Sending money overseas ought to be a straightforward operation, particularly within a modern, tech-savvy society, but from time to time, things can go wrong. Luckily, The Money Cloud is here to help you learn what courses of action to take in the event of a mishap.
Some banks and money transfer operators (MTOs) do not have operations in every country they offer to send money to, relying instead on correspondent banks.
What happens is that when a customer instructs a bank or MTO to send money overseas to a person or company, the bank or MTO calculates the cost of the transfer, and deducts that amount of money from the customer’s account, then instructs a correspondent bank to complete the transaction in the destination country, where the correspondent bank has an operation.
The correspondent bank also has an account with the organising banks, usually called a nostro account, and deducts the money from the organising bank in order to complete the transaction.
We can see already that the process is not without risk. There are several bank accounts involved in completing the transaction; not just sender and receiver, but nostro account, and correspondent bank account too.
Mistakes can happen; account numbers can be misquoted or input inaccurately, transactions can fail, be delayed, or not be actioned quickly enough, and on occasion the sender may wish to cancel or reverse the transfer at short notice.
Most banks and MTO’s track the progress of an overseas money transfer throughout the process, so if there are any issues or bottlenecks they can be quickly identified and resolved, but inevitably, there are times when things go wrong and a third party is called in to arbitrate the dispute.
If you are involved in a dispute over an international money transfer, the best place to refer your complaint to is the Financial Ombudsman. First of all, you should try to resolve your differences with your bank or MTO, but if that fails the Financial Ombudsman is who you should turn to.
On their website, the Financial Ombudsman helpfully outlines some instances of previous disputes. For example, one dispute arises when a man purchases a car from overseas and makes a transfer to pay for the vehicle, only to discover an hour after authorising the transaction that the information he has received about the car is false. He asks for the transfer to be reversed, but the bank informs him the following week that the transaction could not be reversed, and worse still, that the money sent has already been withdrawn by the receiver.
In this instance, the bank did not issue a request for the transaction to be cancelled for 2 days, despite the man making his request to cancel just one hour after authorising the transaction.
Luckily for him, the man contacted the Financial Ombudsman, who investigated and discovered the delay in the recall request being made. In this case, the Financial Ombudsman ordered the bank to refund the sender’s entire transaction, and pay him compensation.
Of course, not all transactions that go wrong are the fault of the bank or the money transfer operator, but it does go to show that when making money transfers overseas, you should always use a regulated bank, MTO or broker. If you do not use a agency authorised by the Financial Conduct Authority, or equivalent agency overseas, then you will not be able to seek help should something go wrong.
Sending money overseas should be a quick and painless operation, but as we can see it is still far from perfect. Technology is improving all the time, and many modern overseas money transfer services are trying different techniques, such as peer-to-peer matching (TranseferWise) and even the blockchain (Ripple, MoneyGram) to make things even more efficient, and cheaper too.
If you are in any doubt, start by using an overseas money transfer comparison engine like The Money Cloud. The Money Cloud will automatically search for the best deals, based on cost, and exchange rate spread, and only deals with hand picked, authorised brokers, so you can be sure your money will be protected in the (unlikely) event the transfer hits problems.
People send money overseas for many different reasons, but often they are urgent ones. In another example on the Financial Ombudsman’s website, a man tries to send money to his wife in Moscow who is in urgent need of finance. The bank, at the man’s request, provides a list of banks he can send the money too. He selects and “English sounding” name to make it easier for his wife to locate the branch as she does not speak Russian.
Unfortunately, the bank that the man selects in not in Moscow, Russia, but Moscow, Idaho, in the USA!
Again, thanks to the Financial Ombudsman, the man and his wife receive compensation and the matter is resolved. But it just goes to show, when making an international money transfer, the more time you spend finding the deal and broker that is right for you, the more you reduce the risk of a mishap, and if the worst does still happen, you have recourse to a third party who can arbitrate on any dispute.