Money Transfer Accounts

Yasmin Qureshi Excerpts

Wednesday 17th July 2013 Westminster Hall

[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 Other banks have already withdrawn it, so the suggestion that those small and medium-sized companies could go elsewhere is nonsense.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.

--- Later in debate ---

[Simon Danczuk]

That is exactly the point that I am leading on to. People in my community send money back to their families—in this instance, in my constituency, to Pakistan, Kashmir and Bangladesh. At this important time of Ramadan, as my hon. Friend the Member for Bethnal Green and Bow pointed out, people rely on the businesses that we are discussing to help them send charitable contributions to the countries from which they originate. We should not underestimate that. Friends and families out in other countries may be exceptionally poor and reliant on such charitable donations, in particular at this important time of year of Ramadan, to help them to celebrate Eid and to buy new clothes, so that they can have a reasonable time at a key point in the Islamic calendar. As a result of the changes, my constituents, instead of being able to use a good, local and independent firm, which complies with all the regulations, will have to use one of the banks, Western Union or MoneyGram.

[Yasmin Qureshi]

On the point about small businesses following regulations, may I share with my hon. Friend my experience of sending money abroad? In my constituency, the regulations are followed with passport copies, addresses and so on. Does he agree that it is disingenuous of the banks to use that as an excuse for not carrying out transactions for those companies?

[Simon Danczuk]

Absolutely. That does seem to be an excuse, and is the crux of where we are.

Another point that has been made clear to me is that without the small independent firms in towns such as Rochdale, my constituents, instead of paying a flat fee of £5 and receiving a good exchange rate, will have to use Western Union or MoneyGram, pay a flat fee of £20 and receive a less competitive exchange rate. They will have to use a less local and less personalised service and pay more for it. That is the consequence, which can only be described as outrageous.

I have some points for the Minister to consider. First, why is Barclays closing these accounts after it made businesses spend thousands of pounds on compliance? Secondly, why are Western Union and MoneyGram not affected? I believe that Western Union in registered in southern Ireland, not the UK, for tax purposes and perhaps that is an issue in its own right. Thirdly, will the banks benefit and start to do the sort of business that they are denying small independent firms from doing? The changes will push such businesses underground, which could feed the criminal fraternity. I urge the Minister to do all that he can to remedy the situation.

--- Later in debate ---

[Mike Gapes (Ilford South) (Lab/Co-op)]

I apologise to my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) and to the Minister. I have a Select Committee meeting at a quarter to 4 and hope that they will accept my apologies for having to leave.

I want to comment briefly on two things. First, my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) referred to the position taken by Ministers at the beginning of July; but unfortunately, I am going to disappoint him. I have received a letter dated 10 July from Lord Deighton, in response to representations that I made in June on behalf of constituents. He said:

“I hope your constituents will be able to secure banking facilities from another bank, or make alternative contractual arrangements, rather than close. I cannot oblige the banks to make facilities available. The choice of business customer is a commercial decision for banks to make.”

He simply refers to the fact that the Office of Fair Trading will examine support for small and medium-sized enterprises later in 2013.

As for the 12 August deadline, which businesses in my constituency face, I received a letter from a Mr Duale of the largest organisation that transfers money to the Somali community—other Members may have received the same letter—and it pointed out how just a few weeks after the international Somalia conference in London, when we pledged £180 million of support, the damage implied by the decisions that have been made could outweigh that increased support.

Other hon. Members have talked about the effects elsewhere. I have constituents in various organisations who are very concerned about the impact in countries all over the world. My constituent Mr Shah of Zak Money Exchange, Ilford lane says that the business could close and that eight employees would lose their jobs. He raised the same concerns that others have raised: why cannot the nationalised banks do more? Barclays may have got into trouble, and we have heard about Mexican drug barons and money laundering, but why cannot other banks do something?

Barclays’ reputational damage in this country is an issue. I suspect that many people who will be affected by what is happening will have bank accounts—their own commercial bank accounts for their small businesses, or personal accounts. It is not good for Barclays’ reputation if the perception arises among millions of British people that it has a down on the poor and on migrant communities. Barclays should consider that carefully.

As for Western Union, there is a wider issue to do with the relationship between the United States, the US authorities—perhaps in particular US jurisdictions—and their way of dealing with extraterritoriality. We have the potential through the forthcoming European Union-US negotiations, which are to do with trade and international co-operation, to exert pressure back from the European side. Britain is more significant than many European countries in such matters, but we should not ignore the potential to raise with the US authorities, at all levels, the effect of their behaviour globally on communities in the UK, in the wider European context and worldwide. That is a matter for another debate—perhaps tomorrow—but I want to highlight the need for us to be more robust about the issues.

It is true that we need to eradicate money laundering, crack down on terrorist and drug financing, and all the rest. However, an alternative to the present arrangements is that people will start to take money in suitcases through airports and smuggle it across borders, making themselves vulnerable to being taken prisoner—to hostage taking, banditry and piracy. That is a bigger global threat than some of the other problems that are cited.

[Yasmin Qureshi]

I should like to comment on the point about fears of money laundering and drug dealing. People in my constituency—I do not know about other parts of the country—who use small companies to send remittances are hard-working people who earn very ordinary amounts of money. They send very ordinary amounts: £50, £100 or £150. They do not send thousands and thousands of pounds, and therefore those small businesses feel insulted that somehow they are being tarnished by the suggestion that they are laundering money.

[Mike Gapes]

People are right to feel that way, because it appears on the one hand that Barclays and on the other that the Government do not care. The Minister says, “This is a commercial matter and we are not going to get involved.” However, Barclays, without giving reasons to people in small money exchange firms, is simply saying, “Sorry, we are no longer prepared to deal with you.” It is not saying that those people have done anything irregular or illegal; it is saying only that the facility is no longer available. That is terrible.

In a wider context, we have been criticising the banks for their failure to support small and medium-sized enterprises; yet it seems in this context that the Government are not prepared to get off their seat and do anything to help the poorest communities globally and the people in Britain who are trying to transfer money, which, as has been said, is a larger amount than the international development assistance that is transferred from states to countries and people in the poorest countries in the world. Instead, the Government say, “This is nothing to do with us. This is simply a commercial arrangement.” I am sorry, but that is not good enough.