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Western Union International Submission in Response to Finance Canada's 2006 Review of Financial Sector Legislation:

Submission to the Department of Finance on behalf of Western Union International in connection with its request for

Submissions regarding an Effective and Efficient Legislative Framework for the Canadian Financial Services Sector

Western Union is pleased to make this submission to the Department of Finance in connection with its review of the certain legislation affecting financing services entities.

Overview of the Money Transmission Business

Western Union began sending money for customers over 130 years ago, when the Western Union Telegraph Company started offering telegraphic money transfers throughout the United States. Western Union began serving Canadian consumers in the 1870's. Today, Western Union provides a convenient, fast and reliable way to send money in over 195 countries and territories. Western Union has over 219,000 agent locations throughout the world, including 3,100 agent locations in Canada.

Western Union is proud of the role it has played in expanding the use of electronic remittance systems and enabling millions of immigrants to send money back to their families. Western Union built its money transfer business to meet a void in the financial services marketplace. At one time- not very long ago- a convenient, fast and reliable means for immigrants to send small amounts of money to friends and relatives back home did not exist. Western Union identified that need and filled it. Western Union continues to strive to serve the hardworking immigrant communities around the world.

The most common type of money transmission involves the following steps:

a. The sender goes to an agent location of the money transmitter. (Generally, these locations are not owned by the money transmitter because the volume of transactions at a single location will not economically support the investment that would be required if the location were owned by the money transmitter. The location owner typically is an agent of the money transmitter and offers other retail services from the location.) 

b. At the location, the sender will be asked to complete a form with send instructions. In some locations, the sender may provide this information to a central office of the money transmitter over a telephone.

c. The clerk will take the completed form and enter the information into a computer linked to the central office of the money transmitter. If the operation is not computerized, the clerk may call the central office with the sender's information.

d. The clerk collects the amount of money the sender wants to send plus the amount of the service fee in cash.

e. The clerk provides the sender with a receipt. The receipt tells the sender the total amount paid, the amount of the service fee, and, if the exchange rate is determined at the time of send, the currency exchange rate and the total amount of foreign currency that will be paid out in the receiving country.

f. The sender contacts the recipient and advises the recipient that the money is available for pick up at the money transmitter's locations. Some money transmitters offer phone cards with their service so that the sender can call the recipient.

g. The recipient goes to a location of the money transmitter in the receiving country and picks up the amount of foreign currency sent. The recipient typically does not pay any additional fees.

Western Union also offers consumers a means to send cash payments to billers, such as utilities, credit card issuers and other lenders. In those transactions, consumers go into an agent location and send a payment to a particular biller. Under arrangements with the billers, Western Union will electronically deposit the funds it receives into the billers' bank accounts.

The level and quality of services offered by money transmitters varies. While every transmitter transmits money, as with other businesses, competitors in the money transfer business offer different levels of service. Small money transmitter may serve only one corridor and have only one or two "send" locations and one or two "receive" locations. Large transmitters may have thousands of locations. Large transmitters offer high levels of customer service, usually with telephone call center with operators speaking dozens of languages.

Western Union's service is convenient, with 219,000 locations worldwide, many of which are open 24 hours, 7 days a week. Customer service is a priority, with toll free call centers operating 24 hours/7 days a week. Operators speaking over 20 languages enable consumers to track their transactions and to obtain information regarding the services. At most locations, money transmitted may be available for pickup immediately. Payout in cash is standard and often the receiver has a choice of payout in different currencies. Message delivery or free phone time is provided with many international transactions. US and Canadian consumers can send money over the telephone or over the Internet.

The actual money paid by an individual sender is not sent to the receiving location. Money transmitters have made arrangements with businesses located in the send country and in the receiving country to receive and pay out money transmissions in accordance with the instructions of the senders and the money transmitters. These businesses act as agents for the money transmitters. Under these arrangements, the agents will typically pay out the money to the recipient using the agents' own cash. The money transmitter will settle with the agent later for alltransactions handled by the agent. These aggregated funds are wired through the banking system from the bank account of the money transmitter to the bank account of the agent.

Many businesses act as agents for money transmitters. These include grocery stores, pharmacies, hardware stores, travel agencies, and check cashers. It is important to allow these services to be offered by these businesses because these businesses are frequented by the immigrant population which may not be comfortable using a bank. However, banks as well as post offices can and do act as agents for money transmitters. In addition, banks compete with money transmitters by offering similar services.

Government Regulation

While many countries have chosen not to regulate money transmission, many countries impose limitations and restrictions on the money transfer business. Money remitters are sometimes regulated by a country's central bank and/or its finance ministry, although some countries (including the United States which regulates this service at the state level) do not regulate money remitters at the national level. Some countries require companies engaged in funds transmission to be banks or foreign exchange houses, although the regulations applicable to those institutions are often unnecessarily burdensome to the business and purposes of pure money remittance. In countries that have developed separate regulations for money transmitters, a money remittance licensee typically has fewer regulatory obligations than a commercial bank, since a money remittance company does not accept deposits, make loans or engage in other banking activities. To promote more competition in Canada, Western Union believes that Canada should not put in place a highly regulated regime which will inevitably restrict competition. Western Union does, however, support the licensing and appropriate regulation of nonbank service providers separately from banks.

A typical state regulatory scheme in the United States provides as follows:

a. A government agency, usually the regulator of other financial institutions, is designated as the regulator of money transmitters.

b. A company must apply for a license to engage in money transmission. For a license to be approved, the applicant must demonstrate that it has the financial responsibility, financial condition, business experience, character and management to justify the confidence of the public and that it is fit, willing and able to carry on the proposed business in a lawful and fair manner.

c. A company is required to provide a surety bond or maintain liquid assets in a reasonable amount to protect its customers' funds.

d. Licenses are subject to annual renewal.

e. Licensees are required to periodically file reports with their regulator regarding the level of services performed and their financial condition.

f. Licensees are subject to onsite examinations by their regulators.

g. Licenses may be suspended if a licensee's financial condition is impaired, its management is involved in criminal activities or it is not conducting its business in accordance with applicable law.

The United States regulatory scheme offers a model for Canada to use in regulating the money transmission. It offers an appropriate regulatory balance, adequately protecting the consumers from loss while not overly burdening the money transmitter with cumbersome regulatory requirements. The US model, however, can be improved. The lack of a national regulatory system unnecessarily increases the cost of regulation. For example, Western Union reports to over 45 state regulators. Approximately 10 different regulators conduct onsite examinations each year. There is significant overlap and duplication of effort by these regulators which leads to increased costs for the money transmitters and ultimately higher prices for its customers.


Western Union is supportive of increased regulation of the money transmission industry in Canada and recommends that the US model be considered the most successful in protecting the consumer while encouraging competition. Western Union offers its expertise and resources to assist the Canadian government in its effort to provide such regulation.