First Solution Money Transfer was a UK based private limited company which provided a money transfer service, providing expatriates the facilities to transfer money back to their family in Bangladesh.
Campaigns organised by various community leaders and the local Member of Parliament has led to investigations of the collapse by the Metropolitan Police and a review of this industry by the government. Tighter regulation in this sector is expected to be introduced by 2009. The government has also indicated support for the setup of a crisis fund to compensate the victims.
In presenting its accounts to Companies House, First Solution presented abbreviated accounts in accordance with the Financial Reporting Standard for Smaller Entities; these standards also obviated the need for the company to provide a cash flow statement to the authorities. As a result the data available from Companies House about First Solution’s business activities are remarkably skimpy.
As the figures are presented, the most substantial item in First Solution Money Transfer’s accounts is an interest-free loan which the Company had made to First Solution UK Ltd, and of which Dr. Fazal Mahmood and Mr Ghulam Rabbani were also Directors. This loan amounted to GB£24,834 in 2005, and had risen to GB£190,697 in 2006. The documents also show that the Directors paid themselves GB£9,600 in 2004-05, and a similar amount the following year, during which independent Auditors were also paid GB£5,000 for their services.
In keeping with the Company’s presentation of itself as a small business, the Directors concluded, and the Auditors concurred, that there was no need to include any details of the funds which the Company transferred to Bangladesh on behalf of its customers. Hence the only indication of the Company’s success (or failure) in implementing its core business was the declaration of a small loss of GB£435 on its foreign exchange activities during 2005-06. No details of the Company’s activities during the following financial year are available at Companies House, since the business had by then collapsed.
The company achieved a staggering growth since its inception in July 2004, increasing its turnover from 4 million GBP to approximately 87 million GBP year ending 2007
The scandal sent shockwaves through the Bangladesh money transfer industry in the UK. Measures are being put in place by the Government of Bangladesh to ensure a similar situation does not occur again.
The UK government will also bring in tighter regulation to this sector but these are not expected to be in place until 2009.
However, there are also a number of companies in the UK provided remittance facilities to Bangladesh which do not have the approval of Bangladesh Bank nor are they listed in the UK section of Bangladesh Bank's inward remittance providers list.
In an article in the East London Advertiser, Dr. Roger Ballard of the Centre for Applied South Asian Studies at the University of Manchester suggests that First Solution may well have been the first fruits of efforts by the UK's Department for International Development (DFID) to replace 'informal' community-based value transfer networks with 'more reliable' formal sector initiatives. DFID made a GB£7.5 million grant to the Bank of Bangladesh to achieve just that.
But although their publicly announced reason for doing so was to provide migrants with cheaper and more reliable services, the underling subtext of such initiatives - also strongly backed by the World Bank and the US Treasury - was to prevent these 'informal' 'underground' networks being used by terrorists and drugs smugglers - even though there was little or no evidence that hawala networks were actually being used for such purposes. Most informed commentators concluded that such 'informal' networks provided migrant workers with a service which was easier to access, cheaper, swifter, and if anything even more reliable than those provided by the banks and other former sector agencies.
DFID thought otherwise. First Solution was only too ready to agree, and carefully conformed with the necessary regulatory requirements - which were all about countering Terrorist finance and Anti-money laundering. The regulations made no reference to steps to be taken to ensure financial reliability. In the past there had been no need to do so. Trust-based networks which grew out of local communities had been extremely reliable.
However, First Solution was a totally different kind of beast. It was organised by the top down, had the blessings of the Bangladesh Bank, and perhaps of DFID as well (although they have so far kept their heads well below the parapet). But First Solution was a limited company: it wasn't grounded in networks of mutual trust or coalitions of reciprocity; and as a limited company it operated on the principle of caveat emptor - buyer beware. That's the capitalist logic of formality.
In a press statement displayed on the company's website, the directors stated that Bangla TV, a UK-based Bengali language satellite TV channel, had been irresponsible in showing angry public opinion calling for the directors and their families to be "pursued" and not to rest until they were shown "naked in the street". The directors have also stated that Bangla TV had caused panic among the community by falsely stating that the company had gone bankrupt when it hadn't on 25 June 2007. The company, therefore, had no choice but to call in liquidators as the investment and cash-injection it was seeking at the time had fallen through as a direct result of these misrepresentations by Bangla TV.
In an e-mail interview given to the E-Bangladesh news site, the directors re-iterated their views on the cause of the downfall.
On 10 July 2007, George Galloway held a meeting with Kitty Ussher (Economic Secretary to the Treasury) and called on the government to set up a Farepak-style crisis fund to compensate the victims. The minister said there would be support for such a fund from the government and a statement would be made to parliament shortly on the First Solution crisis.
Hundreds of people demonstrated and lobbied MPs outside the houses of parliament on 11 July 2007. The government has confirmed it is planning a rescue package to compensate the victims although the government itself would not be donating any money into the fund. The issue was debated in Parliament on 18 July 2007.
On 3 August 2007, the Government's Official Receivers were appointed as provisional receivers and the previous liquidators, Panos Eliades Franklin & Co were dropped at the request of the Secretary of State, Stephen Timms. A provisional court date of 6 November 2007 has been announced.
The Directors of First Solution Branches have been working behind the scenes since the start of this fiasco to try and come up with a Rescue Plan to revive First Solution Money Transfer Ltd. The Rescue Deal would mean that the creditors are get their money back and also First Solution Money Transfer Ltd does not go into the history book as a major Bangladeshi business failure in the UK. The plan is currently awaiting approval from the Treasury and the High Courts.