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Millions of Somalis may be deprived of life-saving money transfers from their loved ones in the United States. Somali money transfer operators (MTOs), the only companies able to safely and legally deliver cash in Somalia, are taking steps to suspend their operations after learning that the principal bank facilitating these money transfers is closing their accounts under regulatory pressure. The account closures are scheduled for Friday, February 6
Every year, members of the Somali diaspora send approximately $1.3 billion to their friends and relatives in Somalia, exceeding all humanitarian and development assistance to the country and comprising between 25 and 45 percent of the country’s economy. Somalis use most of this money to pay school fees, food, healthcare and other necessities.
“The decision to close these accounts is catastrophic for the Somali community. For the past few years, I have been warning every regulator and official about the devastating effects of closing the last safe and legal pipeline to provide humanitarian remittances to Somalia,” said Representative Keith Ellison. “Next week, will Somali Americans have any viable options to remit money and opportunities? Will shutting bank accounts for money services businesses serving Somalia increase opportunities for illicit activities as remittance flows are pushed underground? There is no doubt that a decline in remittances will exacerbate the humanitarian crisis and erode the gains Somalia has made in recent years.”
While the US Treasury Department does not and cannot coerce private financial institutions to do business with Somali MTOs, other options are available to ensure that hardworking Somali Americans can continue to support their loved ones while minimizing the risk of money laundering. For example, the Treasury Department can announce a special, temporary regulatory regime for banks dealing with Somali MTOs, or it can designate a public financial institution, such as a Federal Reserve Bank, to transfer funds abroad on behalf of the MTOs. With the account closures scheduled for the end of next week, urgent action must be taken to avoid millions of Somalis losing their lifeline of remittances.
Scott Paul, Oxfam America’s Senior Humanitarian Policy Advisor, is available for comment, along with Rep. Ellison (D-MN), former Somali Central Bank Governor Yussur Abraar and Michael Zwirn from Adeso.