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ombudsman news

issue 76

March/April 2009

case studies involving the transfer of money abroad - and associated currency exchange

In these days of instant electronic communication, it is tempting to suppose that it will be a quick and simple matter to send money round the world. The reality, though, is often rather different and we regularly receive complaints that centre on the transfer of money abroad, often with associated currency problems.

Consumers generally assume that transferring money abroad is very much like sending money to another bank account within the UK. The expectation is that the money will go straight to the account of the person the money is intended for (the "beneficiary"). However, the process is more complicated, particularly when money is being sent outside the European Union. The time and complexity involved in these transactions can sometimes take the consumer unaware. In all probability, the UK bank will have to send the money via one or more intermediary banks abroad (sometimes called "correspondent" banks) before it reaches its final destination - the beneficiary's account.

So there is often considerable scope for misunderstandings to arise - and it is not only consumers who can find all this confusing. Bank employees, particularly those who are not experienced in handling foreign transactions, can also sometimes get into difficulties. If a mistake has been made and a transfer needs to be recalled, it is usually possible to put things right. However, quick action is needed to ensure the money is retrieved before it reaches the beneficiary's account.

Some of the complaints we see have come about because of basic misunderstandings about currency conversion rates. Unlike other sorts of financial deals that consumers may have arranged through their bank, such as a fixed-interest rate on a new mortgage product or savings bond, currency conversion rates will fluctuate throughout the day. So the rate that applies at the point when a transaction takes place may differ from the one the consumer had expected. And quite small differences in the rate can make an appreciable difference to the value of the money, particularly when large sums are involved.

Given that we covered issues relating to money transfer and currency exchange in issue 64 of ombudsman news (September/October 2007) in the article "banking disputes related to foreign travel" we are surprised that some firms are still not handling complaints of this type in the way we would expect.

At the moment, we are only able to deal with complaints about money transfers where the transfer was made through a bank or building society, or through some other type of business that we currently cover. However, building on the considerable experience we have already gained in dealing with complaints of this type, from November 2009 we will be able to consider complaints against all businesses in the United Kingdom that provide consumers with payment services.

issue 76 index of case studies

  • 76/1 - consumer complains about bank's failure to successfully recall a payment made by money transfer
  • 76/2 - money transfer carried out incorrectly when inaccurate information was entered on the transfer form
  • 76/3 - consumers complain that bank misled them about the exchange rate they would get when transferring funds from one country to another
  • 76/4 - transfer of funds to foreign bank delayed when incorrect information was entered on the transfer form
  • 76/5 - consumers complain that bank's advice about transferring money abroad led to excessive charges
  • 76/6 - limited company in liquidation says bank contributed to its failure by not transferring payments within "guaranteed" timescale
  • 76/7 - money transfer carried out incorrectly when inaccurate information was entered on the transfer form

consumer complains about bank's failure to successfully recall a payment made by money transfer

After agreeing to buy a second-hand car from a Mr K, who lived in Hungary, Mr N contacted his bank to arrange payment. He instructed the bank to send £8,600 by electronic transfer from his current account to Mr K's account in Hungary.

Shortly afterwards, Mr N phoned his bank and asked it to recall the transfer. He had just received information that showed Mr K had substantially misrepresented the age and condition of the car.

The following week, Mr N contacted the bank for confirmation that the transfer had been recalled. He was very surprised when the bank said that its "recall request" had not been successful. The bank told him that by the time the request arrived at the Hungarian bank, the money had already reached Mr K's account and he had withdrawn it.

Mr N had acted very swiftly in asking his bank to try and recall the transfer. He therefore found it hard to believe that the bank had not been able to stop Mr K from getting the money. However, when he raised the matter with the bank, it simply said it had done its best and was unable to discuss the transaction further. Mr N then complained to us.

complaint upheld
We studied the audit trail for the electronic transfer and for Mr N's subsequent request for it to be recalled. One hour and seventeen minutes after the money had left his bank, Mr N had asked the bank to recall it. The bank sent its recall request to the Hungarian bank two days later. The money reached Mr K's account at the Hungarian bank the day after that, and Mr K had withdrawn it that same day.

We asked the bank why it had taken so long to send the recall request. Initially, it denied that there had been any delay. However, it later admitted that it had been very busy on the day in question. It said Mr N's request might therefore "not have been processed as quickly as normal".

After looking at the evidence, we were unable to find any reason why the bank could not have ensured that Mr N's request was dealt with promptly. We thought the recall request would very probably have been successful, if the bank had not waited so long before sending it.

So we said the bank should pay back the £8,600 to Mr N, together with interest on the money for the time he had been without it. We said it should also pay him £200 for the upset and inconvenience he had been caused.

money transfer carried out incorrectly when inaccurate information was entered on the transfer form

Mr G went to the local branch of his bank and arranged to transfer £6,000 to his wife. She was visiting Moscow at the time, on business, and had contacted him to say she needed the funds urgently. The transfer was made on a "pay on application" basis.

