Money transfer in limbo   

In early 2022, Tama sent money to an elderly friend overseas that needed money. Tama said his friend tried to collect the money, but he was told the money had not come.

Tama asked the money transfer company to refund him. The company explained that they needed Tama’s friend to telephone them to complete a verification process. Tama was not happy with this: he wanted to be refunded immediately.

The money transfer company would not refund the transaction until they could complete their verification process. Tama was not satisfied with this, and he asked FSCL to investigate the transfer.

Dispute

The money transfer company said they could not refund the money based on the information Tama had given them about the transaction and the receiver, and they said there was no further information Tama could give them to have the transaction refunded. They needed information from Tama’s friend.

The money transfer company explained that they are subject to a wide range of laws including the enhanced customer due diligence requirements under sections 22 – 25 of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the Act). The money transfer company needed more information from Tama’s friend to avoid potential breaches of laws.

Tama believed that the money transfer company had not sent the money for his friend to collect. Tama said his friend had identification on him when he went to collect the money and he was told the money had not come, and that his friend had called the money transfer company five times.

Review

On balance, we were not satisfied that Tama’s friend had telephoned the money transfer company. They had no record of a telephone call and Tama had no evidence that his friend had called the company.

We concluded that the most pragmatic outcome was for Tama to ask his friend to contact the money transfer company to complete their verification process. However, we said we would make further inquiries with the money transfer company if Tama could show us that his friend would not contact the company.

The money transfer company had not adequately answered our questions about what would happen to the money if Tama’s friend did not contact them about the transaction. The money transfer company said the money would remain on hold until they received the information they needed from Tama’s friend. However, from our research into the Act, the company had no legal basis to hold the money indefinitely.

We were also not satisfied that the enhanced customer due diligence requirements, referred to by the money transfer company, gave them a basis to hold the transaction. The requirements relate to the originator of the transaction (Tama) and information about the originator that must accompany a transfer. The requirements are not about the beneficiary of the transaction (Tama’s friend).

Resolution

After we gave the parties our preliminary view, the money transfer company decided to refund the transaction. They investigated the transfer again and they were able to establish that Tama’s friend was not a sanctioned person.

Tama accepted the refund in final settlement of his complaint.

Insights for participants

When a money transfer company believe they are not able to pay money to the receiver or refund the money back to the sender, we expect them to explain the legal basis for why they must hold the money. We also expect them to explain what they will do with the money if they cannot release it to the sender or the receiver.