Memorandum submitted by the UK Money Transmitters
Association
"Evidence that that the UK high street
banks are discriminating against registered money transfer companies
wanting to open bank accounts—this leads to financial exclusion
both for the money transfer companies concerned and the individual
consumers who wish to send remittances"
INTRODUCTION
The present submission has been prepared by
the UKMTA, the trade association representing money transmitters
in the UK. There are around 1230 registered money transmitter
operators (MTO's) in the UK. These include well know names such
as Western Union, Moneygram and Chequepoint, which offer global
(or near global) coverage as well as small community based money
transmitters which may only provide services on one corridor (eg
India or Nigeria).
The UKMTA particularly represents smaller and
medium sized money transmitters and has around 350 companies in
its network. The money transfer sector is regulated by HM Revenue
and Customs.
The vast majority (85%) of UK money transfer
companies offer money remittance services, processing money transfers
on behalf of consumers (often migrant workers) wishing to send
remittances back to friends and family in their country of origin.
Most of these transactions are for small sums of a few hundred
pounds. It is estimated that the UK market for remittances is
£2.3 billion.
The money transfer market place is one of the
most dynamic UK financial sectors today and the UK government
has been seeking to encourage its growth. Reference is made in
this regard to the Chancellor's Pre-Budget Report 2005 which makes
explicit reference (para 5.148) to the importance of remittances
for development purposes.
MONEY TRANSFER
COMPANIES ARE
BEING REFUSED
BANKING FACILITIES
BY THE
HIGH STREET
BANKS
The UKMTA is wishing to submit evidence because
we are concerned about the way in which the money transfer sector
is being treated by the UK high street banks.
Put simply, the banks are denying bank accounts
to money transmitter companies registered with HMRC without any
good reason. This represents a major impediment to the growth
of the money transfer sector since it is not possible for a money
transfer company to offer a money transfer service without a bank
account. Evidence gathered by UKMTA (survey attached) suggests
that as many as 75% of money transmitters have experienced problems
obtaining or retaining a bank account.
UKMTA further believes that as many as 25% of
MTO's which have registered with HMRC have not been able to trade
because of problems in obtaining banking facilities.
This is having a negative impact not only on
the companies themselves but also on the increasing numbers of
money transfer consumers who are being denied access to the cost
effective, fast and reliable service which the best money transfer
companies offer. Many money transfer consumers (who are often
relatively poor recent migrants to the UK) will thus be suffering
financial exclusion twice over because they may already have been
denied access by the banks to their own personal bank accounts.
The big risk arising from all of this is that,
if money transfer companies are prevented from operating legally
through lack of a bank account, they will then exit the formal
sector but continue to trade in the black market. The predominant
concern of the government and law enforcement agencies must surely
be to keep as many money transmitters as possible operating in
an open and regulated environment. Indeed, the significance of
this view has been emphasised by Superintendent Simon Davis of
the Metropolitan police (copy of letter attached). (Not printed)
UKMTA SURVEY—THE
MTO/BANK RELATIONSHIP
The UKMTA has carried out a survey of its member
companies (results attached) which reveals the true extent of
the problems in the MTO/bank relationship.
The survey reveals reveals that:
— 75% of money transfer companies have
had trouble opening or retaining bank accounts
When asked by the MTO why banking facilities
have been withheld:
— 67% of banks have responded that
they have a policy not to work with money service businesses
— 37% of banks have given no reason
for not offering account services
— 15% of banks have indicted an unwillingness
to deal with cash deposits as the reason to deny banking facilities
— only 2% of banks have indicated that
concerns about AML controls are a reason to deny banking facilities
Which banks are refusing bank accounts to money
transmitters?
(of all those MTO's refused bank accounts, not all
MTO's approached every bank)
— 56% of all those who were refused
banking facilities were refused by RBS/Nat West
— 52% of all those who were refused
banking facilities were refused by HSBC
— 50% of all those who were refused
banking facilities were refused by Lloyds TSB
— 30% of all those who were refused
banking facilities were refused by Barclays
Where are MTO's banking now?
— 64% of MTO's are banking with Barclays
— 20% of MTO's are banking with HSBC
— 10% of MTO's are banking with RBS/Nat
West
— 8% of MTO's are banking with Lloyds
TSB
All of the MTO's in our survey are registered
with HM Revenue and Customs. HMRC is empowered to remove registration
if it has issues or concerns about an MTO.
