Saturday, February 07, 2015

More Somali Woes

 Somali remittances are a lifeline. The United Nations estimates Somalis in the diaspora send home $1.6bn annually, significantly more than foreign aid. According to a UN study, more than 40% of Somalis receive remittances, the bulk of which are used for basic needs, including food, clothes, medicine and education. Total annual remittances to Somalia are estimated at $1.6bn (£1bn). There is no functioning banking system in Somalia, so remittances are the only way people outside the country can support those at home. They play a crucial role during the frequent droughts as international aid agencies use them in cash for food programmes.

Somalia has criticised a move by a US bank to close accounts of money transfer companies. Merchants Bank of California handles about 80% of money transfers - remittances - from the US to Somalia, worth about $200m (£131m) annually. But it announced on Thursday that it had to withdraw its services due to new money-laundering regulations. The Office of the Comptroller of the Currency (OCC), a federal regulator, told the US bank last year that it found its anti-money laundering procedures inadequate. In the US, bank directors are responsible for ensuring all the funds they handle are used for legitimate purposes. In a similar move in 2013, UK banking giant Barclays also sought to cut ties with Somalia by closing the account of leading Somali money-transfer operator Dahabshiil. Barclays, which said the move was part of a crackdown on money laundering, eventually agreed to keep the account open so that Dahabshiil could find a replacement bank.

"They are the lifeblood... for many, many Somalis, so from a humanitarian perspective it is clearly worrying if there is a complete stop in remittances," said Nicholas Kay, the United Nations special representative for Somalia, said the remittances were a survival mechanism for Somali families.

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