by Adolfo Pesquera
(originally published July 23, 2006 in the San Antonio Express-News)
Dusk approaches on a Friday - payday - and Josef Delgado, 25, enters La Michoacana Meat Market on Fredericksburg Road to send money home.
The store has a booth operated by Barri, one of the ubiquitous company logos inside Loop 410 at almost every convenience store in Hispanic neighborhoods. Remittance companies like Barri have been growing for about five years along with Texas' immigrant communities.
"Immigrants are not very keen about banks," said Julissa Bonfante, a spokeswoman for international banking company BBVA Bancomer. "They're going to feel more comfortable going to these small mom-and-pops."
All kinds of small businesses - coin laundries, bus lines, notaries public and clothing stores included - offer wire-transfer services with names like Vigo Remittance Corp., Giromex and DolEx. Even the U.S. Postal Service and banks have their own remittance arms.
But banks have been less accommodating to the small remittance companies, shutting many of their accounts in fear that banking examiners will penalize them for helping an industry seen as a haven for terrorist or drug trafficker transactions.
If regulatory oversight is too heavy-handed, some experts fear it will drive underground an industry vital to the interests of U.S. trading partners in Latin America.
Hispanic immigrants sent $53.6 billion from the United States to Latin American countries in 2005, an increase of 17 percent over the previous year according to the Inter-American Development Bank. Mexico received more than $20 billion. The remittances represented 17.1 percent of the gross domestic product in El Salvador and 12.2 percent of GDP in Guatemala and the Dominican Republic.
That growing volume attracts non-traditional remittance service providers. The U.S. Postal Service launched its "Dinero Seguro" in 1997, and several national banks began providing wire transfer services over the past four years.
Still, the majority of customers flock to small retail operators in their neighborhood.
At La Michoacana Meat Market, Delgado sent $300 to his family in Ciudad Hidalgo in the central Mexican state of Michoacán. His transaction is representative of the national average: $307.21.
When Delgado arrived in the United States more than eight years ago, he used Western Union. At that time, there were few choices. He prefers Barri, which provides a face-to-face transaction with a teller as opposed to a direct-line telephone to a distant representative.
"With Barri, it's more comfortable. It's cheaper," Delgado said.
Barri, a small 25-year-old Houston-based, Mexican-owned company, entered San Antonio in the spring of 2004, said María Bazaldúa, the San Antonio district manager.
"We have nine locations here, and we're looking for more locations," she said.
The vast majority of remittance transactions occur through small convenience stores and other retail locations, said Bonfante of BBVA Bancomer. BBVA of Spain owns Laredo National Bank but does not see advertising remittance services through banks as the best way to handle that market, she said.
"We have 40 percent of the market share of money that goes from the United States to Mexico," Bonfante said.
Bancomer Transfer Services is the wire platform used by the U.S. Postal Service, Wells Fargo and many other companies. Mexicans know the Bancomer name, one of the most dominant retail bank chains in Mexico, but it has almost no retail presence in the United States except for a few branches in California.
The mom and pops are so widespread some store owners think they need their remittance service even if they feel ambivalent about it.
David Padilla's grocery on Culebra Road has been in the family for 50 years. In the mid-1990s, many of the old Tejano families died out or moved to the suburbs. Padilla estimates the majority of newcomers are recent immigrants from Mexico and Central America.
Around 2001, Padilla recalls, customers frequently asked for "envíos de dinero," the wiring of money.
He keeps telephones on the counter for Western Union and Orlandi Valuta. Both are companies owned by Denver-based First Data Corp., which also recently acquired Vigo.
"For the paperwork I have to deal with and the complaints I get, the fee I make is hardly worth it," Padilla said. "But people ask for it and I do sell telephone cards."
People who send money often buy a prepaid phone card to tell the recipient how to retrieve the money. The knowledge that Padilla's competitors offer the service keep the money wire phones on his counter.
Most transactions are legitimate, but in 2004 concern over terrorist financing led bank examiners at the federal Office of the Comptroller of the Currency to take action that hurt the remittance industry. Because of the longstanding problem of laundered money tied to drug trafficking, the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN), state financial departments and the Internal Revenue Service closely monitor money service businesses.
