The British government needs to act now on money transfer firms

By: Rushanara Ali MP

What would you do if your ability to support your family was suddenly taken away?

That is the reality facing many of my constituents. It is also the nightmare scenario facing thousands of families across the UK, following a decision by Barclays Bank to remove the bank accounts it currently offers small money transfer agencies. You might not have noticed them on your local high street, but these small firms, rooted in communities, are often the only means of getting funds abroad cheaply at low cost to remote places where there isn’t access to banking in places like Somalia. Many communities need these firms to send their loved ones small amounts of money, or remittances, for example during Ramadan when British Muslims alone give £100 million to charity and family members. Dozens of these small British businesses face closure next month and over 3,500 British jobs could be lost.

But the problem is greater than jobs under threat. It is also bigger than threatened charitable giving. Remittances support millions in the developing world and greatly reducing the amount of money the UK would otherwise need to give to developing countries in order to boost their stability, development and growth. The global remittance economy, in this way, has a hugely positive impact worldwide and has helped keep millions out of poverty.

A local community activist, Ayan Mahamoud, told me that it’s Somalia and Somaliland that will be the worst hit by this decision: “There is simply no other legal way of sending money to remote areas in Somalia” she told me, and she’s right. Somalia has no banking system and international aid charities rely heavily on small money transfer firms too. Ayan said: “We’re not just talking about families helping each other, we’re also talking about humanitarian aid organisations like Oxfam who use these services.”

Somalia is one of the poorest countries in the world, and the Dahabshill money transfer firm in my constituency, for example, is one of the only ways to send money there. Without banking facilities, Dahabshill would not be able to continue trading and now may have to close.

That is why I and 46 other Labour MPs have written to Barclays and the government in order to ask for at least a six month delay in closing these accounts. If it is serious about promoting small UK businesses and jobs at home while a viable solution is found as well as enabling people to support loved ones, we need this government to act now. That is why, this month, I also called for a debate in Parliament on this topic. During that debate, I and my Labour colleagues called on the government in the strongest possible terms to be explicit about what it will do to save these firms, protect British jobs and businesses, and reduce the negative impact on the families of British people living in the developing world.

Of course, Barclays is not taking its action without its own reasons. The bank is stating concerns that some money transfer agencies might not have the proper checks in place to spot criminal activity. The bank’s decision also follows the imposition by US authorities of a $1.9bn fine on HSBC last year for poor money laundering controls. That led HSBC to say it would get out in of the money service sector entirely. Of course, it is only right for Barclays to review of its procedures and take action against any criminal activities. But taking such a draconian action means that potentially millions of innocent people across the globe will have their financial lifelines switched off.

The issue boils down to this: if Barclays’ hands are tied by US regulation, we need to find a way for the British government to find a solution for British people. So far, the government has been slow to act. Given that August is the deadline facing many of these businesses, I hope it won’t be too late.

We need to protect the UK remittance industry. People have a right to help their families, wherever they are in the world and especially if they live in places that are hard to reach or far less fortunate than the UK. The effect of floods in Pakistan in 2010, for example, would have been far more harshly felt without cash donations from family members in developed countries.

Overall, remittance flows from the UK reached $3.2bn in 2011 and $530bn worldwide in 2012. That sum is greater than the world’s development aid budgets put together. While remittances cannot replace investment or aid, it’s very clear that they complement long-term international development.

There is no more effective lifeline for the developing world than remittance flows. Thousands of British jobs are at stake. The next step is in the hands of this government and regulators working with the banks. Let’s see if the government is serious when it says it’s dedicated to protecting small firms and businesses in Britain.

Rushanara Ali is MP for Bethnal Green and Bow and Shadow Minister for International Development.

This article was published on the LabourList.