Money Transfer Organisations

Rushanara Ali Excerpts

Tuesday 9th September 2014 Westminster Hall

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Streeter.

I am extremely grateful and delighted that we have a chance to debate the important issue of international finance and money transfer organisations. The new Minister’s predecessor, the right hon. Member for Loughborough (Nicky Morgan), was extremely supportive in responding to and working with officials and many Opposition Members to try to get a lasting solution to the challenge faced by money transfer businesses, which need banking facilities to ensure that remittances can be sent to developing countries, particularly to support family members and economic and humanitarian development. I hope that the Minister will update us on the progress that her Department and other Departments have made on trying to come up with a workable and effective solution that will ensure that the sector gets the support it needs and that there is greater transparency on the actions of banks and on how they enable remittance to flow safely.

In June 2013, Barclays bank announced its decision to close accounts held by community-based money transfer businesses. A number of the affected businesses were in my constituency, which is how I got involved with the campaign to build support in Parliament and across the country. I am grateful to some 50 hon. Members on both sides of the House who joined the campaign, who spoke in community meetings with Ministers and who supported me and others in setting up the “Save Remittance Giving” campaign, which has commanded the support of some 122,000 people who signed the petition to highlight the concern about the ending of banking facilities for the many UK money transfer businesses that were trying to get help and support to people in developing countries. We were fortunate in having the support of not only parliamentarians but people from community groups—particularly in the British Somali community but also in the British Asian community and many other diaspora groups and ethnic minority communities—and, more broadly, from the media and non-governmental organisations such as Oxfam and, of course, the Overseas Development Institute, both of which lent their expertise and are examples of how important remittance is in complementing development aid efforts.

The flow of remittance from the UK to people in developing countries accounts for more than £15 billion each year, and the vast majority of those transactions are made by people to poorer family members and to remote places across the world in the form of food, medical aid and assistance. The transactions can help to build schools, hospitals and roads. Many hon. Members on both sides of the House have visited countries, working with their constituents, to see some of those projects happen because the British ethnic minority and diaspora communities have contributed directly to develop their countries. That is particularly the case in countries that have come out of conflict and are trying to rebuild. Somaliland, which is the beacon of a region that is trying to rebuild after a conflict that affected the region’s fate for so long, is one such example. Many of my constituents who are originally from Somaliland have worked tirelessly to raise money and find appropriate ways to get remittance into Somaliland and beyond, particularly during the east African famine crisis, to support people and help rebuild their country.

The stakes are incredibly high, not only for development and developing countries but for us. If we do not have legitimate ways to ensure that ordinary people can get support to their family members and the societies that they have come from, so making their contribution to rebuilding those countries, we will miss out on an important opportunity to ensure that remittance can play a significant role not only in the past but in the future.

Governments across the world have faced pressure to reduce their aid budgets, and our Government have faced that pressure from certain sections of the media. I am glad that the aid budget has not been reduced, and I hope that on Friday the International Development (Official Development Assistance Target) Bill, which would legislate for a development aid target of 0.7%, takes a step closer to being enshrined in law. Successive Governments across the world have faced pressure on their development assistance budgets, and we all know that, combined across the world, remittance eclipses the world’s combined budget for overseas development assistance. This is not about small amounts of money going to individuals, although that is important; it is about the collective effort that citizens make to support family members and fellow citizens across the world, particularly in the poorest countries.

Last year, following the campaign, following the efforts of communities across the country and following the media attention, we encouraged Ministers in the Treasury and in the Department for International Development, working closely with officials, to find a long-term solution to the problem, so that money transfer businesses can be given the bank facilities that they need. Without access to clearing banks, it is virtually impossible to give assistance, particularly to countries without a proper banking system.

I am grateful to the Minister for continuing the effort to try to establish a process through the action group on cross-border remittances. As the framework set out, the process needs to be robust, effective and safe. Will she provide an update on that process? I thank her for keeping us updated. My understanding is that the safer corridor pilot will be implemented in September and that, subject to the effectiveness of that pilot, further action may be taken to roll out the facility to other countries in which the problem has arisen.

We need to act quickly because if citizens are left to their own devices to get help to their families in places such as Somaliland, Somalia and elsewhere—countries that have no banking system and no proper provision, and about which there are terrorism and security concerns—without the support of safe routes through money transfer companies, they are more at risk of having their money hijacked, which is not only dangerous and damaging for those affected but can have major ramifications for our security. There is a clear economic and humanitarian dimension, but there is also a security dimension.

