Somalia’s money transfer woes; flexibility in special circumstances

Barclay’s bank one of Britain’s largest announced to the dismay of many that, it will no longer furnish Business Management Services (BSM’S) to Somali money transfer companies, arguing in a brief statement that;

…some money service businesses don’t have the proper checks in place to spot criminal activity and could therefore unwittingly be facilitating money laundering and terrorist financing. – statement

The bank fears that some of the cash sent to Somalia through money transfer companies (known locally as ‘hawala) , might end up funding activities of alShabaab which is designated internationally as a terrorist organisation.Even with Dahabshiil being the biggest and probably the most reputable money transfer company operating in Somalia, could not avoid being axed.

Barclays told Dahabshiil the move was “a commercial decision due to the risks of the sector in which you operate”.

“The decision to exit our business relationship with you is not a negative reflection of your anti-money laundering standards, nor a belief that your business has been unwittingly been a conduit for financial crime,” Barclays wrote in a letter sent to Dahabshiil. BBC

There have been similar denial of financial services across the Atlantic in the U.S with same the motive, leading to an outcry from Somali diaspora in the state of Minnesota.

The move to shut down the service came two months after two Somali-American women from Rochester, Minnesota, were convicted of raising money for al Shabaab rebels, militants linked to al Qaeda who control parts of the Horn of Africa country. reuters

In a case analogous to that in the U.S, two identical twins Mohammed Shabir Ali and Mohammed Shafiq Ali were convicted of sending thousands of pounds to their brother who is fighting alongside alShabaab in somalia,and almost certainly the cash went through money transfer services.

While police say they will never know the exact amount of money they sent over, the twins admitted the charge on the basis it was £3,000, sent to Somalia between August 2008 and June last year. The Telegraph

So there is no doubt the hawala system is vulnerable to being used as conduit for the purposes of financing activities deemed illegal under national and international law, however, it can be argued that these amounts are quiet negligible when compared to the hundreds of millions sent each year in hard currency.

Looking at somalia’s recent history, it is not hard to see why the banks and Somalis on the receiving end find themselves in this predicament. In the midst of somalia’s famine in 2011, International NGO’s found themselves held back from helping  the starving, lest they violate US anti terror measures and be accused of providing inadvertently material help to al-Shabaab.

Although US anti terror laws were not the main reason for the disaster that unfolded, it certainly contributed to the crises.

According to analysts, the deaths were caused by people and politics: the Islamist militia the Shabab, which denied humanitarian access to the hardest-hit areas and prevented starving people from leaving; local clan warlords, who stole food aid; and the transitional government in Mogadishu, the capital, whose officials diverted aid.

But American policy also played a considerable role, according to analysts, with the Shabab designated a terrorist organization by the U.S. in 2008. U.S. counter-terrorism law imposes sanctions on any group found to be offering even indirect assistance to a terrorist group. Some U.S. and international agencies halted aid deliveries to Shabab-controlled areas, fearing they could be charged with helping a designated terrorist group. In January 2010, the World Food Program suspended aid to southern Somalia, after reports that the Shabab was diverting supplies. LA Times.

Miraculously the International Committee of the Red Cross (ICRC) was the only organisation of its size and capacity to maintained  vital aid delivery operations before being kicked out, whilst making sure its food supplies were not being diverted especially by al-Shabaab.

Thankfully although late in the day for aid groups (and sill having misgivings), flexibility in the face of disaster was shown on the part of the Obama administration by easing legal constraints.

There is also a security dimension to all of this, and if denial of service is carried through it will probably serve as counter-intuitive measure. Desperate individuals will look for other ways, which will mean for many – capitulating to illegal channels.

…cash sent to the region may become more vulnerable to the risks of money laundering. Licensed money remitters may be forced to close…which will only favour underground black-market services. Simon Davis, Director of AML CFT Compliance Ltd Wall street journal

News reports had emerged across the Atlantic last April that an agreement has been reached with another bank over a year after the account closures. Dahabshiil had the luxury of transferring their operations to another state. However, in the UK there is no such option and the implications would be serious, especially more so at a time when the international community is trying to help somalia on its feet.

twitter Follow the Somali War Monitor on Twitter  @somwarmonitor

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