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July 26, 2013

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Remittances decline feared if UK money transmitters blocked

Remittances decline feared if UK money transmitters blocked
LONDON: Around 200 Pakistani money-transfer agents could be severely affected, more than 5,000 staff employed by them could lose jobs and Pakistan itself could face fall in remittances from Britain if Barclays Bank’s recent decision to withdraw banking facilities from approximately 70 per cent of UK money-transfer firms goes ahead.
Pakistani money transmitters are complaining that while Indian and Bangladeshi financial institutions have come to the aid of their money transmitters in Britain, the response from Pakistan has been missing completely and not a single bank or the government body has uttered a word to support their clients in the UK.
Barclays claims it is withdrawing the accounts of agents following a routine review of its anti-money laundering and counter-terrorism policies, but will not tell firms what extra controls would meet its requirements. Its understood that the UK bank is acting on advice of the US baking regulators but the decision of Barclays is strange because money-transmitters from the UK are already regulated by both the Financial Conduct Authority (FCA) and Her Majesty’s Revenue and Customs (HMRC).
After the bank announced its plans, money-transfer firms, especially the ones owned by Indians, Pakistanis and Bangladeshis, have protested that since other banks are refusing to offer new accounts and that will lead to thousands of people losing jobs and communities will suffer as those sending money abroad are forced to use a handful of giant US money-transfer providers.
A meeting has been held at the House of Commons in which MPs from cross-section called on Barclays and other UK banks to change their minds. An estimated £5.74 billion is sent from the UK each year to countries as diverse as Pakistan, India, Bangladesh, Poland and the Philippines. If the decision is not reversed then the customers will be forced to use a handful of US-registered providers led by companies such as Western Union.
UK’s remittance market is centred on migrant communities who regularly send money back to friends and family. In the case of Pakistan, it’s widely known that the country cannot function without help from remittances Pakistani diaspora sends back home.
Money transfer agents fear that migrant communities will face significant disruption. Well-known Pakistani money-transfer agent Arif Ali from Ilford, East London, said that money transfer agencies run by immigrants provide fast, reliable and cost-effective service. He said that if customers are forced to send money through expensive means then there is every likelihood that unregulated ‘Hawala’ operators will come into action and customers will look to send money through cheap means.
He said that the money transmitting sector plays a crucial role in supporting the economies of all the developing countries and depriving them to do so will have consequences for millions of people.
Qaiser Ali Syed, a Pakistani money transfer agent in London, said that for the last few years money transmitters and PRI joined hands and created a lot of revenue for the State Bank of Pakistan as well as a boost in the foreign exchange reserves crossing the three billion mark, per annum. “If services were discontinued in the UK there will also be decline in foreign exchange which will not only have an impact on the State Bank of Pakistan but also a major impact on the already fragile economy. We would request the state bank to release the rebate and give us what is owed.”
Dominic Thorncroft, Chairman of the UK Money Transmitters Association (UKMTA) which represents the sector said: “Barclays and the banking sector as a whole is denying the right of legitimate, regulated and profitable businesses to trade. We’re calling on the banks, the FCA and the government to start talking about how responsible firms can obtain an account.”
According to World Bank Bilateral Remittances Matrix, 2011, Indians in Britain send £3,904m to India through money transfer agencies (16.85%); Nigerians send £3,883m (16.76%); Pakistanis send £1,341m (5.79%); Bangladeshis send £740m (3.19%). 63% of money is sent through cash; 17% is account-based services; internet services is £15 percent. Of the total amount sent, UKMTA members send around 40 percent; 55 are US registered chains, 17 percent is bank transfers and 15 through other means.
Barclays stresses that their decision to close money transmitter bank accounts in the UK was part of a global decision in relation to reducing risk to the bank in the payments sector and that there are extreme negative consequences for Barclays elsewhere if a firm they bank in the UK is implicated in financial crime.
Rushanara Ali (Bethnal Green and Bow MP) said in the parliament that remittance plays a vital and complementary role in helping to lift millions of people out of poverty across the world. “It helps save lives in the Indian subcontinent, for instance in as 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,” she added.
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