— 87% of MTO's had received an initial
HMRC visit to confirm AML controls/procedures in place
— 65% of MTO's had received an HMRC
visit in last 12 months
UK MONEY TRANSMITTERS—WHAT
THEY SAY
ABOUT THEIR
RELATIONSHIP WITH
THE BANKS
"A bank account to be closed without a
reason despite trading with them for five years is very surprising
and disappointing. In spite of following all the regulations from
both HMRC and the banks" (Mukesh Biashara, Biashara London
Ltd)
"Bank managers and advisors on all levels
(especially small business managers) give a straight `we don't
work with MSB, period' statement. Barclays corporate wouldn't
get in touch with me and Barclays small business manger didn't
want to know. This was despite forecasts of approximately £20
million per annum worth of turnover with more than sufficient
AML regulations in place" (Dulal Miah, Deena Transfers)
"Threat of account closure hanging over
us and limiting our ability to expand the volume of business."
(Mathew, Dolphin Global Services Ltd)
"HSBC informed us of its intention of closing
the account in October 2001, 3 weeks after 9/11. Despite the fact
we had been banking with them since 1992, HSBC decided not to
provide services to money transmitters and gave us six months
to make other arrangements" (Orlando Romero, Giros Seguros)
"We're too small a company to put up a
fight" (Maria Rocha, Metro Remittance)
"Lloyds bank have given us notice not to
use the account for money service business while Barclays Bank
have closed the account" (Kemmy Akinrinmade, Made to Serve)
"Over a decade of satisfactory and successful
bank, RBS have abruptly decided to withdraw banking services without
giving any reason" (Ahmed Ashraf, Raffles Exchange Ltd)
"We are working with guide issued by HMCE,
but can't understand refusal of bank account from bank" (Aftab
Mahmood, Usman International)
"It was very hard to arrange banking currency
though my bank, in the end we had to put £250,000 deposit
down with separate `smaller' fund managers" (Nick Williams,
IFX Ltd)
"Barclays Bank charge quite a bit to bank
large cash sums, which include other charges such as, for how
many paying in slips are used" (Abdul Mannaf, Sultana Saree)
Reference is also made to the file of letters
attached from:
WHAT THE
UKMTA SAYS ABOUT
THE POLICY
OF THE
BANKS TOWARD
MONEY TRANSMITTERS
The MTA believes that the policy of the banks
is discriminating not only against money transfer operators, but
also against consumers who wish to send money transfers and who
may already be facing financial exclusion. The problem is exacerbated
by both a lack of awareness of the issue and a lack of joined
up thinking within the Treasury, HMRC, BBA and the FSA.
(i). Banks do not want to offer money
transfer services to migrants
Many money transfer consumers are relatively
recently arrived in the UK and may not be able to access a bank
account. Even if they can, the banks themselves have proved reluctant
to provide a cost effective service to migrant workers wanting
to send money home. If a migrant does manage to open an account,
charges for a bank to bank transfer are extremely high (£25
basic charge is standard), exchange rates are poor and the transfer
may take up to three weeks to arrive. Contrast this with the money
transfer sector, which can deliver a cash payment in the destination
country cheaply and quickly (often within a few hours).
(ii). Banks attitude to money transfer
companies
Whilst the UK banks may not be too concerned
to cater directly to the money remittance market, they do have
an interest in scrutinising those money transfer companies which
are allowed to operate and may seek to close down those companies
which they consider to be too successful and, therefore, a longer
term threat to their market share. The committee should consider
whether it is in the interests of consumers for banks to have
this kind of power.
It is presently very easy for a UK clearing
bank to close down a money transfer company account. As our survey
has shown, the banks don't even feel obliged to justify this action.
(iii). Limited number of banks offering
services to money transmitters
The situation is made even worse by the relatively
small number of UK clearing banks which can provide services to
money transmitters. For reasons of practical accessibility, money
transmitters are practically limited to the main four clearing
banks which are located in the high street. Yet it is clear that
Lloyds and Nat West are hardly providing services to money remitters
and that HSBC is only marginally doing so. This means that the
majority of money transmitters are forced to rely on Barclays,
and their stated policy is not to provide banking services for
money transmitters with an annual turnover under £1 million.
If they maintain this approach, then many more money transfer
companies will be driven out of business.
The situation is exacerbated by the high bank
charges which money transfer companies are facing—one bank
has indicated that it will not provide a service to money transmitters
unless there is a guaranteed fee income to the bank of £5000
per month. This is prohibitive for the small operator.
There is one high provider of financial services
which is presently under-utilised as a provider of services to
money transfer companies—the post office. The UKMTA estimates
that as many as 8,000 post offices are registered with HMRC (exact
information confidential).
