LONDON-- Barclays PLC settled a legal dispute with one of
Africa's largest money transfer companies after the British bank
was accused of unfairly trying to shut down its bank account.
In May 2013 Barclays said it would close the bank accounts of
Somali remittance company Dahabshiil and some 250 other money
transfer companies as part of a drive to meet stricter money
laundering rules. Dahabshiil initially managed to block the move on
competition grounds and the case was set to be heard in a U.K.
court later this year.
On Wednesday Barclays and Dahabshiil said they settled the
closely watched dispute on mutually acceptable terms. "As part of
the agreement, there will be a transition period to allow
Dahabshiil to end its banking relationship with Barclays and move
to alternative arrangements," the remittance company said. No
payments were made as part of the settlement, according to a person
familiar with the matter.
Barclays's decision to cut Somali remittance companies' bank
accounts spiraled into a public-relations fiasco. Aid groups
criticized Barclays's move, saying it could have far-reaching
consequences in a country like Somalia with no formal banking
system. Every year, migrant Somalis send around $1.3 billion back
to their home country, according to the charity Oxfam. The Somali
President Hassan Sheikh Mohamud and a Somali born, British Olympic
champion runner, Mo Farah, waded into the debate.
Analysts held the case up as an example of the side effects of
ever tightening anti-money-laundering regulations. Following a
series of high-profile settlements with U.S. and U.K. regulators,
banks have been chopping hundreds of bank accounts to ensure they
don't fall foul of rules.
Dahabshiil said Wednesday that it was looking for an alternative
solution while working with the British government on a project to
track payments made from the U.K. to Somalia.
Write to Max Colchester at max.colchester@wsj.com
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