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Federal Reserve headquarters in Washington

Amid the U.S. government’s acknowledgment of rampant document and benefit fraud, the Federal Reserve is wiring 26,000 Social Security payments every month to Mexicans south of the border.

Officials with the Federal Reserve and Social Security Administration insist payments are not going to illegal aliens but admit they cannot be certain. Meanwhile, the Department of Homeland Security has launched a new task force to address the “growing” problem of benefit fraud, including in the Social Security Administration.

Jean Tate, spokeswoman for the Federal Reserve, said 26,000 of the 27,000 payments made monthly via the Fed’s “Directo a Mexico” service are for Social Security recipients.

Mark Lassiter, spokesman for the Social Security Administration, told WND he was not familiar with the Fed’s Directo a M?xico program.

Still, he insisted the payments had to be going to legal beneficiaries of Social Security.

“For example, if I am a U.S. citizen and I retire to Mexico, I can continue to draw my Social Security benefits while I am in Mexico,” he explained. “Or maybe the person is a Mexican citizen who was legally in the U.S. and had a work-authorized Social Security number.”

Lassiter told WND he was unaware of any study the Social Security Administration had conducted on the 26,000 monthly payments made through Directo a M?xico.

He said he had no breakdown of the characteristics of the recipients.

Still, Lassiter insisted it was “highly unlikely” any of these 26,000 were receiving payments illegally in Mexico.

“You have to have a legally issued Social Security number that authorizes you to work to get Social Security credit for those earnings,” Lassiter explained to WND. “But I don’t have specific breakdowns of these 26,000 recipients in Mexico that you’re talking about.”

Lassiter suggested filing a Freedom of Information Act request to get more details on the recipients.

“I have confidence that when we determine that someone is eligible for Social Security benefits, we are determining that the person is legally eligible for Social Security benefits,” Lassiter said.

Nevertheless, on Dec. 6 the Department of Homeland Security announced the creation of the Document and Benefit Fraud Task Force, an inter-agency group created “to combat the growing problems of document fraud and immigration benefits fraud.”

The Inspector General’s office of the Social Security Administration was listed as one of the participating agencies.

No ID required

The Federal Reserve introduced Directo a M?xico in fall 2005 to allow U.S. financial institutions to utilize the Fed’s Automated Clearing House channel to remit payments to Mexico.

Directo a M?xico is a joint market effort between the Federal Reserve and the Banco de M?xico, the central banks of the U.S. and Mexico, respectively.

According to the Federal Reserve, in 2005 the amount of funds transferred to Mexico reached more than $30 billion, up from $16.6 billion in 2004. The remittance market to Mexico has experienced double-digit growth in recent years.

“Approximately 250 institutions are enrolled nationwide in Directo a M?xico,” Tate told WND. “However, enrollment in the program does not mean that an institution is using it.”

Tate noted there “seems to be a concentration of the financial institutions using the Directo a M?xico program, in corridors found in the Carolinas, Arkansas, Kentucky, Tennessee, Illinois, Iowa, Wisconsin, Colorado, Oklahoma, Texas and California.”

Still, U.S. banks and credit unions currently account for no more than 3 percent of all remittances sent to Mexico.

A leading player in the remittance market remains Western Union.

A key competitive marketing strategy for Directo a M?xico has been to reduce the cost of remittance transfers.

Tate told WND financial institutions tend to charge from $2 to $5 per transfer, compared with a much larger average cost for making a remittance transfer through Western Union.

Using the “Money in Minutes” calculator on the Western Union website, a $100 transfer from New Jersey to Mexico requires a $5 fee, compared to a $25 fee for a $500 transfer.

Also, Directo a M?xico prices conversions of the U.S. dollar to the Mexican peso competitively, according to a fixed formula that does not change regardless of the amount being transferred.

The explanation for why banks and credit unions using Directo a M?xico have such a low share in the remittance market compared to Western Union may in part be in the identification requirements needed in the two programs.

Tate told WND that in the Directo a M?xico program, each financial institution determines which ID documents it chooses to accept, but all participating Directo a M?xico financial institutions are restricted by the approved options specified in the Patriot Act.

Western Union will accept the Matricula Consular cards issued to Mexican nationals by Mexican consulates in the United States, even though Mexican nationals frequently obtain multiple cards and counterfeits are commonly available.

Mexican consulates regularly issue Matricula Consular cards to Mexican illegal immigrants in the U.S.

Western Union spokeswoman Kristin Kelly declined comment, explaining to WND that her company is currently in a quiet period pending release of earnings.

WND called a Western Union 800 number and confirmed that a Matricula Consular card would be sufficient for an illegal alien to wire money to Mexico.

The telephone assistant explained the identification of the sender was important only if there was a problem with the transfer and the sender wanted a refund.

The assistant also explained the money transfer could be made using a credit card or a debit card over the telephone or on the Internet.

The Western Union 800 number explained the wire transfer fee was $5 for the first $100 transferred and 5 percent of the principal for amounts larger than $100.

Social Security totalization

As WND previously reported, after refusing to release the document for three and a half years, the Social Security Administration in January finally made public a totalization agreement that “would allow millions of illegal Mexican workers to draw billions of dollars from the U.S. Social Security Trust Fund.”

The disclosure was forced by a Freedom of Information Act request filed by the TREA Senior Citizens League, a non-partisan seniors advocacy group.

On June 29, 2004, the Social Security totalization agreement with Mexico was signed by the U.S. Commissioner of Social Security and the director general of the Mexican Social Security Institute. The agreement has not yet been signed by President Bush.

Once Bush signs the agreement, which can be done without receiving congressional approval, the House of Representatives or the Senate would have 60 days to vacate the agreement by voting to reject it.

The U.S. currently has Social Security totalization agreements with 21 countries, but none with Mexico. The Social Security international agreements are designed to allow workers to combine earnings from foreign countries with earnings in the U.S. to qualify for U.S. Social Security benefits.

The agreement with Mexico would allow a Mexican worker to qualify for U.S. Social Security benefits with just six quarters (18 months) of U.S. employment. Typically a U.S. worker who turns 62 after 1990 needs 40 calendar quarters (120 months) to receive U.S. Social Security benefits.

The problem is further compounded because only about 40 percent of non-government workers in Mexico participate in Mexico’s state retirement system, whereas 96 percent of America’s non-government workers participate in Social Security.

In February 2004, Congress passed H.R. 743, known as the Social Security Protection Act. The bill included a provision by Sen. Charles Grassley, R–Iowa, then the chairman of the Senate Finance Committee, that prohibits illegal aliens, as well as their spouses and dependents, from any claim to Social Security benefits for work they performed while in the U.S. illegally.

A loophole in the bill, however, permits use of the quarters spent working illegally in the U.S. if the person were to obtain legal working status subsequently.

Moreover, the totalization agreement with Mexico would seem to lift the requirements of the Social Security Protection Act for Mexicans working in the U.S. illegally.

In September 2003, the U.S. General Accounting Office estimated a Social Security totalization agreement with Mexico would cost $78 million in the first year and would grow to $650 billion (in constant 2002 dollars) in 2050.

The GAO admitted even this estimate was low given that the totalization agreement provides an additional incentive for millions more Mexicans to enter and work in the United States.


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