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My blog aims to tackle the issues which affect the financial markets in a tongue-in-cheek, ironic, sarcastic, dry-humoured, self humiliating, non-technical and light hearted way. None of my words are meant to offend. My comments are not intended as an offer, solicitation, or recommendation to buy or sell, but it you do make a profit on my advice I will take full responsibility.


HOW SAFE ARE REMITTANCE TRANSACTIONS?

March 17, 2012 by The Currency Kid   Comments (0)

Initiatives such as ‘swift’ confirmation, Iban, enforcement of proper identity checks and usage of special codes ensure that the payment process is secure
The transfer routes between the UAE and India and Singapore and the Philippines are considered the top two remittance paths in the world. A MasterCard Worldwide report notes that India received $49 billion in remittances from the UAE in 2008, while the Singapore- Philippines corridor recorded transactions of $6.98 billion in the first five months of 2009, a 2.8 per cent growth over the same period in 2008. Picture used for illustrative purposes only
A regular money remitter himself, Michael Obenieta never thought a simple act of charity could cause him so much stress. Last month, the US-based expatriate wired money online for his brother-in-law in the Philippines. Even before the bene-ficiary could collect the money, someone else had already claimed it in another location.
Obenieta is still clueless as to how his money somehow got diverted and landed in the wrong hands. “Whatever happened to the promise of security in online transactions?” he asks. Whatever the cause of the failed transaction, it serves as a cautionary tale that no matter how advanced payments technology seems to be today, nothing is infallible. And while this happened outside the UAE, it doesn’t guarantee all your transfers are foolproof.
Sending money is part of life overseas. From helping dependent families, sending gifts of money, building a dream house to meeting other financial obligations back home, most expatriate workers in the UAE need the services of a remittance company.
Repatriated funds have become an influential force in the economy of many countries including India, Philippines and Mexico. Worldwide remittances in 2008 stood at $443 billion (Dh1.62 trillion), about 70 per cent of which is estimated to be flowing into the developing economies.
The transfer routes between the UAE and India and Singapore and the Philippines are considered the top two remittance paths in the world. A MasterCard Worldwide report notes that India received $49 billion in remittances from the UAE in 2008, while the Singapore-Philippines corridor recorded transactions of $6.98 billion in the first five months of 2009, a 2.8 per cent growth over the same period in 2008.
Security breaches:
A huge chunk of such funds goes through wire transfer outfits, many of them small mum-and-pop companies. A comprehensive study released in 2008 by Panda Security, a provider of security software for consumers and businesses, looked into over 300 money transfer firms to see how secure their businesses were.
It revealed that these firms were extremely prone to security breaches. It found that the computers which stored very sensitive information were unsafe as they had outdated antivirus protection and were often used by the company staff for other purposes such as internet chats and downloads.
“These computers are not secure for transactions. This lack of security could allow criminals to intercept authorised remittances,” the firm said in a statement.
Banks and remittance companies in the UAE, however, assure that their transactions are secure so they guarantee that any remitted money will reach the intended beneficiaries. Marc Aubry, Western Union vice-president for marketing in the Middle East and Africa, said they have put in place a number of initiatives to prevent consumer fraud — from enforcing proper identity checks, using special codes, training their staff to educating their own customers.
Senders are given a Money Transfer Control Number (MTCN) which is unique to a transaction and which the consumer communicates in private to their receiver. Agents are also trained to screen money remitters and try to discourage those that obviously deal with strangers (i.e. those who send money as payment for goods to people they have no personal knowledge of).
“Our internal policies and procedures are regularly reviewed to safeguard against fraudulent activity and we frequently update our agents to assist them in recognising potential consumer fraud at the point-of-sale. We also have a team of security and customer service personnel who are dedicated to managing and preventing consumer fraud.”
Several checks:
At First Rate FX, which offers money transfer service, each transaction goes through a number of security checks and secure payment systems. Every transfer generates an official bank document called Swift (Society for Worldwide Interbank Financial Telecommunications) confirmation or MT103, which are useful for tracing the funds after they have left First Rate FX.
The beneficiary can use this official confirmation to trace the funds until they eventually reach the intended account. Not only that, the company also holds a full insurance policy which covers all eventualities. “This insurance policy covers every transaction and ensures against any payment which is sent to the incorrect person, or sent in a fraudulent transaction,” says Chris Canning, currency analyst at First Rate FX.
