Somalis fear Barclays decision to shut down money transfer service

Posted by Josh Conibear in Banking on 5 November 2013 - Josh worked as a Credit Analyst at checkmyfile until 2014

The UK government is being urged to stop Barclays closing the last remaining facility in Somalia which allows its citizens overseas to send money back home.

Barclays is trying to shut down the service after HSBC had to pay £1.2 billion in fines last year for failing to stop 'drug kingpins' depositing 'dirty' money and hiding transfers from 'rogue nations' such as Cuba, Iran and North Korea, of which according to American prosecutors disregard US sanctions.

Although Barclays was not involved with the HSBC fines, it acted as the catalyst in Barclays trying to end its 15 year relationship with Dahabshiil, the last company that allows the Somali Diaspora to wire small quantities of money back home.

The money transfers create a non-governmental welfare system in Somalia, impacting on an estimated 60% of Somali households, one-third of which would not be able to afford food, medicine and school fees without them. In fact the transfers add up to more than the country receives in international aid. Undoubtedly Barclays reasoning is being called into question not only by Somalia but also by humanitarians.

For Barclays, its reasoning is solely that of company controls and compliance with international financial regulation and potential risk to the firm - both in terms of reputation and possible legal penalties from the US and other jurisdictions - stating that it is recognised that some money service businesses do not have the proper checks in place to spot criminal activity and could unwittingly be facilitating money laundering and terrorist financing.

The abuse of such services can have significant negative repercussions for Somali society. In 2011, two Somali women in Minnesota were convicted of funnelling money to Al-Shabab militants using hawala brokers and a Somali website. Allegations have also been made linking Dahabshiil to Somali Islamists. Barclays has told Dahabshiil that the move was "a commercial decision due to the risks of the sector in which you operate.”

Regardless of recent crime and allegations, Barclays has said that they remain very happy to serve the many companies who do have strong anti-financial crime controls, including those who send money to Somalia. It is also important to mention that 90% of remittances do not go through the Barclays service due to their limitations on transferred amounts.

Although Barclays may have legitimate reasons for wanting to close the link with Dahabshiil, more than 100 academics and aid practitioners wrote to the British government last week to protest Barclays decision, warning that closing down money transfer channels will only encourage people to send funds through illegal, unsafe, and untraceable channels, thereby potentially making the problem of support to proscribed parties much more serious.

It is also important to mention that Dahabshiil's anti-financial crime controls are fully compliant with all applicable legal requirements and industry best practice and have been regularly audited by HMRC for a number of years without any adverse findings.

Somali President Hassan Sheikh Mohamud has also called on Barclays to reverse its decision, stressing that the country is at a turning point 'after two decades of chaos'.

Barclays finds itself having to weigh its corporate responsibility and its duty to its global customers to maintain a reputation for tackling financial crime against fundamentally protection of their company identity and against pulling the rug from under the feet of people battling extreme poverty before the Somalia fledgling government can step in to help.

The reality of the matter is that there is no other bank willing to open an account for Somalia remittances; potentially pushing an already unstable state into humanitarian crisis and economic stagnation. But this is not a moral dilemma to burden Barclays and in the words of the UK's Foreign and Commonwealth Office, “Barclays' decision is ultimately a private commercial matter.”

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