Money Transfer Accounts

Barry Gardiner Excerpts

Wednesday 17th July 2013 Westminster Hall

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

It is always a pleasure to serve under your chairmanship, Mr Bayley, and I know you take a great personal interest in these issues. I congratulate my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) on securing this important debate. I also congratulate other Members on the excellent contributions that we have heard so far.

I declare a number of interests. Like many other Members, I have a significant number of constituents from Somaliland, Somalia, Yemen, Pakistan, India, Bangladesh and Sudan. Those communities have a long and proud history in my constituency, and they all remit funds to those locations. I also declare an interest as the secretary of the all-party group on Somaliland and Somalia.

Some weeks ago, these issues were brought starkly to my attention by a number of the money transfer organisations involved in remitting to Somaliland and Somalia. A month ago, we had urgent discussions with the new ambassador to Mogadishu and with senior Foreign Office officials, so people have been aware of this challenge for some time, and I will return to that at the end of my remarks.

I want to underline how important remittances are and how crucial it is that we find a solution and get things right. Members have spoken of the value of remittances to individual families, who are often in difficult circumstances. Oxfam provided a helpful briefing, which said:

“in most cases, money received is used to cover basic household expenses including food, school fees and medical costs.”

It notes that, in a recent survey,

“one third of respondents said that they would not be able to meet these basic needs if remittances were stopped.”

That is in addition to the concerns Oxfam and other humanitarian organisations have about their ability to provide services if money transfer services are stopped.

Many hon. Members have mentioned the security and stability implications, particularly in the case of Somaliland and Somalia. The hon. Member for North West Norfolk (Mr Bellingham) eloquently noted that the changes could be a step back for the country, which is coming out of conflict and instability. That is certainly not what the UK Government want, particularly after the recent Somalia conference and the many other steps that friends of Somaliland and Somalia have taken to see the two countries progress.

Remittances are also a complement to aid. There are two crucial issues. This is not only about my constituents; it is also very much in the UK national interest to find a solution to this problem. Remittances play a crucial role alongside our aid moneys. In the end, we want to graduate countries out of aid and ensure that they can stand on their own two feet, so pulling the rug out from under a number of them in this way will be particularly problematic.

We have heard many of the figures already, but I want to reflect on a few of them. I have tabled questions to the Treasury, and the answers show that the UK remits upwards of $23 billion a year to third countries. Remittance flows globally are estimated at upwards of $500 billion. Those are huge sums and often dwarf aid flows to countries.

An answer from the Minister of State at DFID said that the Department estimated that Somaliland received upwards of £500 million annually, while 50% of Somalia’s gross national income came from remittances, which ultimately supported 3.8 million people. Those are huge numbers, so this is not a small problem—it is fundamental to the ability of these countries to be successful. As my hon. Friend the Member for Bethnal Green and Bow said, Somaliland and Somalia face particular problems, which need to be addressed. They do not have the services that are available in some other countries, and with 70% of money transfer services potentially affected by the changes, we really have a very large problem.

I do not think that anyone would disagree that we want safe and secure transfer methods for senders and recipients. There are also legitimate concerns about money laundering, terrorist financing and other issues, although only a small amount of remittances are affected by such activities, and the vast majority end up in the destinations where they belong. However, we really could be jumping from the frying pan into the fire. We could increase the security risk and end up with channels for transferring money that are not policed or regulated in the same way as existing channels. Individual constituents could be ripped off, as they are forced to use more expensive or less secure methods of sending remittances —indeed, there is the possibility of theft increasing and money going missing—rather than the reputable organisations that already operate in this field. With 70% of money transfer services potentially at risk from the changes, we have a huge problem.

As I said at the beginning of my remarks, I met Foreign Office officials and the new ambassador to Mogadishu some weeks ago. Since then, I have had discussions with the Minister and with other officials. I have also had discussions with Barclays itself. My hon. Friend the Member for Brent North (Barry Gardiner) and I secured a meeting with it the other week, and we had a constructive conversation, notwithstanding the criticisms and concerns that have been raised, a number of which Barclays must answer further questions on. To be fair, however, Barclays was constructive, and it did not just want to shrug its shoulders and turn away from the issue; it wanted to work with the Government and diaspora communities to find solutions.

