Money Transfer Accounts

Baroness Bray of Coln Excerpts

Wednesday 17th July 2013 Westminster Hall

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Bayley.

I am delighted to have secured this debate on the provision of money transfer account services by banks and their impact on Britain’s ethnic minority communities in particular. Remittance plays a vital and complementary role in helping to lift millions of people out of poverty across the world, and it plays a vital role in ensuring that, as well as our commitment to aid, we engage the public in giving to their loved ones, who are often on the verge of poverty and would not qualify for development aid. This is a vital debate because we need to consider how we support individuals to give to family members across the world.

Remittance helps to save lives through direct support by providing for loved ones in remote areas of the world. It helps save lives in the Indian subcontinent, for instance in Pakistan and Bangladesh, and in many other places, especially during times of crisis such as Cyclone Sidr in Bangladesh a few years ago and the earthquake and floods in Pakistan. Many of our constituents from various African and Latin American countries send money through remittance.

I will focus on the recent decision that has propelled us into calling for this debate. Barclays made the decision to withdraw banking facilities from small and medium-sized community-based money transfer agencies, which provide low-cost, legitimate routes for sending money to remote places across the world. In some of those places, it is very difficult for mainstream money exchange and money transfer companies that do not have networks, agents or structures to get assistance to family members. Taking the example of disasters, those are the times when people need to get assistance to their families immediately, which is certainly what happened in countries such as Pakistan and the many others that I mentioned.

[Angie Bray (Ealing Central and Acton) (Con)]

I thank the hon. Lady for giving way so early in this debate. One area she has not mentioned is Poland. I have a large Polish community in my constituency that is facing the loss of One Money Mail, which has become a tried and trusted service for many people in the Polish community when sending remittances back to Poland. Those people are extremely concerned that they may have to lose the service, which they have grown to trust and which they use frequently; it will be a great loss to the community.

[Rushanara Ali]

I thank the hon. Lady for her intervention. She has added an important perspective to the debate, which is that the issue also affects countries that people might not have thought about.

I commend parliamentarians, because some 46 Labour MPs have already signed a letter to Barclays, and I know that the all-party group on Somaliland and Somalia has also made representations to the Government. MPs and parliamentarians from both sides of the House, and many other people, have raised the alarm bell with the Government. That highlights our deep concern about how decisions that have been made in the past, not just by Barclays but by other banks such as HSBC, to remove banking facilities that are affordable for hard-pressed families who are trying to get support to other parts of the world, have been supported rather than punished. We should encourage people to give, and I hope that the Government will consider the issue closely.

According to the Financial Times, more than 250 money transfer companies are now facing closure following the decision by Barclays to withdraw the service. Other banks have already withdrawn it, so the suggestion that those small and medium-sized companies could go elsewhere is nonsense. We need to ensure that the decision of those banks does not send a signal to other banks that there is something wrong with such businesses and that other banks should not do business with them, which is essentially what has happened. That is the insidious conclusion that is being drawn at the moment. Allegations are being made that those businesses, many of which are in our constituencies, are engaged in activity that is not legal.

Barclays has said to me that it is concerned about only the 1% of companies that represent 46% of the problem. The Government and regulatory authorities should consider how to assist Barclays and other companies that need to clean up operations where there are problems. If that 1% is a problem, assistance should be provided to address that problem rather than involving the 99%, in the case of Barclays, that do not pose a problem. If that logic were applied to the banking sector, for instance, we would not have a banking sector left. I ask the banking sector to have some empathy and to think about what the consequences would have been for it if, during the financial crisis, all companies in the sector had had to be shut down just because there were certain bad apples.

I hope the Minister will consider the issue and answer the question about how we can focus and zoom in on the areas where there are cowboy operators, which none of us want. The diaspora and ethnic minority communities in this country and across the world do not want to see cowboy operators; they want legitimate, well regulated mechanisms for sending money to loved ones.

As I said, 45 other MPs and I supported the letter to Barclays bank that the Minister has seen, and I look forward to hearing what he, his Department and the regulatory authorities will do to try to help with this important matter. We are asking for some breathing space. We are asking Barclays—I do not believe this is an unreasonable request—to extend the date from August by another six months to give the Government, the regulatory authorities and the Minister the breathing space to bring people together, including the British Bankers Association, the banks and interested parties such as the money transfer agencies and the communities that use their facilities, wherever possible, to arrive at a solution that does not lead to the industry’s closure.

More than $3.2 billion of remittance a year is sent from the UK, and remittance amounts to some $530 billion worldwide, which is more than the total global international development budget. We must act internationally in concert with our American partners. The decision to apply fines to Standard Chartered and HSBC has led to the decision by UK banks such as Barclays to stop remittance facilities. Frankly, the companies have nothing to do with what has happened in the US with the breaching of sanctions, or with the other cases in which banks have been involved, but they are being punished.

If we do not find a way to address the problem, the risk is enormous, because there will be no legitimate ways for people to send money to remote parts of the world. Of course, there is virtually no way for people to get assistance to countries such as Somalia through a legitimate route. We need a constructive way forward, and I hope the Minister can explain how his Department and officials will work with the banking sector to develop an industry-wide solution so that we can ensure that the remittance and money transfer industries are strengthened in light of the crisis, rather than destroyed.

I also hope that the Minister will consider that if banking facilities to money transfer agencies end, what is likely to happen is what used to happen before a regulated mechanism was in place. On the whole, people who are not wealthy want cheap and affordable means to get assistance to their loved ones, particularly in times of desperation and crisis, such as when a family member has died and money needs to be sent quickly for burials and associated costs, or when there is an urgent health care emergency, likely or actual conflict or a humanitarian emergency, as was the case in Somalia and the rest of east Africa in 2011 and as is likely to happen in future. If there is no legitimate route to send money, there is a major risk that the industry will be driven underground and that clandestine mechanisms will be used to get money to family members. If that happens in the billions of pounds, we will not be providing remitters with the back-up, support and legal mechanisms to send money safely to their loved ones. It will also mean that some countries are unlikely to be able to monitor the amount of money flowing into their economy, leading to inflationary pressures.

Furthermore, there are security issues. People worry, rightly, that their money might end up in the wrong hands, and potentially in the hands of extremists. In countries such as Somalia and Somaliland, there are grave concerns about that risk.