Understanding US Remittance Regulations: A Brief Guide

Streamlining consumer protection regulations in US remittance transactions.
min read
June 14, 2024

Sending money internationally can be full of uncertainties, This can lead to significant losses for families relying on funds, especially when the amount received is less than expected. Regulations protecting consumers in remittance transfers are crucial to ensure fairness and transparency. 

The Consumer Financial Protection Bureau (CFPB) plays a vital role in overseeing these regulations. In this blog, we will explore key remittance regulations in the US and explain why they are essential for consumers.

What is Remittance?

Remittance is the process of sending money from one place to another, typically from one country to another. It is commonly used by individuals working abroad to send a portion of their earnings back to their home country to support family and friends.

Remittances play a significant role in the economies of many developing countries, providing a vital source of income for millions of families. Money can be sent through various channels, including banks, online transfer services, and specialised remittance companies.

Why are Remittance Regulations Important?

Every day, a large sum of money is transferred internationally for various reasons. In 2023, the remittance flow reached $669 billion globally. Both senders and recipients need assurance that these transactions will be completed as planned and that the funds are secured and received in full.

This is where the importance of remittance regulations comes into play.

1. Ensuring Lawful Transactions

By implementing strict guidelines, regulatory bodies help prevent transactions associated with fraud, money laundering, and the funding of illegal activities. These measures not only protect consumers but also safeguard the global financial system.

2. Building Consumer Trust

Customers can place more trust in services that are regulated by the central authorities. Financial institutions and money transfer services must meet high standards set by regulatory bodies, ensuring transparency, security, and accountability. This compliance reassures customers that their money is managed responsibly and reaches its destination safely.

3. Protecting Consumers

Regulated remittance services are required to provide clear information about fees, exchange rates, and delivery times. This transparency helps consumers make informed decisions and avoid hidden costs. 

Moreover, consumer protection laws, such as those enforced by the Consumer Financial Protection Bureau (CFPB), offer additional protection against errors and unauthorised transactions.

4. Enhancing Security

Regulatory frameworks mandate uncompromising security measures to protect customer data and transaction details. This reduces the risk of cyber theft and ensures that personal information is kept confidential. Such security measures are crucial in maintaining the trust of consumers who rely on these services for their financial needs.

5. Facilitating Economic Stability

Regulated remittance services contribute to the economic stability of both sending and receiving countries. For many developing nations, remittances are a vital source of income, supporting millions of families. 

What are Remittance Regulations in the US?

Regulations governing remittances in the US are designed to protect consumers and ensure the secure transfer of funds internationally. These regulations cover various aspects of electronic money transfers and impose specific requirements on remittance transfer providers.

1. Electronic Fund Transfer Act (EFTA)

Enacted in 1978, the Electronic Fund Transfer Act (EFTA) regulates wire transfers and other electronic payments in the US. It aims to protect consumers engaged in electronic funds transfers by ensuring transparency and accountability.

2. Foreign Account Tax Compliance Act (FATCA)

The Foreign Account Tax Compliance Act (FATCA) regulates American taxpayers holding money in foreign bank accounts. FATCA requires US citizens to report their foreign accounts to prevent tax evasion and ensure compliance with US tax laws.

3. Dodd-Frank Wall Street Reform and Consumer Protection Act

Before the Dodd-Frank Act, remittance transfers largely fell outside the regulation of federal consumer protection laws. Section 1073 of the Dodd-Frank Act amended the EFTA by adding new Section 919, which created a comprehensive system for protecting consumers in the US who send remittance transfers to individuals and businesses in foreign countries. 

This amendment applies to various types of remittance transfers and providers, including money service businesses (MSBs), banks, and credit unions.

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It is important to know the remittance regulations in the US to ensure safe, transparent, and efficient international money transfers.

The Electronic Fund Transfer Act (EFTA), the Foreign Account Tax Compliance Act (FATCA), and the Dodd-Frank Wall Street Reform and Consumer Protection Act ensure that transactions are conducted lawfully,  consumer rights are protected, and the financial system remains secure.


Q1. What are the compliance requirements for remittance service providers in the US?

Remittance service providers in the US must comply with regulations under the Electronic Fund Transfer Act (EFTA), Dodd-Frank Act, and state laws. They must provide clear disclosures, adhere to anti-money laundering (AML) rules, and follow procedures for error resolution and consumer protection.

Q2. How do anti-money laundering (AML) regulations affect remittances?

AML regulations require remittance providers to verify customer identities, monitor transactions, and report suspicious activities to prevent money laundering and terrorist financing. These measures ensure the integrity and security of the financial system.

Q3. What is the Bank Secrecy Act, and how does it relate to remittances?

The Bank Secrecy Act (BSA) mandates financial institutions, including remittance providers, to keep records of significant transactions and report suspicious activities. This helps detect and prevent money laundering, ensuring transparency and accountability in remittance transactions.

Q4. Are there any limits on the amount of money that can be sent from the US to other countries?

There are no specific federal limits on the amount of money that can be sent from the US to other countries. However, remittance providers may set their limits, and large transactions may require additional verification and reporting under AML regulations.

Q5. What is the Consumer Financial Protection Bureau's (CFPB) role in remittance services?

The CFPB oversees remittance services by enforcing consumer protection laws, such as the Electronic Fund Transfer Act (EFTA). It ensures that remittance providers disclose fees, exchange rates, and delivery times and protects consumers' rights to cancel transfers and resolve errors.

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Aayush is a strategic growth marketer with over 6 years of experience working in the US and European markets for various financial services companies. He has a proven track record of success in helping businesses grow, increase revenue, and improve marketing strategies.

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