Last summer, the British banking giant Barclays sent account closure notices to some 250 clients in the United Kingdom, giving them 60 days to find a new home for their cash. Most of the customers were small remittance companies -- so-called money services businesses -- that served the country’s large diaspora communities. Since big international banks don’t typically have branches in Somalia and Bangladesh, such money transfer firms are the main pipeline through which immigrants send money to family members back home. Increasingly concerned about complying with government regulations to combat terrorist financing, however, the banks wanted to clear their books of any excess risk.
Condemnation came swiftly, and a coalition of nonprofits, politicians, and sports stars mobilized to fight the Barclays decision. The account closures, they said, constituted the severing of a “financial lifeline” for fragile, poverty-stricken states. Somalia, for example, receives more money from remittances than it does development aid, and according to the World Bank, developing countries receive over $400 billion in remittances annually. In response to the uproar, the British parliament held debates, set up an action group, and commissioned a report (to which I contributed). Barclays managed to close most of the accounts anyway.
In its defense, Barclays argued that the high costs of complying with counterterrorism regulations meant that it was no longer “commercially viable for [the bank] to continue to pro...