This meant that the money would be sent to a bank in Moscow, where Mrs G would go, show appropriate identification, and collect the money.

As neither Mr G nor his wife knew any banks in Moscow, Mr G asked his bank if it could advise him on where best to send the money. One of the staff at the branch showed him a list and told him it contained the names of all the banks that had "operations in Moscow".

Mr G chose one of them, on the basis, as he later told us, that it had a "western rather than a Russian name". He thought this bank was unlikely to have more than one branch in Moscow, so the possibility of any confusion would be minimised. This was an important consideration, as he was anxious to ensure his wife was able to collect the money as quickly and easily as possible.

Mr G's bank duly carried out the transfer. Unfortunately, as he subsequently discovered, the bank he had selected was not in Russia but in Moscow, Idaho, in the United States of America.

Conscious that his wife was still urgently awaiting the money, Mr G told the bank he could not wait for it to try and retrieve the money and then re-send it to a bank in the "right" Moscow. He therefore arranged a further transfer through a money transmission business.

The money that had been sent to Idaho was eventually returned to Mr G. However, because it had been converted into US dollars and then back again to sterling, he got back less than the amount he had sent.

When Mr G complained to the bank about its "incompetent handling" of the transfer, the bank drew his attention to a statement on its transfer form. This said that the bank would not be liable for any loss that resulted from inaccurate information being entered on the form. The bank also pointed out to Mr G that it had not been obliged to provide him with a list of banks, and had only done so because he had specifically asked for assistance.

Unhappy with the bank's response, Mr G came to us. He said he remained convinced that the bank had been at fault. He thought it should compensate him for the worry he had been caused and the additional costs he had incurred.

complaint upheld
We accepted that the bank had not been obliged to provide Mr G with any information, when he asked if it could tell him of any suitable banks in Moscow to which he could send the money. However, having decided to assist him, the bank was obliged to exercise reasonable care and skill in doing so.

In this case, the bank had shown Mr G a list and had told him it included all the banks that had branches in Moscow. This list had been compiled by the bank itself and it included the bank that Mr G had chosen. However, as the list only gave the names of the banks - not their addresses - Mr G had no way of knowing that the bank he had selected was in the "wrong" Moscow.

The bank told us it had warned Mr G that it was unable to guarantee that all the information it held about the banks on the list was entirely up-to-date.

It had also told him it could not guarantee that Mrs G would find it easy to locate any of the banks on the list. We pointed out that - crucially - it had failed to warn Mr G that some of the banks on the list had no operations at all in Russia.

We did not agree with the bank that the wording on the transfer form absolved it from responsibility in this case. Mr G could not reasonably be held liable for entering incorrect information that the bank itself had given him.

We upheld the complaint. We told the bank to pay Mr G the cost of the second money transfer, together with the amount of money he lost on the currency conversions for the reclaimed payment to Idaho. We said it should also pay him £200 in recognition of the worry and inconvenience he had been caused.

consumers complain that bank misled them about the exchange rate they would get when transferring funds from one country to another

Mr and Mrs B were starting to make plans for their retirement and decided to sell the house in the far south of Ireland that they had owned for some years. They wanted to keep their existing house in the UK as their main residence. However, they planned to use the proceeds of the sale of their house in Ireland to buy another property - probably in Spain.

As the couple were in no great rush to buy the new property, they thought they would transfer the proceeds of the sale from their account at a bank in Ireland to their bank in the UK.

Before doing this, they phoned their Irish bank to ask what exchange rate it could offer them if they converted the money from euros to sterling before transferring it to their UK bank.

The couple then phoned their UK bank to see what exchange rate they would get if they transferred the money in euros, and then asked the UK bank to convert it to sterling. They later said that the UK bank had quoted over the phone a "guide conversion" rate from euros to sterling of 1.28, for transactions up to the value of £25,000.

From this, they concluded that they would be better off transferring the money in euros and then asking their UK bank to convert it to sterling. They had not told their UK bank exactly how much money they were thinking of transferring. However, they thought that when the bank realised the transaction was valued at over £25,000, it would give them an even better rate than the one it had quoted.

So Mr and Mrs B instructed their Irish bank to send the proceeds of the sale - totalling 273,950.50 euros - to their UK bank account. The couple were very unhappy when they found that the UK bank had credited £204,663.77 to their account, having converted the euros to sterling at a rate of 1.3385, and deducted a small transaction charge.

Mr and Mrs B complained to their UK bank, saying that because it had "deviated" from the rate it quoted over the phone, they had received substantially less money than they had been expecting. They said the bank had misled them and should therefore compensate them for the amount of money they had "lost".

complaint not upheld
We listened to the recording of Mr and Mrs B's initial telephone conversation with their UK bank about the exchange rate. We were satisfied that this recording gave an accurate account of what had been said. However, there was no mention of an exchange rate of 1.28.

