Foreign exchange services are provided by many banks around the world. Foreign exchange services include: * Currency exchange - where clients can purchase and sell foreign currency banknotes. * Foreign Currency Banking - banking transactions are done in foreign currency. * Wire transfer - where clients can send funds to international banks abroad.

currency exchange[1] (American English) is a business whose customers exchange one currency for another. Although originally French, the term bureau de change is widely used throughout Europe, and European travellers can usually easily identify these facilities when in other European countries. It is also common to find a sign saying "Exchange" or "Change." Since the adoption of the euro, many exchange offices incorporate itslogotype prominently on their signage.
The term bureau de change is not used in the United States.[citation needed] Instead, the terms used in the United States and in Canadian English are currency exchange and sometimes money exchange, sometimes with various additions such as foreign, desk,office, counter, service, etc., for example foreign currency exchange office.
Location :
A bureau de change is often located at a bank, at a travel agent, airport, main railway station or large stores— namely, anywhere there is likely to be a market for people needing to convert currency. So they are particularly prominent at travel hubs, although currency can be exchanged in many other ways both legally and illegally in other venues. Some of the major players include Travelex and HSBC

Business model:
A bureau de change makes profit and competes by manipulating two variables: the exchange rate they use to calculate transactions, and an explicit commission for their service.
The exchange rates charged at bureaux are generally related to the spot prices available for large interbank transactions, and are adjusted to guarantee a profit. The rate at which a bureau will buy currency differs from that at which it will sell it; for every currency it trades both will be on display, generally in the shop window.
So the bureau sells at a lower rate from that at which it buys. For example a UK bureau may sell €1.40 for £1 but buy €1.60 for £1.
So if the spot price on a particular day is €1.50 to £1, in theory £2 will buy €3, but in practice this would be hard if not impossible for average consumers to get. If the bureau de change buys £1 from a consumer for €1.40 and then sells £1 for €1.60, the 20¢ difference makes a profit.
This business model can be upset by a currency run when there are far more buyers than sellers (or vice versa) because they feel a particular currency is overvalued or undervalued and becomes not worth a Continental.
The business may also charge a commission on the transaction. Commission is generally charged as a percentage of the amount to be exchanged, or a fixed fee, or both. Some bureaux advertise themselves as commission-free, which mathematically just means they further load their offered exchange rates. As an additional complexity some bureaux offer special deals for customers returning unspent foreign currency after a holiday. Bureaux de change rarely buy or sell coins, but sometimes will at a higher profit margin[citation needed], justifying this by the higher cost of storage and shipping compared with banknotes.

Consumer issues:
Changing money at a bureau is often more expensive than withdrawing it from a Automatic teller machine at one's destination or paying directly by debit or credit card,[citation needed], but this varies depending on the card issuer and the type of account. Some people may feel uncomfortable carrying a lot of cash and so prefer to use a card.
Some may also prefer to hold foreign currency rather than change it back if they are expecting to return to where it is used. Companies that frequently send employees abroad may essentially act as their own exchange by reimbursing their employees in the local currency and holding the foreign currency. If exchange rates are relatively stable, the fees charged by a bureau may exceed any likely fluctuation and it also makes the company's accountancy easier.[citation needed]
In the alternate, some prefer to buy their currency before they travel, either just for a sense of security, or because they speculate the exchange rate is better at that time than it will be when they make their trip.[citation needed]
In 2002 many bureaux reported substantial reductions in profit due to the replacement of many European currencies with the Euro.

Illegal activity:
A number of countries require Bureaux de change to register as Money Service Businesses that come under Anti-money laundering controls. However in countries where currency exchange is lightly regulated they can be used as front organizations for money laundering. Customers bring legally obtained money and receive illegally obtained money in return. The owners of the bureau may themselves launder money

Wire transfer:
Wire transfer or credit transfer is a method of electronic funds transfer from one person or institution (entity) to another. A wire transfer can be made from one bank account to another bank account or through a transfer of cash at a cash office. Wire transfer systems are intended to provide more individualized transactions than bulk payment systems such as ACH and Check21.
Different wire transfer systems and operators provide a variety of options relative to the immediacy and finality of settlement and the cost, value, and volume of transactions. Central bank wire transfer systems, such as the Federal Reserve's FedWire system in the United States are more likely to be Real time gross settlement (RTGS) systems. RTGS systems provide the quickest availability of funds because they provide immediate "real-time" and final "irrevocable" settlement by posting the gross (complete) entry against electronic accounts of the wire transfer system operator. Other systems such as CHIPS provide net settlement on a periodic basis. More immediate settlement systems tend to process higher monetary value time-critical transactions, have higher transaction costs, and a smaller volume of payments. Currency transaction risk (because of market fluctuations) may be reduced (in part) by immediacy of settlement.

