The U.S. banking system is exasperating Luz Igot. She and her husband have run a money-transfer company that sends cash to the Philippines from a small shop in Kensington for the past seven years with few problems. Today, the war on terrorism is threatening to put them out of business.
Last year, Chevy Chase Bank closed her accounts, she said. In the next few months, she set up accounts at Bank of America and later Wachovia. In short order, the banks closed those accounts, and all gave her similar reasons for their decisions.
Luz and Romeo Igot's small company sends about $1 million a month to Manila, but the growing reluctance of banks to handle accounts for small money-transfer companies may put them out of business.
(Sarah L. Voisin -- The Washington Post)
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"The reason why they closed us is because they don't know who are our customers," Igot said. "I try to explain to them I have all the IDs and the [customer's] information, but they said, 'No'. It hurts the small ones like us. Where do we go from here?"
Their company, Jeci Cash Transfer, got caught in the limelight of a national debate about whether money transmitters are an easy tool for money laundering.
Such companies came under new scrutiny when it was discovered that money transmitters were used to wire cash to the hijackers just days before the Sept. 11, 2001, attacks. A stream of new banking regulations in the USA Patriot Act of 2001 required banks to know their customers, which some banks interpreted as extending to the customers of their money-transfer clients.
Some considered those clients too risky, and large U.S. banks began announcing last year that they planned to limit or end their relationships with small and medium-size money-transfer companies. No background check or bank account is required to use a money-transfer service and identification is required only to send more than $1,000.
Money-transfer companies, whose customers typically trade in cash, use bank accounts to deposit large sums of money each day and to wire money to accounts in foreign countries. Without bank accounts, they cannot operate.
"This is devastating. . . . It is a tidal wave. One bank after the other is closing them out. There is nowhere to go," said Michael McDonald, a former IRS special agent who now consults with money-transfer companies. "Banks are being challenged by regulators for not knowing enough about the source of funds from these entities. How much does a bank need to know?"
The answer to that question is unclear, which has prompted the Department of Treasury's Financial Crimes Enforcement Network (FinCEN) to schedule a hearing next week with banks, money transmitters, check cashers and their trade groups to discuss "mounting concern" in the financial sector regarding banking for money transmitters, according to a letter the agency sent out last month.
The small companies transmit a portion of the more than $30 billion that immigrants living in the United States send back to their families, according to the Inter-American Development Bank in Washington. Large companies, such as First Data Corp.'s Western Union and MoneyGram International Inc., have been largely unaffected because of the size of their networks, according to the National Money Transmitters Association and regulators.
