Following the introduction of tighter rules on money laundering, small money transfer shops and independent bureau de changes are facing closure in their hundreds. The rules initially meant to prevent laundered money from recycling into the economy, however, seem to have led to ‘small-money’ businesses (SMBs) getting denied access to bank accounts and subsequently foreign currency. A move caused by the banking sector’s perception of the SMBs as too risky.
An example of one business in this predicament is a 30-year family business in Stamford Hill London, by the name Marvelpride. The company finds itself in a fix following its foreign currency supplier – Thomas Exchange Global (TEG)- ending their relationship due to continued demands from its bank RBS to do so. With foreign exchange accounting for two-thirds of the business’ transactions and with only six months to find a new supplier in the already limiting situation; Mr. Goldman the owner, fears they may run out of business.
The Association of UK Payments institutions, executive chairperson, Dominic Thorncraft, said many of the enterprises under the organisation started closing as early as December 2012 following the closure of their bank accounts by an undisclosed bank. Surviving businesses were forced to pay higher service fees to gain access to foreign currency from third parties.
Mr. Thorncraft, on the other hand, said there was a new Payments Services Directive, which would prevent banks from closing SMBs accounts in the above manner; however, the directive was two years away from its implementation.
In August 2015, Business Secretary, Sajid Javid, after admitting that small businesses were suffering under the new rules, announced a review of the rules. The review was meant to make sure the rules protecting the larger institutions in the financial services industry were not undermining new as well as existing smaller businesses in Britain.
Stephen Platt, the founder of KYC360.com, which conducts anti-money laundering inquiries, says banks acted in the manner they did following the publishing of the UK National Risk Assessment. The assessment termed SMBs, such as bureau de change, as high-risk candidates for terrorist financial activities. Thus, banks are not entirely to blame as they are just selective about who they want to deal with financially.
In addition to this, Mr. Platt also warned against the continued use of the stringent regulations as they were creating a financial exclusion for vulnerable members of the society such as immigrants who use SMBs to send money to their relatives in developing countries.
SMBs that are seeking to remain in business may soon have to start striking deals with new or smaller banks that do not have the capacity to manage the risk of money laundering. In addition to this, if the standards used by banks become too stringent, the SMBs may have no other alternative but to deal with underground banking systems.