Mr and Mrs B admitted that before transferring the money they had researched exchange rates on various websites and in several newspapers, as well as talking to both their Irish and UK banks. They agreed that they could not be certain of the context in which they had heard about the rate of 1.28 - and they confirmed they had never been told this was a "fixed" rate.

They also admitted that their expectation that they would get a better rate when converting a larger sum was not based on anything either the UK or the Irish bank had told them.

We were satisfied that the bank had not misled Mr and Mrs B about the likely rate it could give them. We were also satisfied that it had correctly told them that the actual exchange rate they would receive depended on the market exchange rate at the time the money went through. We did not uphold the complaint.

transfer of funds to foreign bank delayed when incorrect information was entered on the transfer form

Mr and Mrs D were having some improvements carried out to their holiday home in France. They had agreed to pay their French builder the euro equivalent of £5,000 by 9 August.

So on 27 July Mrs D, who was at home in the UK at the time, phoned her UK bank. She asked it to transfer the money to the joint account that she and her husband had at a French bank.

Unfortunately, instead of arriving at the French bank on 28 July, as it should have done, the money was not available to the couple at the French bank until 17 August.

The couple complained to the UK bank about its failure to carry out the transfer correctly. They said it should compensate them for the expenses they had incurred as a result. They told the bank they had been obliged to travel out to France to "appease" their builder and "sort out various problems resulting from the delayed payment".

The transfer had been delayed because the identifying number for the French bank had been misquoted on the transfer form. Mrs D insisted that she had given the details very clearly and accurately when she phoned the bank with her instructions. However, the bank said it had accurately transcribed the details she had provided, so the error must have been hers.

The couple had backed up their complaint with a copy of their French bank statement. Referring to this, the UK bank said the statement showed that the money was received in France on 28 July. It said the couple must therefore have been mistaken in saying that they had not had access to the money at their French bank until 17 August.

Unable to get any further with their complaint, Mr and Mrs D then came to us.

complaint upheld in part
We asked the UK bank to let us have its recording of Mrs D's call, instructing it to make the payment to the French bank. From this, it was clear that she had given the bank the correct identification number. So we were satisfied that the bank had made a mistake when it completed the transfer form.

It seemed to us that the bank had become confused about the date on which Mr and Mrs D had received the money into their French bank account.

It was true that the French bank had back-dated the transfer to 28 July, for interest purposes. However, the couple had correctly stated that the funds had not actually been available to them until 17 August.

We then looked closely at the expenses Mr and Mrs D had claimed from the bank. They had said that they had been obliged to travel to France solely to sort out the payment and appease their builder. However, we noticed that they had remained in France for a further week after the date on which they said they had met and paid the builder.

We established that the builder was well-known to Mr and Mrs D, and had already carried out a variety of building jobs for them - on a number of previous occasions. And there was no evidence that the delay in transferring funds had affected either their relationship with him, or his completion of the building work, to the extent that a personal visit was necessary.

We were therefore unable to agree with the couple that the bank should meet all the expenses they had said they incurred as a result of the UK bank's mistake.

We did, however, say that the bank should refund the fee that Mr and Mrs D had paid for the transfer, together with the cost of their telephone calls to their French bank when trying to find out if the money had arrived. We said the bank should also pay the couple £150, in recognition of the inconvenience they had been caused.

consumers complain that bank's advice about transferring money abroad led to excessive charges

Mr T, who was planning to move abroad once he had retired, went into a local branch of his bank to ask about the cheapest and quickest way to transfer money to Portugal. He later told us that he was advised to use his debit card.

Some six months after he had settled in Portugal, Mr T complained to his UK bank about its "excessive charges". He also said that it had misled him about the best way of transferring money to Portugal.

The account fees that the bank had charged him and his wife on their use of their debit card in Portugal included a commission fee of 2.75% and a cash-handling fee of 1.5% for each transaction. As the couple had used their debit card to make frequent and substantial cash transfers from their UK bank account, the cumulative account fees were substantial.

Mr T's bank did not accept that it had given him incorrect advice about transferring money to Portugal. However, it agreed to refund some of the charges, totalling £200, and it later offered a further £150 as a gesture of goodwill. Mr T insisted he was entitled to a refund of all the charges but the bank disagreed. Mr T then came to us.

complaint not upheld
The bank branch where Mr T had asked about transferring money to Portugal was a large one, with around 100 staff. Unfortunately, he was unable to recall the name of the member of staff he had spoken to - or even the month in which he had visited the branch.

We asked him if he had withdrawn any money or carried out any other transaction during his visit - as we hoped this might help us to pinpoint exactly when he had made his enquiry. However, Mr T said the only reason for his visit had been to ask about transferring money.

