Domestic Wire Transfers are Governed by Federal Regulation Finance Essay

In the United States, domestic wire transfers are governed by Federal Regulation and by Article 4A of the Uniform Commercial Code.

The country register information regarding international transfer to make sure that funds are not sent to terrorist organizations or countries and entities under sanction by the government.

It is the OFAC, the Office of Foreign Assets Control, which is in charge to monitor international transfers. If the office suspects that financial transfers are sent to one of these entities, the institution will block the transfer and freeze the money.

As an example of the cost, Bank of America as of February 2010 charged $25 to send a wire and $12 to receive one within the US. For international transfer, it charged $35-$45 outgoing, $16 incoming. However, fees may vary from bank to bank.

People have to know that banks can take a fee without the contentment of the client. There is no legislation to protect customers from these practices. It happens usually when there are different intermediate banks. However, the use of cheques does not allow these practices: the amount is fully guaranteed and fees are only due to the last endpoint bank.

Recently, the COFACE decided to downgrade the mark that this institution gives to evaluate financial risks of a country, to the USA. The country received the note A1 due to several reasons:

- The signs of slowing down of the American economy multiply (3, 3 % growth in 2006 and 2, 4 % planned in 2007).

- The difficulties of the residential real estate market are likely to spread to the whole economy and affect the consumption of households

- An access more difficult to the credit for the most fragile companies that could lead to an increase of non-payments and failures.

Coface plans an increase incidents of 5 % payment prevents Sylvia Greisman, chief Economist of Coface.

Different institutions are in charge to prevent risks of non-payment:

Bank Secrecy Act

The Bank Secrecy Act of 1970 (or BSA, known as the Currency and Foreign Transactions Reporting Act) requires U.S.A. financial institutions to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, file reports of cash transactions exceeding $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities.

Export-Import Bank of the United States

The Export-Import Bank of the United States (known as Ex-Im Bank) is the official export credit agency of the United States. Ex-Im Bank's mission is in charge to assist the export or import of goods and services to international markets.

Financial Crimes Information Network (FinCen) - US Department of Treasury

FinCEN tends to improve the security of the country, and identify criminal activity, safeguard financial systems from abuse by promoting transparency in the U.S.

United States Department of the Treasury

The Treasury Department is the executive agency responsible for promoting economic prosperity and ensuring the financial security of the United States. The Department is in charge of different activities such as advising the President on economic and financial issues, encouraging sustainable economic growth. The Department of the Treasury maintains systems that are critical to the financial infrastructure, such as the production of coin and currency, the disbursement of payments to the American public, revenue collection, and the borrowing of funds necessary to run the federal government.

Source : https://www.ustreas.gov/

EUROPE

In Europe, since 2005, risks of payments have been growing. In average, companies have been paid within 17 days late.

Behind this trend, situations can be different according to the country. To decode that, Intrum Justitia assigns to each country a payment risk index which summarizes all local settings affecting the creditor companies (average, delays settlement payment delays, losses on bad debt...).

However, the European community wants to set up a single way of payment: the Single Euro Payments Area.

The SEPA project will provide new instruments of payment that will allow making transfers in all the SEPA area as easy as if it was in a national level.

It involves the creation of a zone in which all electronic payments are considered domestic, and where a difference between countries part of Europe does not exist.

The goal of this project is to improve the efficiency of cross border payments and turn the fragmented national markets for euro payments into a single domestic one: SEPA will allow customers to make payments to anyone situated anywhere in the area using only a single bank account and a single instrument of payment.

The project includes the development of common instruments, procedures, and infrastructure to facilitate economies of scale.

Since January 2008, banks are pushing customers to use this new payment instruments. By 2010, the majority should be on the SEPA framework. As a result, banks will need to invest a lot in technology to be able to carry on SEPA payment instruments.

For Multi-national companies and banks, SEPA will offer the opportunity to secure their payments dealing out onto common platforms across the Eurozone. For consumers and companies, SEPA could mean cheaper, more efficient and faster payments transfer when moving Euro from one Eurozone country to another. 32 countries will take part of SEPA.

SEPA have various objectives:

Standardization of payments:

This will take place with an equal limit of time, fraud levels, processes… There won't be differences between national and international payments in the SEPA area.

Reduction of cash money:

The Single Euro Payments wants to decrease the amount of cash money by increasing electronic money through a reduction of costs of electronic money.

Increasing surveillance of electronic money:

SEPA will check electronic flow particularly regarding money laundering and terrorism funding.

Sources : https://www.intrum.com/en/investors-and-media.html

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