International Money Transfer Charges

Andrea Leadsom Excerpts

Wednesday 17th December 2014 Westminster Hall

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

It is a pleasure to serve under your chairmanship today, Ms Dorries. I thank the right hon. Member for Dulwich and West Norwood (Dame Tessa Jowell) for raising such an important topic. I say to her, first, that it has taken up a lot of my time since I have been in this role. It is a very complicated issue and it is very important to me that we get it right.

I also congratulate the right hon. Lady on raising the issue with the Prime Minister at Prime Minister’s questions earlier today. As he set out, the Government are acutely aware of the importance of remittances from UK residents that are sent to their family and friends in developing countries. Annual remittances from the UK amount to more than £15 billion. In the specific case of Somalia, remittances support nearly 3.5 million people and account for approximately half of Somalia’s gross national income. Since I came to this job earlier in the year, I have therefore personally been making sure that the Government are doing everything we can to ensure that remittances continue to flow through accessible and secure channels from the UK to all regions of the world.

The House will be aware that transparency of fees and charges for financial services products and competition between providers are key priorities for the Government. Increased transparency promotes greater competition, it provides better outcomes for customers, and it helps strengthen people’s trust in financial institutions—it is fair to say that that has been somewhat shaken in previous years. Therefore, it is my firm belief that greater competition as a whole in the financial services industry will lead to greater innovation, and ultimately to better outcomes for customers.

We have put in place a huge range of programmes of reforms to support greater competition in banking. That includes putting competition at the heart of the regulatory system, with statutory competition objectives for both the Financial Conduct Authority and the Prudential Regulation Authority. Very importantly, we have created the new Payment Systems Regulator, which will come into its full powers on 1 April 2015.

The PSR has three statutory objectives: first, to promote effective competition in the markets for payment systems and for services provided by those systems; secondly, to promote the development of innovation in payment systems, in particular the infrastructure used to operate payment systems, in the interest of customers; and thirdly, to ensure that payment systems are operated and developed in a way that considers and promotes the interests of customers.

Coming back to the specific issue that the right hon. Lady raised on the cost of remittances, I am aware that my ministerial colleagues at the Department for International Development have been considering the cost of money remittances, and they have already taken action to reduce fees. That includes action to improve the transparency of fees by supporting the pioneering price comparison website sendmoneyhome.org to increase transparency around remittance transfer costs and to stimulate competition. The average cost of sending £100 has fallen by 5.6% across 11 countries and by 28% to India. The web platform has now become fully commercialised and has been replicated in France, Germany, Italy, the Netherlands, Australia and New Zealand.

DFID has been taking action to improve inter-market co-operation. Between 2009 and 2015, DFID will support the FinMark Trust in its drive to reduce the average cost of remittance transfers from South Africa to other Southern Africa Development Community countries by 30% by 2014.

Given the concerns rightly raised by the right hon. Lady today, I plan to write to my ministerial colleagues at DFID to ask that we work together to think about what more can be done and particularly to seek an update on the points she made about the Brisbane G20 discussions. However, as I have said, this is an extremely complicated issue. She is fully aware that in recent years we have seen growing concern among banks globally about money laundering and terrorism financing, and, of course, the very real possibility of potentially crippling enforcement action against banks that fail properly to protect against these risks. The money service business sector has been particularly affected, as she knows.

The right hon. Lady mentioned the actions taken by the hon. Member for Bethnal Green and Bow (Rushanara Ali), and my hon. Friend the Member for Ealing Central and Acton (Angie Bray) and many other colleagues have also brought this issue to the attention of the House on a number of occasions.

I know that the right hon. Lady is also aware of the action group on cross-border remittances, which was set up at the start of 2014 to seek to address this worrying trend towards debanking the money service business sector. The action group is composed of Government representatives, banks, money transfer operators and industry associations. It has initiated a number of important activities to revise guidance on compliance with the money laundering regulations; to improve the understanding of money laundering and terrorism financing risks; importantly, to sustain the flow of remittances from the UK through formal channels; and particularly, to improve trust in the remittance sector.

Our banks and regulators have a very real responsibility to ensure that they are not supporting activities that could pose a threat to British citizens and undermine the progress that developing countries are making. The right approach to tackling these threats should effectively deter, detect and deal with those who seek to use the financial system, including money remitters and banks, to launder money or fund terrorism. At the same time, it should protect and support legitimate businesses and, in particular, critical lifelines for countries such as Somalia.

In conclusion, as the Prime Minister set out earlier today, this is a very complicated area, but I would like to reassure the right hon. Lady that the Government are committed to doing what we can to keep remittances flowing and the costs down.