Why USD Transfers are Becoming Less Popular in Europe

The main currency used around the world is USD and the banking

industry in Asia, Europe and the Americas is based on USD. USD became a global currency (also called reserve currency) when in 1944 the Bretton Woods Agreement pegged exchange rates for all currencies to the USD which held the largest gold reserves. Since then almost all businesses conduct their transactions in USD using intermediaries. An intermediary is an individual or institution that acts as the middleman in order to facilitate a financial transaction.

Recent changes in the American financial system, particularly regarding anti-money laundering regulations, compliance and due diligence procedures have affected international finance. Now all non-US banks transferring their clients’ USD funds through the US banking system are under scrutiny. US banks may review each transfer, reject it, approve it, freeze it or request supporting documentation validating the legitimacy of the transfer i.e. invoices etc. US banks handling the transfer are entitled to examine the documentation related to the transfer and verify to their satisfaction that the transfer is above board and passes all regulation.

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US Banking Restrictions on USD Transfers from Europe

When a financial institution in Europe transfers a large amount of USD through an American bank the US bank has the right to close the European bank’s account at any time. This means that the European bank will be unable to transfer USD outside of its system. This would cripple any European bank which would hold their clients’ USD but not be able to transfer it outside of their system. Virtually isolating the European bank from international banking. US banks also have the authority to ban transfers of USD from certain industries like Forex, sports and gaming. Read more information on Euro Bank Account

The Alternative to USD Transfers in Europe

To avoid the risk of USD banking restrictions, European banks are extremely cautious about transferring USD. Instead European banks advise their clients to make most transfers in Euros using the SEPA system. When making transfers in Euro and using the SEPA system the banks are not risking becoming subject to sanctions by the American banking system. The restrictions and regulations in American banks acting as intermediaries for USD transfers by European banks have led European banks to advise clients to minimize US transfers and instead use alternative currencies like Swiss Francs, Japanese Yen or Australian Dollars.

We are seeing fewer and fewer USD transfers in Europe and this trend is likely to continue. Although US transfers still dominate the international market other currencies are definitely gaining ground