Legal scam: Wire Siphoning
From Personal Finance
Wire siphoning is a practice that enables financial institutions to take a hidden fee from an unsuspecting consumer. The recipient makes a guarantee that they do not charge a fee to receive a wire transfer. The recipient arranges with a bank to charge a fee for all wire transfers by taking the fee directly from the payload (the assets being transfered). The reassurance to the client that the recipient charges no fee compels the client to send money, figuring that if the deal goes sour, they can always get a refund wired back at no cost. When the client discovers that less money arrives at the destination, the attacker simply claims that they did not charge the fee - their bank charged the fee. And if the client wants a refund, the bank will take another fee out of the remaining money being returned. The client is then trapped, because they're already committed to paying the cost of doing business, whether or not they actually want to continue.
[edit] Application: European FX markets
The attacker is normally a ForEx broker. It's so common among forex brokers, that it's difficult to find a forex broker who does not make a misleading claim about free wire transfers. Europeans are a common target for the wire siphoning scam, because it's very common for wire transfers to be completely free within SEPA. The EU ruled that a bank must charge the same wiring fee to move money between other SEPA nations as the bank charges for domestic wires. That ruling had the effect of compelling banks to charge nothing to their direct retail clients for sending or receiving SEPA wire transfers. The EU ruling coupled with the common free wire created a misconception among Europeans that all eurozone wire transfers are legally free. Wire siphoning exploits this misconception, using banks that comply with the law by equally charging a fee for all wires as an instrument to run the scam.
[edit] Analogy
Suppose you need to ship some widgets from A to B. You contact a shipper, who quotes you 50 dollars. Without the your knowledge or consent, the shipper then subcontracts the shipping to a third party, and tells that third party that they can keep some of the widgets as payment. The client-facing shipper can then move your widgets at no cost to him, and pocket the 50 dollars. The subcontractor, who has no direct relationship with the client, keeps some undisclosed number of widgets to pay himself. When you discover that fewer widgets arrived at the destination, you have no recourse, because the person you hired did not take any of the widgets - you might not even know who took them. This is essentially how wire siphoning works, when the widgets are some form of currency.
[edit] Concrete Examples
CMC Markets is a forex broker who has partnered with Natwest to run the wire siphoning scam. Clients who fund a new CMC Markets account are told where to wire the money, and Natwest will keep some of it, so less money than you send appears in the clients trading account. If you request a refund and account cancellation, CMC will send the money back the same way it came - through Natwest, who will take more money before returning it to the client. CMC Markets does not publish any fees, but when asked, this is their email response: "I have confirmed with our Payments department that we do not charge any fees for wire transfers, for deposits nor withdrawls. This is not to say that you won't incur any fees though, but if you do, any fee charged will be charged by your bank, not by us." What they didn't say is that Natwest (their bank, not the clients) siphons money that transfers in either direction.
Varengold is a forex broker who actually publishes a wire transfer fee for transfers of amounts smaller than €12,500, and states that larger transfers are free. This overt claim gives the impression that fees are transparent, and implies that there aren't any hidden fees. However, their bank (Dresdner bank) charges an undisclosed fee on client money in transit, in addition to Varengold's fee.
X-Trade Brokers is a forex broker who plainly states that there are no fees. However, when emailed and asked specifically about the fees charged by their bank (Pekao S.A Bank), they come clean and say "0,5% of the nominal (min 50 but max 300 PLN which is around 15-90 USD)80 PLN (around 20-25 USD)." The problem is, those not aware of the scam are unlikely to be keen on asking about the additional fees of their bank.
MB Trading does not disclose any fees on their site for wire transfers. When asked what fees they charge for wires, and what fees their bank charges, they evade the real question and state simply that they charge no fees. When emailed again, and again asked what bank they use and what the fee is, they say they use Wells Fargo, and state "You need to contact your bank to see what they will charge you, we do not control fees from other financial establishments." Note that it's common for forex brokers to evade the part of the question regarding the bank they use, and need to be asked twice.
