UPDATE: This story has been updated with comments from Western Union's chief financial officer following its first-quarter earnings release. It also has a correction: Mexico is not part of Western Union's Latin America and Caribbean region, but North America. We have updated the second paragraph to reflect this correction and regret the error.
Donald Trump's plan to deport all illegal immigrants and build a wall at the southern U.S. border and make Mexico pay for it could cause some collateral damage, including to cash transfer company Western Union (WU) .
The Englewood, Colo.-based company sees a significant chunk of its business come from Latin America and the Caribbean, as well as Mexico. Latin America and the Caribbean comprised about 11% of Western Union's revenues in the first quarter, and Mexico, which it includes in its North America figures, is 4%. Most revenues are derived from funds being transferred out of the U.S., also known as remittances.
"Mexico for us continued to grow faster than the rest of the market," said Western Union Chief Financial Officer Raj Agrawal. "We're pleased on the overall growth there."
The company reported first quarter earnings today, hitting $0.37 per share in earnings on $1.3 billion in revenue, in line with analyst expectations. Western Union's total revenue in 2015 was $5.5 billion.
The company has worked to make significant inroads in Mexico of late. In 2015, it launched direct-to-bank money transfers to Mexico from the U.S. to allow customers to send cash to individual bank accounts and expanded transfer services with a government-sponsored development banking institution. On a conference call with investors in February, CFO Raj Agrawal said Western Union's Mexico business is growing faster than the market.
But if GOP frontrunner Trump makes it to the Oval Office, that might change.
The billionaire businessman has said that he would compel Mexico to make a one-time payment of $5-to-$10 billion to foot the bill for his border wall by clamping down on remittances to the country, which is a big part of how Western Union makes its money.
Trump's proposal would alter Section 326 of the Patriot Act, a rule initially aimed at terrorist financing, that prescribes regulations for financial institutions to ask customers for identification. Under Trump, the rule would be changed to include wire transfer companies, which are currently not required to follow customer-ID procedures because they don't require a formal banking relationship.
"Western Union will suffer enormously from this Trump regulation," said Alex Nowrasteh, immigration policy analyst at the libertarian think tank the Cato Institute.
If Mexico pays for the wall, he'll allow remittances to go through. If he doesn't, he'll keep the stop on them.
Should it stick, the maneuver would make an enormous dent in U.S.-to-Mexico remittances that the World Bank estimates totals about $25 billion annually. It would impact the services most commonly used to make such transfers, MoneyGram (MGI) , PayPal's (PYPL) Xoom and, of course, Western Union, which First Analysis Corp. analyst Larry Berlin estimates brings in $165 million in revenue Mexico annually.
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"It will hurt businesses in the area, all the companies that are providing the service of money transfers," said Moody's analyst Alfredo Coutiño.
Not only would such a clampdown cost remittance companies like Western Union money, but it would also be costly for tax payers. The federal government overseeing each and every transaction coming in and out of the country would be cumbersome and time-consuming.
"The measure of practicality of confiscating remittances from undocumented Mexican workers in the U.S. implies a lot of work, because that implies that the government will have to monitor the transactions in order to determine if one transaction was made by an undocumented person," said Coutiño.
The implementation-related obstacles to Trump's rule were not lost on President Obama when he caught wind of the proposal. He brushed the plan off as unreasonable, telling reporters it would not work and could cause more illegal immigration from a damaged Mexican economy. "The notion that we are going to track every Western Union bit of money that is being sent to Mexico, good luck with that," he said at the time.
As for what Western Union will do should Trump become President and attempt to stop remittances, the company is unsure.
"It's hard to speculate right now," said Western Union CFO Agrawal. "That's really speculation at this stage, and we certainly follow all of the rules and regulations within our business."
Even if Trump were able to implement his wire transfer ban until Mexico pays for the wall, people would likely find a way around it. A remittance crackdown would likely lead to the creation of parallel markets -- documented immigrants transferring money through their accounts for undocumented acquaintances and friends, cash being smuggled across the border, or the use of hard-to-track and illicit forms of transfer.
"They're going to find their way around it, either by using Bitcoin, other crypto-currencies, or, unfortunately, other black market alternatives," said Nowrasteh. He also said such a rule might incentivize immigrants in the United States illegally to get fake identities, or for companies to simply look the other way.
Agrawal agreed. "If there was an artificial put onto anything to the Mexican market, it might have unintended consequences," he said. "It is possible that money could flow underground or through informal channels, which is not what anybody wants, especially the governments that would be involved."
Berlin downplayed the risk to Western Union, Trump proposal or not. He said the 3% loss of revenues from Mexico, while noteworthy, wouldn't be a "big blow" to the business. And the chances of Trump actually enforcing such a plan are slim. "Odds of it happening are really, really small, so it's not a concern at this point," he said.
But even so, it's not just Trump's remittance ban that would hurt Western Union. His plan to deport all 11 million undocumented currently in the United States would impact it, too, as some surely use Western Union to send money back home. Nowrasteh noted that remittances would be just the tip of the iceberg there.
"If Trump succeeds in deporting all unauthorized immigrants, it will cost the U.S. economy $2.6 trillion in economic growth over the next decade as so many workers, entrepreneurs, and consumers are removed. Additionally, it would cost the government an estimated $205 to $619 billion to actually remove all of those 11-to-12 million people," he said.