Bank account shutdown hurting communities sending $10 billion a year to family overseas

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The multicultural miracle of Australia is also a $10 billion money machine, as residents support relatives abroad with payments called ‘remittances’.

That’s the amount sent overseas annually, helping to .

“It’s very important,” said businesswoman Duki Wani.

“If they don’t receive the money, they’re going to die.”

Sitting in her hair salon and boutique in a mall in Footscray, in Melbourne’s inner-suburbs, Ms Wani runs through the relatives in Uganda and South Sudan she supports with small, regular payments.

“I send every month, I have to send money,” she said.

“I have to send to my brother, I have to send to my son, I have to send to my uncle, I have to send to my niece… I have seven (relatives to support), I have to help them.”

But for African-Australians it’s getting harder, as remittance businesses that deliver money from the community see their bank accounts shut and are unable to open new ones.

Banks shut accounts over fears of money laundering

Tech entrepreneur Mohamed Ibrahim, a Commonwealth Bank customer since 1982, used to send $1 million a month to Somalia.

His business accounts were shut last week. He’s tried 14 new banks and has been turned down every time.

The problem is more about the bank than his business.

“There’s an Australian expression about ‘unintended consequences’, and I think that’s what’s happening,” Mr Ibrahim said.

In recent months, Westpac copped the nation’s biggest ever fine — $1.3 billion — for not doing enough to stop criminals laundering money and financing terrorism.

Financial crime agency AUSTRAC smacked the Commonwealth Bank with a $700 million fine for similar breaches of Anti-Money Laundering and Counter-Terrorism Financing — so-called ‘AML/CTF’ laws — in 2018.

It appears that banks worried about the risk of law-breaking have been closing the accounts of remittance businesses, particularly those that send money to areas of Africa suffering conflict.

That’s led to a perverse situation: where money-shifters registered with AUSTRAC and complying with Australian laws are being forced to close.

That leaves customers, dealing with physical cash, to send money in riskier and less transparent ways outside of government oversight.

“(AUSTRAC) are saying ‘You are not doing anything wrong. You have a license. You can collect the money’,” Mr Ibrahim said.

“But the bank refuses to work with you and AUSTRAC can’t force the bank (to give you an account), therefore it’s up to you to do what you want to do.”

In a statement, a Commonwealth Bank spokesperson said remittance businesses provide “an important service to the community”.

“We continue to provide services to this sector, but all clients need to meet the standards and obligations we have under our Anti-Money Laundering and Counter-Terrorism Financing laws and bank policies,” the bank said.

A ‘life or death situation’

Despite being registered with AUSTRAC and following laws around identifying customers correctly to lower the risks of terror financing and money laundering, Abdi Adam, director of remittance business Bakaal Worldwide, hasn’t been able to get a bank account for four years.

“If people don’t get money to the countries, literally people could die — that’s how important it is,” he said.

“This is a life and death situation.”

Without accounts, he’s handling a million dollars a month in cash.

It’s not only more dangerous and expensive for his business, customers now need to travel long distances carrying cash because they can’t use online banking.

But banks trying to reduce risk has increased the likelihood of desperate customers using unregistered, unlicenced online operators.

“There’s only two options,” Mr Abdi said.

“The money will go in the right channel, it will be reported to AUSTRAC, to the government agencies, clean books, clean records, everything transparent.

“If people don’t have an option to send it the right way, well, they will send it whatever option they have to send money, because that’s how important it is to send money.”

Mr Abdi has even lost the accounts he used to pay his salaries and taxes.

“I hope the regulators, the Australian Government, understand how important the service that we provide is to the countries that we send the money to,” he said.

“I’m originally from Somalia myself, I’m a refugee, I understand how it is important to receive money to survive.”

Countries dependent on remittances

Half of Australia’s population was born overseas or had one — or both — parents born overseas.

The amount Australians send in remittances is double what was sent a decade ago, and often vital to the economies of other nations.

More than 36 per cent of the entire gross domestic product (GDP) of Lebanon is money sent from other countries.

For South Sudan it’s 35 per cent of GDP, the value of all the goods and services produced in a year.

For the nations of Pakistan and The Philippines it was 9 per cent each in 2019, according to data from the World Bank.

Closer to home, the economy of Tonga would collapse without money sent from Tongans overseas, because it accounts for 40 per cent of GDP.

It’s lower in Samoa (17 per cent) Kiribati (10 per cent) and Fiji (7 per cent), but still a key part of supporting those nations.

The World Bank predicts global remittances will plummet by 20 per cent this year due to the coronavirus pandemic, .

In a statement, AUSTRAC said protecting “businesses, communities and our economy from risk of criminal exploitation” was the reason the laws exist.

“Banks are obliged to manage the (money laundering and terrorism financing) risk posed to their business and customers and are responsible for decisions to cease providing banking services to remittance businesses due to (these) risks,” it said.

Westpac chief executive Peter King appeared before a Parliamentary committee in September and was asked by Labor’s Andrew Leigh if banks would decide it was easier to shut remittance businesses rather than help a cleaner sending money back to family in Samoa.

“I think it’s clear that if we can’t meet the requirements then we’ll have to stop providing products,” Mr King said.

“That’s the clear message: ‘Meet the law.’ The fines are just too big if you can’t meet the law. So we are looking at those processes internally and we will stop businesses if we can’t meet the law.”

For Duki Wani, supporting relatives in areas of Africa where the economy has collapsed due to conflict, the need to send remittances will outlast any changes in governance practices or bank policies.

“We don’t send a lot of money, because when we send just a little money it’s very big for them,” she said.

“They can provide food, medicine, and also they help themselves.”

By business reporter Daniel Ziffer (Original ABC Article)

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