Tl:dr; frequent transfers to South Africa for a long time that led them to categorise him as a Money Service that needed to provide business documentation. From his conclusion it appears that the DoJ rules would lead any bank to do the same, so now he uses wire transfers instead of ACH with his new credit union account.
Later on the article, when he talks about not needing access to the receiving account to confirm payments, I kinda got it. Just the initial framing of "what if we used bank transfers for payments" threw me for a loop.
Why do other banks make it such a pain to transfer money?
Many banks make transferring money from your account painful as they fear losing your deposits. We figure if we make it easy to do the things you want to do, you’ll be happier and less likely to leave. So, transfers are simple with us.
I've always viewed the difficulty of transferring money out of my account as a robust security feature.
> when I saw that a transfer (it's called a "wire transfer") will cost me $35 on the sending side, and the receiver will pay another $25.
Wire transfers are different than ACH transfers. Wire transfers cost money and take less than one business day. ACH transfers are inexpensive* and generally take in the ballpark of five business days.
* They are inexpensive for the bank. At banks that treat their customers fairly, they're generally free because the cost accounting is generally more than the cost of performing the transfer. At shitty banks, (BofA, Wells Fargo, etc) they're arbitrarily expensive.
> I live in the US and don't pay fees on transfers between my brokerage account and checking account. They take a few days to clear though
They're probably doing an ACH [1] transfer, which is net settled [2]. They take longer but are cheaper than wires. Fedwires, once transmitted from the sending institution, take seconds to be received [3]. They're real-time gross settled [4], i.e. faster but costlier [5]; many institutions waive (i.e. eat) these fees for clients with more than ~$50,000.
[5] Why? Because they're immediate and irrevocable. The first part means the bank has to use actual funds on hand, versus hoping a countervailing transfer cancels out the work or letting a profitable (relatively speaking) investment pay out. The second part means mistakes are more resource-consuming.
I wanna know how he managed to initiate a wire for $35MM online (and approximately 100% of account balance), presumably to a brand new recipient, and only got a single phone call and the wire request wasn't rejected. Maybe things have changed, but my experience now is that I'd have to go into a branch to do that wire, and I'd probably get the normal verification call plus another from the account manager.
He signed up customers with documented agreements saying that their funds would be segregated and not lent out, and then he used the U.S. banking system's wire infrastructure to have their money sent directly to his hedge fund Alameda Research instead of the exchange FTX.
I once was attempting to receive a wire transfer from a company for some consulting work I did. After failing to complete the transaction a few times, I found out that the credit union I'd kept my checking account at for years didn't even have the ability to accept the kind of wire transfer that was being sent. I had to create a one-off savings account at a bank to handle the transaction.
This is not some random Western Union fly-by-night process. These are serious bank-to-bank transfers with plenty of documentation about who's who on both ends. That documentation is required not only by bank policy but by law (e.g. IRS and anti-terrorism laws). The fact that the wire transfers are highlighted so much in the charges is that they are interstate transactions, which makes them federal crimes rather than state crimes. Which gives the Feds an excuse to get involved.
For domestic transfers, under what circumstances do people use wire instead of ACH transfers? I've only used wire transfers for international purposes.
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