Sam Coates, Political Correspondent
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A money-transfer company used by members of the Bangladeshi community has collapsed, depriving at least 2,000 families across Asia of funds and causing despair in some of Britain’s poorest areas.
Police and detectives from the Insolvency Service are investigating why First Solution Money Transfer, based at the London Muslim Centre in Whitechapel, East London, was unable to deliver at least £1.7 million intended principally for the Sylhet region of Bangladesh.
MPs told Parliament of concerns about the way the company’s directors had acted, saying that it should have been impossible for a money transfer company to lose customers’ money.
The directors strongly deny wrongdoing, blaming the speed at which the company expanded as well as currency fluctuations.
The case has also raised jitters about the rapid growth of the money-transfer business, which does not come under the remit of the Financial Services Authority.
Tower Hamlets Trading Standards initially said that the matter was “too big” when asked to investigate, while the police first referred the matter to Revenue & Customs.
The role of a local TV station serving the Bangladeshi community in the East End is also under the spotlight. Fazal Mahmood, one of the three directors of First Solution, was also managing director of Channel S until the day before the money-transfer business collapsed.
Ofcom, the broadcasting regulator, has been asked to investigate whether the channel “assiduously and ruthlessly promoted as a community service” First Solution and whether the advertisements were properly billed and paid for.
The station’s bosses described Dr Mahmood’s position as “honorary” and Channel S has said that it has had nothing to do with the money-transfer business.
The money-transfer industry, which is not subject to the same regulation as banks, is growing at 20 per cent a year and is now worth £145 billion, according to the World Bank. It grew quickly after September 11, 2001, when Western countries wanted to discourage informal money transfers across national boundaries. The Department for International Development gave £7.5 million to the Bangladesh State Bank to enourage the switch. This led to the extremely rapid growth of companies such as First Solution, which grew from a turnover of £4 million in 2004 to £87 million in 2006-07.
It was popular in the East End of London because it advertised higher exchange rates for lower fees and a quicker service to more outlying areas of Bangladesh than rivals. The company, whose Brick Lane office claimed to take up to £50,000 a day, according to the East London Advertiser, stopped taking orders on June 27 and went into voluntary liquidation.
The matter reached Parliament last week, with a debate by MPs led by George Galloway, the Respect MP – one of his final acts before an 18-day suspension over the funding of his campaign against Western sanctions on Iraq. He said that the alarm over First Solution had first been raised in mid-June when he was told that £150,000 had failed to reach Bangladesh. He alleged that the directors of First Solution knew about the problem but continued to trade as an insolvent company – a criminal offence, which they deny.
Mr Galloway told MPs that Dr Mahmood was convicted in 2004 of two breaches of the Immigration and Asylum Act 1999, and questioned whether he should have been able to build a business of that size.
Paul Farrelly, the Labour MP for Newcastle-under-Lyme, told MPs: “If it looks like a fraud, sounds like a fraud and quacks like a fraud, it is a fraud.” Anne Main, chairman of the Conservative Friends of Bangladesh, is urging victims to register their loss with the liquidator.
Dr Mahmood, along with Gulam Rumi and Shah Hadi, the two other directors of First Solution Money Transfer, issued a statement admitting that 2,000 transactions had failed to complete, but denied that they had acted dishonestly.
“There is no evidence of criminal behaviour on the part of the directors, nor to our knowledge any other staff of First Solution,” they said, adding that they were unhappy at the way Mr Galloway’s “defamatory” remarks had spread across the Asian world. “We deeply regret the fact that, as a result of the rapid growth of the company’s business, the necessary management procedures were not in place to effectively manage and control all the transactions being processed through our agents,” they said.
“The directors are confident that in due course we will show completely that the cause of the problems had nothing to do with any impropriety or dishonesty.”
Financing food and education
— Money sent home by Bangladeshis living abroad accounted for £2.9 million in 2006-07
— In Bangladesh money sent from abroad counted for more than half of the household income of recipient families Most recipients of money sent from abroad spend it on food and education
— 70 per cent of money transfers to Bangladesh are outside formal money-transfer networks. Fee and exchange rate are the two most common reasons for using informal channels
— Money sent home by Filipinos working overseas last year totalled £6.5 billion – about 10 per cent of the country's economy
Sources: International Association of Money Transfer Networks and the Bangladesh Government
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Paul O'Rourke - good to see you want to wind the clock back to the 70s and re-introduce capital controls. Perhaps you are nostalgic for the Winter of Discontent too.
In the modern world, only countries like Zimbabwe and North Korea have capital controls. Everyone else celebrates the the idea that people should be free to create wealth for themselves and spend it as they see fit. Why should you get upset just because someone has been more financially successful than yourself?
AA, New York, New York
true say that a portion of their income goes abroad,
it is for those whom earn this money to decide how this monies are spent and distributed. some will blow a hundred quid on a west end hooker and others will make a charitable contibution to support a family for an whole month with that hundred quid.
baz, west end, uk
A futher comment, just reading Lynda Plums e-mail again, I note that there are almost no spelling mistakes except where she uses the word 'curry' instead of 'carry'!
With regard to 'immigrants' (Mr O Rourke) sending their money 'home', many immigrants like Lakshmi Mittal richest man in the UK, Mohammed Al Fayed, and many many others (read the Forbes richest people in the UK list) actually bring in Billions into the UK. How ironic that you with an IRISH name, whose anscestors probably came to England to work and send money back to Ireland should say such things. Perhaps you should also look into the billions being sent back to the UK by expats working in the Gulf, China, Far East, South East Asia, the UK economy is dependant on trade between nations and on the sale of sklls and services overseas! Indeed one Scotish tea company in Sylhet, Bangladesh alone sends back around 12million to the UK!
