Within 10 days of the September 11th attacks, the manager at the Boby Express money transfer office in Flatbush noticed a change. The State of New York Banking Department regulators began enforcing rules for money services businesses that had been on the books for years, agents said.
They requested the manager ask for identification for anyone sending more than $2,000 to Haiti, and make copies of the identification cards, keep a file with the information of the senders, and to record their transactions in a separate book.
“Some people are scared to give their I.D.,” said the manager, who spoke on condition of anonymity. “Sometimes, they don’t come back.”
Three years after the tragic event, the aftershocks continue to ripple through New York’s immigrant communities. Not only did they lose jobs during the economy’s downturn, money that they do have and wish to send to relatives back home is under scrutiny.
Fearing that informal money transfer companies may be facilitating the flow of cash from the United States to terrorist organizations worldwide, the federal government set plans to stem the flow of suspect money.
Workers and non-residents sent more than $72 billion to their home countries in 2001, according to the World Bank, with 65 percent going to developing countries. Of that amount, 28.4 percent originated from the United States, the World Bank reports. Haiti received $1.2 billion in 2003 from the Diaspora, or 24 percent of that impoverished country’s gross domestic product, according to the Inter-American Development Bank.
Facilitating the transfer of money falls on the shoulders of thousands of money transmitters. The stringent enforcement has caused business to slow and it is much more difficult for transmitters to obtain a license, advocates say.
Before September 11th, the Boby Express manager said, about three people would come into the Flatbush Avenue office each month to transfer more than $2,000 each, the threshold amount regulators find suspicious. The average transfer to Haiti is $200 to $250, she said.
When her staff began asking for identification, some acted surprised and provided it. Others simply left and did not return.
In December 2004, a peak season for money remitters, not one client made a transfer of $2,000.
Resulting from the Patriot Act of 2001 and rules set by the federal Office of Foreign Asset Controls (OFAC), the enforcement efforts aim to prevent money from going to terrorists. The federal government’s involvement signals bigger changes to come in the industry – though they may take years – such as higher prices for a transfer, advocates say. It also puts a question mark next to the future of mom-and-pop transfer agents.
The immediate impact is that many transmitters – some who do business in the Haitian community – are struggling to stay compliant. They have had to update their computer systems and risk losing customers each time they ask for documents to verify the legitimacy of the transfers.
“They’re squeezing agents,” said Jean Martelly Montas, manager for CAM’s New York and New Jersey branches. They may be fined for not having signs up. Before, they didn’t care.”
Agents operating out of bodegas, beauty salons, multi-services, and other shops are fined if they do not display the proper credentials prominently. Sometimes, Montas said, regulators drive around to observe the ins and outs of customers in a suspect location.
The Boby Express manager said New York State regulators are more vigilant than before when it comes to compliance. That means her company has had to update its computer systems, which now allows one branch to see whether a sender had made a transfer at another location. Cashiers have had to make copies of people’s driver’s license, passport or other identification.
Another challenge facing money transmitters, besides compliance with OFAC requirements, is banks closing money transmitters’ accounts, making agents question the institutions’ motives. Facing the possibility of fewer licensed transmitters available raises the question of competition and impact on customers. The banks may also be preparing to open a division that would serve the as-yet untapped immigrant market, according to an expert’s report.
Dr. Manuel Orozco, a remittance industry expert at the Inter-American Development Bank, said in a 2003 report that banks have realized that money leaving the United States is a significant market and want to take part in it.
In 2001, financial giant Wells Fargo became the first major bank to enter the market, with its Intercuenta Express for remittances primarily to Mexico. In 2002, Orozco said, U.S.-based banks began entering the market, primarily targeting Mexicans.
David Landsman, executive director of the National Money Transmitters Association based in Great Neck, N.Y., said if banks were to enter the market, their prices may be higher. People who may not be living in the United States legally might not be able to obtain acceptable identification.
The U.S. Treasury’s Financial Crimes Enforcement Network, the federal regulatory body that monitors crimes such as money laundering, advises banks to know the purpose of customers’ money, the source of funds used to open an account and the expected activity of money transmitters. Other mandatory data are the clients’ financial information, including primary lines of business and major customers, and local reputation; as well, a bank needs to know the money transmitter’s anti-money laundering policies, procedures, and controls. Banks must also obtain third party references, information from verification services and business owners, and a money transmitter’s license, including any restrictions it may have.
In the New York area, J.P. Morgan Chase, North Fork, PNC Bank and Citibank are among those who have either closed or sent notices of closing to money transmitters and check cashing entities.
Without bank accounts to keep the amount of cash required to pay out the transfers in the receiving countries, money transmitters cannot function, said Landsman.
This article was written as part of the Independent Press Association’s New York Ethnic Press Fellowship.
