Whether you’re sending funds abroad to pay a vendor, support relatives, cover college tuition, or invest in property, there are a variety of money transfer providers to choose from. Traditional financial institutions, like banks and credit unions, typically offer their customers greater security, but their transaction fees and exchange rates can be cost-prohibitive. There’s been a proliferation of inexpensive money transfer providers as alternatives to banks, but how do you know which ones to trust?
Make Sure the Provider is Well-Regulated
Different countries have different authorities for ensuring that money transfer providers treat customers fairly and provide them with recourse should something go wrong. Be sure that whatever service you use is in compliance with at least one of these regulatory agencies.
United Kingdom
Unlike banks and building societies, who hold customers' money in deposit accounts and process loans, money transfer providers are not part of the UK's Financial Services Compensation Scheme. (This fund compensates consumers if a financial services firm fails and can't pay claims against it.) However, all money transfer providers that are based in the UK must be either "authorised by" or "registered with" the Financial Conduct Authority (FCA).
Providers authorised by the FCA, such as the ones featured on FXcompared, are subject to stricter requirements. They must do the following:
- maintain a minimum amount of capital (if their turnover exceeds EUR3m per month)
- follow fair pricing rules
- establish systems and procedures for preventing money laundering and other financial crimes
- hold all transactions over £50 in an insured and segregated account, which protects your money in case the firm goes bankrupt
United States
In 2013, the Consumer Financial Protection Bureau (CFPB) issued new regulations to protect consumers who send funds electronically from the US to other countries. These regulations apply to banks and credit unions that provide wire and ACH transfers, as well as to money transfer providers that process over 100 transactions per year.
To comply with the CFPB, money transfer providers must disclose to consumers the following:
- the exchange rate
- fees and taxes collected by the provider
- additional fees charged by the provider's agents/intermediaries
- the amount of money that ultimately gets received (not including fees charged to the recipient or foreign taxes)
In addition, providers are required to investigate any problems reported by consumers and offer redress if appropriate, such as a refund or another attempt at a transfer without charge.
US-registered money transfer providers, like Moneycorp, also fall under the authority of FinCEN, a bureau of the US Department of the Treasury that enforces anti-money laundering (AML) and anti-terrorism legislation (specifically, the Bank Secrecy Act). When consumers use providers that are regulated by FinCEN, they can rest assured that their money is not being funneled towards illegal activity and that it will arrive at its destination in a secure manner.
Australia
The counterpart to FinCEN in Australia is called the Australian Securities and Investment Commission (ASIC). Customers looking for a money transfer provider based in Australia, should make sure they're regulated by ASIC. Such providers must do the following:
- keep customer funds in segregated accounts
- comply with risk management criteria
- train and monitor authorised representatives of the provider
- resolve disputes satisfactorily
- comply with Australia's AML and anti-fraud legislation
All Australian-registered money transfer providers on FXcompared, such as OFX, are ASIC-regulated.
Canada
Money transfer providers based in Canada are overseen by FINTRAC, the Financial Transactions and Reports Analysis Centre of Canada. Like the other agencies mentioned above, FINTRAC is responsible for both preventing financial crimes as well as protecting consumers. FINTRAC-regulated companies must maintain high customer service standards, including keeping customer funds in segregated accounts.
Seek Recourse If There's a Problem With Your Money Transfer
If you have an issue with a money transfer--such as a delayed payment, a payment that was never received, or improper/fraudulent charges--first reach out directly to the provider you used. To be in compliance with the regulations described above, they must adequately address customer disputes within a reasonable timeframe. If their response leaves you unsatisfied, then you can escalate to a higher authority.
Some countries offer additional complaint mechanisms that supplement those of their regulatory agencies. In the UK, for example, you can submit a complaint through the Financial Ombudsman Service. When you do so, they will investigate how the problem happened, who was at fault, and how the provider can set things right. Even providers that aren't based in the UK but have a lot of customers there, like PayPal, are voluntarily covered by this service.
Given the strict security and customer service rules that properly regulated money transfer providers must abide by, as well as the multiple channels for dispute redress, you can feel confident in your choice of providers. As long as you take the information above into account, your money should arrive safe and sound.
