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US Banks Fear Penalties, Pull Out Of Money Transfers To Somalia

US Banks Fear Penalties, Pull Out Of Money Transfers To Somalia

Fearing penalties for inadvertently aiding terrorists, U.S. banks are increasingly reluctant to handle cash transfers to Somalia, NPR reports.

Somali-Americans are lobbying Washington to keep the cash lifeline intact as the East African country faces a potential drought and famine this summer, according to an NPR.org blog.

Somalia lacks a formal banking system, and residents rely on money handlers, or hawaladars to receive money from abroad. Remittance payments from the U.S. and elsewhere account for 40 percent of Somalia’s economy, according to the charity Oxfam, NPR reports.

Minnesota is home to the largest Somali-American community in the U.S. Goth Ali, 28, works at a cell phone shop in the Village Market, a Somali-American mall in Minneapolis. He wires $400 to $500 each month to relatives in East Africa.

At the mall’s three money service businesses, you can wire cash anywhere in the world through the money transfer system called hawala. Ali says every month he sends $400 to $500 to his siblings.

“The money we send to Somalia is a lifeline,” Ali said.

The money transfer business is highly regulated, says hawala operator Shakir Hussein. “If somebody walks in right now, first I require identification,” he said.

Businesses like Hussein’s help Somali-Americans send more than $214 million to Somalia
every year, according to Oxfam.

In addition to requiring IDs from customers, hawala dealers or hawaladars, need bank accounts to operate and most American banks are reluctant to work with them, fearing the money could wind up in the wrong hands, NPR reports.

In 2011, two Somali-American women from Rochester, Minn., were convicted of funneling money to the terror group al-Shabab.

That led a Twin Cities bank to get out of the wire transfer business. Other banks stepped up to fill the vacuum, but now Merchants Bank of California — one of the last to work with hawaladars — says it’s pulling the plug at the end of July.

Many in the industry fear severe penalties for transferring dirty money — even accidentally, banking consultant Bert Ely told NPR.

“There’ve been some banks, particularly large banks, that have been fined very significantly for violations in this area,” Ely said. “And so the safe way to play it is just not to do the business.”

Aid agencies in East Africa say there’s a strong possibility of another drought in Somalia, which could lead to a repeat of the 2011 famine that killed an estimated 260,000 people.

It’s urgent that Congress pass legislation to make it easier for banks to handle wire transfers, says Jaylani Hussein, a board member with the Twin Cities-based American Relief Agency for the Horn of Africa.

“This is an issue that just needs to be resolved now — otherwise we’ll be talking in August and talking about the number of people we’ve lost,” he told NPR. “And we have something we could do today to save lives.”

Democratic Rep. Keith Ellison authored a bill that passed the Republican-controlled House in May and is now in the Senate. It streamlines some money-wiring regulations that will reduce the risk for banks, Ellison said.

If Somalia experiences a drought as forecast, the ability to wire money will grow even more important to Somali-Americans and their families back home. Aid groups say if the money wiring problem is resolved, they’ll be able to spend less time lobbying — and more time trying to prevent another famine in Somalia.