We believe the Select Committee should encourage
the post office to carry out a strategic review of its role in
providing services for money transmitters. We believe the post
office should be doing more to offer services to the wider money
transmitter community and should not be linked into exclusive
agreement with any one company.
Since the post office remains in the public
sector, it seems strange that the government has not not to date
sought to maximize its potential for increasing the range of financial
options within the remittances market place, particularly given
the clear government policy (expressed in Pre-Budget Report) to
support initiatives in this area.
(iv). Lack of awareness of the MTO/Banks
relationship in government/lack of a joined up government/regulator
response
Neither HMT or HMRC were aware of the problem
in the MTO/banking relationship until it was highlighted by UKMTA.
The official response of the Treasury is that
no money transmitter which is registered with HM Revenue and Customs
should be denied a bank account for reasons of deficiency in their
AML controls. However, this Treasury response fails to appreciate
the very limited information which HMRC is allowed to give out
in response to requests made about a registered money transmitter
(on request, they can do know more than confirm that the money
transfer company is registered—they can give out no other
information).
The problem is made more difficult because HMRC
visits to money transmitters may occur many months after the company
is registered (HMRC estimates that it can take up to 9 months
to make an initial visit for London based MTO's); inspections
do not on every occasion lead to a written report of what was
inspected. In this way, the money transmitter has no way of confirming
to a third party (such as a bank) that an inspection has taken
place. Nor can they confirm a positive inspection result.
The problem will be made more difficult when
HMRC moves to a "risk based" approach, which means that
money transmitters which are operating well will receive less
attention from HMRC. In effect, the registration regime is not
helping money transmitters to get banking facilities. MTO's might
legitimately ask why they bothered to get registered in the first
place.
Nor is there any description of what money transmitters
do and how they are regulated in the Joint Money Laundering Steering
Group guidance, which is the key official guidance on AML issues
in the UK. Money transmitters are not represented on the steering
group of the JMLSG.
WHAT THE
BANKS/FINANCIAL
REGULATORS SAY
The UKMTA has been trying to establish what
is the formal position of the banks and other interested parties.
The four major banks plus the FSA/BBA were invited to attend a
recent open seminar on the Bank/MTO relationship on 13th January
2006 (summary of discussion attached). The position of the banks
as we understand it now is as follows:
— Barclays Bank—attended and
spoke at the seminar, have a clear policy on money transfer business.
However, money transmitters are concerned at their stated policy
not to provide account facilities for money transmitters with
an annual turnover of less than £1 million. If pursued actively,
Barclays will only be prepared to offer banking facilities to
the top 20% of money transmitter companies.
— RBS/Nat West—attended the seminar,
but didn't say one word. The UKMTA has been in regular contact
since, is still trying to establish if the bank have a policy
on money transmitter accounts.
— HSBC—did not attend the seminar,
but submitted a letter (attached). (Not printed)
— Lloyds TSB—did not attend the
seminar, and no further information has been provided on their
attitude to money transmitter accounts.
— BBA—although invited, did not
send a representative to the seminar, their view is not known.
— FSA—attended the seminar, but
did not express any view.
— JMLSG steering group—The UKMTA
has asked to be represented on the steering group of the JMLSG
but no response has been received.
Contact names at all the institutions above
can be provided on request.
