Barclays under fire for “outrageous” remittance closures

Barclays’ impact on global remittances was discussed in Westminster Hall

At a passionate debate in Westminster this week MPs, led by Rushanara Ali, member for Bethnal Green & Bow, called for government action in the wake of Barclay’s recent decision to close accounts for a large number of small payments businesses in the remittances sector.

In May, Barclays completed a review of its anti-money laundering policy, in which it determined that some 250 customer companies no longer met its criteria, of which approximately 80 are active in the remittances sector. These businesses were given 60 days’ notice, and sent letters informing them of the decision. Though Barclays would not provide the full set of criteria, Banking Technology has learned that features such as the presence of a full-time member of staff to handle AML, and the transaction history of the firm are among the factors considered.

The MPs raised the matter in a Westminster Hall debate in the hope that government ministers will be able to exert pressure on Barclays to grant a six-month extension to the affected businesses. Ali expressed concerns that the decision by Barclays would jeopardise families in developing countries such as Somalia, which rely extensively on remittances from family members in the UK and elsewhere for their income. Remittances account for approximately one-third of Somalia’s GDP, according to figures provided by the World Bank.

“I have deep concerns about 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,” she said. “Barclays has said to me that it is concerned about only the 1% of companies that represent 46% of the problem. Government assistance should be provided to address that 1% rather than involving the 99% that do not pose a problem. 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.”

Other MPs voiced concerns about the ability of the affected firms to find an alternative provider, especially given similar moves by HSBC earlier this year to close customer accounts. Simon Danczuk, Labour MP for Rochdale, cited the example of Shamshad Ali, who runs a money service business called Sterling Currency Exchange Ltd and is the general secretary of the remittance association of the United Kingdom.

“HSBC decided unilaterally to close his bank account, because it no longer wished to operate in the sector,” said Danczuk. “I worked with Shamshad to get the bank to change its mind, but to no avail. He and I then worked together to find an account with another bank, again to no avail. We tried the Royal Bank of Scotland and NatWest, both funded through the public purse and in receipt of much public money, but they too refused him. He now has to operate his business in conjunction with another business, which still has an account with Barclays—but time is running out, and that might well end as well. The Government need to know about the serious consequences, which include the closure of good businesses at the cost of many thousands of jobs throughout the United Kingdom and certainly of a number of jobs in Rochdale.”

Rushanara Ali: deep concerns about UK remittances

Danczuk added that instead of using a “good local firm that follows the rules”, customers will have to use services such as Western Union or MoneyGram, where they would have to pay £20 instead of £5 and get a less competitive exchange rate. “It can only be described as outrageous,” he said.

“Why are Barclays closing these accounts when they’ve made these businesses pay thousands on compliance. Why are Western Union and MoneyGram not affected? Will the banks themselves be benefitting from doing this kind of business. It will push business underground and feed criminals.”

Barclays claims that of the 80 money transfer firms affected, the majority have already found an alternative provider. It estimates that around 20% of firms were unable to find an alternative within the 60-day period, and says that these firms received an extension, normally of one month. Barclays says it has not closed any of the affected accounts, despite the expiry of the original deadline.

“We are speaking with remittance industry bodies to support them in finding a solution for global remittances given the regulatory and financial crime pressures upon them,” said the bank in a statement. “In the meantime, to assist customers find alternative banking services, we have given them double the normally permitted time, and are extending this where it is appropriate to do so. Only a small number of money remitters we are not comfortable in banking have asked for an extension, and they have all been given more time to find another bank.”

Industry body the British Bankers’ Association is due to hold a meeting with government representatives on the issue in the coming weeks.