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Shakedown of Money Transfer Industry Underway On March 31, 2005, North Fork Bank and J.P. Morgan Chase closed the business accounts of money transfer agencies with hundreds of outlets in New York’s immigrant neighborhoods. Their action, the banks argue, is in response to the more stringent requirements of the USA Patriot Act to crack down on those who seek to launder money to support terrorism. But in reality, those most affected are millions of families who have come to rely on remittances from loved ones living in the United States to help put food on their table, pay the cost of education for their children and medicine for their grandparents, and help put a roof over everyone’s heads. Banks are trying to push these businesses out of the remittance industry in order to take over those transactions themselves. This is a systematic shakedown by the big commercial banks to get rid of their competition under the guise of national security. “I don’t know how long we will be able to stay in business with all these new regulations,” says a source from a New Jersey-based business who prefers to remain anonymous. Even after major marketing initiatives, banks have been unable to make significant inroads into the lucrative money transfer industry where immigrants sent $60-70 billion back home in 2004; this amount will double by 2010. And if one takes the total amount of money sent from developed countries to families in their countries of origin, the total will skyrocket to $300 billion by the end of the decade. Currently banks manage only 3% of this market in the United States. They covet the $8-20 profit from fees and commissions that money transfer outlets earn per transaction. With immigrants in the United States making 150 million transactions last year alone, the potential profits are immense. According to the Texas Business Review, commercial banks are eager to tap this market to help address adverse trends that include meager profits from financial investments since the US economy slowed down in 2001, the falling number of corporate loans, and the loss of customers, especially among higher income people who have shifted from interest-bearing accounts to mutual funds and brokerage firms. The finance industry needs the money transfer business to counteract these trends. The potential client base is enormous. In a 2004 survey of immigrants in New York, Los Angeles and Miami conducted by Prof. Manuel Orozco, the leading analyst on remittance practices in the United States, 51.50% of immigrants from Latin America and the Caribbean who regularly send money back to their homeland do not possess a bank account. Luring this huge client base is the real motivation behind the decision to close the bank accounts of immigrant businesses. What these banks couldn’t achieve with savvy marketing campaigns, they will be able to get with the hammer of the USA Patriot Act. Unfortunately for immigrants, mainstream financial institutions want their money but haven’t been interested in providing services to them. A recent San Francisco Chronicle editorial quoted Tom Kelly of J.P. Morgan Chase as saying “If you look at certain groups, there are people whom you would not want to extend checking accounts to.” For a person who lives in Sunset Park in Brooklyn, the closest North Fork branch is 27 blocks away, and the only J.P. Morgan Chase branch in the borough is 66 blocks away. And none of them are open after 3 on Saturdays, and definitely not on Sundays, unlike most neighborhood-based money transfer outlets. And what about the cost of sending money? Citibank doesn’t even allow a wire transfer without an account. For immigrants, money transfer agencies are attractive because they are in the neighborhood, transactions can be done in one’s own language, and they tend to have outlets near the family back home that makes receiving the remittance convenient-- assets that the big commercial banks do not have. Opening branches in neighborhoods, hiring local people who speak the language, investing in community projects, lowering fees, and showing that they actually care about the families who entrust their life’s savings to them, are critical gestures for financial institutions to make if they expect to attract immigrant resources. Viewing them as a community who has a propensity to support terrorism is not an endearing approach. “It feels like the banks and the federal government think that each of our customers is a terrorist,” laments the New Jersey businessman. So while the scam is on, and the shakedown is happening, the only ones suffering are the families who have to wait a little longer for the next wire transfer. FRANCIS CALPOTURA is Executive Director of the Transnational Institute for Grassroots Research and Action (TIGRA) based in Oakland, California. ARTEMIO GUERRA is Organizing Director for the Fifth Avenue Committee based in New York City. |
