First Solution Money Transfer

Infobox company
name = First Solution Money Transfer

type = Private
foundation = 2004
location_city = London
location_country = UK
locations = 41 branches, 100+ agents
key_people = Dr Fazal Mahmoud (Chairman)
Gulam Rabbani Rumi (Director)
Shah Mohammad Abdul Hadi (Director)
industry = Foreign exchange market
services =
num_employees =
slogan = "Shopner Shomadhan"
(Dreams Realised)
homepage = [http://www.first-solution.co.uk/home.php www.first-solution.co.uk]
dissolved = 2007
footnotes =
intl = yes

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 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.

History

According to the records available at Companies House, 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.

Company structure

First Solution Money Transfer had its headquarters at the London Muslim Centre in East London with another prominent office in Brick Lane. 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 liquidation 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. [ [http://news.bbc.co.uk/1/hi/england/london/6271686.stm Millions lost as firm goes bust] . BBC News. 2007-07-04.]

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. [ [http://www.theyworkforyou.com/wms/?id=2007-07-11a.55WS.1 Written Ministerial Statement on First Solution Money Transfer] . Hansard. 2007-07-11.] [http://www.eastlondonadvertiser.co.uk/content/towerhamlets/advertiser/news/story.aspx?brand=ELAOnline&category=news&tBrand=northlondon24&tCategory=newsela&itemid=WeED13%20Jul%202007%2013%3A04%3A49%3A920 Rescue deal in sight over First Solution collapse] . East London Advertiser. 2007-07-13.]

Bangladesh Bank

The Bangladesh Bank governor stated that First Solution was not given a license by the Bangladesh Bank. [ [http://nation.ittefaq.com/artman/publish/article_37284.shtml BB Governor on First Solution’s fraud] . The New Nation. 2007-07-02.] 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. [http://www.bangladesh-bank.org/investfacility/drawing.php Inward remittance facilities] . Bangladesh Bank.]

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. [ [http://e-bangladesh.org/headline/money-transmitting-to-bangladesh-from-ukpoor-performance-of-bangladesh-bank.html Money Transmitting to Bangladesh from UK] . E-Bangladesh. 2007-07-14.]

In an article in the East London Advertiser, [ [http://www.eastlondonadvertiser.co.uk/content/towerhamlets/advertiser/news/story.aspx?brand=ELAOnline&category=news&tBrand=northlondon24&tCategory=newsela&itemid=WeED13%20Jul%202007%2012%3A57%3A43%3A710 First Solution: Did the Government's 'safety first' plan backfire?] . East London Advertiser. 2007-07-13.] 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. [ [http://www.arts.manchester.ac.uk/casas/papers/pdfpapers/firstsolution.pdf First Solution: A safety-first plan backfires] . Centre for Applied South Asian Studies. 2007-07-12.]

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. [ [http://www.arts.manchester.ac.uk/casas/papers/hawala.html Hawala/IVTS Networks] . Centre for Applied South Asian Studies.]

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; [ [http://www.arts.manchester.ac.uk/casas/papers/pdfpapers/coaltions.pdf Coalitions of reciprocity] . Journal of Banking Regulation. 2005.] and as a limited company it operated on the principle of "caveat emptor" - 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 fraudulent 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. [ [http://www.first-solution.co.uk First Solution Money Transfer Press Statement] . Directors, First Solution. 2007-07-03]

In an e-mail interview given to the E-Bangladesh news site, the directors re-iterated their views on the cause of the downfall. [ [http://e-bangladesh.org/headline/approximately-1.7-million-pound-was-failed-to-deliver-dr.-fazal-mahmood.html Approximately 1.7 Million Pound was failed to deliver: Dr. Fazal Mahmood] . E-Bangladesh. 2007-07-11.]

Investigation

An investigation has been initiated at the request of Stephen Timms, 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)

Campaigns

On 8 July 2007, a rally was held at Altab Ali Park 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. [ [http://respectuk.blogspot.com/2007/07/george-galloway-welcomes-positive.html George Galloway welcomes "positive negotiations" with Treasury on First Solution] . Respect Party. 2007-07-12.]

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. [ [http://www.publications.parliament.uk/pa/cm/cmtoday/cmwhall/12.htm#hddr_2 Parliamentary debate] . Hansard. 2007-07-18.]

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.

