Money laundering is a bad thing – it supports crime and terrorism. And the banks’ payments payments systems are the soil in which money laundering can grow. So Barclays has decided to close the accounts of 100 of the money transmission businesses that transport remittances from the UK to Somalia through accounts with Barclays. No doubt it has been frightened by the $2b fine that HSBC received for its part in the black economy. Yet these money transmission businesses are a vital support of a substantial part of the Somali economy.
Moreover Barclays has in the past recognised that access to finance contributes to development and to the Millennium Development Goals. However most of the contribution that it acknowledges to the MDGs seem to be in the form of charitable activities. These may be worthy, but the £100m a year that Barclays’ money transmission services send back to Somalia alone from the UK must entirely dwarf that.
So what will happen? Most likely the money transmission will go on through unregulated channels such as hawala. Unfortunately these are precisely the mechanisms that are most likely to support criminal and terrorist activity. Beyond that, any further economic chaos created in Somalia by this decision is only going to exacerbate the forces of terrorism.
Time for some joined-up thinking?