A new report urges U.S. banks to work with money-transfer companies to allow money to be channeled from the U.S. to Somalia.
Minnesota Public Radio said that the report finds that U.S. banks consider it "too risky" to accept remittances from Somali-Americans because of terrorism concerns. The report was co-authored by international humanitarian groups Oxfam America, Adeso and the Inter-American Dialogue. Their findings said that squeezing off funds from the U.S. has catastrophic consequences that "...threaten the country's progress towards peace, security and sustainable development."
Remittances are a crucial piece of Somalia's economy, with hundreds of millions of dollars sent by relatives in the U.S. More stringent regulations designed to thwart terrorist attacks prompted many banks to be unwilling to work with Somali remitters and has disrupted the flow of cash to the poverty-stricken nation.
The Guardian, a London-based newspaper, reports that foreign remittances provide a financial lifeline for 3.8 million people living in Somalia, about 40 percent of the population there and is used to pay for food, clothing, education and medical care.
Scott Paul, a spokesman for Oxfam America, said the risks for banks can be managed. His group's report recommends that money-transfer companies improve training to help employees detect suspicious activities. MPR reported that U.S. Bank says it's working with a Somali-American remittance company to allow the transactions, but an agreement has not been finalized. According to Census data, Minnesota has the largest concentration of Somalis in North America.
Two years ago a Minnesota community bank announced it was closing accounts with remittance companies after two Rochester women were convicted of funneling money to a Somali terror group.
The bottleneck is an international problem. The Guardian reported that Barclays in the United Kingdom said in June it planned to withdraw its services to about 250 money-service businesses because of regulations against money laundering. After an outcry by Somali remitters, the deadline was pushed back to Sept. 30.