Migrants’ money channels are a murky world

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Migrants’ money channels are a murky world

Carol Goard

July 26, 2011

There is no paper trail. There is no oversight. There are no clear rules. But the cash flow is staggering: roughly $200 billion a year.

This amount, sent home by immigrants and migrant workers through back channels, dwarfs global foreign aid. Canada’s share — approximately $7.5 billion a year — is more than double the country’s official development assistance.

Although these hand-to-hand remittances do a tremendous amount of good in poor countries, they pose serious risks for both senders and governments.

Immigrants have no guarantee their earnings will actually reach their families. The money could be pocketed by greedy middlemen, stolen enroute or whittled down by bribes to corrupt local officials.

Financial authorities have no knowing whether this informal financial system is being used by drug dealers to launder dirty money or terrorist groups to finance international operations. It certainly has the potential to do both.

Yet few governments are taking steps to regulate this trouble-prone business. More surprisingly, they know almost nothing is known about it. All of the available statistics are ballpark estimates. All of the current knowledge is based on anecdotes and regional fragments.

A Toronto-based citizens’ group aims to spur reform. Acorn Canada, made of up low-to-moderate-income families, is conducting a multi-year campaign to make remittances safe and transparent.

It has taken the lead because its members — many of whom support families in Asia, Africa and Latin America — are tired of choosing between exorbitant bank fees and unreliable couriers.

Acorn has just released a report outlining the magnitude of “hawala,” as it is called, and the way it works.

A typical transaction unfolds something like this: An immigrant or seasonal worker wants to send money to his family back home. His English is rudimentary and he is intimidated by bureaucrats and paperwork and incomprehensible service charges.

So he checks an ethnic newspaper and finds an advertisement for cheap money transfers to his homeland. He visits the establishment, usually a small export-import business, and arranges to send a small amount — say $100 — to his family. The owner charges a commission ranging from 25 cents to $1.25 and gives him an identification number that can be used to pick up the money.

The merchant then contacts one of his suppliers or agents in the immigrant’s home country and arranges to get the money to its destination. The two traders settle their debt by manipulating their balance sheets.

When the system works, it provides a cheap, efficient way to send money overseas. When it breaks down, the immigrant is out-of-pocket and powerless.

There are safer ways to transfer funds, but they are extremely expensive. Acorn tracked the cost of sending a $100 remittance to Mexico, using recognized financial institutions, last fall. It found the cost could run as high as $50.

The cheapest option was MoneyGram, which charged between $3 and $10, depending on the speed and the level of service. The highest-priced was HSBC (Hong Kong and Shanghai Banking Corporation), which charged $50.84. The only Canadian bank willing to divulge its fees, Toronto Dominion, fell in the middle at $35.91.

“These rates are predatory,” says Kay Bisnath president of Acorn. They drive people to use they underground system. They induce risky behaviour.

This week, a delegation from the grass-roots group will attempt to convince deputy finance minister Michael Horgan that it would be in Canada’s interests to cap remittance rates and require banks to disclose their fees. Ottawa needs a window on this multi-billion cash flow and immigrants need a safe, affordable way to send money home.

It is unlikely that “hawala” will ever be eliminated. But in a 21st-century financial system that can move money securely around the globe with the push of computer button, immigrants deserve a better alternative.

Carol Goar writes for Record news services.

 

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Op-Ed: Canadian Government Allowing Migrant Worker Ripoffs on Remittances

By Kay Bisnath, ACORN International, and Pascal Apuwa, ACORN Canada

The Canadian government can no longer afford to be apathetic towards the plight of migrant workers’ remittances when they are behind a guest-worker program that accepts candidates based on low levels of education and strong family ties. With such criteria it is unimaginable that the government would be unaware of the role of remittances in the lives of these workers’ families.

Every year, 20,000 workers from Mexico and the Caribbean, mostly men, make the journey to work in Canada’s agricultural sector, largely in southern Ontario and British Columbia. These migrant workers are brought to Canada through the government sponsored Seasonal Agricultural Worker Program (SAWP) for up to eight months. The program describes its function as matching “workers from Mexico and the Caribbean countries with Canadian farmers who need temporary support during planting and harvesting seasons, when qualified Canadians or permanent residents are not available.”

 

 

This is no sea cruise.  Workers in the SAWP are poorly treated. They are required to work overtime without extra pay and a significant portion of their wages (about 25%) goes towards Canadian taxes and government programs as a donation to the Canadian government since they will never reap any benefits.