Process:
Bank wire transfers are often the most expedient method for transferring funds between bank accounts. A bank wire transfer is effected as follows: 1. The entity wishing to do a transfer approaches a bank and gives the bank the order to transfer a certain amount of money. IBAN and BIC codes are given as well so the bank knows where the money needs to be sent. 2. The sending bank transmits a message, via a secure system (such as SWIFT or Fedwire), to the receiving bank, requesting that it effect payment according to the instructions given. 3. The message also includes settlement instructions. The actual transfer is not instantaneous: funds may take several hours or even days to move from the sender's account to the receiver's account. 4. Either the banks involved must hold a reciprocal account with each other, or the payment must be sent to a bank with such an account, a correspondent bank, for further benefit to the ultimate recipient.
Banks collect payment for the service from the sender as well as from the recipient. The sending bank typically collects a fee separate from the funds being transferred, while the receiving bank and intermediate banks through which the transfer travels deduct fees from the money being transferred so that the recipient receives less than what the sender sent.

Regulation and price:
In 2002, the European Commission relegated the regulation of the fees that a bank may charge for payments in euros between European Union member countries down to the domestic level,[1] resulting in very low or no fees for electronic transfers within the Eurozone. Wire transfers between the Eurozone and external areas can be expensive.[citation needed]
In 2005, Iceland, Liechtenstein, and Norway joined the EU regulation on electronic transfers. However, this regulation is intended to be superseded by the Single Euro Payments Area (SEPA), consisting of 32 European countries.
In 2009 EC published a new regulation (EC) No 924/2009 [2] on cross-border payments in the Community and repealing Regulation (EC) No 2560/2001 (the text of which is no longer available[clarification needed]). The new regulation (EC) No 924/2009 Article 1 (q.v., Ref.4) states that an IBAN/BIC transfer within SEPA must not cost more than a national transfer, no matter which currency is used. But receiving bank can charge for exchanging to local currency. However, according to Article 7 any current arrangements (made between payment services before November 1, 2009) can be honored up to November 1, 2012.
In the United States wire transfers are costly and seldom if ever used by consumers. As an example of the cost, Bank Of America as of November 2011 charged $25 to send a wire and $12 to receive one within the U.S. For international transfer, it charged $35–$45 outgoing, $16 incoming.[3] However, fees may vary from bank to bank.
In the United States, domestic wire transfers are governed by Federal Regulation J[4] and by Article 4A of the Uniform Commercial Code