K Hussain, West Midlands, Engand
Eshaan Akbar - It is you who is talking stereotypes. You talk of 'these communities'.
Before I retired I could barely afford to pay tax on one job let alone hold down 2 or 3. 'These communities' as you call them, are probably working in the black, or grey, economy and pay little, if any tax.
I grew up in a time when sending money from the UK was severely restricted and so it should be now. Of course the financial contribution of immigrants to this country (I cannot force myself to give it a capital C) cannot easily be quantified - whilst Britain turns a blind eye and accepts the third world attitude towards finance we shall never have the true picture.
We have no obligation to feed and support the population of Bangladesh and should not expect new British citizens to do so with what should be our taxes.
If the real contribution of 'these communities' to Britain is off licences and kebab shops then we need to revisit our immigration policy with some urgency.
Paul O'Rourke, Rochester, UK
There appears to be an error in your article, money sent home by Bangladeshis in 2006-2007 was in the region of £2.9 Billion, not million!! quite a big difference! Before people like Lynda Plum start ranting about the amount of 'untaxed' money sent back by these 'Asians!', most of the money was sent back from the Middle East, not the UK. Also Lynda, First Solutions was a British company, registered and paying taxes in the UK. It was not even registered in Bangladesh. By the way which 'British' institution should they have used? HSBC (Hong Kong and Shanghai Bank), Abbey (Spanish Santander group) or perhaps Westernunion (USA). Your 'inuendos' about people money laundering, hiding ill gotten gains etc are dispicable and shows your ignorance. Finally, there are around 10,000 Indian restaurants in the UK owned by people of Bangladeshi origin, these businesses turnover £10 billion + pounds pa, their popularity alone shows that most British people are more broadminded!
K Hussain, West Midlands, Engand
Write about one subject and end up replying *?#@$"5&!
For those NOT so able to comprehend worldly matters, here is a simple explanation.
Those who send monies abroad today, comes back to their respective original countries tomorrow as EXPORT EARNINGS!!! The sterling stays in the UK accounts, lets say a well known Bangladeshi Bank the 'Sonali Bank', so when a Bangladeshi IMPORTER wishes to purchase British goods to sell in Bangladesh, he/she goes to the Sonali Bank giving them his Bangladeshi monies in exchange for sterling from UK official accounts and goes shopping here in UK. So my dear Plum and O'Rourke, in some ever long indirect means of business, your job is secure because of this process of sending monies abroad. The clue is in this statement, "The Department for International Development gave £7.5 million to the Bangladesh State Bank to enourage the switch." The UK government knows of the benefit to securing your job.
Keanu , Luton, UK
It is nothing to do with greed! Its common sense that if you can find a company providing the same service for cheaper- you will choose that company- we all do it, its called trying to find value for money.
First Solution messed up big time- if they recognised that the business was expanding more rapidly than they could cope with- why didn't the stop taking orders and make this public? Instead they decided to keep taking money off people who are already poor.
Money transfer companies have indeed expanded massively in the last few years, and its essential that they come under some sort of regulation like the FSA otherwise many easily fooled people who trust local businessmen will find themselves out of pocket more and more.
Sam, Manchester,
Lynda, your comments astound me. The individuals concerned were merely trying to send money to impoverished relatives and seem to be the victims of some unscrupulous businessmen. What is wrong with using a service that is designed to fit your needs? Money transfer companies are legitimate, for example Western Union, a multi-billion dollar American concern. Whether or not they are regulated is a decision for the Government.
I fail to see the criminality or culpability of those who were trying to send money to Bangladesh, and how they deserve their 'comeuppance'. It seems as though you are taking an opportunity to criticise 'these Asians' when in fact they have been defrauded. It is hard to have any sympathy for your argument.
J Barnet, London, UK
£1.7m declared as declared "lost". What about the money not declared. A great many people will use a service like this money transfer business to launder their ill gained funds. No-one should be surprised when this sort of enterprise fails. Why dont these Asian people use well known bona-fide, properly regulated British financial institutions to send their money overseas. The Asians living in this country, who no doubt call themselves "British" still want no truck with the indigenous institutions but prefer to stick with their own kind, so shouldnt bleat & cry foul when the wheel comes off & they lose out. I wonder how much tax has been paid on the funds that went through this company by the people depositing it. It seems that a number of people have received their come-uppance. I really hope that the labour government does not seize on this as an opportunity to curry favour from an ethnic group of probable & potential voters & compensate these people at the British tax payers expense
Lynda Plum, London, england
Paul O'Rourke - you make a stereotypical point there.
People from these communities (I come from Bangladeshi and Pakistani descendancy) will hold 2-3 jobs so that they are able to facilitate living in London whilst sending much needed money to their homeland.
The contribution of immigrants to the British economy cannot easily be quantified - the off licence you'll go to at 2 or 3am or the fried chicken/kebab shop you go to after a night out or even the off licences open on a Sunday are almost invariably run by immigrants (in London at least).
£100 a month is equivalent to approximately 1300-1400 Taka (the currency in Bangladesh) and that will be enough to run a poor family for at least 3 and a half weeks. The money they receive is essential for food, education, weddings and religious ceremonies.
Eshaan Akbar, London, England
This perfectly illustrates the lie that immigrants are financially benefitting this country. It is now quite obvious that a substantial portion of their income is being sent abroad.
Paul O'Rourke, Rochester, UK
If a small business is offering better rates than the established banks than there is a risk involved. In the end it is greed. Customers using this service wanted MORE than they were likely to get in the market place. I think it is called greed. Remember BCCI. They were offering better rates than the rest.
Kevin Murphy, Birmingham, United Kingdom
Another BCCI ?
Edward Johns, Lannion, France