The SAWP exploits workers’ desperation to earn Canadian wages. Workers’ strong family ties and socioeconomic statuses emphasize the widespread need for affordable money transferring services. When asked, SAWP representatives admitted to having little knowledge of which money-transferring services program participants utilized or the fees they faced. SAWP workers are left to find ways to remit money without any assistance from the governments that has brought them here.

Using easily accessible Western Union, fees to transfer funds increase dramatically as the transferred sum decreases, often making the service unaffordable. Migrant workers usually send half their paychecks home (about 200-300 dollars). To send these sums with Western Union, fees can range from 7.5% to 12%. This doesn’t include the hidden exchange rate fee that comes out of the amount transferred. This changes daily with the exchange rate fluctuation and has been estimated by ACORN Canada at 4 – 6 %.  Migrant workers in Canada have also been known to use Vigo Remittance Corporation to send their money home. While Vigo’s fees are lower than Western Union’s, the fees range from 6 % to 7% (for sums of 200 to 300 dollars), they are still sit above ACORN’s and the G-8’s, where Canada is also a primary participant, goal of a flat 5% rate and are still unaffordable for many migrant workers. For the low-wage migrant worker, such rates only further perpetuate their plight.

ACORN International and its federated partners ACORN Canada and ACORN Mexico have made continual demands of the Finance Ministry and provincial governments in both countries to regulate Money Transfer Organizations (MTOs) and cap fees, with only limited success and a limp promise thus far that there will be more disclosure. In the case of bi-national agreements that are moving migrant workers to Canadian soil to serve Canadian business and agricultural interests and profit Canadian tax coffers, can there be any moral or political justification for inaction around remittance profiteering by the Canadian government at all levels? ACORN, Canadian, Mexican, and Caribbean citizens are united in saying, “No!” and demanding change now!

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Toronto Star: Help immigrants ship home cash

There is no paper trail. There is no public oversight. There are no clear rules. Yet the cash flow is staggering: roughly $200 billion a year.

That is how much immigrants and migrant workers send home though a makeshift network of traders and couriers. Canada’s share — approximately $7.5 billion a year — dwarfs the country’s foreign aid budget.

Although these untraceable remittances do a tremendous amount of good in poor countries, they also pose serious risks for both the sender and the state.

Immigrants have no guarantee their earnings will actually reach their families. The money could be pocketed by greedy middlemen, stolen in transit or whittled down by bribes to corrupt local officials.

Governments have no way of telling how much dirty money from drug dealers and terrorists is circulating in the system. It is certainly conducive to both.

 

 

But no one is stepping forward to regulate this trouble-prone business. More surprisingly, almost no one knows much about it. The statistics are all estimates. The academic studies are all based on fragmentary knowledge and conjecture.

A Toronto-based citizens’ group is working to change that. Acorn Canada, made up of up low- to moderate-income families, is conducting a multi-year campaign to make remittances safe and transparent.

It has taken on this ambitious task because its members — many of whom support families in Asia, Africa and Latin America — are tired of choosing between being gouged by the banks or swindled by greedy couriers.

Acorn just released an easy-to-read report outlining the extent of “hawala” (the colloquial term for the hand-to-hand system and the way it works).

A typical chain of transactions looks something like this: An immigrant or seasonal worker wants to send money to his family back home. His English is rudimentary. He is intimidated by big institutions, paperwork and costly service charges.

So he checks an ethnic newspaper and finds an advertisement for cheap money transfers to his homeland. He visits the establishment, usually a small export-import business, and arranges to send a small amount — say $100 — to his family. The owner charges a commission ranging from 25 cents to $1.25 and gives him an identification number that can be used to pick up the money.

The merchant then contacts one of his suppliers or agents in the immigrant’s home country and arranges to get the money to its destination. The two traders settle their debt by manipulating their balance sheets.

When the system works, it provides a cheap way to send money overseas. When it doesn’t, the immigrant is out-of-pocket and powerless.

There are safer ways to transfer funds, but they are extremely expensive. Acorn tracked the cost of sending a $100 remittance to Mexico, using recognized financial institutions, last fall. It found the fees could run as high as $50.

The cheapest option was MoneyGram, which charged between $3 and $10, depending on the speed and level of service. The highest priced was HSBC (Hong Kong and Shanghai Banking Corporation), which charged $50.84. The only Canadian bank willing to divulge its fees, Toronto-Dominion, fell in the middle at $35.91.

“These rates are predatory,” says Kay Bisnath, president of Acorn. They drive people to use the underground system. They force them to take unwanted risks.

This week, a delegation from Acorn met Deputy Finance Minister Michael Horgan hoping to convince him it would be in Canada’s interest to cap remittance rates and require banks to disclose their fees. It made the case that Ottawa needs to get a handle on this multi-billion-dollar business and immigrants need a safe, affordable way to send money home. The next step is up to the government.

