Damned if they do, fined if they don’t

Poor old Barclays.  On 10 July 2013, it was reported that the bank had decided to close about a hundred accounts held by various money service businesses which regularly send money to Somalia, because of (to quote the BBC article) “fears they are being used for money laundering”.  Since then, Somalis living in the UK have been campaigning to have the decision overturned, claiming that Barclays is cutting a vital lifeline between expatriate Somalis in the UK and their families back home.  The largest such MSB whose account is being closed, Dahabshiil, warns that the closure of its account at Barclays (and therefore its business) could force Somalis to turn to “unregulated and illegal providers”.

But let’s just look at this from an AML perspective.  Somalia is at the bottom of almost every ranking you can imagine, including the Transparency International Corruption Perceptions Index.  I’m guessing here (as there is nothing on the Barclays website by way of a defensive press release) that the Somali MSB business from companies such as Dahabshiil is not particularly profitable.  I should imagine that someone inside Barclays has done the sums and realised that the enormous amounts of due diligence that would be required just cannot be funded.  The answer, of course, is for these MSBs to up their game.  In a Guardian article supporting the call for Barclays to reconsider, the writer observes that “two remittance agencies, Moneygram and Western Union, will remain unaffected by the Barclays move.  But though they are the major players, their charges are often higher than the other operators, and they simply do not have the reach of some of the other agencies.”  I’m guessing that their charges are higher in part because they spend more on due diligence – and in turn, Barclays feels able to continue taking the (slightly reduced  when compared with, say, Dahabshiil) risk of doing business with them.

I sympathise with the customers of Dahabshiil, I really do – as with all money laundering prevention steps, 99% of the people affected are entirely honest.  But what if Barclays said, oh, go on then, there’s not much by way of due diligence, but people really need us to keep open this conduit for money to flow between the UK and Somalia.  Is the FCA really going to accept “But the Somali community wanted us to” as a reason for ignoring due diligence obligations and sensible risk-based removal of potentially dangerous exposures?

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3 Responses to Damned if they do, fined if they don’t

  1. Richard Fuller says:

    The sector is legal and regulated. Any business that is legal and regulated should have the RIGHT to a bank account. If Barclays deems it risky and an administrative burden, then impose appropriately proportional bank charges, but don’t create an anti-competitive market by closing the ‘little guys’. This is now extending beyond money remitters to cheque cashers, as well. People who have had years’ long relationships with Barclays are having the rug pulled out from under them without proper explanation, chance to appeal, or enough notice to find an alternative account. No wait – there aren’t ANY BANKS out there willing to accept new accounts in the sector, so there won’t be an alternative account. It is shameful. Many people, who run honest businesses, are losing their livelihoods because the banks can’t be bothered to work with these account holders to come up with a viable solution.

  2. Dear Richard
    Thank you for getting in touch. You make some excellent comments, but I should think that the banking sector would disagree with you about a bank account being a RIGHT. It is a service like any other, and – unless the government provides it – it must be down to individual commercial providers to decide who to take and keep as a customer. It is akin to shopkeepers and publicans being able to refuse service.
    That said, I know that the UK government (and others) are keen to ensure that we do not create a class of “the unbanked” – if you do a Google search on “financial exclusion”, you will find plenty of discussion on this matter.
    I agree that those already holding accounts should be given proper notice of the withdrawal of services – I do not know what T&Cs they signed when opening the accounts, but Barclays may be at fault if they have not given the required period of notice.
    Best wishes from Susan

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