Security:
Bank-to-bank wire transfer is considered the most secure international payment method.[by whom?] Each account holder must have a proven identity. Chargeback is unlikely, although wires can be recalled. Information contained in wires is transmitted securely through encrypted communications methods. The price of bank wire transfers varies greatly, depending on the bank and its location; in some countries, the fee associated with the service can be costly.
Wire transfers done through cash offices are essentially anonymous and are designed for transfer between persons who trust each other. It is unsafe to send money by wire to an unknown person to collect at a cash office: the receiver of the money may, after collecting it, simply disappear. This scam has been used often, especially in the so-called 419 scam.
International transfers involving the United States are subject to monitoring by the Office of Foreign Assets Control (OFAC), which monitors information provided in the text of the wire to ascertain whether money is being transferred to terrorist organizations or countries or entities under sanction by the United States government. If a financial institution suspects that funds are being sent from or to one of these entities, it must block the transfer and freeze the funds.[6]
SWIFT or IBAN wire transfers are not completely free of vulnerabilities. Every intermediate bank that handles a wire transaction can take a fee directly out of the wire payload (the assets being transferred) without the account holders knowledge or consent. In many places, there is no legislation or technical means to protect customers from this practice. If bank S is the sending bank (or brokerage), and bank R is the receiving bank (or brokerage), and banks I1, I2, and I3 are intermediary banks, the client may only have a contract with bank S and/or R, but banks I1, I2, and I3 can (and often do) take money from the wire without any direct arrangement with the client. Clients are sometimes taken by surprise when less money arrives at bank R. Contrast this with cheques, the amount transferred is guaranteed in full, and fees (if there are any) can be charged only at endpoint banks.,[7] Europe offers some partial protection from this practice by prohibiting European intermediate banks from taking a fee out of the amount being transferred, even for transatlantic transfers. However, it's still common practice for a European brokerage firm to state that they charge no transfer fee, and then contract their bank to take an unpublished fee from the amount transferred as a means to compensate their bank with their clients assets. E.g. CMC Markets implements this policy in partnership with Natwest.
European privacy law may be breached by some USA operators such as SWIFT, so EU users are sometimes required by their service provider to make an explicit declaration that seeks to circumvent EU privacy regulations.

Methods:
Retail money transfers
One of the largest companies that offer wire transfer is Western Union, which allows individuals to transfer or receive money without an account with Western Union or any financial institution.[8] Concern and controversy about Western Union transfers have increased in recent years, because of the increased monitoring of money-laundering transactions, as well as concern about terrorist groups using the service, particularly in the wake of the September 11, 2001 attacks. Although Western Union keeps information about senders and receivers, some transactions can be done essentially anonymously, for the receiver is not always required to show identification.[9]
Another option for consumers and businesses transferring money internationally is to use specialised brokerage houses for their international money transfer needs.[10] Many of these specialised brokerage houses can transfer money at better exchange rates compared to banks, thus saving up to 4%.[10] These providers can offer a range of currency exchange products like Spot Contracts, Forward Contracts and Regular payments.[11]
[edit]International
Most international transfers are executed through SWIFT, a co-operative society founded in 1974 by seven international banks, which operate a global network to facilitate the transfer of financial messages. Using these messages, banks can exchange data for the transfer of funds between financial institutions. SWIFT's headquarters are in La Hulpe, on the outskirts of Brussels, Belgium. The society also acts as a United Nations–sanctioned international standards body for the creation and maintenance of financial-messaging standards. See SWIFT Standards.
Each financial institution is assigned an ISO 9362 code, also called a Bank Identifier Code (BIC) or SWIFT Code. These codes are generally eight characters long.[12] For example:Deutsche Bank is an international bank with its head office in Frankfurt, Germany, the SWIFT Code for which is DEUTDEFF: * DEUT identifies Deutsche Bank. * DE is the country code for Germany. * FF is the code for Frankfurt.
Using an extended code of 11 digits (if the receiving bank has assigned extended codes to branches or to processing areas) allows the payment to be directed to a specific office. For example: DEUTDEFF500 would direct the payment to an office of Deutsche Bank in Bad Homburg.
European banks making transfers within the European Union also use the International Bank Account Number, or IBAN.
[edit]United States of America
Banks in the United States use SWIFT to send messages to notify banks in other countries that a payment has been made. Banks use the CHIPS or Fedwire system to actually effect the payment.
Domestic bank-to-bank transfers are conducted through the Fedwire system, which uses the Federal Reserve System and its assignment of routing transit number, which uniquely identify each bank.

Other electronic transfers:
There are forms of electronic transfer that are distinct from wire transfer. Electronic funds transfer system (EFTS) is one such system. This is the system one uses when one gives one's bank account number and routing information to someone owed money and that party transfers the money from one's account. It is also the system used in some payments made via a bank's online bill payment service. EFTS transfers differ from wire transfers in important legal ways. An EFTS payment is essentially an electronic personal check, whereas a wire transfer is more like an electronic cashier's check.
In the United States, such EFTS transfers are often called "ACH transfers," because they take place through the Automated Clearing House.
One important way ACH transfers differ from wire transfer is that the recipient can initiate it. There are of course restrictions, but this is the way people often set up automatic bill payment with utility companies, for example.