international payments post dodd-frank: a game changer
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TRANSCRIPT
International Payments Post Dodd-Frank: A Game
ChangerPresented by
Evan Shelan, CEO, eZforex
Breffni McGuire, Vice President, NEACH
Jorge Jimenez, FedGlobal Director, Federal Reserve Bank of Atlanta
Outline of Today’s Presentation
• The Problem
• Explanation of Reg E
• Federal Reserve System’s ACH Approach to Reg E
• Q & A
The Problem• Anxiety within the financial community due to
Dodd-Frank
• Many CU’s have or will discontinue International Payments
• Section 1073 Reg E Mandates…
• Pre-payment disclosures of:
–Exchange rates
–Estimated Fees
–Date of funds availability
• Error resolution support
• 30-minute consumer opt-out
Breffni McGuire, Vice President, NEACH
Dodd-Frank 1073, Final Reg E Remittance Transfer Rule
• Background & highlights
• Evolving requirements in “final” rules
• Status going into the October 28th deadline
• Current industry issues
How we got here
• Dodd-Frank Wall Street Reform & Consumer Protection Act– Section 1073 – Expands Reg E (subpart B) to
all consumer-initiated cross-border transfers
• Consumer Financial Protection Bureau (CFPB) charged with implementation– Remittance Transfer Rule
Definition of a remittance transfer
• “A‘remittance transfer’is defined broadly to include all electronic transfers of funds to designated recipients located in foreign countries that are initiated by a consumer in the United States utilizing a remittance transfer provider’s services”– Designated recipients may be consumers,
businesses, your member
Further Definition
• Consumer-initiated international transfers for personal, household, or family purposes– Cross-border wire transfers– International ACH Transactions (IATs)– Online bill pay– Loads onto certain credit cardsCredit/debit card payments to foreign merchants are not
covered
• Limited exceptions– Transfers of $15 or less– Payments arising from securities trading
Definition of a Remittance Transfer Provider
• An entity providing remittance transfer services in the normal course of business– Credit unions and banks– Money transmitters– Broker/dealers
• Normal course of business defined to be more than 100 transfers a year
• Does not have to hold the consumer’s account (e.g., Western Union)
Safe Harbor Provision
• Credit unions with 100 or fewer remittance transfers a year are granted safe harbor under the Rule– Credit union is not a remittance transfer provider
if it did not exceed 100 remittance transfers in the prior calendar year and provides 100 or fewer remittance transfers in current calendar year
– Credit union exceeding the 100-transfer limit has “a reasonable time period, not to exceed six months” grace period in which to comply
Senders and Recipients
• Sender (your member) must be a consumer (“natural person”) in a State– Focus on the account location (for transfers
made from an account)
• Recipient is a person, business, etc. located in a foreign country– Focus on location of recipient account (for
transfers made to an account)
• May be the same member
Rule Provides Three Consumer Protections Under Reg E
• Disclosures – Credit union’s responsibility– Prepayment disclosure to your member– Receipt discloser to your member; may be
combined into single disclosure w/above
• Cancellation – Consumer’s choice
• Error resolution – Credit union’s responsibility
Disclosure Requirements
- Must be: (1) written; (2) in English and in any foreign language used by the remittance transfer provider to advertise, solicit or market; (3) accurate at the time payment is made
Ability to Use Estimates
• 5 exceptions allow estimates:– Temporary exception: Insured depository
credit union / bank– Permanent exceptions
• Transfers sent via FedGlobal ACH Payments• Preauthorized and recurring transfers• Transfers to (5) nations with laws affecting foreign
exchange rates (“safe harbor”)• Disclosure of foreign taxes and ‘non-covered’ third
party fees* – optional to provide* Non-covered third-party fees are not required to be calculated and disclosed under Reg E, subpart B
Cancellation Right
• Consumer has 30 minutes to cancel a remittance transfer– From time of making / authorizing the transfer
• Refunds must be made in full w/in 3 days
• Specific rules for pre-scheduled transfers– 3 or more days in advance of transfer date– Uncommon in credit unions
Error Resolution
• Sender has 180 days to report error(s)
• Error types include:– Amount– Delay– Documentation
• Credit union must investigate and resolve within 90 days
Evolution of the Final Rule
Key Changes in April Final Rule
• Credit union is not liable if a member provides an incorrect account number or incorrect identifier for recipient’s institution
• Five conditions must be met– CU gave member notice before payment that incorrect data
could cause member to lose the transfer amount– CU can show that member provided incorrect information– The incorrect data caused the transfer to be credited to the
wrong account– CU used reasonably-available efforts to verify that the
recipient institution’s identifier corresponded to its name– CU “promptly used reasonable efforts’ to recover the funds
Extends compliance effective date to Oct. 28, 2013
Key Changes in April Final Rule
• Lifts mandate for credit union to provide disclosure of fees charged by non-covered 3rd party (e.g. bene bank) to the recipient– Unless the foreign institution is acting as an
agent on behalf of the provider
• Lifts mandate for credit union to disclose foreign taxes other than national taxesBut, a credit union must include a disclaimer
that such fees and taxes may apply
Extends compliance effective date to Oct. 28, 2013
Current Issues to Consider
• Are the April 30th changes enough for your credit union to provide remittance services?
