x Abu Dhabi, UAEWednesday 17 January 2018

Hold out for fair exchange

The modern-day remittance man must watch out for banking tricks that can drain funds before they ever reach his pocket, writes Felicity Glover.

Illustration by Gary Clement for The National
Illustration by Gary Clement for The National

The spendthrift, disinherited and graceless, accepted his pittance with an easy air, only surprised he could escape so simply from the pheasant-shooting and the aunts in the close; took to the life, dropped easily out of knowledge, and tramping the backtracks in the summer haze let everything but life slip through his fingers. - Judith Wright; Remittance Man

I must have been about 15 when I studied Remittance Man at school. Written by the late, great Australian poet Judith Wright, it is about a 19th-century practice that saw many men from the United Kingdom exiled by their families to the colonies, including, of course, Australia.

Some were indisgrace, others were out of luck when it came to the birth order of their siblings and would never inherit the estate (and, therefore, a livelihood), which would always go to the first-born son. Many were the "black sheep" of the family and, rather than stick around and continue to embarrass their loved ones with their antics, were forced to try their luck in the new(ish) world.

They were called remittance men because they survived on the money their families sent to the far-flung places they had settled in, most probably once a year thanks to the fact that it was, after all, the 19th century and electronic banking and foreign exchange houses didn't exist back then.

Imagine the effort that would require.

As it turned out, I discovered we also had a remittance man in our family when I was studying the poem.

My great-grandfather, who came from a titled family in Wales (OK, so not all Australians are from convict stock), was sent to Australia and lived off the remittances his family sent. He settled in Sydney and the rest, so they say, is history.

His family's estate went to his older brother, but my side of the family did inherit his mother's jewels and they continue to pass down to the eldest daughter in my family to this day.

Unfortunately, I have an older female cousin, so missed out on that inheritance - although I think I did inherit my great-grandfather's expat gene, which has left me all the richer; spiritually, at least.

When I was 15, I never dreamt that the word remittance would play such an important role in my adult life. But as an expat, sending money from one side of the world to the other has grown to become an important part of my finances.

Of course, I am just one of the millions of expats who do this. According to the World Bank, cross-border remittances last year totalled US$483 billion (Dh1.77 trillion).

That's a lot of money criss-crossing the world to support families, pay mortgages or go into pots of savings.

But that hard-earned money of ours also puts billions of dollars of profits into the coffers of banks and financial institutions thanks to the unfavourable rates we are given and the fees - some hidden - we are slugged with for the privilege of sending our money home.

Here's a good example. In March, a friend of mine sent Dh90,000 (US$24,503) from her HSBC account in the UAE to her Lloyds TSB account in the United Kingdom. She's been sending money home this way since she started working here in the belief that "my bank would be giving me a reasonable exchange rate".

My friend is an intelligent, well-informed professional. She always does her homework when it's time to transfer her money, checking the exchange rates to help her decide the most advantageous time to remit it.

Her transfer in March was a year's worth of savings. On the day she sent her money, she checked the exchange rates that were being offered by various banks, as well as on www.reuters.com and www.xe.com to compare what was on offer. With £1 buying about Dh5.79 on the day of the transfer and a Dh100 transfer fee, she was secure in the knowledge that she was getting a fair bang for her buck. Or dirhams in this case.

"I was expecting to get around £15,500 in my UK account," she says.

"I was shocked when I saw that only £14,976 had got there. The exchange rate HSBC gives you only shows up on your account after you have made the transfer some days later. And I was shocked to see that the rate given was 6.0093270.

"As a worst-case scenario, I would have thought that the bank would have charged me 200 or 300 points on the rate plus the Dh100 transfer cost, but in this case the difference is massive.

"The amount this transfer cost me - Dh3,000 - is more than the cost of my annual flight ticket home and is not a sum of money I can afford to lose."

She's complained to HSBC, which "closed" her complaint without giving her any compensation and she now plans to take it to the complaints department of the Central Bank. In the meantime, she has vowed to take her business to an exchange house, where she knows she'll get a more transparent - and better - rate.

Back in 2007, the World Bank released a report called the General Principles for International Remittance Services.

Compiled by a task force of representatives from international institutions involved in remittances and from central banks in both remittance-sending and remittance-receiving countries, the report is a revelation - not just that it exists, but also because there are principles financial institutions are expected to follow to ensure a transparent global remittance system free of hidden fees and unfavourable exchange rates.

You learn something new every day.

In the introduction, Timothy Geithner, the US Treasury secretary and the chairman of the committee on payment and settlement systems, set up in 1980 by the central bank governors of the Group of 10 countries, says the report's aim is to provide "general principles designed to assist countries in improving the market for remittance services".

The report sets out five principles financial institutions should be following. Here's the first one: "The market for remittance services should be transparent and have adequate consumer protection."

It also spells out the role public authorities should play in the implementation of these principles.

"Public authorities should evaluate what action to take to achieve the public policy objectives through implementation of the general principles," it says.

It's a good thing my friend is taking her complaint to the Central Bank now that we are both aware of the general principles for international remittance services. She's even going to quote the report when she sends her complaint.

Isuggest you do, too, if you believe you have been affected by opaque exchange rates or hidden fees at banks or financial institutions.

You can contact the Central Bank's consumer protection unit on 02 691 5290 or by email (complaint@cbuae.gov.ae).

The more the merrier, I say.

And remember: it doesn't take much to line up at an exchange house to send your funds home. The money you are saving should be inspiration enough.