Transferring large sums of money internationally

The world is smaller than ever. Borders feel like they're disappearing. 

You can jump on a plane and travel to any part of the world in hours. 

You can communicate with anyone in an instant. 

You can run a business from anywhere... All you need is a laptop and an internet connection.

Humans are always looking for the greenest grass and those with the means aren't afraid to move countries, invest assets abroad, or transfer large sums of money internationally.

To give you some context:

• Last year, 134,000 millionaires relocated across the world. 

• Foreign buyers spent $42 billion on US property. 

• Global foreign direct investment flow (FDI) surpassed $1.3 trillion,

That’s not even the peak, with global cross border payments expected to reach $300 trillion in the next five years.

While travel and communication have never been easier, finding your way through international banking systems, regulations and currencies is still like chopping through the rainforest with a machete. 

There are security concerns, hidden fees and terrible exchange rates, which can cost tens of thousands on large money transfers. And when transferring large sums of money internationally goes wrong, it is devastating.

So, before you start transferring money to another country, it's important to understand the process and the best way to transfer large sums of money internationally. In this article, you will also find the top tools and platforms so you can move your money safely, efficiently and compliantly, all for the lowest cost.

How to transfer large sums of money internationally

While your regular bank can facilitate international transfers, there are a number of factors to consider to find the fastest and cheapest method. 

Traditional wire transfers through banks

A wire transfer is an electronic transfer of money directly between banks. It is the traditional way to send large sums of money. Most international banks use something called the SWIFT network. This is a secure messaging layer that banks use to send payment information across borders. This doesn't actually move money itself, but instructs banks where to send funds. It's a secure and trusted part of the banking system.

But when using traditional banking systems, it can feel antiquated and slow. For example, wire transfers can take anywhere from 3 to 5 days to complete and incur excessive fees and poor exchange rates along the way.

In fact, sending money via traditional banks can cost 3 to 5% in fees and currency markups, while modern Fintech platforms such as Acctual can be under 1%!

When money travels across borders, it involves several intermediaries. In effect, funds pass through several different middlemen before reaching the recipient bank account. Each step along the way takes not just time, but incurs fees. 

You can think of it like a long haul international flight… along the way, you have several layovers which add time and expense to a journey before eventually reaching your final destination.

Plus, once the money leaves your account, the system is opaque until it finally ends up with the recipient. That’s nerve wracking with large payments.

Correspondent banking

Correspondent banking is a relationship where one bank (the correspondent) offers services to another bank (the respondent bank) in a foreign country. The correspondent bank is the link in the chain that helps to facilitate transactions such as managing currency conversions, clearing checks, or transferring funds. For example, a bank in the United States that wants to send money to a bank in Brazil could use a correspondent bank that has operations in both countries.

As a banking customer, it might be helpful as it means you don't need to start a relationship with a separate bank that offers services in both countries. But with more intermediaries, higher fees and slower transfers arrive. And again, trust has to be put in more parties, opening up more potential errors, fraud, or problems along the way.

Bank to bank transfers (Private banking)

Special bank to bank transfers are available for the biggest corporations and high net worth individuals. They offer a closer relationship management and custom solutions. You can think of it as a more private banking solution that helps to send and receive funds in a reliable way for international payments.

They tend to be preferred for their established infrastructure and client familiarity, plus it gives you the ability to access personalized investment management and tailored solutions for wealth management.

Of course, this bespoke type of service will incur much higher fees and can have longer processing times than other digital options. Adding to this, for the average person looking to transfer money when moving to another country, it's not an accessible service.

Currency brokers and FX specialists

A currency broker is a specialist who helps you buy, sell, or transfer foreign currency. They act as an intermediary between the interbank market and traders to execute trades on behalf of clients. In simple terms, they offer access to the global foreign exchange market.

It's a handy solution if you're looking to switch large sums of money from one currency to another. Each broker will offer different exchange rates and fees along the way, but generally, they offer better rates than banks.

You should still consider the speed at which a broker will transfer your money. It may take one to two days, or longer. Plus, it can depend on what country you're sending money to and from. The over the counter design of Forex transactions can also reduce the regulatory oversight you have compared to traditional banking mechanisms.

Digital Fintech platforms

Over the last decade, a number of FinTech (financial technology) services have acquired significant market growth. There are companies like Acctual, Wise, Revolut and Pioneer which are able to complete transfers quickly, transparently and at low cost.

These companies aim to offer a more modern digital banking solution through technology, using software to improve both the execution of financial transfers and the customer experience. The whole idea is that they are fast, transparent and cheaper than traditional methods.

