Money Transfer Accounts

Stephen Doughty 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.

[Hugh Bayley (in the Chair)]

I should do a commercial between each speech: the Minister is asking to have a little more time, if possible, so that he can better answer your questions. I leave that thought in your minds.

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

I am grateful for this opportunity to speak under your chairmanship, Mr Bayley. I, too, add my thanks and congratulations to the hon. Member for Bethnal Green and Bow (Rushanara Ali) for securing this important debate. We have had a number of discussions on this issue already, and I look forward to continuing to have those discussions with her. I know that this is a very important issue for her and for all of us in this Chamber and beyond, and I welcome this opportunity to respond.

This issue is of concern to Ministers across Government and to hon. Members on both sides of the House, because a healthy, functioning remittance sector is crucial for the thousands of our constituents up and down the country who use such services to send money abroad. If you will allow me, Mr Bayley, I would like to speak for a moment about my gran. My gran—my mother’s mother—has been receiving remittances regularly for more than 50 years, since my parents first arrived in our great country and settled, first, in Rochdale. She continues to receive the benefit of remittances. When I first visited her while I was growing up, one of the things that I noticed was that she lives in a very remote village in Pakistan that has no bank. I think that the nearest bank is at least 10 miles away. She is unbanked. There were only a few remitters, at least to begin with, many years ago, that could get money to my gran. I mention that only to show that, at a very personal level, I do understand this issue and how important it is in Britain and particularly to British individuals such as myself, who are from an ethnic minority background.

The sector plays a crucial role in supporting the economies of all the developing countries that have been mentioned today that receive these funds. We all want to see a healthy remittance sector, but we also want to see a legitimate remittance sector. Our banks and regulators have a real responsibility to ensure that they are not inadvertently facilitating any kind of criminal activity. That could be money laundering, drug trafficking or the financing of terrorism, some of which we have heard about today. All are activities that pose real threats not just to UK citizens, but to global security. Of course, there is a fine balance to be struck between managing those risks and ensuring that essential services are still available to families in the UK. I would like to reassure hon. Members that we are committed to getting the balance right. This afternoon, I will set out some of the steps that this Government are taking towards ensuring a robust and sustainable remittance sector.

We recognise the role of Government in effectively supervising and regulating the money service business sector to help to drive up standards in this area. Last year, we strengthened the Money Laundering Regulations 2007, with a particular view to helping Her Majesty’s Revenue and Customs, as the relevant regulator, to strengthen its supervision, and HMRC is making every attempt to close down those businesses that are engaging in criminal activity and tarnishing the sector as a whole. Last month, it worked closely with the Metropolitan police and the Serious Organised Crime Agency to target organised criminals operating in this sector. However, in the longer term, proactive solutions must be found to avoid the need for such action in the future. The best way to achieve that is by creating a remittance sector in the UK that is trusted by all stakeholders and with which all banks can feel confident about doing business.

I have spoken with several of the leading high street banks—including, of course, Barclays—during the last few days. Some have expressed important concerns on the structural features of the sector and particularly on the issues surrounding transparency. I can confirm that I am looking urgently into what measures the Government might be able to take, and speaking to all relevant authorities to look at what options are open to us to try to allay as far as possible some of the concerns that those banks have expressed.

Separately, work has already been under way for some time through Project Quaver, led by HMRC and SOCA, on developing a healthy and sustainable sector. That project brings together the Government, law enforcement, regulators and industry to help banks and money service businesses to understand the risks that come from abuse of this sector, and to strengthen their compliance.

However, we recognise that having effective anti-money laundering and counter-terrorist financing procedures in place is not only essential to preventing, detecting and disrupting illicit finance. They provide the confidence for foreign investment and stable economic growth in many of the developing countries that have been mentioned. Developing effective regimes requires effective co-operation between the public sector and the private sector to understand and mitigate the threat of illicit finance, so under the UK presidency, the G8 has this year committed to launch a public-private sector dialogue on illicit finance, which will be held in Namibia in September of this year. That will not only help to tackle the issue of robust regimes in the traditional financial sectors, but address the opportunities and the risks posed by new payment methods, such as mobile money services. By bringing together private sector experts from around the world and Ministers and officials, the dialogue will be a unique opportunity to leverage expertise and drive reform that meets the specific needs that countries face, particularly in sub-Saharan Africa.

[Stephen Doughty]

rose—

[Kevin Brennan]

rose—

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[Stephen Doughty]

I thank the Minister for being very generous about interventions. Again, I am very interested to hear what is going on at international level—dialogues and so on at the G8—but, echoing the comments of my hon. Friend the Member for Cardiff West (Kevin Brennan), we want to know what will happen in the next couple of weeks, given what is happening on 12 August. I do not want to betray any confidences, but Barclays was offering a meeting at its headquarters. Will we see a meeting of the key stakeholders—the banks, the non-governmental organisations and the diaspora communities—in the next fortnight?

[Sajid Javid]

I think that both hon. Gentlemen knew that I was coming to this issue next. I am referring to the immediate effect of Barclays’ decision. I recognise that some of the things that I mentioned a moment ago, although very welcome, are long-term projects. In the short term, the Government are committed to doing everything that they can to minimise the impact on individuals and businesses in the UK of any immediate changes in this market. I understand that businesses in this sector will face challenges. That is why we are committed to working with the banks, trade associations and money service businesses to try to find solutions that do not mean extensive business closures. However, the truth is that we do not know what the full impact of some of the decisions that have been discussed here today will be. We are monitoring the situation and will continue to do so in the course of the next few months.