NEXT STEPS—WHAT
THE UKMTA WOULD
LIKE THE
GOVERNMENT TO
DO
We hope that the Treasury Select Committee would
support the following suggestions:
— Recognise and endorse the contribution
made by money transfer companies in increasing the flows of remittances
to developing countries (and elsewhere)
— Recognise that there are advantages
to the economy from keeping as much money transfer activity in
the open regulated economy as possible
— Recognise that fair competition in
the money transfer market place is essential to improve choice
for consumers
— Recognise that there should be a
"level playing field" between banks and money transfer
companies
— Request that banks should work constructively
with money transfer companies in a proactive way to ensure that
money transmitters are not discriminated against when applying
for banking facilities
— Recognise that there will be increased
security concerns if increasing amounts of money transfer transactions
take place in the informal economy, away from effective scrutiny
by law enforcement and the security services
In addition, the UKMTA hopes that the Select
committee will encourage:
HM Treasury
— To work with HMRC, FSA, BBA and UKMTA
to issue guidance to the UK banks on how they should deal fairly
with money transmitter companies
— To devise a future regime for regulation
in the money transfer sector which positively helps money transmitters
to obtain banking facilities
— To keep under review the banking
charges made to money transmitters so that smaller money transfer
companies are not unfairly excluded
UK high street banks
— Individual banks to have a clear
policy on working with money transmitters which sets out what
information they can legitimately be asked to provide when applying
for a bank account (n.b. Barclays Bank has already adopted such
a policy, all other banks should be encouraged to do the same)
— Individual banks to provide clear
information on why they have declined a money transmitter account
(if they have done so)
— Individual banks to keep under review
and report to FSA on an annual basis the number of money transmitter
accounts they have to allow FSA to monitor that money transmitters
are not being excluded
Joint Money Laundering Steering Group
— To support active involvement by
money transmitters as a member of the JMLSG steering group
UK Post Office
— The Post Office to investigate the
services it provides to money transfer companies, with a view
to increasing significantly the facilities it offers these companies
February 2006
Appendix
UKMTA—MEMBERS
QUESTIONNAIRE
HMRC has registered 1230 businesses for the
purpose of money transfer; but has no way of knowing how many
registered money transmitters are presently trading (the UKMTA
estimates that 75% are trading). The questionnaire was circulated
by UKMTA in January/February 2006 to 300 money transmitters, all
of whom are registered with HMRC. 61 completed questionnaires
were returned (6.7% of trading MTO's)
Q1. PLEASE DESCRIBE
THE NATURE
OF YOUR
BUSINESS?
| Money remitter | 85%
|
| Currency exchange and transfer of larger sums—eg for property purchase abroad
| 18% |
| Other | 3% |
Q2. WHAT IS
THE AVERAGE
SIZE OF
TRANSACTION PROCESSED
BY THE
MTO?
| less than £500 | 48% |
| £501-1000 | 24% |
| £1001-5000 | 10% |
| £5001 plus | 18% |
Q3 WHAT ARE
THE TOP
TEN DESTINATIONS
FOR TRANSFER
(BY NUMBER
OF MTO'S
PUTTING COUNTRY
FIRST ON
LIST FOR
VOLUME OF
TRANSACTIONS PROCESSED)
| Nigeria | 15% |
| Brasil | 10% |
| Philippines | 8% |
| Spain | 8% |
| India | 6% |
| Pakistan | 5% |
| Uganda | 3% |
| Jamaica | 3% |
| Colombia | 3% |
| Bangladesh | 3% |
Q4 HAS THE
MTO EVER HAD
A PROBLEM
IN GETTING
OR RETAINING
A BANK
ACCOUNT?
Q5. WHAT IS
THE REASON
GIVEN BY
THE BANK
FOR NOT
OFFERING BANKING
FACILITIES?
| Policy not to work with MSB's | 67%
|
| AML controls not sufficient | 2%
|
| Security of customer funds an issue | 4%
|
| Didn't like business plan | 7%
|
| Don't want to deal with lots of cash deposits
| 15% |
| No reason given | 37% |
| Any other reason | 10% |
Q6. NUMBER OF
BANKS APPLIED
TO BE
BEFORE MTO OBTAINED
ACCOUNT FACILITIES
| 1 bank | 33% |
| 2 banks | 17% |
| 3 banks | 14% |
| 4 banks | 5% |
| 5 banks | 5% |
| (MTO's not have problems obtaining banking facilities)
| 26% |
(3 MTO's do not have banking facilities—are obliged
to bank with other MTO's)
Q7 BANKS GIVING
NEGATIVE ANSWERS
TO MTO'S
REQUESTING BANKING
FACILITIES
| Lloyds | 50% |
| Nat West | 56% |
| HSBC | 52% |
| Barclays | 30% |
| Bank of Ireland | 2% |
| Alliance and Leicester | 6%
|
| Northern Bank | 2% |
| Abbey | 4% |
Q8. WHO DOES
THE MTO BANK
WITH NOW?
| Lloyds | 8% |
| Nat West | 10% |
| HSBC | 20% |
| Barclays | 64% |
| Bank of Ireland | 2% |
| Alliance and Leicester | 0%
|
| Northern Bank | 0% |
| Abbey | 0% |
| Halifax/Bank of Scotland | 6%
|
| Habib Allied | 2% |
| ABN | 2% |
| None | 3% |
Q9 HAS THE
MTO HAD AN
INITIAL VISIT
FROM HMRC?
| Yes | 87% |
| No | 11% |
| don't know | 2% |
Q10 HOW MANY
HMRC VISITS HAS
THE MTO HAD
IN THE
LAST 12 MONTHS?
| 
