US Effort to Crack Down on Terrorism Funding is Choking Humanitarian Lifeline: NGOs
New report outlines devastating blow in Somalia from remittances cutoff
In the name of cracking down on terrorism funding, the U.S. imposed new regulations affecting banks that handle money transfers to Somalia.
But that effort has dealt a devastating blow to ordinary people in the Horn of Africa country, a trio of nonprofit organizations has charged, as U.S. banks have stopped operating with Somali money transfer operators (MTOs), effectively severing a vital lifeline that funded the most basic necessities.
In their new report, Hanging by a Thread: The ongoing threat to Somalia’s remittance lifeline, Oxfam, Adeso and Global Center on Cooperative Security outline the importance of the $1.3 billion in annual remittances the country receives.
Somalia, the report states, "does not have a functioning commercial banking system," and 40 percent of the population relies on these money transfers to meet their basic needs.
"This is not just extra money; this is money that I need to survive on a daily basis," the report quotes Hawa Abdullahi Warsame, a Somali woman living in northern Somalia, as saying. "Not only am I dependent on it, but over 10 relatives—my entire extended family—are as well. I have sick relatives who need medication, and children that I am trying to provide an education for. This money is vital for that."
As Reuters reported earlier this month, U.S. banks were stopping the remittances "because of regulations designed to stop money falling into the hands of groups branded 'terrorists' by Washington, such as Somalia's al Shabaab."
Just two weeks ago Merchants Bank, which handled 60 and 80 percent of all remittances to the country from the U.S., announced it was shutting down money transfer services to Somalia—a decision slammed by Rep. Keith Ellison (D., Minn) as "catastrophic."
Adding to the crisis, the organizations said, was Australia's Westpac Bank announcement that it would be stopping remittances, while the UK's Barclays Bank announced it was shutting down the transfers last year.
The Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regulation, in fact, could be counter-productive, the report states. The organizations explain:
As Somali MTOs lose their banking arrangements, remittances to Somalia could decrease in volume and go underground. This would defeat the object of upholding AML/CFT regulations, and would create a system that regulators and law enforcement officials cannot penetrate, increasing the potential for abuse. Informal business networks, supported by couriers carrying hundreds of thousands of dollars, would likely replace the current formal systems that are accountable to regulators and the communities they serve. Families that depend on remittances would suffer, while the criminal networks that seek to exploit the system would benefit.
The report states that though the U.S. has taken steps forward to help the country's financial stability, "the system facilitating remittances from the U.S. to Somalia remains in critical condition and the U.S. government remains startlingly unprepared to manage the potential fallout."
Degan Ali, Executive Director of Adeso, and Ed Pomfret, Somalia Campaigns and Policy Manager Oxfam, wrote Thursday, "Somalia is at a crossroads, and if we truly want to support the country as it strives to rebuild itself, we should be doing everything in our power to support the most resilient system that exists in Somalia today, instead of trying to destroy it."
The new report follows a warning from the United Nations last month that Somalia faced a "worrisome" outlook for 2015. Philippe Lazzarini, UN Humanitarian Coordinator for Somalia, said that there were 3 million people in need of humanitarian and livelihood support, and added, "It is an essential prerequisite to continue to do everything we can to address the current humanitarian needs to prevent the relapse of a major crisis jeopardizing recent historic peace and state building gains."