Wiring Money and Enterprise Resilience

Stephen DeAngelis

May 12, 2006

Today’s Washington Post contains an interesting article about how competition has reduced the cost of wiring money from the United States to other countries.

Krissah Williams, “Competition Cuts Cost of Wiring Money,” Washington Post, 12 May 2006, p. D01. Read the article

You might wonder what the connection is between wiring money and Enterprise Resilience. Enterprise Resilience is a response to the complexity generated by globalization, especially its security, compliance, and competitive aspects. Globalization cannot continue without the free flow of resources, capital, and people. Part of the people flow includes what has been termed the “global commute.” With all the talk about immigration (legal and illegal), people are coming to understand that not all workers want to stay in the United States. Some come to earn enough money to support their families back home and to build a nest egg with the dream of returning to their homeland. Sometimes the money is used to help improve the quality of life for extended family members (such as parents) who have no desire to leave their homes. One sign of this is the $52 billion that article says immigrants annually wire to Latin America and Caribbean from the United States.

 

Here’s where the global commute meets Enterprise Resilience. Anyone familiar with the flow of drugs and the growing Latino gang problem understands that not all of this money comes from hardworking individuals sending it home to support their families, even if most of it does. So let’s back up a bit, the article points out that the reduced cost of wiring money means that more money gets into the hands of poor families — which is important for developing the economies in Gap countries. Money wired to Latin American by expatriates now eclipses the official development aid reaching those countries. The article points out that even more money could be saved if those transferring money were bank account owners. Not only does that help on the sending end, it helps on the receiving end. Recipients are more likely to also have bank accounts if institutional transfers ensure that more money actually makes it into their accounts. This has the concomitant benefit of making other financial services (such as micro-loans) available to account holders — and that’s good for everybody.

Fast forward to my earlier point, not all wire transfers are legal. That is one of the reasons the Bank Secrecy Act and USA Patriot Act were passed — to stop money laundering that supports criminal and/or terrorist activity. Because regulatory burdens can be onerous, consolidation of companies involved in wire transfers is increasing. As consolidation increases and competition decreases, prices for transfers could again rise. As noted in the article:

The consolidation is also being driven by regulatory hurdles facing the industry, said David Landsman, the executive director of the National Money Transmitters Association. After Sept. 11, 2001, remittances came under greater scrutingy and several large banks have refused to do business with money-transfer companies, fearing that they could be held responsible under the USA Patriot Act for ensuring that the companies are not used to launder money.

One of the examples we use in explaining what Enterra Solutions® does and how our Enterprise Resilience Management Methodology® works is opening a bank account. Our approach makes opening an account more efficient and completely auditable, which helps remove some of the fears banks have about doing business with money-transfer companies. Our Solution is about building trust on the global information grid and the Washington Post article points out how critical that is for keeping the wheels of globalization greased.