It is unlikely that “hawala” will ever be eliminated. But in a 21st century financial system where money can be moved with the stroke of a computer key, immigrants deserve a better alternative.

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Interview with Pascal Vuvu, a member of ACORN Canada

by Kate Ayalogu

Pascal Vuvu is a Nairobi, Kenyan citizen who migrated to Canada on June 12th, 2006. He has been using remittance services ever since he moved to Canada, taking care of his loved ones back home and sending funds to his Orphaned cousins in Uganda. On average Depending on how much Pascal saves from working, he sends approximately $100.00 CD abroad using services such as Western Union and Money Mart through Canada Post. He is charged $16.00 by Western Union for every $50.00 to $100.00 he sends, not including exchange rates. The cheaper alternative is to use Money Mart, which charges him $10.00 to send $50.00 to $100.00 abroad; however since banks are only found in Urban areas, Pascal must factor in travel expenses (transportation costs) in order for his family to attain the accesses they need to receive the funds.

 According to Pascal, “it’s too expensive for me to send money to my mum because that will mean I have to send money to one of the relatives in Nairobi who will have to travel about 400 kilometers home.” He continues saying that his cousin will have to spend more than what he has spent sending money home.

 “Fare from Nairobi to my rural home area is Kshs. 3000.00 two ways, and sending $50.00 dollars is equivalent to Kshs. 3000.00. For someone to travel or take money to my mum I have to pay for their fare as well which makes it more expensive” He adds that relying on another to pass on these funds to his mother is risky due to theft.

 Pascal could be saving anywhere from $11.00 to $20.00 from remittances were the fees cheaper. This could mean a savings of up to $100.00 a year, if not more, which would contribute to his mother’s, orphaned cousins’, and his safety and security.

 Money regulation is very important for us since we assist in stimulating the economy back home. The money we send assist with either medical services or temporary employment – Pascal Vuvu

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Informe sobre Remesas – Peru Remittance Report

En Lima, Perú estamos siguiendo la Campaña de Remesas con acciones abiertas a la población en general, para insertar miembros a la organización de diferentes ámbitos y localidades, ya que en las Comunidades donde trabajamos actualmente difícilmente podemos encontrar miembros que reciban envíos de remesas del extranjero. Las familias que la componen, por su bajo nivel de ingresos, no pueden acceder o aspirar a salir fuera del país y menos a trabajar fuera de él, por no contar con visas y recursos para poder pagar sus boletos al extranjero.

Es por eso que Nuestras Acciones consisten en salir a las calles y volantear para invitar a las personas a ser parte de ACORN Peru y unirnos para conseguir el objetivo Principal: 

CONCIENTIZAR A INSTITUCIONES FINANCIERAS EN EL COBRO JUSTO DE REMESAS.

Las Actividades realizadas,

Entrega de Cartas a las entidades Bancarias; de las que estamos esperando respuestas

Volanteo alrededor de los bancos para identificar y motivar a aquellas personas que se identifiquen con la Campaña, para que se afilien a ACORN Peru.

(En los volantes, están los números telefónicos de ACORN. Próximamente esperamos contar con una cuenta electrónica exclusiva para la afiliación de estos miembros, a su vez que podríamos contar que ellos debiten. Según mi apreciación estas personas si contarían con una cuenta o tarjeta bancaria para sostener esta Campaña, a diferencia del miembro Común de ACORN en Perú.

 

Adjunto,

Fotos para que se hagan una idea de cómo estamos desarrollando esta Campaña.

 

In Lima, Peru. We are following the campaign of remittances, with actions open to the general population, to insert members into the organization of different areas and localities, as in the communities where we currently can hardly find members receiving shipments and remittances from abroad. Since the families that make up for its low income level does not aspire to reach or leave the country and less to work out of it, for not having visas and resources to pay for their tickets abroad.  That is why our actions are to take to the streets and leaflets to invite people to be part of ACORN and unite to achieve the main objective. Sensitize FINANCIAL INSTITUTIONS IN THE COLLECTION OF REMITTANCES FAIR.
Based Activities,  Delivery of letters to banks, of which we are waiting for answers Leafleting around the bank to identify and motivate those who identify with the campaign, to join ACORN.
(In the leaflets, are the phone numbers of ACORN, Soon we hope to have an exclusive email account for the affiliation of these members, in turn we could count them and debited), According to my assessment of these people if they would have a account or credit card to support this campaign, unlike the common member of ACORN in Peru.

Deputy photos to give you an idea of how we are developing this
Campaign.

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