First Solution Money Transfer
Encyclopedia
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.
In June 2007, the company went into liquidation owing nearly GB£2 million pounds to the public, the majority of whom were from the Sylhet
region of Bangladesh
.
Campaigns organised by various community leaders and the local Member of Parliament
have 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.
, First Solution Money Transfer was set up as a Limited Company
with a share capital of GB£100 on 14 April 2004. Of these 35 shares were held by Dr. Fazal Mahmood, 35 by Mr Ghulam Rabbani, 25 by Shah Mohammed Abdul Hadi, and 5 by Mohammed Nazrul. All four were named as Directors of the Company, and Ghulam Robbani as the Company Secretary. A further 40,000 shares of GB£1 each were issued during the 2005-06 accounting year, but the documents give no indication as to how or to whom the shares were distributed.
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.
. Additional branches and affiliated agents were dotted around the major towns and cities of the UK with a few in the rest of Europe.
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
in June 2007 owning, according to the company directors, GB£1.7 million pounds to the public who had used its money transfer service in the preceding 2–3 months.
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 sudden closure of former First Solution Money Transfer Ltd (now known as XTL Ltd) on 28 June 2007 was a major blow to the UK Bangladeshi community which used it to send their hard earned money to relatives in Bangladesh.
Since then, some of the former agents and branch staff of First Solution embarked on a ‘corporate recovery’ package to resolve this situation and reach a position whereby all remittance creditors can be paid.
The new management of First Solution, consisting of 13 former Agents and Branches, successfully acquired the First Solution brand and commenced trading in May 2008.
One of the stated goals of the new organisation was to pay back as much of the money as possible to people who had lost funds in the scandal. It is unclear how much of the money has been repaid.
The UK government was expected to bring in tighter regulation to this sector by 2009.
governor stated that First Solution was not given a license by the Bangladesh Bank. However, First Solution is listed on the Bangladesh Bank's website as having agreements with a number of banks in Bangladesh through which it was permitted to remit money into the country.
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.
ulent activities or undertook risky speculative business in the currency market.
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.
, minister of the Department for Business, Enterprise and Regulatory Reform
. In the early hours of 6 July 2007, the Metropolitan Police
seized documents and computers from the First Solution head offices in London
. These materials have now been requisitioned by the Companies Investigation Branch of the BERR
(formerly DTI
)
where George Galloway
called on the government to compensate the victims for the money they lost in this scandal.
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.
In June 2007, the company went into liquidation owing nearly GB£2 million pounds to the public, the majority of whom were from the Sylhet
Sylhet Division
Sylhet Division , also known as Greater Sylhet or Sylhet region, is the northeastern division of Bangladesh, named after its main city, Sylhet...
region of Bangladesh
Bangladesh
Bangladesh , officially the People's Republic of Bangladesh is a sovereign state located in South Asia. It is bordered by India on all sides except for a small border with Burma to the far southeast and by the Bay of Bengal to the south...
.
Campaigns organised by various community leaders and the local Member of Parliament
Member of Parliament
A Member of Parliament is a representative of the voters to a :parliament. In many countries with bicameral parliaments, the term applies specifically to members of the lower house, as upper houses often have a different title, such as senate, and thus also have different titles for its members,...
have led to investigations of the collapse by the Metropolitan Police
Metropolitan police
Metropolitan Police is a generic title for the municipal police force for a major metropolitan area, and it may be part of the official title of the force...
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.
History
According to the records available at Companies HouseCompanies House
Companies House is the United Kingdom Registrar of Companies and is an Executive Agency of the United Kingdom Government Department for Business, Innovation and Skills . All forms of companies are incorporated and registered with Companies House and file specific details as required by the...
, First Solution Money Transfer was set up as a Limited Company
Private company limited by shares
A private company limited by shares, usually called a private limited company , is a type of company incorporated under the laws of England and Wales, Scotland, that of certain Commonwealth countries and the Republic of Ireland...
with a share capital of GB£100 on 14 April 2004. Of these 35 shares were held by Dr. Fazal Mahmood, 35 by Mr Ghulam Rabbani, 25 by Shah Mohammed Abdul Hadi, and 5 by Mohammed Nazrul. All four were named as Directors of the Company, and Ghulam Robbani as the Company Secretary. A further 40,000 shares of GB£1 each were issued during the 2005-06 accounting year, but the documents give no indication as to how or to whom the shares were distributed.
