Oxfam’s tame ex-banker Will Martindale wonders what on earth Barclays is up to in cutting the remittance lifeline to Somalia
“I can skype my mum, and see her, and watch her go hungry, fall ill. But they’re saying I can’t transfer money for food or to see a doctor. How can that be?”
Istarlin lives in South London. She’s one of thousands of Somali migrants around the world who send approximately $1.3 billion every year to friends and families at home. Generosity on this scale is laudable. It’s far more money than Somalia receives in humanitarian aid.
Barclays is the only remaining major bank in the UK still providing this service to Somalia. But earlier in the year, due to a perceived increase in risk, it published plans to close all Somali money transfer accounts. The deadline was yesterday.
Over 100,000 signatories, an Olympic double gold medallist and Somali community groups joined together in an unlikely coalition. They were up against Barclays and the Treasury. The call was clear. Barclays needs to extend for at least 12 months, long enough for the Treasury to work closely with banks to re-write problematic regulation and strengthen due diligence checks so that banks can once again be confident in servicing Somali money transfer organisations.
As Mo Farah explained, failure to do so is life or death for millions of Somalis. A recent UN report shows that 40 percent of families in Somaliland and Puntland receive remittances. This money is integral to their survival.
There are few options: Somalia has no formal banking sector. The remittance corridor is the only official means of getting money into the country. Istarlin explains “there’s a money transfer organisation on the high street. Every month I’ll transfer £100. It costs me just £2.50.”
Money eventually reaches Somalia having criss-crossed multiple regulatory jurisdictions. In recent months, banks’ interpretation of legislation on money laundering and counter terrorism has become tighter and more risk averse.
In late 2012, HSBC was fined a record £1.2 billion by US regulators. Reports suggested HSBC accounts in Mexico and the US were being used by drug barons to launder money. HSBC is not alone in falling foul of the regulators following large-scale money laundering as regulatory authorities on both sides of the Atlantic have stepped up efforts to combat illicit flows of money.
But this has little to do with Somalia. The similarities are slight. Most Somalis living in the UK are not wealthy. Individual transfers are usually less than £200, and often as little as £25: average income in Somalia is under £200 a year. So far no Somali operators have had any accusations against them. Failing to find a solution risks driving transfers underground which is in no-one’s interest, not least the regulators.
In my short time at Oxfam I’ve seen the very best of banking; impact investment, financial inclusion and socially responsible investment – for example our Behind the Brands financial sector engagement. Banks can and do facilitate development.
But Barclays is getting it seriously wrong at a time when it is desperately trying to re-brand. Instead of championing its ability to channel money safely to poor people in a remote land, Barclays is in effect imposing a financial boycott on some of the world’s most vulnerable people.
Somalia has been torn by more than two decades of conflict. Over 2 million people remain displaced, inside and outside the country. 43% of the population survives on under a dollar a day.
At the time of writing (Monday, 10pm) there is brief respite for one major Somali money transfer organisation. Barclays will extend for two weeks, with details emerging of another bank facilitating corporate and aid money transfers, but not yet the crucial individual remittances. Barclays still planned to close the other three money transfer organisations’ accounts.
If sustainability is central to the way Barclays does business, the moral implications of this decision must be considered alongside the financial. On that basis there remains an obligation to ensure that remittance channels remain open.
Barclays is no monster. I have several friends that work there. They can cite a dozen good things Barclays does, but they too are frustrated at this spectacular own goal and the needless suffering it will cause. It’s time for Barclays to show some leadership.
If Barclays decides to keep open a lifeline to some of the world’s most vulnerable people, is it really going to run a serious risk of prosecution under laws designed for entirely different circumstances? The Treasury ought to be able to put their minds at rest on that.
But even if there is some small risk, Barclays could count on a lot of allies to back them in keeping the lifeline open – not least the 100,000 signatories, Mo Farah and international NGOs who’ve been campaigning for them to see sense.