Remittance Transfers

Kristi von Tickner, VP/Financial Services Manager, Scott Valley Bank

by Kristi von Tickner, VP/Financial Services Manager, Scott Valley Bank 

We have all become all too familiar with significant regulatory changes affecting banking such as the Dodd-Frank Act and the Consumer Financial Protection Bureau (CFPB). One of the many consumer protections brought about by the Dodd-Frank Act is the expanded scope of Regulation E protections related to certain international funds transfers (the Remittance Transfer Rule). The new rule takes effect on October 28, 2013 and Scott Valley Bank will then process foreign consumer remittance transfers under the new rule. (This new rule does not apply to US corporations sending international wires.)

What constitutes a remittance transfer (also referred to as a foreign wire or an international wire)? Generally, a natural person (consumer) in the United States who sends money electronically to consumer or business recipients in foreign countries for “personal, household, or family use” is sending a remittance transfer. For example, your child is attending school abroad and is in need of tuition funds. You, as a consumer, remit funds through your bank to your child in the foreign country. That transaction constitutes a remittance transfer. The same would be true if you, as a consumer, had purchased a product from a company in a foreign country and chose to remit payment to that foreign company by wire.

Under the new rule, how is a consumer better protected when sending a remittance transfer?

To implement the new Dodd-Frank Act remittance transfer requirements, the CFPB issued a new rule that requires most companies to provide certain disclosures to consumers when they request an international wire. The disclosures aid in providing full transparency during the international payment process. The disclosures will provide information such as:

  • Transfer Amount (original amount)

  • The full foreign exchange rate by which the payment will be converted

  • Amount to be received by the beneficiary (in receipt currency)

  • All fees charged by the originating provider and those charged by the provider’s agent/intermediary institution. Additional fees/taxes may be applied by the receiving international institution/country, which will affect the amount received by the beneficiary.

  • The date the funds will be available to the recipient in the foreign country

  • Error resolution rights and contact information of the US-originating financial institution (provider).

  • Contact information for the provider’s state regulator and the CFPB’s toll-free number for consumer complaints

The sending consumer has 30 minutes from the time they agree to process the payment to cancel it and receive a full refund.  Consumers also have 180 days to report errors in regards to a particular transfer. If an error is reported, the originating financial institution must investigate the transfer and aid in the resolution of the error. 
As with any transfer, domestic or foreign, it is extremely important that you as the consumer provide exact instructions regarding the wire transfer, i.e. the full name of the financial institution, applicable bank codes (as defined below) and the beneficiary’s name, full physical address and account number.

  • SWIFT Bank Identifier Code – Each bank that is a member of SWIFT has its own unique code to identify the bank to which the wire is en route.  An 8 or 11 character SWIFT BIC is a unique series of alphanumeric characters that help to identify a specific financial institution.

  • International Routing Code – Some countries throughout the international banking community have created IRCs, which are used in combination with the SWIFT BIC to aid in routing the payment through a main office to a branch.

  •  International Bank Account Number – The IBAN varies by country/institution. It consists of a country code, branch code and the beneficiary’s account number.  Warning! Only the bank servicing an account can provide the correct IBAN of that account.

  • Mexico CLABE account number – In addition to the SWIFT BIC, Mexican banks now require an 18-digit CLABE account number be added to the beneficiary instructions to ensure payment. The CLABE number is a replacement for an account number and is required on all Mexican Peso and USD payments sent to Mexico.

Best practice is to obtain written wire instructions from the beneficiary/beneficiary bank.  The more precise the information provided up front, the better the chances the recipient will receive the funds without delay and without unnecessary processing fees by the receiving foreign institution.

View Look in The VAULT - Scott Valley Bank - August 2013