I have reported, often, on Barclays shooting itself in the foot on this blog. I suspect I will do so again before too long. Bt right now Barclays is doing something much worse. It is cutting off the economic lifeline of millions of people in Africa. As the FT reports:
Barclays has defended its decision to sever links with hundreds of international money transfer companies in spite of a high-profile protest led by the Olympic gold medallist Mo Farah.
The Somali-born British athlete headed a petition signed by more than 25,000 people and presented to Downing Street on Wednesday, which urged the British government to consider the affect the bank's action will have on some of the world's poorest people.
Candidly, this action is callous. The defence is that (the FT again):
A number of the world's largest banks have pulled back on operations in profitable emerging markets as international anti-money laundering rules tighten.
Barclays' decision follows a similar action by HSBC in the wake of its record $1.9bn settlement with US authorities over money-laundering allegations.
The bank said its decision to close accounts was based on concerns about the checks used by companies to prevent criminal activity, not the countries involved.
“The risk of financial crime is an important regulatory concern and we take our responsibilities in relation to this very seriously,” Barclays said.
I'll be blunt. I don't believe them. If they were worried about money laundering Barclays would pull out of Cayman, the BVI, Jersey and other locations where tax evasion and high level avoidance is rampant - all of it only possible because of the presence of the world's major banks and the availability of corporate and trust secrecy that facilitates the movement of billions and even trillions of funds behind a veil of respectability, all in the pursuit of greed and excess.
But instead Barclays is pulling out of a sector where the average transaction is a few hundred pounds at most and people are literally dependent for their economic survival on such payments being made.
This stinks of pure hypocrisy and utter indifference on Barclays' part - and they deserve to be more than roundly condemned for it. The world needs to hold them to account for the suffering they will cause.
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Does their pulling out not open up a potential new market for others? Can’t a new bank be built to cater for these small transactions?
They were quite happy to support transactions with money transfer companies for years even though they knew that the service was so open that it facilitated fraud .
Sounds like an attempt to close down the money laundering competition or at least stop them becoming a threat .
A case of crocodile ethics! These banks will never use money as social value!
I am very surprised you have written this, you condemn the banks for not doing enough to prevent fraud and money laundering, and then condemn them when they do something. I thiought the whole point behind this is that not only is criminal money being laundered but terrorism is also being funded thorugh the money transfer services? I imagine that these services have been very profitable for them otherwise they would not have bothered, so I am sure they are not just doing it to spite the poor.
Shall we keep this in proportion?
The sums involved, individually, are small
Of course there is a risk of abuse. All systems carry such risk. But compared to the Barclays operations in many tax havens the risks here are tiny
And lets stop the absurdity of saying terrorism is funded this way – most terrorism takes almost no money these days so ‘terrorist’ money is found by almost no system
So we have a balance of risks – as ever. There are no blacks or whites. There never are, and the real risk in these systems is pretty low and the benefits very high
That’s the absolute reverse of tax haven activity
So Barclays is closing the wrong thing. That’s my, completely valid, point
Most terrorist attacks do indeed cost less (though that doesn’t take into account the cost of high-profile terrorist outfits like al-Qaeda which do require substantial funding), but what about the costs of living underground? Such transactions are likely targets for terrorist financing and the prevention of such activity is the very purpose of AML regulation.
It seems that the cost of compliance with AML regulation has meant that offering small money transfer transactions in jurisdictions where enhanced due diligence is required is no longer economically viable for Barlcays. That seems to me to be the reason that Barclays have pulled out of this area, and I don’t know why they don’t just say so. We can’t exactly expect them to operate a loss making business in this area.
AML is not and was not terrorism focussed or it would not have been called AML
That just got bolted on after 9/11
Counter terrorism financing and AML regimes undoubtedly go hand in hand. Even if that had only been the case since 9/11, that’s still 12 years of it being the case, which is not exactly insignificant. In any event, every time the IMF or the government discuss one, they discuss the other. The reason for that is the same types of activity are likely to facilitate both money laundering and terrorist financing, so CDD is aimed at prevention and detection of both (or, in the words of the IMF, “they often exploit the same vulnerabilities in financial systems that allow for an inappropriate level of anonymity and nontransparency in the execution of financial transactions.”).
Maybe true
But having discussed this with some at quite high level over the years everyone knows AML has no chance of finding terrorist financing
But it can beat tax abuse
If I were to employ Barclays’ unassailable logic(?), then for fear of getting stung, I would ignore the hornets’ nest the size of a football in the garden near the kitchen door and instead devote my energies to swatting a wasp in the living room with a cricket bat.
Here’s some insight from Rowan Bosworth-Davies, a former fraud investigator in the City http://rowans-blog.blogspot.co.uk/2013/08/barclays-bank-bare-faced-hypocrites.html
I forgot to say, everyone should be following Rowan’s blog. He knows where the bodies are buried in the City.
A balanced piece that summarizes the issues from the point of view of someone who uses these transfer networks, emphasising their importance and the short-sightedness of Barclays’ decision
http://www.aljazeera.com/indepth/opinion/2013/08/201385182737112984.html
This is indeed excellent – thank you for linking to it. I think the article is exactly right to state that “regulatory burden for monitoring Hawalas should be placed on the government and not banks”: the penalties for failure to conduct proper CDD are so severe that it is unsurprising that financial institutions are so jumpy in jurisdictions like Somalia. Otherwise, the service is always likely to be highly unsatisfactory (for example due to abundant account closures as mentioned in the article) in any event. I also massively agree that cooperation between the money transfer service, the bank and the government in imposing due diligence checks is going to be the only way to get Western financial institutions comfortable with the service.
As Rowan says……154 million is a big carrot dangling in front of Barclays….now, they wouldn’t offer bank accounts to those [now] disenfranchised ?