LONDON, 30 October 2013 (IRIN) – Never has the UK’s Somali community taken so much interest in a court case. Dahabshiil Holdings Ltd, by far the biggest company remitting money from the UK to Somalia, has taken Barclays to court to try to prevent the bank closing down its account, without which the company says it cannot legally continue to operate. Other remittance companies have already had their accounts closed, because of what banks say are security concerns about money laundering and terrorism.
Faced with this threat to the system by which they support their families back home, the community has mobilized on an impressive scale. And they have got the government involved. Rushanara Ali, the MP for Bethnal Green and Bow in east London, who has many Somali constituents, had been one of those leading the campaign. She told a recent public meeting on the issue: “Everyone understands that banks are under pressure from US regulators, but what we are asking is not unreasonable – simply that there should be a proper, safe way of getting money to loved ones around the world… But let me tell you, the UK government would not have taken an interest in this issue if you hadn’t exercised your political muscle.”
The protesters have lobbied Barclays Bank on a fleet of bicycles, handed a petition with more than 100,000 signatures to the prime minister’s office, and persuaded one of Britain’s best known sportsman to be the face of their campaign. Double Olympic gold medal winner Mo Farah comes from a Somali family, and says he too uses the money transfer services to help support his relatives. “Of course he does,” campaigner Sulekha Hassan told IRIN. “Any Somali who says they don’t use these services is lying.”
Barrage of indignation
The barrage of indignation, not just from the Somali community, but also aid agencies like Oxfam who use money transfer operations to fund their activities in Somalia, may have startled the government into paying attention, but Barclays, which was the last major British bank still willing to hold accounts for the money transfer services, has stuck by its decision.
Tom Keatinge, a former banker who worked on a government study of the issue, says it all goes back to the attack on the World Trade Centre.
“The amount of compliance work we had to do went through the roof. I counted up the number of terrorism finance and money laundering trainings I had to do over my last 18 months, and it was 15. We were told all the time, ‘Avoid any business that involves cash transfers. Avoid any business that involves third party involvement – in this case money going via Dubai to somewhere else.’… What’s happening now is collateral damage from a regulatory environment which has gone way out of control since 9/11.”
Keatinge told IRIN that banks like Barclays are not so worried about falling foul of British regulation; this is all about the United States. “I think if you look at the dominant pressure that global banks feel, that pressure is from the US. And access to the US market, the dollar market, is the lifeblood of many banks. So from that you can deduce that while the UK regulator is important, the existential regulator is the US.”
The irony – not lost on the government – is that the demise of large, visible, regulated companies like Dahabshiil will only result in money going through less visible channels.
Oxfam’s Ed Pomfret says it does not make sense to say you want more control and transparency, while closing down the only regulated channel. “The only result will be more money moving in suitcases.”
Procedures being tightened
The response from the industry and the British government has been to try to tighten procedures to allay the banks’ fears. The money transfer companies in the UK already go beyond legal requirements and demand proof of identity from everyone sending money, even small sums. They say they will do whatever is necessary to comply.
Meanwhile, the government has set up an action group involving all concerned government departments. These have been given a work plan which will include the Treasury increasing its supervision of the companies and working with them on training and improving their skills. The National Crime Agency will share threat assessments with banks entering the money transfer market and provide them with alerts on risks within the sector. And the Department for International Development, DFID, is to work on setting up a “safe corridor” pilot for Somalia, along the lines of a system already working for Pakistan, which will track payments right through, from sending, through clearing to eventually receiving the money.
But to get this in place is going to take around a year. How will people be able to send money meantime? Well, having their own bank account is only a legal requirement for the larger money transfer companies, those handling more than three million euros a month (just over US$4 million) – which between Britain and Somalia at the moment is only Dahabshiil. Smaller companies are allowed to process their transfers through a “wholesale” Money Service Business – as long as these MSBs remain willing to work with them. But the Somali Money Services Association, SOMSA, warns that these cash processing companies are also starting to come under pressure from their own banks to stop handling transfers to Somalia.
Aid agency payments – OK
NGOs should be all right, because Dahabshiil says it has found a small UK bank willing to handle aid agency and corporate payments. And one company will be able to continue operating because it does not deal with cash or rely on banks, but instead sends money to mobile phones, using the international telecoms infrastructure. But this at the moment is only practical in Somaliland, where mobile cash transfers are already commonplace.
The bigger unresolved question is whether, even when a safe corridor has been built and all the new safeguards are in place, the banks will be willing to get back into what is, after all, only a modestly profitable business. What if they still refuse to reopen the accounts? “They could still do that,” the chairman of SOMSA, Abdi Abdullahi, told IRIN. “And it’s very likely. We’ve been asking then what we should do. We are ready to do anything that is do-able, but they won’t give us any criteria.”
Responding to a change.org petition, Barlcays said it “remains committed to responsibly supporting the remittance industry and we recognise the benefit that money transfer firms provide to local communities around the world. We are happy to continue to serve companies who, in our opinion, have sufficiently strong anti-financial crime controls and meet our eligibility criteria.”
In a separate public statement the bank said:
“In recent months we have had to take some difficult decisions around money transfer businesses. We understand and appreciate the important role these businesses play in helping people to transfer money around the world, in some cases to places where there is great need of financial support. However Barclays has an obligation to operate within the rules and regulations set by governments and regulators in the countries in which we do business. Failure to do so would result in Barclays being prosecuted by regulators around the world and potentially fined many hundreds or potentially billions of pounds.
“Money transfer businesses are a particular focus for regulators given the risk of them being used for money laundering or funding terrorism. We deeply regret that any client has to look for alternative banking arrangements, however Barclays’ stakeholders rightly expect us to do our best to uphold the law and the regulations.”
So what then? There is the interesting precedent of Huntingdon Life Sciences, a company which uses animals for pharmaceutical testing. When, in 2001, it became “unbankable” because of pressure from animal rights campaigners, the Bank of England – which is not normally a retail bank – provided banking facilities to prevent it going out of business. Abdi Abdullahi says SOMSA has asked the government to facilitate the temporary provision of banking services, either with the Bank of England or with the Royal Bank of Scotland, which is currently 80 percent government owned. But so far, he says, the government has not responded.