Is your money safe when using a money transfer firm?

Jane Wardle

Written by Jane Wardle on February 28, 2019

Updated February 28, 2019

Overseas money transfers for business

When you need to send money overseas, there is a range of different options available to you. One popular choice is to use a money transfer firm to send the money on your behalf. There are plenty of money transfer firms to choose from, each offering their own deals and exchange rates to compete for your business.

Choosing the best way to transfer money overseas is often complicated, and as you will be dealing with overseas banks and companies, you won’t always have the same protection that you do in the United Kingdom.

If you’re wondering if you’re your money is safe when using a money transfer firm, then read on for our expert guide and top tips on keeping your funds secure.

Is your money safe when using a money transfer firm?

Sending money abroad

Every firm based in the UK that handles overseas money transfers is required to be registered or authorised by the Financial Conduct Authority (FCA). If your money is in a UK savings account, then it is protected by the Financial Services Compensation Scheme (FSCS), which means if a firm goes bust your money is protected.

When it comes to money transfers, there is no compensation scheme available if the transferring firm goes bust. Firms that are authorised with the FCA will have some safeguards on your money but are not covered by the FSCS. Whether a money transfer firm is approved or registered with the FCA means some slightly different things for your money:

  • Authorised firms are required to safeguard your money by keeping it completely separate from their own company funds. This means if the firm does go bust, it is more likely that you will get your money back. The FCA must authorise every large money transfer firm.
  • Registered firms offer a much weaker level of protection. Smaller money transfer firms have the choice to be registered as opposed to authorised and to be registered they only need to provide the FCA with proof they are based in the UK, and none of their managers has been committed of financial crimes. There is no legal requirement for registered firms to safeguard your money, although they can choose to do so.

Both authorised and registered money transfer firms are required to follow the FCA’s rules about how they handle their customers. For example, they must have an appropriate complaints procedure in place.

How to check if the FCA authorises a money transfer firm?

The FCA will have an up to date list of all registered firms and all authorised firms in the UK, and if a firm is not on this register then either they are not based in the UK or are not authorised or registered. If a firm you are considering is not on the FCA’s list, then double check their paperwork for details on which country they are based in.

You can then check which EU regulator handles that country and find out if they are registered with them. If a firm is not registered or authorised with the FCA, or another EU regulator, then it is best to avoid them completely as they may be operating illegally, and your money may not be safe.

You should always check if a money transfer firm is authorised or regulated by the FCA or other EU regulator, especially if you are transferring a large sum of money. Any firms that are not authorised may be operating illegally, and you could end up losing all of your funds.

How to safely use a money transfer firm

If the money transfer firm you have chosen is safe and legal, then they should provide you with plenty of information both before and after you make a payment. All this information should be in writing and should tell you:

  • The exchange rate that you will be getting
  • The charges and fees you will have to pay
  • A reference number once the transfer is complete
  • Instructions on how the person receiving the money can collect it
  • Final confirmation of all the transaction details, including the exchange rate, final costs, and how long the transfer will take

If you have a complaint about a money transfer firm, or they do lose your money then the first thing you should do is contact them and give them the chance to resolve the issue. If they cannot sort the problem, you should then raise your complaint with the Financial Ombudsman Service who have the power to order them to repay you any lost money.

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