Money Transfer Accounts

Rushanara Ali Excerpts

Wednesday 17th July 2013 Westminster Hall

[Hugh Bayley (in the Chair)]

Order. Colleagues who want to take their jackets off are free to do so.

[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.

[Yasmin Qureshi (Bolton South East) (Lab)]

I congratulate my hon. Friend on securing this debate. She mentioned that more than £2 billion in remittances is sent abroad. It is important to emphasise that although that is a large amount, people often send small amounts— £50 or £100—to their family. Small businesses are therefore incredibly important to people without a lot of means who send small amounts of money.

[Rushanara Ali]

My hon. Friend is absolutely right. The amounts of money are often small. People work hard to make a living and provide a bit of support. I know that because many of my constituents tell me stories about how they are supporting the education of distant relatives or immediate family members by sending them money every month. During Ramadan, which we are in right now, people have a duty to give charity, or zakat. They want to give it to people they know who are poorer, and not through charitable organisations, where administration costs are high compared with direct giving. There are many occasions on which people give small amounts of money. For example, the Muslim community in Britain contributes £100 million in charitable giving during the month of Ramadan alone.

A local activist in my constituency recently said:

“There is simply no other legal way of sending money to Somalia. If these firms are closed, it just means people will have to carry large amounts of money from airport to airport, and all that’s achieved is that everyone will end up a criminal.”

We cannot risk criminalising people who are simply trying to support their families.

Another major opportunity is at risk. Ethnic minority communities have insights and connections in their countries of origin. I see that in my constituency, as I know other right hon. and hon. Members do. They have insights into how to trade with their countries of origin, and affordable remittance facilities are critical to doing so. We are closing off opportunities for small businesses to operate and develop. It is also costing more than 3,000 jobs here in the UK and jobs in those countries.

[Mike Freer (Finchley and Golders Green) (Con)]

I congratulate the hon. Lady on securing this debate. She has explained the security issues created by driving remittances underground. Is it not also true that it could drive the business into the hands of the big American globals, wiping out our domestic small and medium-sized enterprises in the market? That is a dangerous step, which the Government should do all they can to avoid.

[Rushanara Ali]

Absolutely. I would be interested to hear whether the Minister has had any representations from such companies. I understand that some lobbying has been done, certainly in America. It would be useful to know whether he has had representations from bigger agencies, including MoneyGram and Western Union. One concern is that the underlying agenda is to shut down small operators because they do not charge as much and banks do not get as much revenue, and that this is about profit as much as anything else. We need clarity on the criteria that Barclays and other banks have used to stop providing banking facilities.

It is depressing that, unfortunately, the banking sector seems to have learned nothing from the past few years. Small community-based businesses are being hurt while they are trying to run decent businesses and support people. They should come together to consider how to address some of the underlying problems. We understand that there are grave concerns in the banking system about being fined by the US authorities. It is right that we should support the banking sector in ensuring that their due diligence processes are done, but that cannot be an excuse to shut down smaller companies just because they provide competition.

I will press on quickly to a few final points so that others can speak. Somalia presents a unique problem: it does not have a banking sector. That means not only that Somalia will be affected when remittance flows stop, but that humanitarian aid organisations such as Oxfam will lose the ability to send money to the region. Some 40% of people in Somalia who depend on remittance would be affected by that decision. Last year, the Somali authorities said that about $2 billion, or one third of the country’s GDP, is channelled to Somalia through small money transfer agencies.

The country has come out of a conflict that went on for a long time and cost many lives. It relies on the Somali diaspora around the world, who are working hard to rebuild Somalia and Somaliland. This decision would cripple the country. We cannot afford to let that happen, not least because it is in our interest to have a stable, prosperous and effective state in Somalia and Somaliland. That is what my constituents, many of whom are from Somaliland, want. I hope that the Minister will see the connection between this decision and its effect on undermining our aid and peace-building efforts in countries such as Somalia.

Although it could be said, and the Minister may have been told, that this is not as much of a problem for other countries that have a banking sector, the reality is—as he will know from his experience and background, as I do—that in remote places such as the Indian subcontinent, where we have our origins, during floods and in areas where there is no proper infrastructure and no proper roads, getting money to people is difficult. The banking sector is not localised enough. Banks such as HSBC might call themselves the world’s local bank, but they are not local enough. Our response must address the fact that it is impossible to get money to people, in particular at times of crisis, in countries throughout Africa, where there are still major infrastructure problems, and in many Asian countries, so that the banking sector—Barclays in particular—does not fob the Government off by saying, “Well, there are plenty of other operators available,” or, “The Government own a couple of banks, why don’t they to do it?” We need an industry-wide solution that is constructive and that safeguards the remittance industry and companies providing remittance services at low cost.

I have a few final points. On competition, I hope that the Government and the regulatory authorities will look closely at what is really going on. To what extent is this about trying to respond to the fact that these organisations are giving—to use a metaphor—the larger money transfer agencies a run for their money? To what extent is this about the regulatory pressures? I believe that to some extent it is. Where the regulatory concerns are legitimate and genuine, what can the Government and the regulatory authorities do so that we have a set of criteria for those companies to fulfil? Barclays and the regulators certainly have not provided any criteria or explained why banking facilities are being withdrawn. That is the least that these businesses should expect when they employ more than 3,500 people here in the UK and provide desperately needed assistance, not to mention trading opportunities between our country and developing countries.

I hope that the Minister will be able to look broadly at those interconnected issues. I have been told by his fellow Minister in the House of Lords that Barclays is merely making a commercial decision, but we have a responsibility to developing countries, where remittances support millions of people, taking pressure off our international aid budget. We also have a responsibility, if the sector is pretty much eliminated through those decisions, to ensure that money transfers and flows are not driven underground. How do the Minister and his colleagues in the Department for International Development intend to address this? Will he work with our American allies on an international solution, because we recognise that they are calling the shots on fines? Will he make representation to Barclays to provide six months of breathing room to allow the industry, working with the Government, to come up with a framework that can protect this vital industry?

As we speak, thousands of people are signing petitions; the diaspora community, in particular, and the aid agencies in the different sectors believe that people’s lives will be devastated. I hope that the Minister will work with the regulatory authorities on a solution—my colleagues and I are also happy to work with him—because we do not want to return to a debate in years to come and hear that, because of the decision today, many of the agencies stopped operating and people ended up being exploited. In some cases, money might be stolen—we have seen past examples of that—because the sector is not regulated at all, and in some cases remittances might end up in the hands of the wrong people, such as terrorists, and that would be a dereliction of duty on our part. The international community has a responsibility to ensure that people can get money safely and securely, and at an affordable rate, to their loved ones around the world.

[Hugh Bayley (in the Chair)]

I intend to start the wind-ups at 3.40 pm, which leaves us about 45 minutes. With six people wanting to speak, that works out at about seven and a half minutes each.

--- Later in debate ---

[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.