Billions of dollars are transferred out of the country every year. But even with such high traffic, there is still quite a bit of bewilderment surrounding the roads of remittance transfers. This confusion comes with good reason; remittance has many rules and is closely regulated.
What Qualifies as a Remittance Transfer?
Let’s start with the basics. What is a Remittance Transfer? Under Federal law, a “remittance transfer” is an electronic transfer of funds from a consumer in the United States to recipients abroad. For example, transactions that qualify as remittances include:
- International wire transfers
- International ACH entries
- Certain foreign prepaid card transactions
- Certain foreign cash to cash transactions
Simply mailing a check abroad does not qualify, because there is no remittance provider involved and it is not an electronic transfer.
At the same time, the sender cannot be just anybody—it must be an individual consumer (not a business or corporation) who sends the funds abroad for personal, family, or household reasons. And remember, consumers do not have to have an account at the institution to be a sender; transfers made in person can be remittances. On the other hand, the designated recipient can be either an individual or business, as long as that individual or business is located in a foreign country.
It is also important to note that the sender must be in a state, territory, or possession of the United States (including places like Puerto Rico and US military bases or embassies located in foreign countries). Likewise, if the receiver is located in any state, territory, or possession of the United States, then this transaction does not meet the qualifications to be a remittance.
Who Qualifies as a Remittance Transfer Provider?
A key component of understanding remittance transfers is knowing who qualifies as a Remittance Transfer Provider. A remittance transfer provider is a business that transfers money electronically for consumers to people and businesses in foreign countries. This includes banks and credit unions, money transmitters, and other types of financial service companies.
There is a safe harbor provision in the Regulation. The rule holds that an institution is NOT a remittance transfer provider if they do not make transfers in the “normal course of business.” That means your institution should meet the following criteria:
- It must have 100 or fewer remittance transfers in the current calendar year
- It must have 100 or fewer remittance transfers in the prior calendar year
That is total number of remittance transfers, not per type, not consumers, not accounts, not per division — 100 transfers total.
What Must Remittance Transfer Providers Do?
Generally speaking, remittance transfer providers must provide consumers disclosures and receipts concerning the exchange rate, any estimates used, and transfer amounts and fees. They must also provide senders with cancellation rights. And they must institute error resolution procedures to handle any disputes.
Though remittance transfers often offers a bumpy road, when you know the right routes, rules, and detours you can navigate easily through.