How a banking law to fight terrorism could backfire in Somalia

How a banking law to fight terrorism could backfire in Somalia

Since formal banks and wire transfer companies (like the one above) don't exist in Somalia, they rely on hawalas to transfer funds. Photo: <a href="http://www.flickr.com/photos/emilywebber/4140550254/sizes/m/in/photostream/">Emily Webber (flickr)</a>
Since formal banks and wire transfer companies (like the one above) don't exist in Somalia, they rely on hawalas to transfer funds. Photo: Emily Webber (flickr)

Though they send more than $100 million home each year, the United States' largest population of Somali immigrants can no longer send a dime.

Around 70 percent of Somali-Americans, about 19,000 of whom have settled in the Minneapolis area, rely on remittances to support their families, states Said Sheik-Abdi, program manager for the American Refugee Committee. Money directed to friends and family in Somalia often covers food, education, and business expenses; this has been especially important during the ongoing drought and famine in the Horn of Africa.

Franklin Bank, part of the Sunrise Community Banks network, was the last institution offering hawala services to Somali residents in the Twin Cities. The hawala system, a global money service business, substitutes for wire and banking services where none exist but operates without formal record-keeping. The anonymous service could be used to send money to terrorists, which banks and the U.S. government fear.

Here’s the challenge: since Somalia’s banking system dissolved after two decades of civil war, hawalas have been the only option for U.S. Somalis to send money home.

But in December 2011, the gradual tightening of anti-terror banking laws prompted Sunrise Community Banks to stop all money transfers to Somalia in an effort to curb potential funding of terrorist groups such as al-Shabaab and al-Qaeda.

There has to be a better way. It’s counterproductive to stop all flows of money over the potential acts of a few, especially for an already unstable economy.

While some local Somalis stage protests, others are trying to work with state officials. Hassan Warsame is one of the latter. A financial consultant and member of the Association for Somali American Nationals, Warsame recently stated that not only is this a bad way to fight terrorism but it’s a humanitarian issue. According to the U.S. Treasury Department, Somalis in the U.S. sent over $100 million home last year. Minnesota-based Somalis are currently left with no recourse.

Inaction on this issue will only do more harm by keeping Somalia in thrall to the poverty and chaos that breed terrorism. Terrorists can use this to fuel propaganda abroad, while refugee communities in the U.S. are left feeling powerless.

Fostering dialogue between government officials, banks, and Somali organizations is the first step. Whether it’s through a revised remittance system or official guidelines for banks using hawala, collaboration will be key in finding a long-term solution.

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