Bureaux de change pay the price as money-laundering rules bite

Small firms are being driven to the wall by regulations that were designed to prevent criminal activity.

Hundreds of independent bureaux de change and money-transfer shops across the UK face closure because of tightened rules on money-laundering.

The rules, launched to prevent ill-gotten gains being recycled back into the economy, have resulted in small money services businesses (MSBs) losing their bank accounts or access to foreign currency. They are perceived as too risky by the banking community because they often send money to unstable countries such as Somalia.

Marvelpride, a family business based in Stamford Hill, London, is about to go out of business after 30 years. Its provider of foreign currency, Thomas Exchange Global (TEG), has been forced to terminate the relationship after pressure from its bank, RBS.

Aron Goldman, founder of Marvelpride, at his shop in Stamford Hill,

“About a year ago TEG was told to stop dealing with single shops,” claimed Marvelpride boss Aron Goldman, 58. “At the time, 80 customers had to close down because if you don’t have a supplier, you can’t do business.”

Marvelpride has been given six months to find a new supplier but has been unable to do so in the current environment for de-risking. “We are a legitimate business with 15 people working here but without foreign currency, that’s two-thirds of our business gone,” said Mr Goldman.

“We are a community business, serving local people for 30 years. I’ve known some customers since they were born. We are more than just a street shop.”

Marvelpride is regularly audited by its suppliers and its bank, Mr Goldman claimed. “I work 13 hours a day and 12 of those are for compliance,” he said. “We have followed the laws from the beginning.”

Dominic Thorncroft, executive chairman of the Association of UK Payments Institutions, which has hundreds of members across the UK, said that money services businesses began going out of business in December 2012 when a particular bank, which he declined to name, began closing accounts.

Others began following suit a year later, he claimed, leaving businesses in dire straits, or paying high fees to access services through third parties. “We think this has impacted 90pc of cash remittance companies,” he said.

We are a legitimate business with 15 people working here but without foreign currency, that’s two-thirds of our business gone
Aron Goldman

In August this year, Sajid Javid, the Business Secretary, admitted that innocent small firms were being caught up in the new rules and announced a new review, which would attempt to prevent further money services businesses closures.

“This new review is about making sure the rules we have to protect our strong financial services industry from abuse are not unintentionally holding back new and existing British business,” he said.

According to Mr Thorncroft, there is also a new Payments Services Directive with provisions in place to prevent banks from axing accounts in this way. “But that’s a long two years away,” he said.

Marvelpride will no longer be able to operate its bureau de change from Wednesday.

A Western Union branch in Hong Kong. T

As the independent MSBs are wiped out, the large money transfer corporations stand to benefit  Photo: imagebroker / Alamy

Stephen Platt, founder of financial technology company KYC360.com, who works with regulators to conduct anti-money laundering inquiries, said that banks aren’t entirely to blame for the issue.

“Last month the UK published its National Risk Assessment on money-laundering, which identified MSBs as high risk from a terrorist financing perspective,” he said.

“As a consequence, banks are very focused on who they want to do business with, taking account of risk and reward, and are dumping certain business lines wholesale.”

Anti-money-laundering rules tightened following a spate of high-profile scandals, such as HSBC’s failure to stop laundering by Mexican drug dealers using its accounts.

Mr Platt warned that the stringent regulations may have far-reaching implications, beyond the small businesses that are being driven to the wall.

“MSBs are used primarily by poorer members of society, people who can’t access bank accounts and immigrant communities who use these services to remit money to family in the developing world,” he said. “We’re seeing the creation of financial exclusion for these groups, some of the most vulnerable people in society.”

MSBs seeking to stay in business may strike deals with newer, or smaller banks, that are less equipped to manage money-laundering risk, he added. “As you de-risk, you re-risk. And if the standards imposed on banks are too rigorous, some people may be pushed to deal with the underground banking system.”

Leave a Reply

Your email address will not be published. Required fields are marked *