Losing money internationally
I deal with banks regularly, and while issues arise from time-to-time, they're easy to resolve once you know the methodology. However yesterday I discovered a situation which cannot be easily resolved. It has to do with international transfers.

Domestic transfers between accounts are quite straightforward. Money disappears from the first account, and arrives in the second. The sending and receiving banks may charge a fee for the service, and if so this appears on the customer's statement. All the money is accounted for, and everyone lives happily ever after.

This is not the case for international transfers, as I discovered yesterday. A customer in Europe transferred payment to our account, and while they sent the correct amount, and paid all the bank fees on their end, $19 "went missing" in between Europe and Australia.

The $19 was not a fee from our bank, instead our bank never received the money. The $19 wasn't taken by the sending bank either, our customer had paid the transfer fees separately. Instead, the $19 was taken by an intermediate bank through which the funds were routed. What we're lacking is a paper trail.

From an auditing standpoint, this is an incredible headache. The sender has receipts showing the full amount has been sent. The recipient has a statement showing $19 outstanding. The recipient is not permitted to trace the funds, presumably for privacy reasons. The sender is allowed to trace, but will be charged a fee to do so, and has no reason to believe that money has gone missing except for the recipient's say-so. Unless this extra work is performed, there is no paperwork indicating the whereabouts of the money. No receipts. No invoices. No statements. Nada. It's disappeared without a trace (apologies for the pun).

This arrangement leaves everyone in a bad state. The recipient is dependent upon the sender executing a trace to complete the paperwork, and without that can feel the sender is trying to underpay their bills. The sender has no good reason to complete the trace, they already have their proof-of-payment from the bank, and can feel the recipient is trying to overcharge them. Nobody wants to actually pay an extra fee for the trace, and even if the recipient is willing to pay for it, how do they transfer the funds without the same thing happening again?

The whole matter could be easily avoided by the banks being able to determine intermediate fees in advance and charge them to the sender; or for all intermediate fees to be forwarded to the recipient, where they appear on their statement. The current situation, where money just vanishes in the middle, is absurd.

For those wondering why this is such a big deal, it comes down to accounting and tax. I need to be able to record why we're not going to receive full payment on these invoices. I need to also have appropriate documentation to show the difference is due to a legitimate expense, both for my own records, and also in case the ATO drop around for a cuppa and a chat.

The worst thing is this is the third time we've encountered this problem, and it's only just become apparent how systemic is it. The first time we thought the customer was trying to underpay their bills. The second time we were able to demonstrate to the customer that their bank had lost the money, as there was no intermediate bank involved. However this third time we're dealing with quite lovely clients, who really thought they were doing the Right Thing, and we're finally educated enough to know what's going on.

My easiest solution is to write the funds off as a bad debt, but to do so I need to demonstrate reasonable efforts to recover the funds. I don't want to bother nice clients over a measly $19, especially when it appears this was not their fault. The whole thing is a customer relations nightmare.

Unless we can find a way around this in future, we're going to have to start insisting our international customers pay by bank draft or credit-card only. I'm sure that other Australian businesses have a way around this, and I'd love to know the secret.