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
Cash flow statement
In financial accounting, a cash flow statement, also known as statement of cash flows or funds flow statement, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing...
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.
Company structure
First Solution Money Transfer had its headquarters at the London Muslim Centre in east London with another prominent office in Brick LaneBrick Lane
Brick Lane is a street in the London Borough of Tower Hamlets, in the East End of London. It runs from Swanfield Street in the northern part of Bethnal Green, crosses Bethnal Green Road, passes through Spitalfields and is linked to Whitechapel High Street to the south by the short stretch of...
. Additional branches and affiliated agents were dotted around the major towns and cities of the UK with a few in the rest of Europe.
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
Liquidation
The company went into liquidationAdministration (insolvency)
As a legal concept, administration is a procedure under the insolvency laws of a number of common law jurisdictions. It functions as a rescue mechanism for insolvent entities and allows them to carry on running their business. The process – an alternative to liquidation – is often known as going...
in June 2007 owning, according to the company directors, GB£1.7 million pounds to the public who had used its money transfer service in the preceding 2–3 months.
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 sudden closure of former First Solution Money Transfer Ltd (now known as XTL Ltd) on 28 June 2007 was a major blow to the UK Bangladeshi community which used it to send their hard earned money to relatives in Bangladesh.
Since then, some of the former agents and branch staff of First Solution embarked on a ‘corporate recovery’ package to resolve this situation and reach a position whereby all remittance creditors can be paid.
The new management of First Solution, consisting of 13 former Agents and Branches, successfully acquired the First Solution brand and commenced trading in May 2008.
One of the stated goals of the new organisation was to pay back as much of the money as possible to people who had lost funds in the scandal. It is unclear how much of the money has been repaid.
The UK government was expected to bring in tighter regulation to this sector by 2009.
Bangladesh Bank
The Bangladesh BankBangladesh Bank
Bangladesh Bank is the Central bank of Bangladesh and is a member of the Asian Clearing Union.-History:After the liberation war, and the eventual independence of Bangladesh, the Government of Bangladesh reorganized the Dhaka branch of the State Bank of Pakistan as the central bank of the country,...
governor stated that First Solution was not given a license by the Bangladesh Bank. However, First Solution is listed on the Bangladesh Bank's website as having agreements with a number of banks in Bangladesh through which it was permitted to remit money into the country.
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
East London Advertiser
The East London Advertiser is a weekly local newspaper in east London, England covering primarily the borough of Tower Hamlets. It was founded in 1866 and has been owned by Archant since 2003....
, Dr. Roger Ballard of the Centre for Applied South Asian Studies at the University of Manchester
University of Manchester
The University of Manchester is a public research university located in Manchester, United Kingdom. It is a "red brick" university and a member of the Russell Group of research-intensive British universities and the N8 Group...
suggests that First Solution may well have been the first fruits of efforts by the UK's Department for International Development
Department for International Development
The Department For International Development is a United Kingdom government department with a Cabinet Minister in charge. It was separated from the Foreign and Commonwealth Office in 1997. The goal of the department is "to promote sustainable development and eliminate world poverty". The current...
(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
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
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
Terrorist Financing
Terrorist financing came into limelight after the events of terrorism on 9/11. The US passed the USA PATRIOT Act to, among other reasons, attempt thwarting the financing of terrorism and anti-money laundering making sure these were given some sort of adequate focus by US financial institutions...
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
Caveat emptor
Caveat emptor is Latin for "Let the buyer beware". Generally, caveat emptor is the property law doctrine that controls the sale of real property after the date of closing.- Explanation :...
- buyer beware. That's the capitalist logic of formality.
