Derisking

LIME works with a number of MSBs.

As the UK banks have adjusted their appetite for risk, they have made it impossible for many MSBs to continue trading in the regulated sector.

Whether one believes that phenomenon is driven by law enforcement, regulators or the banks themselves, the closure of many legitimate businesses is bad news. It is bad news for consumers, in that reduced competition and increased costs will drive up fees and it is bad news for law enforcement and regulators. Threatened with closure, it is unsurprising that businesses are looking at more and more elaborate structures that might be used to continue trading.

HMRC and SOCA had a degree of success in bring FX and money remittance into the light throughout the ‘noughties’. Where business had been carried on with no paperwork, on a nod and a handshake, companies registered, opened bank accounts and we began to see some transparency and competition in the market place. Suddenly it was possible to produce more accurate statistics and to work with the industry to increase compliance.

Then ‘Boom’. The banks pulled out. Accounts started getting closed, first in money remittance and now increasingly for all sorts of MSBs.

Money remitters are coalescing into loose networks around MSBs that have been able to preserve bank accounts. I sat in a presentation recently where NCA stated, with no visible sign of irony, that these extended networks represented a greater risk of money laundering. Other companies have reverted to an old and ancient style of business, undoing all of the work previously done.

That’s gone well then.

Trade organisations are fighting as best they can, but MSBs are going to struggle to match the spending power of the Banks.

Right now, a cartoonist would have a banker, a regulator, a politician and a policeman all pointing at each other. Meanwhile, the man with the AK47 will be moving his money through a shadowy disguised operator not licensed or regulated by anyone.