AFRICANGLOBE – The High Court in London has granted money transfer company Dahabshiil an interim injunction preventing Barclays Bank UK from terminating its banking services to the company, granting a reprieve to the families in East Africa, particularly in Somalia, which relies on its Diaspora remittances.
The injunction means that Dahabshiil’s banking arrangements with Barclays are preserved until the conclusion of a full trial. The High Court also awarded Dahabshiil the costs of seeking the injunction, the money transfer firm said in a statement on Tuesday.
In May, Barclays Bank UK announced plans to close the accounts of at least 250 money transfer companies in the UK over fears the funds might be ending up in the hands of “terrorists”, but has repeatedly extended the termination deadline, initially planned for mid-July.
The bank was the last UK High Street bank to offer such a service.
An estimated 40 per cent of Somalia’s population depends on money sent from abroad, Over $500 million is sent to Somalia every year from the UK alone, with a recent study showing that three-quarters of recipients need the money to buy essentials, such as food and medicine.
In 2012, for the first time, remittances became the largest external financial source to Africa, ahead of foreign direct investment and donor aid.
But Barclays has denied targeting Somali money transfer companies, arguing that its decision was solely about the internal controls of the money transfer businesses, “not where they send money to”.
The closures would also affect money transfer companies operating in Ghana, Nigeria, India and Bangladesh, for example, but the lack of a formal financial system in Somalia following years of conflict means that Somalis would be hardest hit, as they have no real alternatives to send money home cheaply, as well as being the most reliant on diaspora remittances.
Barclays’ decision to re-assess the bankability of dozens of money transfer companies in the UK is part of a greater global trend to tighten controls on money flows, as counter-terrorism measures in recent years have meant tightening controls on money flows.
Of the big four British banks—HSBC, Barclays, Lloyd’s Bank and Royal Bank of Scotland— HSBC got out of the money transfer business entirely, in the wake of the US government slapping a staggering $1.9 billion fine on HSBC for poor money laundering controls associated with operations in Iran, Syria and with Mexican drug cartels.
The remaining two, Lloyd’s Bank and Royal Bank of Scotland, are also asking companies to re-apply for bank accounts, only being willing to handle those with stronger controls.
By: Christine Mungai