• Are you on the verge of losing‘safe harbor’ protections under the 100 transfer threshold?
• If you use a correspondent, what is the process for disclosure, cancellation ‘wait time,’ error investigation/resolution?
• If you use a correspondent, ensure you’ve identified international wire transfers
• Does shifting to ACH make sense?
Jorge Jimenez, Director Federal Reserve Bank of Atlanta
Federal Reserve’s ACH Approach
The need today
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• How do your members make international payments?
International Payments Today
Traditionally only offered by the largest global banks
High fees compared to domestic
Beneficiaries paying beneficiary deductions
Remittances Today
Traditionally offered by Money Transfer Providers in non banking channels
Today many senders have bank accounts
International Consumer Wires are now considered remittances too
ACH
International
Expanding ACH
International ACH benefits
No Beneficiary Deductions
Lower Costs
True Innovation in BankingConsistent Delivery Times
Best Foreign Exchanges
International Offering Accessible to all
institutions regardless of size
FI can also handle own exchange
ACH
International
Improves transparency for customers
Fixed-to-Variable (FV)(USD to Pesos)
Example: Fixed-to-Variable payment to Mexico
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ODFI FedGlobal Gateway Operator
RDFIBANXICO Gateway Operator
IAT IAT Local
USD USD MXN
FX
02:15 a.m. ETDay 0
Day 1
Domestic vs International ACH
In domestic transactions you can use US ABA# and Account number, but what about International transactions?
Image Source Page: http://howtogeekon.com/2010/05/18/fit/square-peg-in-a-round-hole_0565/
International ACH features
• It offers payment delivery options both for
• Account-to-Account (A2A)• The standard option of distributing payments between two
deposit accounts.
• Account-to-Receiver (A2R) [Outbound Credits Only]
• This option allows funds from accounts at a U.S. depository financial institution to be retrieved by any receiver at either a participating bank location or at a trusted, third-party provider in certain receiving countries.
International
A2A
Gateway RT and
Canada: CPA # and Account number
Panama: RT# and Account number
Mexico: ABM# and CLABE (18 digits)
Europe:BIC# and IBAN
International
A2R
Gateway RT and
Mexico: 647R (ABM)
Password (acc#)
Latin America: CO00212336750000023642
(table from fedglobala2r.com)
525565656511
(phone number)
How does the IAT Work?
Account number abroad
All Consumer originated transactions are now considered Remittances and fall under Reg.E. Consumers need to be provided with the following disclosures at time of origination among other provision
• Exact Foreign Exchange (or Estimated in some FedGlobal® cases)• Exact fees and taxes applied at origination• Exact intermediary fees applied at receipt (optional)• Exact day of funds availability to beneficiary
While Industry impact still uncertain, your Regional Payments Association can help you stay updated
Dodd-Frank’s Impact
FedGlobal® Features
Transaction Information
37
Default: Current DateTotal Charge to
CustomerDriven by Menu Page
Amount Transferred
Estimate of Exchange Rate
Date Funds are Available to Receiver
Estimate After FXEstimate of Foreign Fees and
Taxes Estimate of Amount to be
Received
Working past the Silos
When thinking of implementing FedGlobal we suggest you include representatives from…
YOU have the solution, it is YOUR responsibility
Treasury Product Office Compliance
Community Development International Desk (if present)
Retail Banking ACH Operations
Today’s Takeaways
• Any credit union providing international payment services must determine what obligations it has under the Dodd-Frank 1073, CFPB Final Remittance Rule.
• There is less than 4 months to determine what your credit union will do by the October 28th effective date.
• Resources and Model Forms are available on the CFPB website www.consumerfinance.gov) and NACHA has a 1073 Solutions Center (www.nacha.org/1073-solutions-center/)
• The final, Final Rule eases some major industry pain points but only FedGlobal ACH Payments offers a permanently compliant solution.
• Instead of dismantling your CU’s existing international payment program, consider viable alternatives that provide benefits to both your CU and the members.
Questions?
Contact Information:
Evan Shelan, CEO
Jorge Jimenez, FedGlobal Director, Federal Reserve Bank of Atlanta
Breffni McGuire, Vice President, NEACH