For example, a platform like Acctual simplifies transferring large sums of money internationally. It allows you to send a payment in the currency you prefer and the recipient to receive funds in the way they prefer – all without the pain of traditional banking systems.

You can even incorporate stablecoins into your transfers. For example, you could make a payment in US dollars and it could be received as USDC stablecoin or vice versa and everything in between, whether that's fiat to fiat transfers or crypto to crypto transfers.

Global transfer networks

A global transfer network is a system that enables the transfer of money and data across borders. It's a new way to transfer money across borders, cheaper and faster than regular bank transfers. An example of this is HSBC's global transfer network that enables you to send payments in over 20 currencies to more than 200 countries or regions.

Often, these sorts of services are available in your standard mobile banking app to send and receive money, just like you would a domestic transfer. They can even be fee free in certain circumstances. They're almost like an upgrade to the traditional banking network.

While they can feel familiar and offer great rates, payments can still be slow, taking two to three business days to arrive. That might be frustrating during weekends or local holidays. Plus, currency support can still be limited.

Cryptocurrency international transfers

Even the slowest, highest fee cryptocurrencies like Bitcoin are faster and cheaper than traditional banking methods, taking minutes to settle at just a few dollars in fees.

But the problem with some major cryptocurrencies is their volatility, which makes them risky for holding and transferring large sums. It's a reason why stablecoins have been developed, such as USDC and USDT, the latter of which being the third biggest cryptocurrency behind only Bitcoin and Ethereum. The idea behind these digital currencies is to always maintain a stable value. They are pegged one to one to the US dollar, meaning one coin is always worth one dollar.

Essentially, they work like digital dollars but with all the benefits of decentralized blockchain networks and crypto. This peer to peer design allows one person or entity to send funds directly to another person or entity, all without the need for a middleman or intermediary bank.

They take borders out of the equation and settle in seconds for just a few cents. It's actually already become one of the most popular ways to transfer wealth around the world. Volumes reached more than $27 trillion last year, which is more than the combined volume of Visa and MasterCard.

Platforms like Acctual incorporate stablecoins directly into their payment systems so you can move flexibly between fiat and stablecoin currencies in your international transactions.

Escrow services

If you're buying and selling assets for large amounts overseas, an escrow service can hold the funds until both sides have agreed that terms are fulfilled. Using an escrow service is prudent, particularly with property purchases, to provide a level playing field and ensure everyone is agreeing to the contract terms before assets and funds are exchanged.

While they can help ensure trust between both parties and resolve disputes, naturally, they come with fees for their service, which can impact the overall cost of a transaction. Adding to this, there's extra due diligence to carry out as you'll be trusting large sums to a third party. Plus, you might feel a lack of control as funds are locked away with a third party during the transaction.

Financial considerations and cost management

Sending and receiving large amounts of money from overseas is one big exercise in financial and cost management. You need to move money from A to B as quickly and cheaply as possible in a secure manner.

Spot rate versus forward contracts

Spot rate is what you might usually refer to as the exchange rate. It's the current price of a particular currency that can be bought or sold right now.

When you go to different banks and exchange partners, you'll often see a different price from the spot rate. This is due to factors like an interbank rate, where large institutions trade currencies directly with each other(also referred to as a wholesale rate). Or there can be two different values, the buy and the sell price. In large though, spot rates are relatively close to the current market and are based directly on the immediate supply and demand and competition within an industry.

Forward contracts are advantageous when regularly moving large sums of money internationally. They give you the ability to lock in the current exchange rate for a future transfer.

Essentially, you're creating an agreement to exchange currency at a set rate at a future date. This gives businesses protection against fluctuating exchange rates. It allows you to lock in a rate that could save thousands on large transfers if a market moves unfavorably. However, you also lose the ability to take advantage of more favorable market moves. For businesses, forward contracts offer more long term stability for large transfers.

Exchange rate markups

When you compare the real spot exchange rate to the rate that your bank or FX currency provider is quoting you, you might notice a difference. This is because banks and service providers add anywhere from a 1 to 5% fee onto the exchange rate. For large sums that can rack up quickly. For example, you could see a $25,000 cost on a $500,000 transfer.

That's why it's so important to shop around for the best provider and solution during big international transfers and even try to negotiate better rates for high volume. Even a small improvement can save thousands on every transfer.

Regulatory compliance and legal framework

It's not just the cost and rate of exchange you have to worry about with international transfers. Regulatory compliance and international money transfer laws also need to be taken into account. Large global bank money transfers will fall under heavy scrutiny in most jurisdictions.

