Page 556 - IOM Law Society Rules Book

The Originator’s ARS Service Provider

The ARS provider at the originator’s location receives the funds and then sends an
instruction for payment to a counterpart at the location of the beneficiary of the
transfer. This communication may occur directly or through an intermediary as well
as through different communication channels (for example, fax, telephone, Internet).
ARS providers normally have a record of their partner ARS providers in the
beneficiary’s location who make payments on their behalf. With more organised
multinational operators this list of partner ARS providers is usually available to the
public; in some circumstances, it may be provided on request.
The operator may assign a code to the transaction. In an internationally franchised
operation this will usually be an easily recognisable multi-digit unique number. In a
hawala transaction it may be a banknote serial number. This unique number will be
communicated to his customer (originator), and the disbursing agent. The originating
customer will usually communicate this unique number to his intended beneficiary
who will then be able to be identified by the disbursing agent.

The ARS Service Provider at the Transfer Destination

The ARS operator at the destination for the remittance makes the corresponding
payment on instructions from the originating ARS operator, to the beneficiary
specified by the originator who meets the identification procedure. This may be a
formal and recorded identification procedure or simply the person who knows the
unique reference number. The ARS operator may have to satisfy two standards of
compliance, depending on differences in compliance regimes in the sending and
receiving country.

The Transfer Beneficiary

The money, once received at its destination, may be delivered directly to the
beneficiary, or else the beneficiary will be notified to go to the premises of the
destination ARS operator to receive payment. Payments may be received in local
currency, hard (international) currency or in the form of a cheque or bank draft. An
identification code may be used to validate the payment. In a jurisdiction with
money laundering controls, the ARS operator could apply CDD-procedures to the
beneficiary. The beneficiary will inform the originator of any failure of the ARS
transaction.

Settlement

ARS transfers may occur in both directions, that is, the service providers may process
both outgoing and incoming transfers at their particular location. Ideally, the transfer
amounts should balance out so that the neither side has a surplus or deficit. In reality
however, ARS operations seldom balance out between the service providers in two
different jurisdictions. The originating ARS operator will accumulate a sum of
money, whilst the destination ARS operator will have a deficit. This deficit has to be
balanced out or settled in the longer term. In general, settlement of the amounts
owed within a network of operators will not occur on a transaction-by-transaction
basis. Often, settlement is effected on a weekly, bi-weekly or monthly basis. Given
this length of time, the pricing of the final set-off transaction will often depend on a