I was therefore concerned when Barclays told us that it had written to the Treasury two weeks ago. I have the letter here, and it is dated 3 July. Indeed, Barclays has had other correspondence with the Treasury. I very much hope that the Treasury has responded by now. Barclays offered to sit down and have constructive discussions with the Treasury, the Foreign Office, DFID, the Home Office and all the other interested Departments to try to find solutions. This is really one of those cases where the Government have to step in.

[Barry Gardiner (Brent North) (Lab)]

We were indeed at the meeting together. It is a very constructive suggestion that there should be a round table with all the major banks, which can then work with Treasury to resolve the problem. It is unfair to load everything on to just one bank, which happens to be the last in line. The Treasury needs to address this issue very seriously. Mr Bayley, let me also apologise for coming late to the debate, owing to another commitment.

[Stephen Doughty]

My hon. Friend makes the point perfectly. As I said, there was a great willingness on the part of Barclays to sit down with Departments. I hope the Minister can reassure us by telling us what steps have been taken—perhaps in the past week—so that we can know that these conversations are going on and will involve all the crucial Departments. Obviously, numerous Departments, banks, organisations and Members have an interest in resolving this matter. Barclays had a number of technical solutions, which I was unable to comment on, but I hope that Treasury officials and the Minister might be able to.

I second the comments made by the hon. Member for North West Norfolk regarding the need for the Government to engage in urgent discussions with the United States, where a lot of the regulatory pressures are coming from, so that we can secure answers.

In conclusion, this is a huge problem with serious implications not only for my constituents and their families, but, ultimately, for this country’s national interests in international development financing and our security needs. We urgently need to find a solution because time is pressing and will run out at the end of August; otherwise we will find ourselves in a very difficult situation.

--- Later in debate ---

[Sajid Javid]

I will come to that point before I finish, but, given the questions asked today, let me say a few words about Barclays.

When I met Antony Jenkins, Barclays chief executive, we discussed its recent decision to end its relationship with a number of money services businesses in the UK and I tried better to understand its perspective. Although we did not discuss decisions taken on individual firms, I was reassured to understand that the recent review of its customers in the sector is being conducted on a case-by-case basis. I was also reassured that it is working with firms to manage the impact of its decision. He confirmed that Barclays will consider on a case-by-case basis extensions to any initial notice period it has given companies, particularly where those companies can show that they are in active discussions with other banks that may take their business.

[Barry Gardiner]

Will the Minister give way?

[Sajid Javid]

I do not have much time. A number of questions were raised by hon. Members, but I will give way very briefly.

[Barry Gardiner]

Without wishing to betray any confidence that Barclays relayed at the meeting with me and my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), it is clear that it has decided not to continue to do business with certain remittance companies, and, despite what the Minister has said about the assurances he received from the chief executive, that was made very clear to us in the meeting. The matter is much more urgent that the Minister is acknowledging.

[Sajid Javid]

I take those points on board. The hon. Gentleman is right to suggest that Barclays has made the decision. It is however showing flexibility over the timing of closing certain accounts, and that flexibility is better than no flexibility.

I shall turn to a few questions raised by hon. Members. The hon. Member for Bethnal Green and Bow asked whether I had received representations from the large money transfer companies. I have not received any representations from such companies. She also suggested—if I understood her correctly—that the banks’ behaviour could be anti-competitive. There is no evidence that banks are acting in concert or are distorting competition. They appear to have acted in accordance with their commercial interests and their desire to minimise risk.

The hon. Member for Rochdale (Simon Danczuk) asked why larger organisations, such as Western Union, are not affected by the decisions of the banks and whether the banks would benefit from the withdrawal of some services. The short answer to why some larger institutions are not affected is that their internal compliance procedures are in many cases similar to what the banks themselves adopt internally; in many cases, they spend more resources on compliance and transparency issues, which they are clearly in a better position to afford than smaller operators; and in many cases they are regulated differently. All companies are supervised by HMRC, but there is a difference between a company registered with the FCA and one fully authorised with it, and banks take that into account.

The hon. Member for Rochdale and others, including the hon. Member for Nottingham East, asked whether we were having discussions with the US. We work closely with the US Treasury and State Department at all times on all regulatory matters, including money transfer. It is important to point out that since many transfers are ultimately in US dollars, there is a US interest. Lastly, I asked the British Bankers Association for a round-table meeting and it has agreed. We will have one, the Government will of course take part and I look forward to it.