UK’s Barclays bank has delayed a move to suspend the accounts of nearly 250 money transfer services operating in Somalia, temporarily keeping thecritical financial lifelines open past its July 10, 2013 deadline. While it is unclear which firms received the extension or how long the reprieve will last, representatives from one of the biggest transfer firms in Mogadishu reported being open for business after the initial deadline had passed. If the decision to delay is rescinded, it will have a major impact on Somalis who depend on money from family living outside of the country. Research on Somali remittances, which the United Nations estimates to be about $1.2 billion annually, accounts for almost half of the recipients’ annual income and is mostly used to pay for food, education and medical expenses. Many in Somalia are still recovering from the effects of the 2011 famine, the worst in 25 years.
Citing unspecified concerns that some of the money transfer firms “unwittingly facilitating money laundering and terrorist financing,” Barclays’ move to halt its services is widely believed to be driven by legal and financial liabilities after another prominent bank was hit with a $2 billion fine in 2012 for being implicated in money laundering schemes.
In response to the bank’s initial announcement to suspend accounts, pleas to British Prime Minister David Cameron and other top British officials to intervene were made by nearly 200 Somali non-governmental organizations (NGOs) on July 1 (a copy of the letter can be viewed here).
If the bank closes the accounts, not only will the Somali Diaspora be affected, but many aid agencies operating humanitarian programs in Somalia, including Oxfam and CARE, will be hampered. “While this suspension will not affect our local transfers, it is worth noting that the UN and many of the large relief and development organizations use hawala money transfers to pay their staff, procure assistance, and implement very successful emergency aid and poverty-relief programs such as cash-for-work,” the United Nations’ Dawn Blalock Goodwin told IRIN.
Many also believe that closing the legal channels of transferring money will drive people to use less accountable alternatives that will make tracing the flow of funds harder. The closing of these accounts “will only encourage people to send funds through illegal, unsafe, and untraceable channels, thereby potentially making the problem of support to proscribed parties much more serious,” say over 100 academics and aid experts who wrote a letter (a copy can be found here) to the British government in late June 2013. They also called on the bank to delay the move, provide evidence that the money transfer firms are not in compliance with existing regulations and to “convene a series of multi-stakeholder discussions” to improve due diligence standards to facilitate these types of financial transfers.
The humanitarian situation in Somalia continues to be grave. The Director the UN’s Office for Coordination of Humanitarian Affairs, John Ging, visited the country in mid-July and reported that one million people are in urgent need of assistance, while another 1.7 million need support to avoid falling into crisis. He also noted that polio has re-emerged in the country, six years after the last case was reported.
In the U.S., a Minneapolis-based bank announced in April 2013 that it would open an account to facilitate money transfers to Somalia more than a year after the last major bank stopped conducting the transactions. Minnesota is home to over 30,000 Somalis that rely on these financial services to send money to family living in the war-torn East African country.