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How safe are remittance transactions?

Initiatives such as ‘swift' confirmation, Iban, enforcement of proper identity checks and usage of special codes ensure that the payment process is secure

Image Credit: Oliver Clarke/ Gulf News Archive
The transfer routes between theUAE and India and Singapore andthe Philippines are considered thetop two remittance paths in theworld. A MasterCard Worldwidereport notes that India received$49 billion in remittances fromthe UAE in 2008, while the Singapore-Philippines corridor recordedtransactions of $6.98 billion in thefirst five months of 2009, a 2.8 percent growth over the same periodin 2008. Picture used for illustrative purposes only
02 Gulf News

A regular money remitter himself, Michael Obenieta never thought a simple act of charity could cause him so much stress. Last month, the US-based expatriate wired money online for his brother-in-law in the Philippines. Even before the bene-ficiary could collect the money, someone else had already claimed it in another location.

Obenieta is still clueless as to how his money somehow got diverted and landed in the wrong hands. "Whatever happened to the promise of security in online transactions?" he asks. Whatever the cause of the failed transaction, it serves as a cautionary tale that no matter how advanced payments technology seems to be today, nothing is infallible. And while this happened outside the UAE, it doesn't guarantee all your transfers are foolproof.

Sending money is part of life overseas. From helping dependent families, sending gifts of money, building a dream house to meeting other financial obligations back home, most expatriate workers in the UAE need the services of a remittance company.

Repatriated funds have become an influential force in the economy of many countries including India, Philippines and Mexico. Worldwide remittances in 2008 stood at $443 billion (Dh1.62 trillion), about 70 per cent of which is estimated to be flowing into the developing economies.

The transfer routes between the UAE and India and Singapore and the Philippines are considered the top two remittance paths in the world. A MasterCard Worldwide report notes that India received $49 billion in remittances from the UAE in 2008, while the Singapore-Philippines corridor recorded transactions of $6.98 billion in the first five months of 2009, a 2.8 per cent growth over the same period in 2008.

Security breaches

A huge chunk of such funds goes through wire transfer outfits, many of them small mum-and-pop companies. A comprehensive study released in 2008 by Panda Security, a provider of security software for consumers and businesses, looked into over 300 money transfer firms to see how secure their businesses were.

It revealed that these firms were extremely prone to security breaches. It found that the computers which stored very sensitive information were unsafe as they had outdated antivirus protection and were often used by the company staff for other purposes such as internet chats and downloads.

"These computers are not secure for transactions. This lack of security could allow criminals to intercept authorised remittances," the firm said in a statement.

Banks and remittance companies in the UAE, however, assure that their transactions are secure so they guarantee that any remitted money will reach the intended beneficiaries. Marc Aubry, Western Union vice-president for marketing in the Middle East and Africa, said they have put in place a number of initiatives to prevent consumer fraud — from enforcing proper identity checks, using special codes, training their staff to educating their own customers.

Senders are given a Money Transfer Control Number (MTCN) which is unique to a transaction and which the consumer communicates in private to their receiver. Agents are also trained to screen money remitters and try to discourage those that obviously deal with strangers (i.e. those who send money as payment for goods to people they have no personal knowledge of).

"Our internal policies and procedures are regularly reviewed to safeguard against fraudulent activity and we frequently update our agents to assist them in recognising potential consumer fraud at the point-of-sale. We also have a team of security and customer service personnel who are dedicated to managing and preventing consumer fraud."

Several checks

At First Rate FX, which offers money transfer service, each transaction goes through a number of security checks and secure payment systems. Every transfer generates an official bank document called Swift (Society for Worldwide Interbank Financial Telecommunications) confirmation or MT103, which are useful for tracing the funds after they have left First Rate FX.

The beneficiary can use this official confirmation to trace the funds until they eventually reach the intended account. Not only that, the company also holds a full insurance policy which covers all eventualities. "This insurance policy covers every transaction and ensures against any payment which is sent to the incorrect person, or sent in a fraudulent transaction," says Chris Canning, currency analyst at First Rate FX.

Rashid Ali Al Ansari, general manager of Al Ansari Exchange, says they follow international standards of security from screening of remitters and recipients to transmission of payment orders. "The payment order invariably specifies the details of the intended beneficiary. Therefore, funds can only be released to the intended recipient at the paying end. This is done by requesting valid identification documents from the recipient/beneficiary," he says.


"Most of our tie-up banks have systems that enable us to track the status of transactions, whether successfully processed or not. Rejected transactions, such as those having incorrect account details, incorrect name are returned to us by our correspondent banks/agents."

Richard Musty, managing director at Lloyds TSB in the Middle East, says bank-to-bank transfers have been made secure through the use of Swift. Additionally, the implementation of International Bank Account Numbers (Iban) provides a security boost, as it contains validation which easily allows banks to verify whether an account number is correct before any payment is processed.

"We also take steps to ensure that the payment instruction process is secure. We implement tight controls over our internet banking and other payment channels, and put numerous checks in place to ensure all information relating to the transfer is sent in an accurate and timely manner. This includes carefully checking every payment instruction and transfer form we receive and assisting our customers in ensuring they complete the necessary payment forms correctly."

Paul Styles, solutions consultant at ACI Worldwide agrees that remittance payments have typically generated negative perceptions among banks. "Now however, the bank-owned cooperative, Swift, has sought to tackle this and has launched the SwiftRemit service. This enables banks to give customers clear and upfront transparency on total cost and execution time."

Moneyback guarantees work only if an error is committed by the company.

