According to a report by the Economist, Africans living in the UK, who are remitting money to relatives in Africa, may soon have to look for a new conduit to transfer funds.  Barclays, the UK retail bank who was one of the last UK bank willing to deal with money transfer agents,   has served notice that it will close the accounts of some 250 money-transfer businesses.   

The decision came on the heels of a legal review at Barclays amongst concerns that some of the agents may not have the proper checks in place to prevent money laundering.   The agent system is essential because the recipients in general do not have bank accounts.  The agents, in turn, need a bank facility in order to be licensed.  Without this banking facility they cannot operate.

Money transfers by migrants across the globe generally pay an exorbitant fee for money transfers.  Africans are already paying approximately 12% in transfer fees or 3% more than the global average.  Thus some observers are calling for the creation of new institutions to replace private banks.  One suggestion is to form a ‘remittance bank’ hosted by the UN or another multilateral agency.

Banks are increasingly nervous about such cash transfers after the HSBC forced into a US$ 1.9 settlement over allegedly shoddy money-laundering controls.  All of this will be ‘water for the mills’ of Western Union, one of the largest global money transfer agency.

Source:  The Economist July 20th 2013 Issue – Page 43