http://www.oxfamamerica.org/explore/stories/under-pressure-a-somali-lifeline-is-about-to-snap/
Under pressure, a Somali lifeline is about to snap
February 2, 2015 By Oxfam
Mohamed Hassan, who lives in Minnesota, is a member of the Somali diaspora
which sends about $1.3 billion back each year to family and friends
struggling to survive in Somalia. Photo: Coco McCabe/Oxfam America
A single bank in California holds the fate of countless families. Bold
government action is required to keep money transfers flowing to Somalis in
need.
The well-being of countless families in Somalia could be at stake if a
California bank, under pressure from federal regulators, closes the
accounts of Somali-American money transfer operators. On Tuesday, Merchants
Bank announced its plan to shutter those accounts on February 6,
potentially severing a lifeline worth between $200 million and $400 million
a year.
That’s money that hardworking Somalis here in the US scrape together to
send back to family and friends who rely on the support for necessities
like food and medical care in a country that has endured decades of
hardship. Members of the Somali diaspora in the US depend on the money
transfer operators to help with the transaction, but without bank accounts
these essential small businesses can’t hold and wire the money abroad.
News of the potential closings comes just a few months after Merchants,
which reportedly handles between 60 and 80 percent of all funds transferred
from the US to Somalia, said it would try to resist regulatory pressure and
keep the accounts open.
In recent years, banks that provide accounts for money transfer operators
have faced intense scrutiny and the threat of high fines for failing to
comply with Treasury department rules designed to counter terrorism and
prevent money laundering. The pressure prompted many banks to stop serving
money transfer operators, with Somali companies particularly affected.
Merchants Bank decided to stay in the business as Oxfam and Adeso, an
international humanitarian and development organization founded by Somalis
pushed the Treasury Department to rewrite banking rules. Now, as the bank
prepares to close accounts, it seems clear that a more urgent solution is
needed. Somali families could begin to feel the effects of the decision as
soon as next week, when the flow of money could drop dramatically. At the
same time, the money is sent will be transmitted through informal and
unregulated channels—something the Treasury Department agrees would be a
significant setback in both security and humanitarian terms.
https://www.youtube.com/watch?v=lEAFgHGxV-4
“Without bold, inter-agency governmental action, all of this is likely to
destabilize communities, empower criminal groups, and deprive families of
the support they need to survive and thrive,” said Oxfam’s Scott Paul, a
senior humanitarian policy advisor. “Reform of banking and money transfer
rules is needed in both countries—and those changes are underway—but it’s
not happening fast enough. Somali families are caught in the middle. They
are the ones who will suffer when the accounts close.”
*Hardship looms*
All told, Somali migrants around the globe send home about $1.3 billion a
year—more than the country receives in humanitarian aid, development
assistance, and foreign direct investment combined. From the US alone the
annual amount is between $200 million and $400 million. Loss of that
support could mean profound hardship for untold numbers of people.
“How would you feel if your mom was sick and you could not provide the
medicine and food she needs?” asked Mohamed Hassen, a Somali elder living
in Minnesota when word of the looming account closures hit his community
last year. “I can’t even eat thinking about [it].”
What can be done?
“The US government bears significant responsibility for the closures,” said
Paul. “With its humanitarian and security objectives on the line, our
government needs to intervene and ensure that families in Somalia can get
the life-saving support they need.”
One solution, said Paul, is for the US government to employ a public
financial institution, like the New York Federal Reserve, to send money on
behalf of the Somali money transfer operators—at least until market
conditions entice private banks back into the business. Alternatively, the
Treasury Department could approve a special regulatory regime designed to
urgently entice banks to re-enter the market.
“Money transfers from abroad are possibly Somalia’s most important source
of revenue,” said Paul. “It’s money that supports community resilience,
promotes peace and stability, and reduces the need for international
humanitarian assistance. It’s in the interest of all of us to make sure the
flow isn’t cut off.”
Received on Wed Feb 04 2015 - 06:51:54 EST