Almost 20 international money transfer businesses have so far joined a class action in the Federal Court against Westpac for "unconscionable conduct" after the bank foreshadowed it would close all their accounts on Monday.
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The legal action, filed late on Friday after talks with the bank failed to resolve the issue, also included a temporary reprieve with an interim court order stopping Westpac from shutting down the trading accounts.
The move comes in the wake of industry fears of being inadvertently caught up in terrorism financing after a money transfer firm in Lakemba owned by relatives of terrorist Khaled Sharrouf was shut down for failing to explain millions of dollars in transfers to the Middle East.
Westpac, which was the last of big four banks to allow the international transfer businesses to use their banking facilities, told the small business operators last month that their accounts will be closed within weeks.
Westpac could not be contacted for comment on Saturday.
The business owners have argued that the disadvantaged and isolated communities in some of the world's poorest regions will be hardest hit by moves to close their operations. The operator of Sydney Forex Pty Ltd said he set up business in 2004 at a time when there was no money transfer businesses to Pakistan. Munir Mohammed said his clients were mostly migrant workers sending money home to their families.
Lawyer Richard Mitry, who is acting on behalf of the 19 business owners, said it is an open class action and will apply to all similar businesses that are affected by Westpac's moves to shut them down. There are about 5500 international money remitters that are likely to be affected.
"It is alleged that Westpac has engaged in unconscionable conduct and breach the code of banking practice by not providing remittance businesses reasonable notice before closing their accounts," said Mr Mitry.
"Some of the businessess have hundreds of thousands of dollars invested. If the accounts are closed and the software is taken away they will be forced to seek alternatives - which will take time. If they are forced to close it could affect the whole industry."
About 2 million people in Australia, mostly from immigrant communities, use money transfer services. Statistics provided by the newly formed Australian Remittance and Currency Providers Association (ARCPA) show that about 90 per cent of remittances are to developing countries and the average amount of money sent is $300. ARCPA director Dianne Nguyen has said their member businesses are happy to meet any new standards required and were already complying with Austrac requirements.