We then checked the bank's records of Mr and Mrs T's account, but found no mention of Mr T's visit, or of his enquiry about transfers.

We had no reason to doubt that Mr T had gone into his branch to ask about transferring money to Portugal. But from what he told us, we thought it unlikely that he had given his name or account number to the member of staff.

He did not appear to have explained that he was going to live in Portugal or that he was intending to make regular, large cash transfers. So the cashier could well have thought he was simply making a general enquiry about how he might obtain relatively small amounts of cash while he was visiting Portugal on holiday.

We noted that after he moved to Portugal, Mr T had continued to receive regular monthly statements from his bank. The debit card charges were clearly marked on these statements, but it was over six months before he queried them. Meanwhile, he and his wife were continuing to use the card to make regular cash transfers.

So we did not agree that the bank should refund all the charges. We told Mr T that, in the particular circumstances of this case, we thought the offer the bank had already made was a generous one, and we advised him to accept it.

limited company in liquidation says bank contributed to its failure by not transferring payments within "guaranteed" timescale

G and J Ltd, a company in liquidation, asked its liquidator to make a complaint on its behalf. The company said the bank had misled it about the timescale within which money could be transferred from the company's UK account to the account of its main supplier in Pakistan.

The company said the bank had "guaranteed" that urgent transfers of funds could be made to the supplier in Pakistan within 24 hours. Apparently, the bank had said it could be certain about this because it held an account with the same bank in Pakistan as that used by the supplier.

In practice, however, G and J Ltd had found that transfers had taken between two and eight days, and it said this had been a significant factor in the company's eventual failure.

complaint not upheld
We found nothing to support G and J Ltd's assertion that the bank had said it had an account with the same bank in Pakistan as that used by G and J's supplier. The bank held an account at the London branch of a subsidiary of the supplier's bank and that had been the position for some years.

When G and J Ltd had opened its account at the bank, it had discussed with the bank's international manager the issue of transfers to the supplier in Pakistan. However, we found nothing to suggest he had ever "guaranteed" that funds could be transferred within a specific timescale.

He had many years experience of transfers of this type and was well aware that several different banks were involved. His bank had no control over how quickly the other banks carried out their part of the process, so it was in no position to issue any "guarantees".

We accepted that the bank's international manager had said the bank would do its best to administer the company's transfers as smoothly as possible. However, we were not persuaded that he had made any false promises.

We also found no evidence - from the information provided to us by the liquidator - that any delays in transferring funds to the supplier in Pakistan had significantly contributed to the company's failure. We did not uphold the complaint.

money transfer carried out incorrectly when inaccurate information was entered on the transfer form

Mr and Mrs A visited their bank to transfer some money to an investment scheme that was run through a company based in Hong Kong. This was the first time they had invested with this company and they had never transferred money abroad before.

They later told us they had shown the cashier their invoice from the investment company and had asked for her help in transferring the money from their current account. They said the cashier had looked at the invoice and had then filled in a transfer form and asked Mr A to sign it.

The invoice gave the name and number of a bank account in Hong Kong and stated that the couple were required to send 5,000 US dollars. However, as the couple later discovered, the bank transferred £5,000 - the equivalent at the time of 9,728 US dollars.

The bank rejected Mr and Mrs A's complaint that the bank had not carried out their instructions correctly. It denied that the cashier had ever been shown the invoice in question and it said the responsibility for any error lay with Mr A.

The bank said that Mr A had signed the form and that this clearly stated that the equivalent of £5,000 was to be sent, in US dollars. Unable to reach agreement with the bank, Mr and Mrs A brought their complaint to us.

complaint upheld
The couple provided clear and consistent information about what had happened when they visited the bank. We found their version of events persuasive, and accepted that they had, indeed, given the invoice to the cashier so that she could draw up the transfer form on their behalf.

We did not agree that the instructions entered on the form were as unambiguous as the bank had suggested. It was certainly clear that 5,000 units of currency were to be sent. However, it was not at all evident which currency was required.

Mr and Mrs A had been relying on the cashier to complete the transfer form for them, and they had given her the invoice which stated they needed to send 5,000 US dollars. We thought it reasonable, in the circumstances, for them to have expected the bank to know what information was needed - and to complete the form correctly.

We did not agree with the bank that if there had been an error on the form, this would have been obvious to Mr A, when he signed it.

Unfortunately, the scheme that Mr and Mrs A had thought they were investing in turned out to be a "scam". So they were not only unable to retrieve the amount that had been transferred in error, they were unable to get back any of their money.

We told the bank to refund them the difference between the amount it should have sent to Hong Kong and the amount it actually transferred. We said the bank should pay interest, to compensate the couple for the time they had been without that money. We said it should also pay them £200 for the worry and inconvenience they had been caused.

image of ombudsman news

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.