The OCC never should have put the onus of policing these businesses on banks, said David Landsman, a spokesman for the National Money Transmitters Association.
"The guidance that has come out from regulators to the banks in the last year is the worst thing that ever happened to us," Landsman said.
San Antonio Federal Credit Union jumped into the money wire business in 2002 by joining forces with Vigo Remittance Corp. It found the unusual level of monitoring and the extra steps involved in completing transactions to be too much for the little business generated. Verification of delivery to the recipient involved not just dealing with foreign banks but also retail locations all over Mexico.
Immigrants, many of whom are undocumented, do not have bank or credit union accounts. Vigo convinced SACU that if the credit union provided a money wire service, the credit union could develop relationships with these clients and get them to open accounts.
"The problem we found was most of these folks didn't want to come into a bank," said Mark Dwyer, SACU first vice president of treasury management. "Part of the problem, too, was foreign transactions are being so highly scrutinized. Ever since 9/11, it really becomes a headache."
SACU dropped the business by the end of 2004.
Banks risked criminal penalties if they did not intensely review these accounts. Rather than mess with it, many banks dropped the business or severely cut their involvement.
Joseph Rooney is deputy commissioner of the Maryland Division of Financial Regulation and president of the Money Transmitter Regulators Association. He speaks on behalf of state financial regulators before FinCEN and other federal agencies. On July 7, he complained to FinCEN's director that examiners go so far as to advise banks to stop serving money service businesses because the industry is too high risk.
The crackdown on remittance services is more serious on the East Coast, and many small businesses closed. The New York State Assembly is considering a bill that would make it illegal for banks to refuse remittance company accounts. FinCEN took steps to fix the situation by issuing more elaborate guidance last summer, but the complexity of the rules made the problem worse, Rooney said.
A FinCEN spokeswoman, Anne Marie Kelly, said the office closed its comment period last week for a new set of rules it will release later this year in hopes of coaxing banks into retaining remittance firms' accounts.
"This is our attempt to address an issue we see as quite alarming," Kelly said. "We hate to see this industry driven underground where there is no transparency in transactions."
Gaspar Silva, a San Antonio native, knows first-hand how difficult it is to keep a bank account. His remittance business, Cash Casa Inc., has been based in Dallas since 2003. In spring 2005, Bank of America gave notice his account would close in 60 days, but he could only make deposits for 30 days.
A money wire company pays the receiver before the sender's money gets deposited. To cover the lag time, money service businesses maintain a fund with a bank that has a relationship with a foreign bank.
The shutdown "gave us a lot of problems," Silva said. "We had 30 days to set up a new banking relationship. Not just any bank has all of the services we need."
After a mad scramble, he found a safe harbor at Comerica.
Banks have been closing accounts to their money service licensees for the past two years, said, Stephanie Newburgh, a deputy commissioner at the Texas Department of Banking.
"It occurs more with the smaller companies, the mom-and-pop organizations," she said.
To help put banks at ease, the state Banking Department is conducting an outreach program, holding seminars around the state to assure bankers that licensees are heavily regulated, she said. To obtain and hold their state licenses, remittance companies must be registered with the IRS. They also go through financial and criminal checks and various reporting requirements.
Bank of America shut most of the accounts it had with money wire firms, but it wasn't shy about offering the service directly. In January 2005, Bank of America launched a revamped service that eliminated its transfer fee and foreign exchange fee to users who would open a checking account. The program went nationwide nine months later.
Wells Fargo has taken a different strategy than Bank of America. While the bank still tries to lure new accounts with wire services, it has also taken a page from the Barri playbook.
"We are in (the Austin) Fiesta Mart," said Raúl Lomeli, Wells Fargo's director of diverse growth for Central Texas.
Wells Fargo does not disclose its wire remittance volume, but Lomeli noted that since 2001 more than 750,000 accounts have opened nationwide with the "matrícula consulares," consulate-provided national identification cards.
Barri, however, is more concerned about competition from DolEx and other small retailers than it is about banks.
"This is a company with good growth," said Bazaldúa, the San Antonio manager for Barri. "We are responsive to our customers. If they say they drive too far to get here and we see the demand for service, we open a new location. We win their confidence and offer them more than one reason to come here."