(Toronto) When Alexander Nachaj needed to transfer a down payment to buy a house, he didn’t worry too much about it – he simply went to his bank branch to send the money to the notary.
Posted at 12:55 p.m.
Nachaj says he asked the cashier at his TD Bank branch to double-check the numbers because he had to sign a form releasing them from any liability for the $18,000 deposit. The cashier then made the electronic funds transfer.
And then the money disappeared.
Thus began the journey of the man from Saint-Hyacinthe in the Canadian system of electronic transfers. The vast majority of the time, the latter successfully transfers money securely and accurately, but as Mr. Nachaj discovered, it’s far from foolproof.
Difficult to explain what went wrong in Mr Nachaj’s case as TD Bank declined to discuss details of the case, but he says several weeks passed before he got an answer as to the destination of the money.
“It’s mind-boggling that in our time a transfer can disappear into the mist for so long, without anyone taking responsibility or even being able to know what happened,” he said.
In the meantime, Mr. Nachaj was at risk of losing his new home, in a hot real estate market, and he had to put together another down payment with the help of his family, then send that money, also by wire transfer.
“It was like walking a tightrope, or something, it was the scariest thing I’ve ever had to endure, because I wondered if it was going to happen again. »
The second payment proceeded normally. This was good news, because part of the concept of wire transfers is that they are generally designed to be irreversible, so the recipient can use the money with confidence, immediately.
“As soon as there are mistakes, we have very big problems,” explained Werner Antweiler, international finance expert at the Sauder School of Business at the University of British Columbia.
“Bank transfers are problematic because once they’re in the system they can’t be recalled and that’s part of their feature. »
A source of complaints
It’s unclear how often wire transfers go wrong, but they rank among the top five sources of complaints about banking products filed with the Ombudsman for Banking Services and Investments, with about 30 cases last year. . From rival organization ADR Chambers Bureau of Banking Services, wire transfers are among the top 10 sources of complaints.
Even if the figures as such are quite small, the amounts in question are often significant. Most complaints also do not reach the external mediators, including that of Mr. Nachaj. In his case, after a few months, the bank’s internal investigation led to the return of his original wire transfer.
TD spokeswoman Caroline Phémius said in an email that when a transfer is lost, the bank works with its customers to try to recover the funds.
“When there is an irregularity in a bank transfer, we take the situation very seriously, as we value the trust of our customers. »
The risks surrounding a bank transfer and the impossibility of verifying in advance that it will be directed to the right place are sufficient for many notaries to avoid using them if possible.
“I don’t encourage our members to transfer money by wire transfer, simply because if it goes wrong, they will hold us responsible,” explained Daniel Boisvert, president of the association of notaries of British Columbia.
Mr. Boisvert believes a more verifiable system would be great, but in the meantime his staff still visits the bank up to three or four times a day to deposit physical bank drafts. And while he thinks big deals, like buying a house, are best done in person, there are workarounds like coordinating with a lawyer in another city who can accept a draft. banking.
The other big reason Mr. Boisvert avoids EFTs is fraud, pure and simple. The Canadian Center for Cyber Security has warned in recent years of an increase in crime with malicious people intercepting emails and inserting their own account details, to which the unsuspecting customer then transfers the money.
“It’s just terrifying for me, and I’m sure it’s just terrifying for other notaries,” argued Mr. Boisvert.
Possible solutions
Solutions are emerging to at least reduce the risk of error and fraud. The UK rolled out a system in 2020 called Confirmation of Payee, where the sender verifies that the name and account number are correct before confirming payment. And SWIFT, which runs the system that underpins many international wire transfers, earlier this year began offering payment pre-validation that verifies the validity of the recipient’s account before transferring the money.
Canada could also improve the reliability of electronic funds transfer payments by joining the system of international bank account numbers used by more than 80 countries, as advocated by Professor Antweiler. The system provides more standardization to reduce errors and has check digits that are used to run an algorithm to catch common errors, he explained.
Such a change would require buy-in from all banks, and errors still occur in the system, noted Payments Canada, which operates Canada’s wire transfer system on behalf of banks and credit unions.
Canadians sending an EFT should be vigilant and verify the account, branch and institution numbers required for a transfer. Numbers can be verified on a voided check, while the recipient can also call their financial institution to double-check, which the sender could also do with the recipient.
But even the most vigilant systems will have shortcomings. Citigroup learned this the hard way in 2020 when, rather than sending a small interest payment on Revlon’s debt, it passed on the entire $900 million debt. She is still fighting to get much of it back.
As for Mr. Nachaj, he says he plans to stick to good old paper checks and bank drafts the next time he needs to move money.
“I won’t wire unless I have to, just because I don’t feel like I have much confidence in that part of the system right now. »