Maryland Cracks Down on Illegal Money-Transfer Companies
Small Firms Send Cash Abroad for Immigrants

MARYLAND (By Krissah Williams, Washington Post) Tuesday, April 26, 2007 — About half of the 120 Maryland-based money transmitters used by immigrants to carry money abroad are operating without licenses and without the insurance that the state mandates, according to regulators who are cracking down on those operations.

"Immigrants that are here working are losing their money," said Susan Clayman, an investigator for the financial regulation division of Maryland's Department of Labor, Licensing and Regulation. The money is sometimes seized by authorities when it is transported illegally by unlicensed companies. Clayman is a former state trooper with a background in narcotics enforcement who was hired last year to root out such unlicensed operations.

The small money transmitters are popular with immigrants, especially recent arrivals, because people at these facilities speak their language, know their culture and sometimes will deliver the money right to a family member's door. They also are often cheaper than banks and run by immigrant entrepreneurs.

"I almost only use this company," said Juan Palma, 23, who stepped up to the counter at Fito Express International Courier in Langley Park and peeled a handful of $20 bills from his wallet to send to his family in Ipala, Guatemala. Palma, a construction worker, lost money when customs agents seized one of Fito's shipments, but he is willing to take the risk.

"We are used to doing things this way," said Angel Pineda, a painter from Chiquimula, Guatemala. He said he began using Fito to send money to his wife in Guatemala when he moved to Langley Park eight months ago.

A money-transfer company, unlike a bank, is not insured by the federal government. To operate legally in Maryland, a transmitter must have a $150,000 surety bond, issued by an insurance company, which protects customers from losses. It must also pay a $4,000 licensing fee renewable every two years. Virginia and the District have similar laws.

In addition, money-transfer companies must register with the U.S. Department of Treasury's Financial Crimes Enforcement Network, which investigates money laundering. Investigators have focused more attention on unlicensed companies after the 2001 terrorist attacks.

Unlike legal companies, which generally operate through electronic networks that can track the flow of funds, unlicensed outlets sometimes carry cash across the border or ship it in boxes. Because it is illegal to leave the United States with $10,000 or more in cash without disclosing it, these funds are at risk of being seized by authorities. The cash can also be stolen. Unlicensed firms do not have insurance to cover those losses.

In the early 1990s, the District got tough on unlicensed financial institutions after three Latino money-service firms that were operating illegally went under, costing customers thousands of dollars.

Money transmitters have been increasingly cropping up in the suburbs, addressing immigrants' preference to live outside of the District. As of 2000, Maryland's immigrant population had surged to 518,315, or 10 percent of the population. Virginia's was 570,279, or 8 percent, and the District's was 73,561, or 13 percent.

Maryland authorities say that at first these facilities operated under the radar but that as their numbers have grown, more problems have emerged. Virginia has not been tracking unlicensed companies because they have not been seen as a major law enforcement problem, according to the State Corporation Commission's Bureau of Financial Institutions.

Latinos alone sent an estimated $500 million last year from Maryland to Latin America, the most per capita of any state, according to the Inter-American Development Bank. Immigrants in the District sent $94 million, and in Virginia, $586 million was sent to Latin America last year, according to the bank.

About 86 percent of the remittances to Latin America are sent by Western Union, MoneyGram or mid-size money-transfer chains, according to a report by Manuel Orozco, professor at Georgetown University's Institute for the Study of International Migration. About 5 percent are sent using ATMs or other traditional banking services, while 4 percent use facilities run by small immigrant entrepreneurs.

Gustavo Torres, executive director of Casa de Maryland, a Latino immigrant advocacy organization with offices in Takoma Park, said immigrants use small transfer companies because the people who work there speak Spanish and the music, television shows and people in the office feel familiar.

"We feel like we've come home when we come" to these facilities, Torres said. "It does not mean those kinds of facilities should not have regulation. We know there are abuses being committed against immigrants. We welcome regulation."

"Almost every ethnic group has their own set of money transmitters, [and] there are more cases than we can keep up with," said Stephen M. Prozeralik, director of enforcement for Maryland's division of financial regulation, which has begun investigating more than a dozen money-service businesses, including companies that send money to Central America, Africa and the Philippines.

Investigator Clayman finds the transfer companies by studying local Latino, African and Filipino newspapers and telephone books, looking for words such as envios dinero or pesos and balikbayan in foreign-language ads.

Langley Park, which straddles Prince George's and Montgomery counties, is home to as many as two dozen of those money transmitters, according to Clayman.

"They pop up overnight," Clayman said while piloting her sport-utility vehicle through the community, which has a large Hispanic population. She slowed to peer in the windows of storefront operations, which may sell clothes and also advertise themselves as international money transmitters. She has also found unlicensed operations run out of apartments and the backs of pickup trucks or set up in parking lots.

When Clayman finds a company advertising itself as a money transmitter, she checks its name against the agency's list of licensees. If it is not on the list, she then sends the company a letter. If the company does not agree to stop sending money or seek a license, she sends a second, harsher letter. Sometimes she also shows up at the companies and warns them to stop operating.

She is investigating 14 allegedly unlicensed transmitters and has served a handful of orders telling companies to stop transmitting money.

Some companies have agreed to pay their fees and become licensed. Others become agents of larger money-transfer companies, such as Western Union or MoneyGram, that are already licensed in the state.

Fito Express's owner, Randolfo "Fito" España, said he learned of Maryland's licensing requirement after receiving a letter from Prozeralik's office. From Chiquimula, Guatemala, where he still lives, he has operations in four U.S. cities.

"Most of our [U.S.] customers are undocumented, and they are afraid to use banks," said España, who travels to Maryland every month.

Last year, customs authorities at Miami's airport seized two Fito Express shipments of cash and money orders totaling $60,000. España said he took out a loan on his home to make sure the $60,000 was delivered.

A few months ago, Maryland regulators warned Fito Express to get a license or stop transmitting cash. España was shipping about $50,000 a week for about 250 customers. He charged $5 to $18 per shipment. Western Union and MoneyGram charges more than $20 to transfer $200 to Guatemala.

To get a license, Fito Express would have needed to pay an annual surety bond premium of about $4,500. It is unlikely a company that sends cash by courier would get insured because the risk of financial loss is too high, according to the Surety Association of America.

After evaluating the situation, España decided Fito Express would no longer send money. Last week, he had a handwritten sign posted in the lobby, "No se recibe envios de dinero. Solo recibe envios de paquete." (Money transfers are not accepted here. Only packages are sent.)

It's not just Latino money-transfer operations that are drawing attention. Across the state line in Northern Virginia, Maria Castro operates Manila Forwarders Corp. Her company is also family owned. After moving to the area from the Philippines in the 1980s, she and two siblings opened the store in Lorton, where they fill boxes with soap, toiletries and used clothes that Filipinos living in the region pay Manila Forwarders to ship via ocean freighter to their families back home. About 10 years ago, she also began sending money.

Castro and her siblings often drive to the homes of their clients to pick up the goods or money they want to send. They deposit the money in a U.S. bank account and then transfer the funds to an account in Manila. From there it is distributed.

Castro said she charges $10 for any amount of money transferred, compared with $25 charged by larger competitors.

The licensing fee and surety bond she pays to be a legal operator in Virginia cut into her profit, she said, but she knows she needs to follow the rules. "It is a nuisance, but if we have to comply, then we have to comply."