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The promised follow on update on the 2Checkout wire transfer saga in Pakistan. The banks are not in it to let a thousand flowers bloom.



Update Two: Dec, 2018. The 2checkout payment processing saga is over. Amounts were finally credited last week to all our accounts. It took a while to work through the system but with the help of the central bank and the digital and treasury teams at the banks involved we were able to find a middle ground that worked for everyone. It was a painful process but the system worked.

Lessons learnt – ask the Central Bank (SBP) for help early on. Make sure you have the requested data and documentation. Share it with your banking teams. You are not alone, ask for help.

First the bad news

Habib Bank Limited (HBL) and MCB Bank Limited on Monday, 26th November 2018, planned to return wires received from 2Checkout on account of consolidated credit card payments to e-commerce vendors, free lancers and micro SME businesses. No reason in writing were given to customers. No prior warning or notices were issued to let customers know about the policy change. For most 2checkout vendors, this was an exceedingly difficult week. Quite a few had payroll and end of month bills to settle which will now get delayed by a fortnight on account of the callousness showed by these three banks.

In addition to writing about the challenge we also spoke to Bloomberg, the News, Dawn and Business Recorder representatives. Two separate conversations were initiated with State Bank of Pakistan. We reached out to PASHA leadership and the Central Executive Committee. We worked closely for a week with one of the bigger banks involved to see if there was some way of resolving this internally without returning the money to 2Checkout. Unfortunately, neither the pressure wave, nor multiple conversations with our banking contacts, or the internal effort helped in resolving the issue.

Second the alternates

If you are a 2checkout customer with accounts with the three offending banks (HBL, MCB) your wire transfers will be returned without processing to 2checkout. In addition, you will most likely be charged for the two-way swift wire transfers by the banks. What can you possibly do and what are you options?

First let’s talk about alternate options.

We spoke to the head of AML at Dubai Islamic Bank (DIB) as well as the CEO and Head of Financial Institution (FI) at JS Bank. Both banks have confirmed that they continue to process 2Checkout payments and do not have any plans to stop such payments. They also confirmed that they have sufficient information and visibility on the underlying initiator transaction provided by their customers. In addition to these we have also received confirmations that 2Checkout payments were processed this week by UBL, Bank Islami, Meezan and a number of other smaller banks in Pakistan. So if your branch manager tells you that this was done because of the new FATF requirements you know that it is factually incorrect.

As a 2Checkout payment processor if you bank with one of the offending big three banks, you will have to move your payments to a bank that is willing to process them in Pakistan. While some of the offending banks have agreed to review their policies, their policy change process moves at a glacial pace and is likely to take anywhere between six months to a year, if they could find consensus internally to revert these policies. We rate the likelihood of this happening as very low. Banks hate to admit that they are wrong and the higher you go within the chain of command the more difficult it becomes to change a course of action without external intervention.

The hold on payment originated from the Anti Money Laundering (AML) and compliance groups at the three banks. The reason for the hold shared informally and through internal channels is that they have no visibility on the underlying transaction. However, this didn’t make any sense since all vendors and clients when asked for the information shared the transaction and initiator customer dump in electronic form with the banks. We all want to get paid. We all have the data. We have nothing to hide. We are not money launderer or terrorists. Despite the availability and provision of requested data in electronic verifiable form, one bank HBL, returned multiple payments without any consideration given to the inconvenience caused to its customers.

Third the inconsistencies in the narrative

There are a number of contradictions in the narrative presented by the three offending banks that indicate that banks are not being completely honest about their underlying motivation. At the least ruling out malicious intent or attempts to collude their unfair and inconsistent application of policies is creating exceedingly negative optics when viewed from a neutral lens. Combined with their unwillingness to document the reasons behind their decisions, their change in policy in writing they are feeding conspiracy theories and additional fodder for consumer complaints.

For instance, let’s examine the AML fallacy first. If consolidated payments are a challenge, then they should be a challenge for all payment gateways and cross border money processors. It appears that this is not the case.

Payments from Payoneer continued to be processed through out Pakistan despite the fact that the same information challenge holds true with these accounts. The only difference is that banks earn between 2 – 3 rupees on every dollar remitted on Payoneer payments as well as earn the float for a few days to a few weeks on rupee balances as this money is prefunded through local rupee accounts. On average payments take between a two days to a week to ten days for final credit to ultimate account holder. Some banks are faster with better service quality; some are fairly lax in ensuring credit. The irony is that as a 2Checkout customer if you agree to receive payments through Payoneer you will receive them in Pakistan through the same bank. But if you insist on being paid through a legal wire transfer the funds will be returned.

The logical reason that stands out is that compared to the 2-3 rupees made on a Payoneer dollar a bank may only make 20 to 30 paisa on a wire transferred dollar. AML complaints and initiator transaction visibility challenges simply go away (disappear or are ignored) when higher profits are involved.

This opens the three banks up to potential complaints and challenges filed against them with the Competition Commission of Pakistan (CCP). They are clearly favoring and pushing customers towards a channel where they make 5 – 10 times more fees compared to a channel which is more fair and efficient for their clients. One such claim is already in the process of being filed.

