Money Transfer Accounts and Remittance Sector

Debate between Rushanara Ali and Sajid Javid

Wednesday 22nd January 2014 Westminster Hall

[The Financial Secretary to the Treasury (Sajid Javid)]

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

I congratulate the hon. Member for Cardiff West (Kevin Brennan) on securing this important debate. I listened carefully to him and to all other hon. Members who spoke. They set out a well-argued case and made their points well.

Remittances play a vital role in supporting the people and economies of countries throughout the world. As we have heard, they are a financial lifeline for the families of Somalis, Pakistanis, Poles and other diaspora groups that are living here in the UK. A healthy and functioning remittance sector is crucial for thousands of our constituents up and down the country. We heard from the hon. Member for Bethnal Green and Bow (Rushanara Ali) about her personal experience, and she referred to comments that I have made about my own personal experience. My parents came to this country from Pakistan. They have many loved ones still living there who rely on remittances. I have seen what it is like if sometimes those remittances are missed or not received—it can make a real difference to day-to-day living standards—so I am grateful to Members who have shared personal stories, or told stories on behalf of their constituents, and their contributions show just how important a topic this is.

The UK is a global leader in the fight against money laundering and terrorist financing. Our banks and regulators have a vital responsibility to ensure that there is not inadvertent financing of criminal activities that could pose real risks to British citizens, as well as to national and international security. The Government are proud of our international role on this issue—we are setting the agenda. The Prime Minister received wide international recognition for his role in driving forward that agenda during our presidency of the G8 last year.

The right approach to tackling money laundering and terrorist financing should support a healthy and growing money transfer sector, rather than stifling legitimate money flows or financially excluding honest customers. I assure hon. Members again that the Government are committed to achieving that approach, and I shall set out the steps that we are continuing to take as we work closely with the private sector to facilitate a sustainable, market-based solution to what I accept is a real challenge.

The context for the debate is the trend in recent years for banks in many countries to withdraw accounts from money service businesses in response to perceived risks, and to reputational and regulatory concerns. That is important, because access to banking facilities makes remittances quick and transparent, and keeps costs low. We need to be clear that neither the Government nor regulators can compel banks to offer an account to any customer. Such a decision taken by a bank is private and commercial, and in accordance with their risk appetite and compliance with legal and regulatory requirements. The Government cannot intervene in banks’ day-to-day decisions. I was asked about the publicly owned banks in the UK, and the same applies to them: the Government cannot intervene in their commercial decisions or prevent—

[Rushanara Ali]

The question is about not the Government forcing banks to act in a certain way, but whether discussions have taken place to encourage banks to look at a solution so that they can play an active role. In the session that the Minister hosted last year, the chief executive of one bank was receptive to such dialogue. It is about working with them to find out whether there is a way forward, rather than telling them what to do. Some more enlightened individuals—board members—in the banking sector are worried about the impact of this situation and the damage it does to their banks’ reputations, and they are keen to explore this issue.

[Sajid Javid]

The hon. Lady makes a good point. Banks should be concerned about the reputational impact that could arise as a result of their decisions. I confirm that the Treasury, the British Bankers Association and other representatives of the banking industry have discussed the issue. We are engaged with all banks, including state-owned banks. I stress that what a bank does, or does not do, is ultimately a commercial decision for it to take.

--- Later in debate ---

[Sajid Javid]

I cannot tell the hon. Gentleman specifically whether a representative was nominated or if there will be one in the group, but I can certainly look into that and get back to him. I can confirm that we are working with the Somalia Government, through the Foreign and Commonwealth Office, on this issue overall.

The Somalia-focused working group may be of particular interest to many hon. Members in the Chamber. The group has been tasked with developing a safer corridor pilot to ensure secure remittance channels to Somalia. The group will work with the World Bank, which will provide technical expertise, and the pilot will aim to improve the security, transparency and oversight of this existing remittance channel. The Department for International Development has held consultations to identify appropriate representatives for the working group on the safe corridor. International partners, including the World Bank, the G20 and the international strategic alliance on law enforcement, are also supporting this work.

