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Making A Money Transfer Overseas: What You Need To Know

01 Jul
diagram showing money being transferred

Making A Money Transfer Overseas: What You Need To Know

How To Move Money Across International Borders In Our Post-FATCA World

To buy property overseas, you need to transfer money across international borders.

Before you do, you want to be sure you understand the administrative practicalities, including the associated fees, and, more important, any relevant compliance and capital controls.

In our post-FATCA, anti-money laundering age, virtually all countries require proof of the source of funds for any large international transfer.

In addition, some countries limit the flow of capital in and out of their economies, especially out. Developing countries use capital controls to try to regulate their currencies’ exchange rates on international markets. These restrictions can limit the purchase of foreign currencies by residents or the purchase or sale of local currency by nonresidents.

These kinds of controls shouldn’t intimidate you or keep you from making a property investment you want to make in another country. Navigating currency controls is a matter of understanding the restrictions and following the rules.

The easiest and most efficient way to transfer money abroad can be through a transfer agency. I’ve been working with Moneycorp for this service for years and recommend them.

An agency like Moneycorp typically means a better exchange rate and lower fees compared with a standard bank transfer. The rates are good because these brokers often don’t actually transfer any money.

An agency might have, for example, a store of money in the United States and a store in Brazil. When you make a transfer request to transfer dollars to reais, your dollars are added to the store in the States and you are disbursed reais from the store in Brazil. And vice versa for a Brazilian client buying dollars.

Things To Consider Choosing A Money Transfer Agency

When choosing a currency transfer agency, keep these things in mind:

  • Transfers are generally most efficient and least costly when the money transfer service has physical presences in both the sending and receiving countries.
  • Confirm that the agency you intend to use will be able to exchange your originating currency directly with your target currency. If not, you may have to exchange the money twice—once to buy an intermediate currency, then again to buy your target currency. This greatly increases the cost.
  • Some agencies work better for large transfers, some are better for small transfers, and some are best at recurring transfers. Understand the process and the costs for the activity you intend.
  • Some companies quote a good exchange rate but charge an exorbitant fee… some charge no fee but give lousy exchange rates. Get a complete quote before committing.
  • Some agencies allow you to lock in an exchange rate for later use. You could buy, say, euros now, when the dollar is strong, for a transfer of funds to Europe at some time in the future.
  • A few companies also allow you to use a limit order. You place a standing order for a given exchange rate, and the order is executed when (if) that rate is struck.

Two countries on my radar that impose exchange controls are Brazil and Colombia.

Brazil takes its exchange controls seriously. Transferring large sums into this country involves a fair amount of paperwork and requires registration of your funds with the government. The easiest and perhaps safest way to navigate the process can be with the help of a money transfer service. These are experienced with the process and know how to work in compliance with the rules. As the sender of funds working with a transfer agency, little will be required of you directly.

In the case of Colombia, any money coming into the country for investment purposes should be declared to the central bank. This guarantees your rights to repatriate the funds (and associated profits) whenever you decide you’d like to do so. You can handle this filing yourself or hire a local attorney to do it for you.

If you’re intending to use the investment to qualify for an investor residency visa in Colombia, it’s this central bank declaration you show to qualify.

Some countries don’t impose capital restrictions, per se, but moving money in or out of the country can have consequences.

Belize, for example, does not officially impede the flow of money in or out of the country. However, the central bank of Belize has only so many U.S. dollars at its disposal at any given time. You must file a request for an outbound transfer and wait your turn. And your transfer could be bumped down in the queue, as priority is given, for example, to active businesses needing to pay for imports.

If you request a transfer of funds during high season, when lots of tourists are coming into Belize with dollars, you should have no problem. During the off season, you should factor in a potential delay.

Lief Simon