Fergus O'Dowd (Louth, Fine Gael)
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524. To ask the Minister for Employment Affairs and Social Protection if an issue (details supplied) in respect of foreign pensions and charges on allowances has been raised with her officials; if so, if her Department is in a position to assist those who have been affected; and if she will make a statement on the matter. [23627/21]

Heather Humphreys (Cavan-Monaghan, Fine Gael)
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My Department, in conjunction with all Government Departments and Offices, is obliged to move banking operations to Danske Bank on foot of a Government Decision to tender for an “All of Government” Banking Service.

The Government’s objective was to identify the most economically advantageous arrangement for the provision of an efficient, streamlined, cost-effective banking structure for all Government Departments and Offices. The solution also had to provide the maximum degree of integration with the new Financial Management Shared Service project. Following a tender process, Danske Bank was awarded the contract in June 2018.

There are approximately 6,400 pension recipients in the US and Canada receiving a pension payment from this Department. My Department wrote to these customers in January 2021, informing them of the potential of charges being levied on their payments by their own bank. They were advised to check with their own financial institution about whether receiving international payments would have an impact on their bank fees and to consider changing their bank in order to avoid or reduce any fees being levied.

In March 2021, the Department made its first foreign EFT payments to beneficiaries outside of the Single European Payments Area (SEPA) via Danske Bank. As a result of this change, US and Canadian banks levied cross border payment charges on their own customers' Irish pension payments. These bank fees were not levied by Danske Bank as their charges are set out in the Government Banking Services contract negotiated with the State and are paid by each Government Department.

Payments to markets outside the SEPA zone - where the sending bank is not a member of the domestic clearing system, such as the US or Canada - are processed as international cross border payments, also known as ‘international wire transfers’. Processing such payments as international wire transfers ensures that the sending bank complies with its national and international Anti Money Laundering (AML) and Counter Terrorist Financing (CTF) obligations. In order to discharge these international wire transfers in markets such as the US and Canada, the services of correspondent banks are necessary, and their use is the industry standard approach.

As Danske Bank is not a member of either the US or Canadian clearing system, it has no option but to use a correspondent bank to deliver Irish pension payments as international wire transfers. Correspondent banks will deduct charges from the payment amount to compensate for the cost of discharging their AML and CTF obligations.

For payments to the US, Danske Bank has negotiated a reduction in the wire transfer fee on Irish Social Welfare payments with its correspondent bank.

For Social Welfare payments to Canada, Danske Bank initially routed all payments through its main correspondent bank in the country. While a correspondent bank can process payments to most Canadian banks, there are some financial institutions for which the assistance of another intermediary bank is required to complete the payment. In these instances, the beneficiary may be charged wire transfer fees by each intermediary bank utilised.

Following consultation with Danske Bank, my Department changed its file generation process in April. This system development is to reduce the likelihood of pension payments being routed through more than one Canadian intermediary bank. This change has been implemented in time for all May pension payments.

My Department has also amended its Social Welfare payment files to ensure that all pension payments to beneficiaries outside the SEPA zone are clearly marked as pension payments. This change was in place for all payments to North America in April. Many bank customers in both Canada and the US can avail of reduced bank fees on pension payments, depending on the financial institution that they bank with, their fee payment plan and the type of account that they hold.

The Department continues to liaise with Danske Bank on the matter.