May, 21 2014, 09:12am EDT
For Immediate Release
Contact:
Blair FitzGibbon, blair@blairfitzgibbon.com or 202-503-6141
Patricia Brooks, patricia@matchmapmedia.com or 202-351-1757
Groups Ask Treasury Dep. to Ease Restrictions on Money Transfers to Somalia
Thousands of families across Somalia are under threat due to the recently announced closures of money transfer companies' bank accounts, international agencies Adeso and Oxfam warned today. The organizations called on the US Department of the Treasury and its regulatory agencies, whose regulations are responsible for the bank account closures, to ensure that Somali-Americans are able to send life sustaining money to their loved ones.
WASHINGTON
Thousands of families across Somalia are under threat due to the recently announced closures of money transfer companies' bank accounts, international agencies Adeso and Oxfam warned today. The organizations called on the US Department of the Treasury and its regulatory agencies, whose regulations are responsible for the bank account closures, to ensure that Somali-Americans are able to send life sustaining money to their loved ones.
"Somalia is hanging once again on the precipice of a full-blown catastrophe," said Degan Ali, Executive Director of Adeso. "Even a minor disruption to the link between Somali communities and their friends and family abroad could push them over the edge into crisis. We can't just sit on the sidelines and let this happen, and neither can the Obama administration."
According to research published in 2013 by Adeso, Oxfam and the Inter-American Dialogue, Somalia receives $1.3 billion per year in remittances, which is more than all foreign aid and investment in Somalia combined. Approximately 40 percent of Somali families depend on remittances to meet their most basic needs, including food, health care and education, and 80 percent of the capital for start-up businesses comes from the diaspora.
"Treasury Department rules and pressure created this crisis. Now the Treasury Department and the Obama administration have to fix it and time is running out," said Ray Offenheiser, President of Oxfam America. "It would be an incredible mistake to allow the only regulated channels for sending money back to Somalia to absorb such a crippling blow. Unless emergency measures are taken, many families will be cut off from their only source of income at a time when conditions in Somalia are getting worse."
Since Somalia does not have a formal banking system and large foreign money transmitters are not a viable option, Somali-American money transfer companies remain the only secure and transparent mechanism to send money from the U.S. to Somalia. Without bank accounts, these companies will be unable to wire money internationally, which threatens their ability to keep their doors open.
Despite the companies' investments in due diligence and anti-money laundering systems, Treasury Department regulations have forced banks to close Somali-American money transfer company accounts at an alarming rate. The latest bank to announce account closures, Merchants Bank of California, has extensive expertise serving money transmitters. Unfortunately, that did not spare it from pressure by the Office of the Comptroller of the Currency (OCC), an independent agency in the Treasury Department, to limit its relationships with money service businesses.
If the Merchants Bank account closures proceed as scheduled, on June 20 between 60-80 percent of US remittances to Somalia will be affected, and some companies will be forced out of business immediately. Some of the companies have arrangements with other banks, but those banks lack Merchants Bank's expertise in dealing with money service businesses and are even less likely to maintain the companies' accounts under pressure from the Treasury Department and its regulatory agencies.
While the closure of formal remittance channels would hurt Somali communities, it would benefit criminal networks that prey on informal money transfer systems that are invisible to regulators and law enforcement officials.
The Treasury Department, State Department and USAID have drawn up plans to strengthen the remittance system and the Somali banking sector, but these are long-term interventions. Emergency measures are needed.
In order to maintain the Somali remittance system in the short-term, Adeso and Oxfam call on the US government to spell out for banks the specific due diligence measures on Somali-American money transfer company accounts that they can take to satisfy their legal obligations. This would ensure that the companies can continue to operate until longer-term solutions are realized.
Oxfam International is a global movement of people who are fighting inequality to end poverty and injustice. We are working across regions in about 70 countries, with thousands of partners, and allies, supporting communities to build better lives for themselves, grow resilience and protect lives and livelihoods also in times of crisis.
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