Even if banks and money transfer companies ensure their payment systems are foolproof, there are many ways by which a remitter's money could be compromised, and the simple act of wiring money can lead to a considerable amount of headache and stress. For example, the wired money doesn't arrive in time for your sister's wedding or it somehow goes missing in transit.

Bear in mind that not all providers have insurance plans in place that will ensure your money is protected at all cost and in most cases, moneyback guarantees are provided only if an error was committed by the bank or one of its agents.

Osama Al Rahma, general manager of Al Fardan Exchange, says that if the money does not reach the right beneficiary within the expected time frame, it could mean a few things: the sender supplied the wrong account number or incorrect beneficiary name, there's no advance payments infrastructure between the sending and receiving branch, or there was an internal "human error".

"It doesn't mean the money is lost. Any transaction should not be lost at any level. This is an obligation of all correspondent banks," he says.

"If the money did not reach the recipient, the transfer could have been delayed because some wrong information was provided — the account number did not match the beneficiary's name or a wrong branch information was given."

Human errors

"Certain human errors can also take place which might result in a delay in the transaction. Besides, how fast or slow the transfer goes through depends on the relationship between the remitting branch and the bank," he explains.

A customer also runs the risk of losing money if he's dealing with a stranger: you are making a down payment on your dream home to a broker in Nigeria who turned out to be a fraud.

Richard Musty at Lloyds TSB Middle East said that payments that are delayed or fail to reach their destination are usually a result of errors on the payment instruction itself, so it is the responsibility of the sender to ensure they quote the correct payment details.

No refund

Western Union pointed out that a money transfer can be paid out to the recipient within minutes, and after the funds are paid, consumers cannot obtain a refund even if the transfer was the result of fraud. "Once the money is sent and collected, it cannot be returned," said Marc Aubry, Western Union vice-president for marketing in the Middle East and Africa."

However, in cases where the money is released to an incorrect beneficiary because a sender provided the wrong account details, Lloyds TSB said the remitting bank would work with the beneficiary bank to try to get the funds remitted back to the sender.

To ensure peace of mind when sending money make sure you provide the accurate beneficiary name, account number or destination address.

You should keep your transaction data, including codes or passwords, secure and keep any identification documents such as ID cards, passports in a safe place.

Use strong passwords for Internet banking and never send money to people or organisations you don't know. 

Inform your beneficiary right after sending money, so he can pick it up before it gets intercepted, and ensure that your service provider has a good track record.

If possible, send your money through a provider that offers money-back guarantee or insurance that protects your money from any eventuality.

Tracing wire transfers

If your money does not reach the desired destination, you should contact your provider immediately. Generally, you will be asked to make a complaint through the customer service department so that the wire transfer company or bank can trace the transaction.

  • "Once you make a complaint, the operations department will start tracing the transaction, to find out where the mistake might have taken place, whether it's from our side or not," says Osama Al Rahma, general manager at Al Fardan Exchange.
  • "If nothing went wrong in our side of the transaction, we will liaise with the corresponding banks (or agents) to investigate why the money has not been credited to the beneficiary." The whole process should take about 48 hours and during that time, there's nothing you can do but wait. "We need to see what happened first," says Al Rahma.
  • If the reason for the delay was that your money was given to a wrong person due to the bank or agent's mistake, you can definitely get your money back. "If the paying bank or agent has made a mistake in identifying the beneficiary, they are legally obliged to return the funds to us as per the written agreement," says Rashid Ali Al Ansari, general manager at Al Ansari Exchange.
  • "If for any reason they fail to return the fund, then legal means are taken to get the funds back. In other words, the funds will be refunded in full to the sender," Al Ansari assures.
  • Depending on the bank or money transfer company you are dealing with, you can also request an official MT103 confirmation, an official bank document which traces a wire transfer. This provides the bank with enough details to locate the exact location of the funds until they reach the beneficiary.

Conmen look for soft targets

  • Despite so many warnings issued, many people still fall prey to scams linked to money transfers.
  • A research by the office of fair trading in the UK showed that 39 per cent of people who lost money to a scam were victims of a money transfer or advance fee fraud. "The conmen often deliberately target older people or people who are especially vulnerable," says Esther Rantzen, who has spent years exposing scammers.
  • How these scams work
  • Victims get an unsolicited phone call, email, letter or fax from someone notifying them they've won a lot of money. The scammer gains their trust and explains that, in order to collect their winnings, they first have to send a small sum of money back to pay for processing fees or taxes. Once the money is sent, they never hear from the person again.
  • Victims get an unsolicited cheque or money order with directions to deposit the money and immediately wire a portion of it back to cover processing fees or taxes. Weeks later, victims learn the cheques are counterfeit, but they have already wired the money to cover the taxes and can't get it back.
  • To protect yourself from a scam
  • If it sounds too good to be true, it probably isn't
  • Don't rush into sending off therequested funds.
  • Ask yourself how likely it is that you have been especially chosen for this offer.
  • Think about how much money you could lose from replying to a potential scam.
  • If an offer sounds dubious, speak to family or friends and seek advice.



Conmen look for soft targets

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Latest Comment

Great story! I send money regularly via exchange houses and so far I haven't found an issue. But you can't avoid thinking that something could go wrong in the transfer. I heard few scary stories about money transfers that go missing. Exchange houses should therefore offer a guarantee or insurance that will protect their clients in case something happens with the money. Transfer centres of course will always say their transactions are secure but there is no absolute guarantee!

Alice Long

11 February 2012 16:14jump to comments