Donald Trump has at long last revealed how he plans to force Mexico to pay for a thousand-mile border wall to separate it from the U.S., and like many Trump proposals, it created a storm of controversy.
In a two-page memo delivered to The Washington Post, Trump outlined a plan that relies primarily on blocking remittance payments to Mexico from immigrants working in the U.S. The Mexican economy benefits from an estimated $24 billion a year in such payments, and according to Trump will be too concerned about losing that revenue flow to refuse to pay between $5 and $10 billion to build a wall.
Financial services experts attacked the plan as unworkable. Speaking to reporters early Tuesday afternoon, President Obama blasted Trump for the stream of “half-baked notions” coming from his campaign. Trump’s proposal, he said would not only have “enormous implications” for the U.S.-Mexico relationship, but is completely impractical.
“The notion that we’re going to track every Western Union bit of money being sent to Mexico?” Obama said. “Good luck with that.”
The plan would use a provision of the Patriot Act, passed in the wake of the 9/11 attacks, to redefine the kind of financial institutions and services covered by the law’s customer identification programs. It would place wire transfer companies like Western Union under the same requirements as banks, and would force banks to expand their customer identification program beyond actual account holders to people paying for a one-time transaction.
The purpose would be to prevent any person who cannot prove that he or she is in the U.S. legally from transferring money out of the country.
Setting aside the ethics of depriving poor families in Mexico (and, possibly, every other country in the world) a financial lifeline in order to extort payment from the Mexican government, there is another major problem with Trump’s proposal.
“It is crazy,” said Kieran Beer, editor-in-chief for the Association of Certified Anti-Money Laundering Specialists, which trains law enforcement and financial services professionals in best practices for blocking illegal money flows.
“First of all it would be an incredible abuse of the Patriot Act … to use it in such a vengeful way that would take in many legitimate payments and hold them for ransom.”
In addition, he said, it’s difficult to imagine the plan ever being implemented. “I can’t see it actually going that far,” Beer said. “There would be all sorts of injunctions and challenges. The remittance industry would fight it in court, and I don’t see how they could lose.”
Stepping back, it’s important to understand what remittance activity between the U.S. and Mexico looks like. According to data analyzed by the Pew Research Center, adult immigrants from Mexico living in the United States sent an average $2,115 back to their home country in 2012
Current Bank Secrecy Act and Anti-Money Laundering regulations require money transfer providers to collect and retain sender identification for all transactions of $3,000 or more – a threshold that the average Mexican national sending money home wouldn’t cross even if he or she sent a year’s worth of remittances back home in one transaction. In reality, those remittances generally take the form of regular small payments, averaging out to about $175 per month.
Even if it were somehow enacted, Trump’s proposal would require not just bank tellers but clerks behind the counter of every convenience store with a Western Union kiosk to become de facto immigration agents, charged not only with determining an individual’s citizenship, but also his or her current immigration status.
In February of this year, the Government Accountability Office examined a proposed piece of legislation that would have imposed similar identification requirements. It concluded that in addition to creating a huge administrative burden on the companies in the money transfer business, it would also require new regulations from the federal government establishing what documents are and are not acceptable proof of legal status.
For example, many states today do not require proof of citizenship to obtain a driver’s license. Others do. That could mean that an immigrant from a state where a license can be obtained without proof of immigration status – even if he or she is actually in the country legally – could be denied service at a bank or money transmitter on the basis of his or her state’s licensing regulations.
Travelers from countries covered by the U.S. visa waiver program would find themselves unable to access some financial services in this country without an additional document – which doesn’t currently exist – proving that they have not overstayed a visa they were never required to obtain in the first place.
Trump’s plan also ignores the fact that for many immigrants, the restrictions would probably not be terribly effective. From prepaid debit cards, gift cards, and just plain old cash, there are plenty of ways to send small amounts of money across the border by mail or in the hands of someone who can cross back and forth freely.
Alternatively, an illegal immigrant could enlist the services of a friend or relative with legal status who could, perfectly legally, transfer funds to Mexico on his or her behalf. An illegal immigrant with some foresight could even open an account at one of the many banks that have offices in both the U.S. and Mexico, and armed with an ATM card, could make small-dollar deposits in the U.S., while a relative made withdrawals on the other side of the border, without attracting any attention at all.