The moneychanging business in Israel went out of business literally overnight at the beginning of this week, after a U.S. regulatory agency pressured credit unions to stop services abroad, The Jerusalem Post reports.
Many Israelis and foreign citizens in Israel use moneychangers to cash checks that would otherwise be slower and more expensive through Israeli banks.
But those agents depend on backing from financial institutions in the U.S., which have bowed to pressure from the National Credit Union Administration (NCUA) because they were operating beyond their regulatory mandate.
Credit unions are legally limited to serving their members, usually residing in the same community or working for the same employer.
“This credit union was offering services outside its field of membership, and when we contacted them about it, they began taking steps to correct that,” NCUA spokesman John Fairbanks explained.
“The institution that closed down most of the accounts was under pressure from the regulator,” Jeffrey Sklar, managing director of the SHC Consulting Group, which advises Israeli money-changers on how to build relationships with U.S. financial institutions, told the Post.
So when North Dade Community Development Federal Credit Union, for example, a small credit union in South Florida, halted its services to money-changers, the effect abroad, notably in Israel, was immediate at the beginning of this week.
“Many Israeli banks also have recently informed their clients that they are no longer willing to accept overseas checks of other currencies for deposit,” Kayman said.
Gershon Kayman, a lawyer at Forex Legal Advisors, said that a solution will not be easily found.
“Changers are now scrambling to create new relationships with banks in the U.S. to deposit their checks, a feat which is quite difficult due to U.S. regulations and the general shying away from such customers due to the high risk and high regulation involved,” he said.
In the meantime there are alternatives, such as e-checks, wire-transfer services and debit-like transfers, though they can take several days to process.