Donald Trump’s new immigration plan boldly declares that, “Mexico must pay for the [border] wall and, until they do, the United States will, among other things: impound all remittance payments derived from illegal wages.”
Would that even be possible? A Trump administration could erect a lot of legal, regulatory, and logistical obstacles to transferring money from the U.S. to Mexico. But those moves would enrage the banks and financial institutions that make money off the transfers, and probably spur interest in transfer methods that escape the attention and grasp of law enforcement.
Still, the U.S. government can make it extremely difficult to send money to a country. The Treasury Department has enacted a series of regulations designed to restrict terrorism financing that holds intermediary banks responsible if the money they transfer ends up in the hands of terror groups. Somalia has no functioning traditional banks, and in February, U.S. banks largely stopped servicing the accounts used by money-transfer operators in Somalia. Somali-Americans are now complaining that they have no way to send money back to their families.
Trump’s pledge to “impound” remittance payments implies seizure, an act that would face a high legal bar to clear. But the government has successfully seized money in the accounts of criminals who smuggle illegal immigrants across the border.
In the early 2000s, Arizona attorney general Terry Goddard and other state authorities suspected Mexican crime syndicates were moving money through Western Union wire transfers, and sought to seize money in Western Union accounts. The figures were mind-boggling, according to the prosecutors’ testimony: $500 million a year in Western Union payments from Arizona, and $2.5 billion a year in payments for people-smuggling overall.
But Colorado-based Western Union contended a state attorney general didn’t have the authority to review wire transfers from other U.S. states directly to Mexico, arguing that it violated the privacy of their customers and overstepped limits on the state’s search-and-seizure authority. State prosecutors countered that the wire transfers constituted payment for crimes committed inside Arizona.
In 2009, the Arizona Supreme Court agreed that Goddard had exceeded his authority when he sought records of transfers exceeding $500 from 29 other U.S. states to Sonora, the Mexican state directly south of Arizona. But the following year, the company reached a settlement with the state, granting investigators in Arizona, California, Texas, and New Mexico “unprecedented” access to records of electronic payments to Mexico.
Trump’s pledge to ‘impound’ remittance payments implies seizure, an act that would face a high legal bar to clear.
Note that Goddard and like-minded prosecutors sought access to accounts being used by cartels and migrant-smugglers, not garden-variety illegal immigrants sending money home to their families. The company and other wire transfer companies would almost certainly balk at prosecutorial fishing expeditions designed to secure broader access to transfer records, setting up another lengthy legal battle.
Of course, where there is a will to move money across the border, there is a way. Tighter legal restrictions would likely spur immigrants to use hawala-like systems that rely on trusted networks of contacts on either side of the border, Bitcoin-style systems that operate outside the traditional financial network, or plain old smuggling of cash.The simplest option for cracking down remittance payments may be taxation. The state of Oklahoma charges a one percent fee on all personal wire transfers of cash to accounts outside the state. The state treats the fee as withholding from state income tax, so any Oklahoma resident who files taxes eventually gets the money back. Those in the country illegally obviously don’t file state income taxes, so they never get the money back or have it credited against a state tax debt. The “wire transmitter fee” brought in $10.5 million in 2014, and $9.7 million the previous year. Wire-transfer companies in the state don’t like the tax because it increases fees.
To some Americans, Mexican workers’ remittance payments represent a fundamentally unjust financial transfer. While $22 billion to $30 billion is a drop in the bucket for the $17 trillion U.S. economy, it’s a matter of principle for these folks. In their eyes, illegal immigrants from Mexico effectively steal from the United States by entering the country, offering unethical employers a labor force that isn’t covered by wage, workplace safety, and other laws, getting paid under the table, and then sending the money out of the country.
But mitigating this perceived injustice might not require grandiose promises to “impound” the money. A simple tax on wire transfers might offer the path of least resistance.
— Jim Geraghty is the senior political correspondent for National Review.