References

* [http://news.bbc.co.uk/player/nol/newsid_6270000/newsid_6271400/6271402.stm?bw=bb&mp=wm Boss accepts losing millions] . BBC News. 2007-07-04.
* [http://www.bbc.co.uk/radio4/youandyours/items/01/2007_27_mon.shtml Missing millions?] . BBC Radio 4. 2007-07-02.
* [http://www.bbc.co.uk/london/content/articles/2007/07/03/towerhamlets_transfer_video_feature.shtml First Solution's last stand] . BBC News. 2007-07-03.
* [http://www.eastlondonadvertiser.co.uk/content/towerhamlets/advertiser/news/story.aspx?brand=ELAOnline&category=news&tBrand=northlondon24&tCategory=newsela&itemid=WeED28%20Jun%202007%2014%3A27%3A26%3A613 E-cash firm halts transfer deals]
* [http://www.eastlondonadvertiser.co.uk/content/towerhamlets/advertiser/news/story.aspx?brand=ELAOnline&category=news&tBrand=northlondon24&tCategory=newsela&itemid=WeED04%20Jul%202007%2021%3A37%3A07%3A923 Cash transfer business calls in insolvency experts as MP calls for probe] . East London Advertiser. 2007-07-04.
* [http://money.guardian.co.uk/news_/story/0,,2132559,00.html Despair as money transfer firm collapses] . The Guardian. 2007-07-23
* [http://www.inthenews.co.uk/money/autocodes/countries/bangladesh/call-mainstream-bank-transfers-$1113607.htm Call for mainstream bank transfers] . 2007-07-25.
* [http://www.eastlondonadvertiser.co.uk/content/towerhamlets/advertiser/news/story.aspx?brand=ELAOnline&category=news&tBrand=northlondon24&tCategory=newsela&itemid=WeED31%20Jul%202007%2021%3A59%3A56%3A093 More questions over First Solution collapse as Galloway raises issue in Parliament] . East London Advertiser. 2007-07-31.
* [http://blogs.mirror.co.uk/mirrorinvestigates/sommerlad/august2007/transfer.htm No solution for money transfer victims] . Daily Mirror. 2007-08-03.
* [http://www.eastlondonadvertiser.co.uk/content/towerhamlets/advertiser/news/story.aspx?brand=ELAOnline&category=news&tBrand=northlondon24&tCategory=newsela&itemid=WeED16%20Aug%202007%2020%3A04%3A59%3A883 First Solution rescue package being blocked] . East London Advertiser. 2007-08-16.
* [http://www.last-solution.co.uk/first-solution-money-transfer-ltd/support-the-rescue-deal-to-revive-first-solution-money-transfer Support the Rescue Deal to Revive First Solution Money Transfer] . Last Solution 2007-08-20
* [http://www.last-solution.co.uk/first-solution-money-transfer-ltd/press-release-directors-of-first-solution-branches-on-rescue-deal PRESS RELEASE: Update from Directors of First Solution Branches on Rescue Deal] . Last Solition 2007-08-28
* [http://news.bbc.co.uk/1/hi/programmes/moneybox/6981771.stm Money transfer collapse] . BBC Radio. 2007-09-07
* [http://news.bbc.co.uk/1/hi/programmes/moneybox/6984924.stm Agents bid to buy First Solution] . BBC News. 2007-09-08
* [http://www.allheadlinenews.com/articles/7008772287 Central Bank Of Bangladesh Streamlines Drawing Arrangement Rules To Avoid Risks] . All Headline News. 2007-10-09.
* [http://www.theasiannews.co.uk/news/s/1018585_delays_in_money_transfer_causes_panic Delays in money transfer causes panic] . Asian News. 2007-10-04.
* [http://www.oldhamadvertiser.co.uk/news/s/233/233293_panic_over_transfer_of_local_funds.html Panic over transfer of local funds] . Oldham Advertiser. 2007-10-10.
* [http://www.eastlondonadvertiser.co.uk/content/towerhamlets/advertiser/news/story.aspx?brand=ELAOnline&category=news&tBrand=northlondon24&tCategory=newsela&itemid=WeED31%20Oct%202007%2018%3A07%3A43%3A347 Rescue deal 'near' for collapsed First Solution money transfer firm] . East London Advertiser. 2007-10-31.
* [http://www.eastlondonadvertiser.co.uk/content/towerhamlets/advertiser/news/story.aspx?brand=ELAOnline&category=news&tBrand=northlondon24&tCategory=newsela&itemid=WeED16%20Nov%202007%2023%3A46%3A42%3A960 First Solution assets go for £30,000 in deal with Liquidator] . East London Advertiser. 2007-11-16.
* [http://news.bbc.co.uk/1/hi/programmes/moneybox/7099852.stm Anger at First Solution payments] . BBC News. 2007-11-17.
* [http://www.guardian.co.uk/business/2007/nov/25/businessandmedia Bangladeshis may sue over First Solution] . The Guardian. 2007-11-25.

* [http://www.last-solution.co.uk/first-solution-money-transfer-ltd/insolvency-practitioners-for-first-solution-need-help-from-victims Insolvency Practitioners for First Solution need help from Victims]
* [http://www.allheadlinenews.com/articles/7007813876 Bangladesh's Eight Banks Asked To Submit Transactions Reports On England-Based Company]
* [http://nation.ittefaq.com/artman/publish/article_37236.shtml Falu’s friend Fazal in hiding: Millions of taka embezzled: Probe starts]
* [http://www.thedailystar.net/2007/07/03/d70703012315.htm BB for tougher strategy to check money transfer scam]
* [http://www.southasianmedia.net/cnn.cfm?id=403453&category=Economy&Country=BANGLADESH Banks asked to hold security money]
* [http://www.thefinancialexpress-bd.com/index2.php?page=detail_news&news_id=3010 BB probing misuse of funds by UK-based company]
* [http://www.greenparty.org.uk/news/3052 Greens call on Government to investigate money transfer scam]
* [http://www.respectcoalition.org/?ite=1487 First Solution Money Transfer Collapse]
* [http://nation.ittefaq.com/artman/publish/article_37310.shtml Overseas remitting system shaken]
* [http://www.thedailystar.net/2007/07/04/d7070401097.htm BB asks banks to find ways to pay clients]
* [http://www.ukasian.co.uk/Money-And-Business/First_Solution_Goes_Bankrupt.asp First Solution Goes Bankrupt]
* [http://www.last-solution.co.uk/first-solution-money-transfer-ltd/further-letter-to-stephen-timms-from-fscg First Solution Creditors Group keeping the pressure on for a full invetigation]

ee also

Foreign exchange spot trading

External links

* [http://www.first-solution.co.uk Official Site]
* [http://www.last-solution.co.uk/ Help the Victim]
* [http://www.youtube.com/watch?v=KfVtMP1loZA Channel S Press Conference refuting allegations linking its Chairman to First Solution] (Language: Bengali/Sylheti)