Why Mo Farah lost: the cost of banking regulation
I THINK we’re all agreed that Britain’s latest hero, Mo Farah, should be allowed to have what he wants. I think we’re all also agreed that we want to stamp out tax evasion, drub money laundering and the abuse of the financial system by the big banks. Unfortunately it appears that we cannot have both at the same time.
Farah has been running a campaign to get Barclay’s to continue to service money transfer companies. There’s around 1,000 of them in the UK, they’re often used by immigrants to send a bit of cash to the old folks back home. Such remittances are in fact the largest reducer of poverty in the world. Vast sums flow through these systems. However, they’re only vast sums in aggregate: most of the actual remittances themselves are a couple of hundred quid or so. And that’s where the problem comes in:
A number of the world’s largest banks have pulled back on operations in profitable emerging markets as international anti-money laundering rules tighten.
Barclays’ decision follows a similar action by HSBC in the wake of its record $1.9bn settlement with US authorities over money-laundering allegations.
Barclay’s was one of the banks offering the basic banking services to those money transfer firms. They’re now a great deal less willing to do so: in fact, they’ve cut some 250 from the list they’re prepared to deal with, leaving only 25 that they will deal with. This list of 25 doesn’t include any at all in Somalia which is what Mo Farah is pissed about.
But the thing is, why should Barclay’s risk the sort of fines that HSBC had to pay? And it’s important to note that no one ever did prove that HSBC was laundering Mexican drug money: rather, the proof was that they weren’t running their bureaucratic system to check that they weren’t laundering Mexican drug money properly. So, what’s a bank to do? Refuse to deal with people who cannot follow the regulatory rules? Or keep open an essential lifeline to a poor country like Somalia?
Well, obviously, we do all demand that the bastard banks obey the law so yes, it’s the Somalis that get screwed.
There really are costs of regulation of an industry you know.