Westpac will be the last Australian bank to close its remittance services on March 31, following an extension to a Sydney-based group of remitters who undertook a class action in the Federal Court.

Remittance providers that were not involved in the action had their ACCOUNTS closed on December 24, when the court action was settled.

Australian banks have shied away from the remittance sector as tighter money laundering and terrorism FINANCING regulations, which aim to prevent money being sent overseas from falling into the hands of terrorist organisations, have increased the risk of banks of being fined.

A spokeperson for the Federal Attorney General’s Department explained that “banks’ decisions reflect their own and, in some instances, their international partnering banks’ assessment of the money laundering and terrorist FINANCING risks, or the potential for breaches of Australian or foreign sanction laws associated with remittance service providers”.

The closures will affect communities with families abroad who are dependent on remittances. The Somali community in Australia has been particularly vocal, saying that Somalia does not have established banking networks or modern forms of electronic FUNDS transfers.

Commonwealth Bank was first to opt out of the $435m global remittance industry two years ago, followed by ANZ and National Australia Bank. “All the remitters moved to Westpac, but finally they (too) decided it was too hard,” said Dr Hussein Horaco, of the Somali Remittance Action Group, which was not involved in the industry-led court action.

“Somali-Australians, often sending just $50 or $100 from their hard EARNEDsavings, send back a combined total at least $10.5million each year to Somalia – more than two-thirds of the amount of aid the Australian Government has sent to Somalia this year,” Dr Haraco said.

Cutting off remittance services could spell humanitarian disaster, he said.

Internationally, the Twitter hashtags #IFundFoodNotTerror and #Somali4Remittances have gathered traction after US banks decided to no longer allow remittance services to Somalia.

The newly formed Australian Remittance and Currency Providers Association estimates 6.5 million Australians with family or friends overseas rely on MONEY TRANSFER services.

“The remittance sector has been identified globally as being vulnerable to misuse for money laundering and terrorism financing purposes.”

– John Schmidt, acting chief executive of AUSTRAC

Westpac said in a statement, “We are continuing to work closely with the government, regulators and our customers to see what longer-term solutions may be possible to support and help make such payments in the future.”

Working Group meetings are underway, chaired by the Attorney-General’s Department and including the Somali Remittance Action Group, remitter groups and representatives from Department of Foreign Affairs and Australia’s international money transfer watchdog, AUSTRAC.

A spokesperson for the Attorney-General’s Department said the meetings have tackled issues including “discussing practical measures that remitters could undertake to make their businesses more likely to fit within the acceptable risk tolerance of banks. The work of the group is ongoing.”

These meetings, both in person and by phone conference, have been productive, according to Dr Horaco. “Before March 31, we’re optimistic about reaching a solution.”

Otherwise, he said, “Black market remitters will be charging 20 percent, but we’ll have no option but to pay the money.”

Somali remitters are currently charging five percent for transactions, which is among the lowest charged by remitters. An Indian proposal that was accepted at the recent G20 meeting suggested remitter fees be capped at this rate.

Already, tighter regulations have forced the price of remittance services upwards.

The Somali community are exploring all their options as the remittance deadline looms. “(We could) take the money in a bag to Dubai and do the transfer there… (But) we need security, cash is dangerous to carry,” Dr Horaco said, adding that the airline ticket was an added expense.

In the 2012-13 FINANCIAL year, more than $30 billion was transferred into and out of Australia through alternative remitters, according to the Australian Crime Commission-led Taskforce Eligo.

AUSTRAC’s fund-tracking operations receive about 20,000 reports a day of suspicious transactions, CASH transactions over $10,000 or electronic TRANSFERS.

There are more than 5,000 registered remitters in Australia, and AUSTRAC have cancelled REGISTRATIONS of those that didn’t abide by strict financial guidelines, including Lakemba-based Bisotel Rieh, run by relatives of Australian ISIS foreign fighter Khaled Sharrouff, which failed to disclose where a $21 million transfer was going.

At the time, the acting chief executive of AUSTRAC, John Schmidt, said the business “may involve a significant FINANCING of terrorism risk.”

“The remittance sector has been identified globally as being vulnerable to misuse for money laundering and terrorism FINANCING purposes,” Mr Schmidt said.

As part of Operation Appleby, law enforcement authorities have arrested Australians suspected of FUNDING terrorist organisations abroad.

“Providing funding is equally criminal as actually travelling to participate and we will use all our resources to cut off the supply of FUNDS to terrorists,” AFP assistant commissioner Neil Gaughan said.