Cause of downfall
It is still unclear if the situation had been exacerbated as a result of media pressure causing thousands of people to demand immediate refunds effectively causing a cashflow crisis at the company and forcing it to call in liquidators. Investigation is currently ongoing to determine the full extent of the problem and whether the company was involved in fraudFraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
ulent activities or undertook risky speculative business in the currency market.
In a press statement displayed on the company's website, the directors stated that Bangla TV
Bangla TV
Bangla TV is a UK-based satellite television channel targeting the Bengali speaking people in the United Kingdom, and in Europe.-History:Launched in 1999, Bangla TV was the first Bengali language television channel in the UK...
, a UK-based Bengali language
Bengali language
Bengali or Bangla is an eastern Indo-Aryan language. It is native to the region of eastern South Asia known as Bengal, which comprises present day Bangladesh, the Indian state of West Bengal, and parts of the Indian states of Tripura and Assam. It is written with the Bengali script...
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.
Investigation
An investigation has been initiated at the request of Stephen TimmsStephen Timms
Stephen Creswell Timms is a British Labour politician, who has been the Member of Parliament for East Ham since 1994. He is a former Cabinet Minister having served as Chief Secretary to the Treasury from 2006 to 2007...
, minister of the Department for Business, Enterprise and Regulatory Reform
Department for Business, Enterprise and Regulatory Reform
The Department for Business, Enterprise and Regulatory Reform was a United Kingdom government department. The department was created on 28 June 2007 on the disbanding of the Department of Trade and Industry , and was itself disbanded on 6 June 2009 on the creation of the Department for Business,...
. In the early hours of 6 July 2007, the Metropolitan Police
Metropolitan police
Metropolitan Police is a generic title for the municipal police force for a major metropolitan area, and it may be part of the official title of the force...
seized documents and computers from the First Solution head offices in London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
. These materials have now been requisitioned by the Companies Investigation Branch of the BERR
Berr
Berr is a surname, and may refer to:* Hélène Berr , Jewish French woman* Henri Berr , French philosopher-See also:* Ber * BERR, Department for Business, Enterprise and Regulatory Reform in United Kingdom...
(formerly DTI
DTI
DTI may refer to:*Debt-to-income ratio*Deep trench isolation*Defense Technology Institute, the Thai defense technology public organisation*Department of Trade and Industry, a government department in several countries*Detroit, Toledo and Ironton Railroad...
)
Campaigns
On 8 July 2007, a rally was held at Altab Ali ParkAltab Ali Park
Altab Ali Park is a small park on Adler Street, White Church Lane and Whitechapel High Street, London E1; formerly known as St. Mary's Park it is the site of the old 14th Century white chapel, St. Mary Matfelon, from which the area of Whitechapel gets its name. Having been destroyed in The Blitz...
where George Galloway
George Galloway
George Galloway is a British politician, author, journalist and broadcaster who was a Member of Parliament from 1987 to 2010. He was formerly an MP for the Labour Party, first for Glasgow Hillhead and later for Glasgow Kelvin, before his expulsion from the party in October 2003, the same year...
called on the government to compensate the victims for the money they lost in this scandal.
On 10 July 2007, George Galloway held a meeting with Kitty Ussher
Kitty Ussher
Katharine Anne "Kitty" Ussher is a British economist and former Labour Party politician.After training as an economist, she was elected Member of Parliament for Burnley from 2005 until 2010, succeeding Peter Pike. Ussher formerly held the position of Exchequer Secretary to the Treasury in Gordon...
(Economic Secretary to the Treasury
Economic Secretary to the Treasury
The Economic Secretary to the Treasury is the fifth most senior ministerial post in the UK Treasury, after the Chancellor of the Exchequer, the Chief Secretary to the Treasury, the Paymaster-General and the Financial Secretary...
) 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.
External links
- Official Site
- Help the Victim
- Channel S Press Conference refuting allegations linking its Chairman to First Solution (Language: BengaliBengali languageBengali or Bangla is an eastern Indo-Aryan language. It is native to the region of eastern South Asia known as Bengal, which comprises present day Bangladesh, the Indian state of West Bengal, and parts of the Indian states of Tripura and Assam. It is written with the Bengali script...
/Sylheti)