Help for money transfer customers

The government hopes the new charter will help customers

People who send money abroad to friends and relatives, often in developing countries, are being offered extra reassurance by a new government scheme.

Businesses running more than half the UK's 30,000 money transfer locations have signed a customer charter.

The Department for International Development (DFID) says the businesses will make it clear how much they charge and what to do if things go wrong.

It is estimated that ethnic minorities in the UK send £2.3bn abroad each year.

First Solution

The potential risk to customers of money transfer businesses was highlighted by the collapse last year of First Solution.

We will continue to work... to make sure payments are easy, affordable, on time and go through registered channels International Development Minister, Shahid Malik.

This served the Bangladeshi community around Brick Lane in the East End of London.

About 2,000 of its customers are estimated to have lost about £1.7m when the business, which had 41 branches and more than 100 agents, went bust last June.

Although a deal has been struck to return more than £400,000 to customers, the circumstances of the collapse are being investigated by the Companies Investigation branch of the Department for Business, Enterprise and Regulatory Reform (BERR).

Money transfer operators have been regulated by HM Revenue and Customs since 2001.

Branches and agents have to be registered and the Revenue inspects them to make sure they are complying with money laundering regulations.

The Treasury is currently consulting on a plan to bring in more regulation of the money remittance industry, in line with the requirements of the European Payment Services directive.

From November 2009 larger money transfer firms or those which want to operate with a spread of international business will need to have a certain amount of financial backing.

These ones will also then be regulated by the Financial Services Authority.

Regulation

As well as being insecure and involving worrying delays, sending cash abroad can also be very expensive, says the government, with some businesses charging as much as £40 to transfer £100.

"The new charter will give more confidence to people sending money to loved ones abroad by providing better information and transparency," said the International Development Minister, Shahid Malik.

"We will continue to work with the financial sector to make sure payments are easy, affordable, on time and go through registered channels," he added.

Among the firms signing up for the customer charter are the Post Office, Moneygram, Chequepoint and many smaller operators.

National income

Government research suggests that 35% of ethnic minority households in the UK send money abroad.

Most is sent to parents, spouses and children and the remittances from all countries make a huge contribution to the economies of the countries receiving the cash.

India and Pakistan receive most from the UK, as Asian households send the largest amounts of money.

But black Africans in the UK are the group most likely to send money, with countries such as Nigeria and Ghana the most common destinations.

It has been estimated that India receives £10bn a year this way from all foreign remittances, while Ghana gets between 10 and 15% of its total national income this way.

The government's Department for International Development (DFID) has been running an advice website called sendmoneyhome for nearly three years.