In late September, Merchants Bank of California announced it would not close the accounts of Somali-American money transfer operators—a move that could have put many of them out of business and threatened a lifeline for countless people.
It’s through the money transfer operators that members of the Somali diaspora are able to send much-needed cash home to family members and friends to pay for basics like food, medical care, and school fees.
In recent years, money transfer operators have found themselves increasingly shut out of banks, and therefore unable to hold and wire money abroad. Banks maintaining accounts for money transfer operators face intense scrutiny and the threat of high fines for failing to comply with US Treasury Department rules designed to counter terrorism and discourage money laundering. With local regulators adding extra pressure, many of those banks decided the challenge of serving Somali-American money transfer operators was just too great, and shuttered their accounts instead.
But Merchants stayed in the business, reportedly handling between 60 and 80 percent of all the funds transferred from the US to Somalia. All told, Somali migrants around the globe send home about $1.3 billion a year—more than the country receives in humanitarian and development aid and foreign investment combined. From the US alone, the contributions amount to more than $200 million annually—money often scraped together from jobs that barely pay their owners enough to support families here.
In May, Merchants announced it had had enough. Under heavy pressure from the Office of the Comptroller of the Currency, an independent regulatory agency housed in the Treasury Department, the bank said come Sept. 30, Somali-American money transfer operators would have to take their business elsewhere.
And what would families in Somalia do if Treasury Department rules cut the lifeline that fed, clothed, and educated their children?
As news of the pending closures trickled through Somali communities around the US, Oxfam and Adeso, an international humanitarian and development organization founded by Somalis, kicked into high gear. They drew media attention to the issue and brokered private conversations with key stakeholders. Merchants’ chief executive officer, Daniel Roberts, traveled to the United Arab Emirates and Djibouti to interview compliance officers who work with money transfer operators and to learn about the array of mechanisms that ensure the security of the funds as they make their way to Somali families.
In the end, Merchants made the decision to stand by the people of Somalia—and to keep the accounts of the money transfer operators open.
“Somali communities are facing the prospect of another horrific food crisis this year,” said Scott Paul, Oxfam America’s Senior Humanitarian Policy Advisor. “They may not know it, but if not for the decision of a California bank, the outlook would be even more dire. Hopefully this episode will serve as a wake-up call for the US government. If the Treasury Department can effectively ease banks back into working with money transmitters and comes up with a plan to prevent Somalia’s money transfer lifeline from being devastatingly cut, that would translate into real progress for Somali families.”