Second as mentioned above information dumps about initiating customers with their contact details, their physical location, even the IP addresses of the network node through which the order was placed, the product purchased, the payment currency is all available in electronic form. The said information where requested was provided to the bank by the vendors. The claim that they don’t have access to information or visibility on the underlying transaction is factually incorrect and intentionally misleading.

Third the banks claim that they can’t verify the provided information. In saying this they are creating yet another contradiction. On one hand they are happy to process visa and master card transaction on their own internal networks without additional verification, on the other they are saying that the customer and credit verification standards used by Visa and Master card on the 2Checkout platform are not acceptable to them. How does this work? Visa and Master card are reliable processor on the bank’s own network but are unreliable on the 2Checkout network?

Fourth no advance notice or warning was given to 2Checkout customers that this hold on processing was being rolled out. Most customers have alternate banking accounts and could have been spared the inconvenience caused by simply sharing an advance warning on the suspension of service. None was given or shared. In addition to the advance warning no explanation in writing was given on why the wire transfer was being returned. No notice in writing was given or shared that indicted that the wire transfer was being returned or will not be processed. Everything was communicated on the phone. Despite repeated request to document the reason behind the cancellation as well as the cancellation itself the banks ensured that no written evidence or citable documentation trail exists that they have done this.

What can you do? Don’t get mad, get back.

How mad are you? Were you really inconvenienced by this episode? Did the bank show you due consideration? Did they make you feel like a suspect in a money laundering and terrorist financing investigation? Do you feel upset? Do you want them to feel just as upset? Do you want the banks to think twice before they treat you like this again? Before they pull a similar stunt down the road? Then don’t get mad, get back at them.

There is one thing that banks hate more than anything. It is having to explain themselves to a national regulator. You want to kick them where it hurts file complaints with two regulators who have the mandate to review, investigate and sanction the three banks involved.

If that sounds like too much work and trouble, then please don’t complain about service quality at your banks. Stay put and just take the next insult, the next inconvenience in your stride. Feel free to offer your other cheek.

If you want to fix things and improve them, you will have to unfortunately make a fuss. Your industry association is not going to file a complaint. If you try and do it on the association platform you will forever remain in a wait state. If you want to file it, you have to file as an individual customer. While the association has a role to play in this specific instance its not the party that has been wronged.

If you have been affected by the ongoing crisis we encourage you to file a formal complaint with the Competition Commission of Pakistan (CCP) as well as lodge a formal complaint with the SBP consumer complaint cell against the bank in question. Both institutions take consumer complaints very seriously. To file a complaint with CCP talk to your lawyer and accountant. They will be able to guide you better. If you can’t afford a lawyer or accountant, file a complaint as an individual at the CCP complaint link.

For a complaint with SBP please follow the complaint guidelines at the SBP site Make sure that the complaint is not frivolous. You don’t want to add to their work load and then not follow up. Quote and cite facts and a clear timeline. Don’t add emotions just work with hard facts. The banks made a wrong decision. They made it worse by sticking to their original bad call. Use that against them. Ask for the rectification that should be made.

SBP prefers that you first try to resolve the issue with the bank. You did. It did not work. They returned the funds and charged you for it. There is your cause. You have to be specific about the cause and nature of your grievances. By returning our funds the banks failed to resolve our problem. Here is a possible list of things that they did wrong and should be penalized for.

No advance notice was served to us about the policy change. No written reason was shared about the cancellation of the transaction. When requested and required data was shared to address and alleviate the cause it was ignored. SWIFT charges were deducted from our account despite the fact that the bank was at fault. They processed other consolidated transactions that represent the same risk and liability but generate higher fees for the bank.

Use the list above as well as any material in this post and in the prior post as part of your complaint with SBP and CCP.

What do you want from the process?

Serve advance notice about policy changes that impact us, our work and our finances. Share written reasons why our transactions are declined. Review and work with requested and required data when its shared. Refund SWIFT charges deducted from our payments despite the fact that the bank was at fault. Compensate us for the grievance caused by delays, error and mistakes on the bank side. Apply the same standards across the board to all payment networks and gateways.

For timeline and materials for your complaints, please feel free to use this post as well as the earlier post on the original crisis. The SBP Banking Conduct and Consumer protection department can be reached through the following channels.

Through Surface Mail to:

Director

Banking Conduct & Consumer Protection Department

State Bank of Pakistan

I.I. Chundrigar Road

Karachi

Through email at:

For General Banking Complaints

cpd.helpdesk@sbp.org.pk

Fax: 0092-21-99221160 – Fax: 0092-21-99212489

While it’s not going to bring your wire back or make the bank change their mind, this the only way you can help your bank understand that they can’t walk all over your rights and may you pay for their mistakes every time they trip up and make a mess in their New York branches.

This is the 2nd update on the issue being faced by ecommerce vendors, free lancers and Micros SME businesses in Pakistan with a unilateral ban on processing 2checkout payments by three banks in Pakistan. For context and background please see the original post on (Pakistan Banks return 2Checkout wire transfers) If you missed the update on top, the issue was finally resolved in early December 2018 after a concerted effort by a number of stakeholders involved.