UK Remittance Market

Andrea Leadsom Excerpts

Tuesday 22nd July 2014 Written Statements

[The Economic Secretary to the Treasury (Andrea Leadsom)]

My predecessor last addressed the House on the issue of continued remittance flows to Somalia on 22 January 2014. Since that time significant progress has been made, but there is more to do by the Government and industry stakeholders.

As we have previously made clear, the UK Government recognise that remittances play a vital role in supporting developing countries, enabling them to move from dependence on aid to self sufficiency and growth. The World Bank reports that global remittance flows to developing countries are more than $400 billion, and are expected to reach $540 billion by 2016.

However, we also recognise that there are considerable difficulties for payment institutions providing services into countries where regulatory and supervisory frameworks are in development, to ensure that the UK financial system is not a conduit for terrorist financing or money laundering. It is important that we ensure remittances flow through secure and transparent channels to effectively detect and deal with those who seek to use remittances to launder money or fund terrorism; as well as protect the majority of remitters who are sending funds for legitimate purposes.

The remittance industry is adapting, with individual money service businesses (MSBs) taking steps to enhance their anti-money laundering compliance; especially within the Somalia corridor. Wholesale MSBs are developing and deploying new systems to improve transparency, operational efficiency, and security of remittance transactions; while other market players are using technology options, such as mobile payments, to improve transparency.

HM Revenue and Customs (HMRC) has strengthened its supervision of MSBs, including increasing the number of inspections, to provide greater assurance that they are meeting their anti-money laundering and counter financing of terrorism obligations. It is developing an e-learning package for MSBs to improve levels of compliance. HMRC is holding regular discussions with banks and MSBs to give banks greater confidence that MSBs are subject to the same standards they are and that they are being effectively supervised by HMRC.

The action group on cross-border remittances, which brings together representatives of the banking and money remittance industries, consumer groups and Government agencies, has made the following progress:

HMRC and the joint money laundering steering group have developed guidance for financial institutions providing banking facilities for MSBs and for MSBs themselves on complying with their anti-money laundering and counter financing of terrorism obligations. As part of the development of guidance, MSBs have committed to adopting best market practice, over and above meeting the minimum legal requirements;

the National Crime Agency have held workshops with banks and MSBs to help develop a better understanding of risk, to help them identify good practice and improve systems as well as detect warning signs and poor practice in the sector; and,

the safer corridor pilot for UK-Somalia remittances, led by the Department for International Development (DFID), is developing a series of co-ordinated interventions to address perceived risk at each stage of the remittance transaction and ensure remittances continue to flow through secure, accessible channels. The detailed design process has been initiated, supported by the World Bank, incorporating consultations with all relevant stakeholders in the UK and in Somalia. The pilot is steered by an advisory group composed of representatives from UK-Somali MSBs, UK-Somali community representatives, banks, NGOs and Government officials. More details on the pilot can be found here: https://www.gov.uk/government/policies/helping-developing-countries-economies-to-grow/supporting-pages/enabling-the-continued-flow-of-remittances

It is vital for the continued flow of remittances that the banking sector engage with individual MSBs who are raising standards now, as well as the longer-term solutions provided by the safer corridor pilot. The UK Government will continue to urgently encourage and facilitate engagement between the banking sector and MSBs on this issue in the coming weeks.

We appreciate that communication of our actions is important, especially within the Somali community, where there are concerns about the short-term viability of the remittance corridor and implications for the humanitarian situation in Somalia.

We have worked closely with community representatives to develop channels that support communication between the community and key stakeholders on this issue. Over the next six weeks a number of workshops will be held with the Somali community in the UK to share information on market developments and help address any community concerns. Details of these meetings can be found here:

https://www.gov.uk/government/policies/helping-developing-countries-economies-to-grow/supporting-pages/enabling-the-continued-flow-of-remittances

The community and the UK Government are determined to work urgently with industry representatives to ensure that up-to-date information is available about remittances and charitable transfers in this rapidly evolving market. At present, the Government understand that:

all members of the Somalia Money Services Association (SOMSA) are sending remittances to Somalia and have secure options for remitting cash deposits; and

a number of other MSBs are operating in the Somali corridor, some using technological solutions.

In order for community members to find a solution which works for their specific situation, the UK Government have ensured that more information about these options is available from Somali Matters and the International Association of Money Transmitter Networks (IAMTN). Both SOMSA and IAMTN have agreed to keep this information updated on the following websites: http://www.somalimatters.org/ and http://www.iamtn.org/

We also understand the community’s concerns about the current humanitarian situation in Somalia.

The UK is one of the largest and most active donors to the humanitarian response in Somalia. The UK has an agreed four-year £145 million humanitarian programme. UK funds are currently supporting emergency nutrition interventions, livelihoods and resilience building through a number of partners, including international and local NGOs, the International Committee of the Red Cross and UN agencies such as UNICEF, FAO and WFP.

As part of the existing humanitarian programme, an internal risk facility has been established to support partners in the unfortunate event of any crisis. We have approved £10 million per year contribution to the internal risk facility.

In conclusion, the money remittance sector provides important services to communities and businesses in the UK, and in some instances is the only means of sending money to vulnerable communities overseas. There are risks for the MSBs themselves and for banks operating in these remittance corridors. We are urgently working with service providers to provide an environment where these risks can be managed so that the flows of money continue.