In the wider context, many parts of the world are undergoing humanitarian emergencies. Families want to get help to loved ones in post-conflict and conflict-affected states, whether they are in Afghanistan, Somalia or beyond, so we must ensure that there is a way for them to do so. We must also ensure that non-governmental organisations can get assistance in countries where remittance facilities are not available. For example, Mo Farah, double Olympic winner, joined our campaign because his country is affected but also because the Mo Farah Foundation is in exactly that position. Aid agencies have a vested interest in ensuring that facilities that work are set up.

I hope that the Minister will use this opportunity to answer our questions. First, although the pilot is welcome, there is an urgency to the situation of money transfer businesses that have been operating successfully but that now face the prospect of banking facilities being made unavailable to them. That has already happened to some of them. There is a gap before a new facility is introduced, and they are unable to access banking facilities in the meantime, so their businesses could go bust. Therefore, no such businesses could be left operating in some countries. Essentially, we face the possibility that a facility that can have a powerful and positive effect will be made available too late. Will the Minister update us on whether she has had any success in her Department working with the Foreign and Commonwealth Office to ensure that the banks that have withdrawn or threatened to withdraw provide a further period of reprieve until the pilot is tested and can be rolled out and until the final programme is in good shape and lessons have been learned?

I am grateful that the World Bank has been drawn into the discussion and is a member of the group. It has an important role to play in co-ordinating efforts and getting the US Treasury involved. What role has the World Bank and the Minister’s Department played in discussions with the US regulators and US Treasury? Decisions made in the US on banking regulation have had a knock-on effect on our banks and their choice to withdraw banking facilities. It is critical to ensure that the UK and US Governments work together. Both countries, as well as other western countries, can benefit from a lasting solution, from the humanitarian, economic and security perspectives.

Our final questions are about the advice and guidance published by the Minister as soon as she took up her new ministerial position. It may be too soon to say, but how confident does she feel that the banking sector will see the guidance as addressing its concerns and that its confidence will be improved and increased, so that it can start to provide banking facilities to remittance businesses? Is an impact assessment process built in to see whether the guidance is having the desired effect of building confidence in the banking sector? I know from the feedback I have had that some money service businesses do not see any change. Can the Minister give any examples of banks that have come back and said, “Given this guidance”—I understand that it is legally binding—“we are in a position to provide banking facilities to MSBs that pass those tests.”? Are there any such examples, and are her officials working to establish that?

On the effort to build a commercial environment in which small and community-led businesses can operate, given that they have extensive and trusted community networks in the UK and the countries where they operate, how can we work with the grain of those networks, so that money flows transparently and in an appropriate and safe way that reinforces the kinds of safeguard needed by both the remitter and our Government and so that the money is not at risk of ending up in the wrong hands?

The debate has gone on for about 15 months now, since the day when Barclays decided to withdraw banking facilities from a number of money transfer businesses in my constituency and throughout the country. The sector creates 3,500 jobs, which are at risk, and it has been quietly doing important work to get help and support to millions of people in some of the poorest places in the world.

I believe that we have a once-in-a-lifetime opportunity to work together rather than saying, “The banks have decided that they will get big fines from the US regulators.” The MSBs predominantly have had nothing to do with that. The US regulators fined HSBC and other banks for their activities, and the banks have responded by trying to crack a nut with a sledgehammer, punishing the vast majority of MSBs, which are law-abiding. Many MSBs provide assistance to security services where necessary, by supporting them to tackle money laundering and terrorism, and work responsibly with our Government and agencies. It is vital to ensure that the sector is strong and can support people in developing countries.

This is also a once-in-a-lifetime opportunity to ensure that the pilot involving World Bank officials, Treasury officials and others, if it is effective, provides a tool to get money safely into post-conflict countries without banking systems. If the pilot is successful in Somalia, it might be applicable to Afghanistan and many other countries where money flows are happening, but we are not clear how, and where they could be fuelling terrorism and other activities that are extremely dangerous not only for those countries but for us. In that context, I hope that the Minister will seize this big opportunity for her, through her role and her brief, to develop a tool that could save millions of lives and improve security in our country.