27 Jun 2013

Somali families’ banking lifeline under threat

Africa Correspondent

A money transfer system allowing UK families to send cash back home is under threat after Barclays said it wouldn’t do business with transfer firms. Jamal Osman reports on the problem facing Somalia.

Hawa Abdulle, a Somali mother, her children and their extended family members are able to eat a simple meal thanks to family members who live in Britain. Millions of Somalis depend on money sent to them by relatives living abroad.

In fact, money transfers are the backbone of the Somali economy. British-Somalis send up to £100m every year and for their relatives back home, it makes up 60 per cent of their annual income.

But word has reached Somalia that because of a decision by British banks, this crucial pipeline is about to be cut off.

“We have heard the British are stopping our money,” Ms Abdulle told us. “We depend on this little money that our relatives send us. We request the British, please do not stop this money coming. We don’t have any other income to pay for our children’s school, rent or anything else.”

From their office on the streets of Mogadishu to their base here in London, Somali money transfer firms, locally known as Hawalas, is how the society stays connected.

Under pressure

Hawalas have already been under pressure especially since the US terrorist attack on 11 September, 2001. Western governments have introduced many rules and regulations to control the flow of money. British authorities have access to Hawalas’s database and monitor how much money people send. And if they are suspicious about certain transactions they often call for an interview.

We have heard the British are stopping our money. We depend on this little money that our relatives send us – Hawa Abdulle

Like many immigrants, I go into one of the Hawala shops to send money to my family back home. It’s fast, reliable and the only legal way to make sure my relatives can eat, send children to school and get basic medical assistances.

But time is running out for the Hawalas we use to transfer money to Somalia. These companies deposit our money into their British bank accounts. Most of the London-based banks have already stopped dealing with Hawalas. Barclays was the last one to do it.

‘Underground’ threat

Now Barclays has written to Dahabshil, the largest Hawala in Somalia, and hundreds of companies like it telling them from next month, their accounts will be closed. And without British bank accounts these businesses won’t be able to operate legally.

Abdirashid Duale, chief executive of Dahabshiil said: “We have a 15-year relationship with Barclays. As far as the account closure, we just received a letter which has been a surprise to us… This kind of action will go opposite of what the banks are trying to do.

“If they are talking about money laundering and system, the closure of these accounts will lead to people going underground and sending money illegally. And I don’t think that is the interest of the UK or Barclays or the humanitarian situation that needs to be addressed.”

‘Criminal activity’

However Barclays is concerned that criminals and terrorists could use the existing system. In a statement, their spokesman said: “It is recognised that some money service businesses don’t have the proper checks in place to spot criminal activity and could therefore unwittingly be facilitating money laundering and terrorist financing.

“We want to be confident that our customers can filter out those transactions…we regret the inconvenience that moving to another bank will cause. To assist customers find alternative banking services, we have given them double the normally permitted time, and will extend that where it is appropriate to do so.”

Like many immigrants, I go into one of the Hawala shops to send money to my family back home – Jamal Osman

Somali activists, who are angry about the decision made by Barclays have set up a petition calling on the government to intervene and to recognises the important role that remittances play in supporting the economy and people of Somalia. On Monday, the Foreign Office convened a meeting to consider in detail the issue of remittances to Somalia, which was also attended by the Home Office, the HMRC, the Serious Organised Crime Agency and the department for international development.

A foreign office spokesperson told us: “officials are preparing an assessment of the impact on the economy and people of Somalia of Barclays’ decision to terminate banking services for a large number of money service businesses.”

In Somalia, this industry is seen as the only successs story and a lifeline for millions. But later on Barclays told Channel 4 News it has now decided it will extend the deadline for some companies including Dahabshil. This will give some hope to millions of people but unless Somali companies find an alternative bank, a crisis may still be on the horizon.