Rashid Ali Al Ansari, general manager of Al Ansari Exchange, says they follow international standards of security from screening of remitters and recipients to transmission of payment orders. “The payment order invariably specifies the details of the intended beneficiary. Therefore, funds can only be released to the intended recipient at the paying end. This is done by requesting valid identification documents from the recipient/beneficiary,” he says.
Tracking:
“Most of our tie-up banks have systems that enable us to track the status of transactions, whether successfully processed or not. Rejected transactions, such as those having incorrect account details, incorrect name are returned to us by our correspondent banks/agents.”
Richard Musty, managing director at Lloyds TSB in the Middle East, says bank-to-bank transfers have been made secure through the use of Swift. Additionally, the implementation of International Bank Account Numbers (Iban) provides a security boost, as it contains validation which easily allows banks to verify whether an account number is correct before any payment is processed.
“We also take steps to ensure that the payment instruction process is secure. We implement tight controls over our internet banking and other payment channels, and put numerous checks in place to ensure all information relating to the transfer is sent in an accurate and timely manner. This includes carefully checking every payment instruction and transfer form we receive and assisting our customers in ensuring they complete the necessary payment forms correctly.”
Paul Styles, solutions consultant at ACI Worldwide agrees that remittance payments have typically generated negative perceptions among banks. “Now however, the bank-owned cooperative, Swift, has sought to tackle this and has launched the SwiftRemit service. This enables banks to give customers clear and upfront transparency on total cost and execution time.”
Tracing wire transfers:
If your money does not reach the desired destination, you should contact your provider immediately. Generally, you will be asked to make a complaint through the customer service department so that the wire transfer company or bank can trace the transaction.
>> “Once you make a complaint, the operations department will start tracing the transaction, to find out where the mistake might have taken place, whether it’s from our side or not,” says Osama Al Rahma, general manager at Al Fardan Exchange.
>> “If nothing went wrong in our side of the transaction, we will liaise with the corresponding banks (or agents) to investigate why the money has not been credited to the beneficiary.” The whole process should take about 48 hours and during that time, there’s nothing you can do but wait. “We need to see what happened first,” says Al Rahma.
>> If the reason for the delay was that your money was given to a wrong person due to the bank or agent’s mistake, you can definitely get your money back. “If the paying bank or agent has made a mistake in identifying the beneficiary, they are legally obliged to return the funds to us as per the written agreement,” says Rashid Ali Al Ansari, general manager at Al Ansari Exchange.
>> “If for any reason they fail to return the fund, then legal means are taken to get the funds back. In other words, the funds will be refunded in full to the sender,” Al Ansari assures.
>> Depending on the bank or money transfer company you are dealing with, you can also request an official MT103 confirmation, an official bank document which traces a wire transfer. This provides the bank with enough details to locate the exact location of the funds until they reach the beneficiary.
Conmen look for soft targets
Despite so many warnings issued, many people still fall prey to scams linked to money transfers.
A research by the office of fair trading in the UK showed that 39 per cent of people who lost money to a scam were victims of a money transfer or advance fee fraud. “The conmen often deliberately target older people or people who are especially vulnerable,” says Esther Rantzen, who has spent years exposing scammers.
How these scams work:
Victims get an unsolicited phone call, email, letter or fax from someone notifying them they’ve won a lot of money. The scammer gains their trust and explains that, in order to collect their winnings, they first have to send a small sum of money back to pay for processing fees or taxes. Once the money is sent, they never hear from the person again.
Victims get an unsolicited cheque or money order with directions to deposit the money and immediately wire a portion of it back to cover processing fees or taxes. Weeks later, victims learn the cheques are counterfeit, but they have already wired the money to cover the taxes and can’t get it back.
To protect yourself from a scam
If it sounds too good to be true, it probably isn’t
Don’t rush into sending off the requested funds.
Ask yourself how likely it is that you have been especially chosen for this offer.
Think about how much money you could lose from replying to a potential scam.
If an offer sounds dubious, speak to family or friends and seek advice.
Source:
By Cleofe Maceda

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