The group working on the pilot has agreed its final terms of reference, through consultation with stakeholders, and these will be presented to the action group next week. The Somalia-focused group, working with its partners, including the World Bank and others, believes that there is a one-year implementation for the pilot project.

Before I conclude, I want to make sure that I have answered questions raised by hon. Members, if I have not answered them already. The hon. Member for Cardiff West asked about international engagement. I hope that I have given him some insight into that, regarding our working with the G20, the World Bank and other international partners. We are also working through the EU. The hon. Gentleman knows that a payment services directive exists, but a second payment services directive is being negotiated with EU partners. We have taken a strong interest in that to ensure that whatever comes out of it does not make this situation any more difficult, but helps to improve it by encouraging the development of rules to deal with money laundering and our other natural concerns that are proportionate and do not make the situation difficult for banks throughout the EU. We have to keep in mind that Britain has, I think, more money service businesses than any other European country, so that is another important aspect of our international engagement.

Several hon. Members asked how well Government co-ordination is working. We have a steering group at Government level, of which the Treasury is part, which meets every single week. As well as the Treasury, the group involves the Cabinet Office, the Foreign and Commonwealth Office, the National Crime Agency, which provides information from our intelligence agencies that we think might help, Her Majesty’s Revenue and Customs, the Financial Conduct Authority and the Department for International Development. The Treasury is a core part of that group, which has proved important in ensuring that we stay on top of the issue and treat it with the urgency that it deserves.

[Rushanara Ali]

I thank the Minister for his answers, but I have a couple of further questions. First, are there likely to be any impact assessments on cash couriers? Will the group’s terms of reference include what it would mean if cash couriers were going into those countries? What should Somali and other remitters expect? Secondly, will the terms of reference be published? Will there be opportunities for people in the community and the various sectors, and for the NGO community and Opposition Members, to feed in their suggestions?

Money Transfer Accounts

Debate between Rushanara Ali and Sajid Javid

Wednesday 17th July 2013 Westminster Hall

[Sajid Javid]

The hon. Gentleman raises a fair point. He is correct, to the extent that if individuals cannot find a legitimate alternative that can reach the parts of countries they want to reach at a reasonable cost, they may be tempted to use illegitimate means, which makes the issue all the more important. I accept his general point.

We are committed to ensuring that commercial decisions taken by banks do not inhibit individuals in the UK from remitting money to families abroad, but, once again, there may be challenges. Individuals might need to approach firms other than those with which they are used to dealing. There may be increased charges. Remittance flows to some countries may be affected, specifically those with less developed or non-existent banking sectors, such as Somalia, as we heard from the hon. Member for Cardiff South and Penarth. I share his concern.

[Rushanara Ali]

I was encouraged to hear the Minister’s reference to his personal experience—his family experience —but I am disappointed at the lack of focus in his response on the fact that we need an urgent solution. I appreciated his time before the debate thinking through a constructive way forward. I hope that he will use the last 10 minutes to talk about how he will get his officials, the FCA and interested parties to use their insights to look at how we can solve the problem. He would be commended for making that happen. Across Government —in DFID as well as in the Foreign Office and his Department—and in his party and my party, there are grave concerns, which have been expressed in the debate. I hope he will use the last 10 minutes to focus on action and delivery, because he will be commended for that.

[Sajid Javid]

The hon. Lady is absolutely right to set that challenge and say that we should focus on action and delivery, and that is what I believe we are doing. I am sure she understands that there is no magic bullet or overnight solution that can be provided by any Government. As we heard today, this is a complex matter. The hon. Member for Nottingham East (Chris Leslie) recognised in his remarks that the banks have legitimate concerns. Other regulatory authorities are involved and hon. Members have mentioned the United States. Whatever the solutions, they may not be perfect and we may not get back to the world as it was before in this space. There will probably be changes to the structure of the industry. I hope she will be reassured, as I make further remarks, that we take the issue seriously.

