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US terror clampdown cuts remittance lifeline to Somalia - Oxfam

Source: Thomson Reuters Foundation - Wed, 31 Jul 2013 02:51 PM
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Muslim men eat iftar, the evening meal, to break their fast during Ramadan, in the Hodan district of Somalia's capital Mogadishu, July 23, 2013. REUTERS/Feisal Omar
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NAIROBI (Thomson Reuters Foundation) – US anti-terror regulations are hurting poor families in Somalia who depend on remittances from abroad to survive, Oxfam said in a report on Wednesday.

Diaspora remittances are the biggest foreign currency earner for Somalia, which is slowly emerging from two decades of civil conflict and recurrent drought. An estimated 600,000 to 800,000 Somalis living in the diaspora send home some $1.3 billion a year to support their relatives.

The United States is the largest source of remittances. But virtually all major US banks have stopped offering remittance services to Somalis in the United States because of counter-terrorism regulations.

“A remittance channel closure is among the most worrisome of the possible and foreseeable catastrophes that could befall Somalia,” the report ‘Keeping the lifeline open: remittances and markets in Somalia’ said.

“Even a partial shutdown could cause tremendous economic and social trauma.”

Over 100,000 people with Somali ancestry live in the United States and send home $214 million each year. This is almost as much as US aid to Somalia of $242 million.

The banks fear being held responsible if money fell into the hands of groups that the US government brands as terrorists, such as the al Qaeda-linked al Shabaab.

Somalis in the United Kingdom are experiencing similar problems sending money home. Last month, Barclays in Britain said it was stopping offering banking services to some Somali transfer firms because of fears that funds might end up in the hands of "terrorists".


Remittances account for one-third of Somalia’s economy.

Half the recipients in Somalia are women, the report said. The money they receive from overseas accounts for half their income.

 For example, one man sends $400 a month to his mother and sister-in-law. This buys food for six people who have no other source of income and pays school fees for three children.

“Families now face the possibility of being unable to access funds from friends and relatives that they desperately require for survival,” Oxfam said in a statement.

It is impossible to send money from the West to Somalia via bank transfers because Somalia’s commercial banking system collapsed in the 1990s after the fall of dictator Siad Barre.

Instead, money is sent using Money Transfer Operators (MTO), such as Dahabshiil.

The MTOs need bank accounts in the United States to facilitate the transfers. But many banks, branding Somalia a risky destination for money transfers, have closed the accounts of MTOs in recent years.

In 2011, Sunrise Community Banks, a small financial institution based in Minneapolis – home to the largest Somali-American population in the country – closed its Somali-American MTO accounts.

This happened two months after two Somali-American women from Minnesota were convicted of raising money for al Shabaab.

The Oxfam report says Somali-Americans with relationships with MTO owners are also having their personal accounts with US banks shut down, contributing to a sense of discrimination.

It includes a letter from a bank to an individual saying: “We acknowledge that you have banked with us for a number of years, however, trends in the regulatory environment and changes in our Bank’s policies require that we discontinue your relationship.”

Experts have warned that the US policy may prove counterproductive in combating terrorism.

“Closing legal channels of transfering money will only encourage people to send money, either for legitimate or ‘nefarious’ reasons, through illegal channels,” wrote Laura Hammond, a senior lecturer at the University of London’s School of Oriental and African Studies.

Continued support from the diaspora is essential for Somalia to emerge from decades of humanitarian crisis, the report said.

US Congressman Keith Ellison is sponsoring a bill to safely facilitate money transfers to Somalia, but it is unlikely to be enacted.

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