Remittance providers want four months grace from Westpac

Last Friday, alternative remittance service providers were in the Federal Court in Sydney seeking orders preventing Westpac from closing their accounts on the grounds that the bank had engaged in "misleading and deceptive conduct."

The reason for this assertion by Sydney Forex, the lead applicant in a class action against Westpac, can be paraphrased as follows:

"The applicant [Forex] was dealing with Westpac in the belief that the bank was looking to accommodate him, or at least to reconsider closing his account. The applicant was not aware of the 'high level' decision to close all alternative remittance service providers' trading accounts, and not give consideration to any case on its merits."

Lawyers representing Sydney Forex and 18 other remittance providers in this class action - which, in theory, could draw in another 5000 remittance firms - argued that the banking arrangements in place with Westpac should be allowed to continue "for a reasonable period of time" of "at least four to six months."

Westpac, for its part, suggested that not all remitters whose accounts had been closed wanted to take part in action against the bank, so whatever was decided would need to provide for those businesses to opt out.

One aspect both sides agreed on was the need for a speedy resolution, balanced against the need to allow sufficient time for any businesses affected by Westpac's decision to close accounts to either opt out or come on board.

Justice Lindsay Foster observed that continuing the arrangements until the case was decided did not appear likely to cause the bank any grief; it was more a general principal that was at stake.  

Westpac's barrister did not contradict Justice Foster, choosing to point out that while the bank would meet an undertaking to continue to provide banking services to Sydney Forex, it could not guarantee the performance of its correspondent banks.

Both parties are due back in Federal Court on 4 December for a directions hearing, ahead of a trial hearing with a start date set for 22 December.

Since the commencement of the AML/CTF Act, approximately 5891 businesses have registered with AUSTRAC as providers of designated remittance services, according to research from the Australian Institute of Criminology (although a word of caution: these numbers date back to 2010).

These money transfer operators are also known more generically as alternative remittance services. On 24 November, Westpac became the final big Australian bank to announce it was no longer willing to facilitate transfers by ARS providers  - saying it was all but impossible to meet the global "know your customer" rules without incurring untenable compliance costs.

Anecdotally, Banking Day understands that a large number of ARS providers who were not wholly or largely dependent on money transfers for their livelihood, but rather viewed them as a "nice to have" revenue stream or a value-add service for their customers, are unlikely to want to join Sydney Forex in its fight with Westpac.