The hon. Lady mentioned DFID, which I was coming to. I have discussed the recent bank actions with DFID officials and my right hon. Friend the Secretary of State for International Development. Initial indications do not suggest a significant impact on the economies of developing countries or their humanitarian situation. The Government will however assess the impact of market restructuring on developing countries and work with private sector and aid partners to mitigate any negative repercussions. The Secretary of State confirmed that the provision of UK Government aid will not be affected. My hon. Friend the Member for North West Norfolk (Mr Bellingham), who has great experience in development, talked about the work of DFID. It has said that it will commission an independent research report to understand the impacts of the recent bank actions on development outcomes in recipient countries.

[Rushanara Ali]

rose—

[Simon Danczuk]

rose—

[Sajid Javid]

I shall give way first to the hon. Lady.

[Rushanara Ali]

I thank the Minister for being generous. Can he explain what evidence DFID used to come to that conclusion? I have not been given any evidence, nor have my hon. Friends or other hon. Members. DFID should be looking at how to improve this important industry, because we want to end aid dependency. It is scandalous that DFID is being so complacent and commissioning a research project, when businesses will go bust in the next month. Will he press DFID to take urgent action with him? I accept that there are no magic wands, but there have been constructive suggestions in the debate, which I ask him to take forward and lead on. He will be commended for coming up with a solution.

[Sajid Javid]

I assure the hon. Lady that DFID takes the issue as seriously as other parts of Government and Members here today do. DFID, the FCO and the Treasury are working closely on it, because it affects all three Departments.

Oral Answers to Questions

Debate between Rushanara Ali and Sajid Javid

Tuesday 29th January 2013 Commons Chamber

[Sajid Javid]

I can confirm the figure used by my hon. Friend. Indeed, if we take account of all the tax changes we have made in the personal allowance, I can also say that an individual on the minimum wage and in full-time employment will see their tax bill halved under this Government.

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

23. More than 50% of children in my constituency are living in poverty, with the Child Poverty Action Group warning that the Government’s tax and benefit changes will push 1 million children into poverty by 2020. Why did the Minister and his Department decide not to publish the child poverty impact assessment alongside the Welfare Benefits Up-rating Bill?

[Sajid Javid]

As a child, I lived in a two-bedroom flat with seven people, and I saw child poverty on my street every day. I know that the hon. Lady cares passionately about this issue—[Interruption.]

Oral Answers to Questions

Debate between Rushanara Ali and Sajid Javid

Tuesday 6th November 2012 Commons Chamber

[Sajid Javid]

I think it is the hon. Gentleman who should be apologising. He is probably having a hard time explaining to his constituents why the number of young people on jobseeker’s allowance in the last five years of the previous Government went up by 45%. I have some good news for him, however. Under this Government, that number is down, and under this Government the number of vacancies in his local jobcentres is up by 30%.

[Rushanara Ali]

All other Olympic boroughs received a much-needed economic boost from the Olympic games, but the Office for National Statistics figures show that youth unemployment increased in my constituency between June and October, not to mention the 141% increase in long-term youth unemployment in the past year. Does the Minister agree that tackling this problem requires action from the Government, with a bank bonus tax to fund 100,000 jobs for young people, and action locally by the council, to take this issue seriously?

[Sajid Javid]

I know the hon. Lady takes this issue very seriously, which is why I believe she took her right hon. Friend the shadow Chancellor to Queen Mary university recently to discuss it with young people. I hope that they told young people that under the previous Government youth unemployment was created as a problem—up 72% in 10 years. I hope she also told them that youth unemployment has fallen by 62,000 in the last quarter because of the Youth Contract, the Work programme, investment in apprenticeships and other Government policies.