Bonafide Remitters Banned from popular Money Service Business

Last year, remittance flows to low- and middle-income countries (LMICs) overtook foreign direct investment (FDI) as the largest source of incoming capital, having previously overtaken official development assistance (ODA) and private portfolio balance. ~ Chris Heitzig

If you are a second or third-generation American, chances are, you no longer have ties to your true motherland. For the rest of us, our American identity is just part of what makes us who we are. The tradition of helping family is a grounding principle, and the adage that “charity begins at home” is both literal and figurative. 

Over the last few years, I have come into contact with many professionals in the diaspora who have a common dilemma. How to get money to overseas relatives without paying ridiculous bank wire transfer fees.  Many relied on Western Union and MoneyGram to facilitate the weekly, monthly, quarterly, and ad hoc remittance to relatives, however, some were off-boarded as clients. 

Yes, industrious people, with stable employment, established identities, good credit, adequate social enriching data, are being banned from MSBs like Western Union and MoneyGram because they have become too charitable. The beneficiaries of the remittances are being banned as well. ~ Theon Alleyne

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Fitting the Profile

The only logical explanation for the arbitrary actions is that either the sender or the recipient triggers an anti-money laundering alert, and appeared to fit the profile of a bad actor. 

The Fines

According to Good First Job, Western Union has paid more than $748 million USD in fines, anti-money laundering deficiencies. Among the numerous allegations leveled at Western Union, was the New York Department of Financial Services view that from 2004 to 2012, Western Union failed to implement and maintain an effective anti-money laundering program aimed to deter criminals’ use of its electronic network to facilitate fraud and money laundering.

MoneyGram International, Inc. had issues with anti-money laundering deficiencies as well. A former Chief Compliance Officer of MoneyGram was personally fined $250,000 for MoneyGram’s AML failures. MoneyGram forfeited over $100 million in 2012 related to anti-money laundering and wire fraud violations. 

Bonafide Remitters as Sacrificial Pawns

It is likely that in response to those huge fines, both MoneyGram and Western Union, developed new patterns to identify suspicious transactions. However, it appears that the use cases or alert parameters were so narrowly drawn, that any remitter or recipient with one or more out-of-pattern transactions is off boarded, explanations be damned. 

Consequently, a few months ago, I speculated that persons who send remittances may have been the subject of defensive Suspicious Activity Reports (SARs) because the money service business did not spend the required time on the Know Your Customer review.

Here are some real-life examples of people who were off-boarded as MSB customers.  

John’s Story

John lives in a Caribbean country. His sister is married to a German citizen. John occasionally receives money in amounts of $100-$200 USD from relatives and friends in the US. Prior to C-19, John’s sister and his brother-in-law planned a trip for her to show off her island to her husband. In advance of the trip, John’s brother-in-law sends him $3,000.00 USD to arrange for local excursions and flights to nearby islands.  

John goes to collect the funds and is questioned by the MSB agent, who appears to document his explanation. John offers to bring back receipts or evidence of the purchases, but the agent declines. John receives the funds. A month later a friend sends John $50.00 USD. John goes to collect the funds and is advised that he can no longer do business with that MSB. 

Mary’s Story

Mary lives in Lagos with her husband and two children. Mary’s aunt in the US sends her $100 US every month to help with family expenses. One of Mary’s children gets into an accident and is hospitalized. Mary’s friends and relatives in the US and Canada hear about Mary’s plight, and they each send between $50-$500.00 over a six weeks period. The MSB agent asks Mary why she is receiving funds from different people. She explains the situation about her child. Mary’s child’s health improves thanks to the good private medical care received.  

Mary has a few dollars remaining and hears about a friend in need. She goes to the MSB to pay it forward and send funds to the friend. Mary is told she cannot do business with the MSB anymore. 

The Irony

John and Mary may be sacrificial pawns caught up in dragnet designed for bad actors. However, MoneyGram and Western Union, the dominant MSB used for remittances, have not yet tuned their AML and Fraud Prevention systems and processes to safeguard the innocent. What is ironic, is that in some cases, the persons making the off-boarding decisions, are sitting in countries that are high recipients of remittances. Yet, they are unable to apply their own experience to the cases, or maybe they never received remittances so the concept is foreign to them.

The Way Forward

Remittance transfer across the world is becoming more accessible. There are more points of access, and the rates have become cheaper...it is getting easier both from the financial and convenience standpoint. ~ Roger Williams

The remittance business needs more disruption. While Venmo, TransferWise, and Xoom offer remittance services, they do not serve many low- and middle-income countries (LMIC). In fact, over the last few months, Xoom appears to have withdrawn service to some countries.  

A Fintech could win the hearts and minds in the diaspora if it facilitates remittance at competitive rates in every non-OFAC sanctioned country in the United Nations. I am more than willing to offer Identity and Access Management, Counter Fraud Prevention, and Cybersecurity expertise to deliver this solution. 

In the meanwhile, good people will have to find alternatives when they become inadvertently snared in an MSB alert. 

The views expressed are the author’s solely, and may not reflect the views of my employer, colleagues, or clients. 

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