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Washington, DC – A $1.3 billion per year stream of cash that the people of Somalia depend on for food, shelter, and other necessities is under threat according to a new report from Adeso, the Inter-American Dialogue, and Oxfam America released today. Fear of US anti-terror and money laundering laws is leading banks to close critically needed bank accounts of US-based money transfer operators. Used for urgently needed remittances, these accounts are sometimes closed in indiscriminate fashion. With the lack of a formal banking system in Somalia, families now face the possibility of being unable to access funds from friends and relatives that they desperately require for survival.
More money in remittances is sent back than Somalia receives in humanitarian assistance, development assistance and foreign direct investment combined. Somalis based in the US send approximately $214 million each year back to their families in Somalia, nearly the same amount the US sends in foreign assistance to Somalia ($242 million). Remittances allow individuals and families to spend money based on their specific needs and immediate priorities.
"Somali-Americans want to be able to send resources to their extended families abroad," said Representative Ellison. "Remittances are estimated to make up approximately one third of Somalia's economy, and give many Somali families the ability to put food on the table. The Money Remittances Improvement Act of 2013 will provide financial institutions greater certainty when working with Money Services Businesses and reduce the regulatory burden for these businesses. We cannot solve all of the problems Somali-Americans face sending money home overnight, but we can simplify the process for both businesses and families."
“Regulators and banks are pointing fingers at one another while the Somali remittance system teeters on the brink,” said Scott Paul, senior humanitarian policy advisor at Oxfam America. “What is needed is a concerted and collaborative effort to make sure Somalis can safely and freely support their families back home. Somalia’s development and recovery hang in the balance.”
To many banks, the fear of running afoul of US Anti-Money Laundering/Combating the Financing of Terrorism requirements has led them to take the relatively easy step of shuttering the accounts of money transfer operators, irrespective of their compliance with US law. Without providing any specific reasons or justifications, banks have been closing the accounts of Somali-American money transfer operators at nearly twice the rate of their Latin American counterparts.
“The Somali community in the US is being pushed to the brink,” said Dr. Manuel Orozco, director of remittances and development at the Inter-American Dialogue and lead author of the report. “A complete shutdown of the formal remittance system can occur if closures continue. Account closures have already endangered the lives and livelihoods of Somalis. If the MTO system shuts down, remittances will not only be reduced, they may also go underground – dramatically reducing the transparency and security of the system. Paradoxically it could become a serious national security problem for the United States.”
Remittances to Somalia amount to approximately $1.3 billion a year, of which 20% comes from the US. The money is a lifeline for many Somalis, providing them with a means to meet their immediate needs for food, shelter, clothing, and other basic necessities as well as open and sustain small businesses, send children to school, and invest in their communities. Remittances to women, in particular, result in investments in education, health, and nutrition.
“More than half the recipients of remittances are women,” said Degan Ali, executive director at Adeso. “These are teachers and business owners. The money they receive can account for more than half of their income.”
Somali money transfer operators also play a critical role in cash relief programs, which Adeso, Oxfam, the United Nations, the US Administration for International Development and other humanitarian agencies used to help Somalis buy food and other basic necessities during the 2011 famine.
“These companies don’t just connect Somalis to their relatives; they connect Somalis with humanitarian agencies like ours so we can provide life-saving assistance,” Ali added.
Note: The report is available in its entirety at http://www.oxfamamerica.org/publications/keeping-the-lifeline-open-remittances-and-markets-in-somalia
Oxfam America is a global organization working to right the wrongs of poverty, hunger, and injustice. As one of 17 members of the international Oxfam confederation, we work with people in more than 90 countries to create lasting solutions. Oxfam saves lives, develops long-term solutions to poverty, and campaigns for social change.
Adeso is an African-founded and led humanitarian and development organization that is changing the way people think about and deliver aid in Africa. We believe that development must come from within, not outside African communities and that it is Africans themselves who must determine their own futures. We work to prevent, manage, and overcome situations that threaten the environmental, social and financial wellbeing of African communities. With this approach, we believe that we can build on the foundations of our great continent and help take Africa forward.
The Inter-American Dialogue is the leading U.S. center for policy analysis, exchange, and communication on issues in Western Hemisphere affairs. It seeks to build cooperation among nations and advance an agenda of democratic governance, social equity, and economic growth.