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Md. Cracks Down on Illegal Money-Transfer Companies

Small Firms Send Cash Abroad for Immigrants

By Krissah Williams
Washington Post Staff Writer
Tuesday, April 26, 2005; Page A01

About half of the 120 Maryland-based money transmitters used by immigrants to carry money abroad are operating without licenses and without the insurance that the state mandates, according to regulators who are cracking down on those operations.

"Immigrants that are here working are losing their money," said Susan Clayman, an investigator for the financial regulation division of Maryland's Department of Labor, Licensing and Regulation. The money is sometimes seized by authorities when it is transported illegally by unlicensed companies. Clayman is a former state trooper with a background in narcotics enforcement who was hired last year to root out such unlicensed operations.


Walter Velasques, office manager at Fito Express, speaks with Dalia Flores, who lives in Hyattsville and is originally from Guatemala. Many immigrants are drawn to smaller firms with employees who speak their language. (Sarah L. Voisin -- The Washington Post)

The small money transmitters are popular with immigrants, especially recent arrivals, because people at these facilities speak their language, know their culture and sometimes will deliver the money right to a family member's door. They also are often cheaper than banks and run by immigrant entrepreneurs.

"I almost only use this company," said Juan Palma, 23, who stepped up to the counter at Fito Express International Courier in Langley Park and peeled a handful of $20 bills from his wallet to send to his family in Ipala, Guatemala. Palma, a construction worker, lost money when customs agents seized one of Fito's shipments, but he is willing to take the risk.

"We are used to doing things this way," said Angel Pineda, a painter from Chiquimula, Guatemala. He said he began using Fito to send money to his wife in Guatemala when he moved to Langley Park eight months ago.

A money-transfer company, unlike a bank, is not insured by the federal government. To operate legally in Maryland, a transmitter must have a $150,000 surety bond, issued by an insurance company, which protects customers from losses. It must also pay a $4,000 licensing fee renewable every two years. Virginia and the District have similar laws.

In addition, money-transfer companies must register with the U.S. Department of Treasury's Financial Crimes Enforcement Network, which investigates money laundering. Investigators have focused more attention on unlicensed companies after the 2001 terrorist attacks.

Unlike legal companies, which generally operate through electronic networks that can track the flow of funds, unlicensed outlets sometimes carry cash across the border or ship it in boxes. Because it is illegal to leave the United States with $10,000 or more in cash without disclosing it, these funds are at risk of being seized by authorities. The cash can also be stolen. Unlicensed firms do not have insurance to cover those losses.

In the early 1990s, the District got tough on unlicensed financial institutions after three Latino money-service firms that were operating illegally went under, costing customers thousands of dollars.

Money transmitters have been increasingly cropping up in the suburbs, addressing immigrants' preference to live outside of the District. As of 2000, Maryland's immigrant population had surged to 518,315, or 10 percent of the population. Virginia's was 570,279, or 8 percent, and the District's was 73,561, or 13 percent.

Maryland authorities say that at first these facilities operated under the radar but that as their numbers have grown, more problems have emerged. Virginia has not been tracking unlicensed companies because they have not been seen as a major law enforcement problem, according to the State Corporation Commission's Bureau of Financial Institutions.

Latinos alone sent an estimated $500 million last year from Maryland to Latin America, the most per capita of any state, according to the Inter-American Development Bank. Immigrants in the District sent $94 million, and in Virginia, $586 million was sent to Latin America last year, according to the bank.

About 86 percent of the remittances to Latin America are sent by Western Union, MoneyGram or mid-size money-transfer chains, according to a report by Manuel Orozco, professor at Georgetown University's Institute for the Study of International Migration. About 5 percent are sent using ATMs or other traditional banking services, while 4 percent use facilities run by small immigrant entrepreneurs.

Gustavo Torres, executive director of Casa de Maryland, a Latino immigrant advocacy organization with offices in Takoma Park, said immigrants use small transfer companies because the people who work there speak Spanish and the music, television shows and people in the office feel familiar.


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