Origin of Forex Trading - Awareness of the Foreign Exchange Rate is a Key to Avoiding Fraud

Avoiding Money Transfer Fraud

The immigrants in the United States have contributed greatly to the economy of the US and to their home country by sending substantial amount of money to their family and others. People from Mexico, the Dominican Republic, El Salvador, and Guatemala send about $8 billion dollars per year.

Many of them utilize money transfer services to send money to their country of origins by availing of a corresponding foreign currency exchange rate. However, the service can be very expensive due to high service fees and many hidden charges. It actually ranges from 10% to 25% of the amount being transferred or sent by the immigrant. Not only that they pay huge amount of fees for wire transfers and pay less than normal foreign money exchange rates, they are also charged by the businesses that offer these types of services other costly financial service such as check cashing.

Transact with Licensed Businesses

The money transfer industry has been regulated by all the states in the US. There are about 28 states and the District of Columbia which have laws requiring business involved in wire transfer and foreign exchange rate services to be registered and licensed by the state bank agency. Although the federal government also has a law requiring business with money transfer and foreign exchange rate services to register with the treasury department and to be licensed, this law actually was intended to address the issue of money laundering but not to protect the general consumers.

If you will be availing a money transfer service, make sure that you check the market price of your currency. Try to check with foreign exchange rate converter or calculators online so that you would know what to expect from these financial businesses. Also, make sure that you check the establishment or business, which will provide you the money transfer and foreign exchange rate services, if it is registered by your state banking agency and has the necessary license. Most of the states that oblige this type of business to have a license will also require some form of security or bond.

This is to protect the consumers when the business will become insolvent. The bond can be used to refund the losses of the consumer. Some states, like New York even has some insurance fund to reimburse the victims. This is very important since there are a lot of shady money transfers from foreign exchange rate companies that are waiting to victimize the ignorant public. If you have been a victim, make sure to report a complaint with your state banking agency.

Securing Your Money

Aside from scrutinizing the business that you will be transacting with for money wire transfer and foreign exchange rate, you should be able to consider the possibility of a transmission problem. You should check if the business that you will be dealing with offers refund claims. A refund claim also has some limits which sets the maximum amount that they can return to you in case there is problem with the money transfer. Make sure to keep the receipts so that you have something to prove about your transaction.

Of course, most of the money sent via wire transfer arrives safely; much of the significant amount of the money is actually lost due to huge fees through foreign exchange rates. These fees are “hidden” in the form of lower than normal foreign exchange rates.

Western Union and Money Gram were even sued in 1998 about their foreign exchange rates stating that they have misled the people sending money to Mexico by failing to inform them that they are paying more due to less favorable currency exchange foreign rate. Hence, as part of the settlement in 2000, both Western Union and Money Gram agreed to disclose the amount of the difference between the foreign exchange rates and the prevailing rate which is also called the spread.

The Wire Transfer Disclosure Act

In 1999, Honorable Luis Gutierrez of the 106th US Congress introduced the Wire Transfer and Disclosure Act of 1999 obliging money transfer and foreign exchange rate businesses to fully disclose all the fees and charges to the public. This act was actually an amendment to the Electronic Fund Transfer Act.

According to Mr. Rodriguez, wire transfer companies are targeting immigrant communities with ads promising low rates for sending money internationally. He said that these promises are grossly misleading since these companies do not always clearly disclose extra fees and charges for converting dollars into a local currency, which is in this case, the foreign exchange rate.

Although, wire transfer companies obtain the best real time foreign currency exchange rates in bargain prices, they still charge a significant amount as conversion fees for their US customers when they send money internationally. The profits from these foreign exchange rate conversion fees are very staggering, making these companies earn millions of dollars more than their service fees for sending money internationally.

Hence, his reason of (re)introducing the Wire Transfer Fairness and Disclosure Act in 2001, which at that time, is supported by 70 members of the House. By enacting the bill, he hopes that this could ensure that each customer who wants to send money internationally through electronic wire transmission is fully informed of all the charges and fees on all transactions, this includes the exact foreign money exchange rate of the currency available to them.

Conclusion

The main point is that every person who would like to send money through wire transfers should check if the business itself is licensed, consider its foreign exchange rate being offered and shop around to avoid paying huge fees.

More Info on : Purchase Foreign Currency | Send International Bank Draft | Send Money International | Wire Transfer Money | Yahoo Currency Convertor