Belgium-Led Cartel Routes Trillions in Wire Bank Transfers: Minimal Regulation Spells Huge Profits
Poirier, Bernard W., The Washington Times (Washington, DC)
PARIS - A Belgian-led international cartel called SWIFT now controls most wire bank transfers between one U.S. business account and another, and in 1998 made $425 million for its services.
Critics say U.S. banks are taking advantage of the lack of regulations to reap huge profits off international transfers.
"There are few areas of finance where service costs to the customer are more inflated in relation to transaction costs to the service than in the field of wire transfers," said Rep. Jim Leach, Iowa Republican and chairman of the House Banking and Financial Services Committee.
During 1998, the last year of record, SWIFT - an acronym for Society for Worldwide Interbank Financial Telecommunications - transmitted more than 937 million messages for its 6,635 member banks and financial institutions around the world.
The coded messages order the secure transfer of bank funds. The total worldwide value of these funds was $750 trillion.
For providing these services for its customers, SWIFT's revenues for 1998 were $425 million.
With operating units in 20 countries, SWIFT has its world headquarters with 700 employees at La Hulpe, Belgium. SWIFT's key technology center, where its 200 employees develop proprietary software and cryptography, is in Manassas, Va.
At U.S. banks, charges for wire transfers range on average from $30 to $50.
Unlike a check that travels 3,000 miles between Los Angeles and Boston, a wire transfer is like e-mail, which costs no more to travel 5,000 miles than 50 miles.
This is true whether the amount to be transferred is $1,000 or $100,000.
However, international transfers will usually cost the receiving bank account a handling charge because the different currencies must be exchanged.
Until a few years ago, American banks arbitrarily sat on check deposits for an excessive length of time and prevented the customer from using his own money in a timely way. …