Documentation requirements to stay compliant

Most payment processors need to verify your identity. This means you'll need to provide proof of ID, address and where the money came from. Missing paperwork, especially with regard to the source of funds, can delay or even block transfers. It's an essential part of international wire transfer reporting requirements and anti money laundering regulations where governments want to know the exact source of your money, whether that's from the sale of assets, income, savings, or inheritance.

If the source of the money can't be traced, then your transfers might be rejected. Next, you'll also need to provide the recipient's information. This would include bank accounts, addresses, IDs. This ensures that the money goes to the right person during the process and meets the legal requirements.

Major governments are getting ever tighter with stringent AML and counter terrorism financing rules. Globally, it's estimated that up to 5% of the world's GDP (nearly $4 trillion) is laundered every year.

Particularly for transactions over $10,000 or 10,000 euros, these will be flagged for review and require transaction reports to be filed. There are now over 120 countries that participate in the Common Reporting Standard (CRS). This is a framework where information is automatically shared on foreign bank balances and flows. In short, a foreign bank is likely to report large transfers to your home country's tax authority.

Real scenarios and examples

Let's dig into some specific scenarios where you might need to transfer large sums of money to another country.

1. How to transfer money when moving to another country

When you're moving abroad, you'll likely need to move the vast majority of your assets to the new country.

At a minimum, you'll need to open a bank account in the new country before you move, then plan the timing of your transfer to ensure access to your funds at the right time. Plus, prepare all the relevant documentation for both countries, including ID, proof of source of funds, addresses, among others.

If you make mistakes in this process, then making the move might be tricky, as banks can be frozen and payments put on hold until errors are corrected.

It's not just about the money being received in a new country; exiting your current residence will have financial implications as well. For example, many countries such as Canada, Germany, South Africa, impose exit taxes when you leave the country, you'll have to pay a capital gains levy.

The biggest no no of all is traveling with large amounts of cash. It's risky and requires a declaration if you're traveling with more than $10,000 of cash across borders. 

2. Buying real estate overseas

Purchasing property abroad is one of the most significant financial transfers that you can make. It requires a complex set of steps from a financial and legal standpoint.

The common practice is to use an escrow or notary trust account. This should be in the destination country where you send the funds, and they're released upon completion of the property purchase.

Over the years, international property deals have been a magnet for fraud and money laundering. So many jurisdictions have tightened regulations for overseas property purchases in recent years. For example, Canada and the UK have imposed registers for overseas entities buying property. 

When transferring money to your escrow or notary trust account, insist on confirming bank details verbally with the company. Never rely on emails or digital copies of account information for bank transfers. Fraudsters have been known to hack and alter details, even intercepting emails to change bank details. 

A great tip if your property purchase is likely to take a few weeks or a month is to collaborate with a currency broker that offers forward contracts. This will help you lock in an exchange rate for the deposit or property payment.

3. Business operations

Companies make up a majority of global financial money flows. International companies transfer large sums on a regular basis. There are all sorts of reasons for this, including global trade payments, payroll, mergers and acquisitions, among others.

If you're running regular trade payments (a.k.a. paying overseas suppliers), then batch processing can help you benefit from scale. Centralizing payments into one platform or provider can reduce bank fees.

If you send regular payments or run payroll internationally, then using a fintech company like Acctual can combine the best fees with the most efficient payment process. Even a small reduction in fees can represent substantial cost savings to a business.

When doing business internationally, you should also think about country risk. Any payment provider should adhere to regulations like OFAC lists to make sure that payments have legal clearance and your recipient is cleared for receiving large amounts of money from overseas.

Simplify international transfers with Acctual

Acctual helps you cut through the complexity of large international money transfers, saving you time and money. 

The platform is designed to simplify sending money abroad, eliminating high fees and slow transaction times.

Companies and individuals benefit from the lowest industry fee, which can drop below 1% for large money transfers. It even supports multiple fiat and stablecoin currencies, giving you complete flexibility in making your payments.

You could pay in fiat currency and receive it in stablecoin in another country, or vice versa.

For example, a Colombian importer can pay in USDT while an exporter in the US receives the payment in USD the same day.

Businesses can use Acctual to run large batch payments for payroll worldwide, deliver supplier payments and everything in between. Individuals can move their money between bank accounts for relocation or make transfers for property and investments.

Acctual offers complete flexibility in large global payments, eliminating the everyday frustrations of traditional banking or managing multi currency bank accounts. 

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