinter

    So making it easier for people to move money who already broke the law, also made it easier for them to break even more laws?

    “Shocking”…

  • IKUredux

    We have veterans who are dying because they cannot procure medical services. There are extremely poor White people somewhere in America not receiving the help they need.. Obama is on his hellbent course, to remove even more jobs held by WHITE people in this so called POSUSA country. Jobs, that are hard to do: Coal Miners, Oil Rig Workers, and, I apologize for my ignorance, but I honestly do not know how to describe a worker in fracking. (I don’t want to go for the obvious: Mother Frackers!). Regardless of the professional name given to the stalwarts in North Dakota providing this energy, know that Obama has it out for you, as well. Gee Whillikers, it turns out that working in the extraction of natural resources requires brains. Which means White people. Extracting natural resources requires courage. Which means White people. Extracting natural resources means dedication, and hard work, and being dependable. Which means White people. So, what does this tell us about the future of the POSUSA? Everybody will be sitting in the dark, either freezing, or boiling, with nothing to eat, no clean water, no gasoline to fuel their cars,in fact, their only claim to fame? They did in fact take in “all the huddled masses”.

  • Perhaps this will make it less appealing to come here in the first place. We can only hope.