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Somali Wire Money Transfers Imperiled

FILE - Barclays and other banks have severed ties with transfer firms that send remittances to Somalis. Interrupting the estimated $1 billion in annual remittances could have dire consequences, aid groups say.

Hundreds of thousands of Somalis have depended on money sent by relatives and friends living abroad as their only source of income ever since Somalia's government collapsed in 1991.

But on Friday, Merchants Bank of California — the last bank willing to do business with Somali-American transfer companies — is expected to terminate those companies’ accounts, endangering financial lifelines and leaving Somalis at risk.

Complicated banking regulations and fears about anti-terror legislation have scared away several other financial institutions, including Sunrise Community Bank in the United States and Barclays Bank in Britain. They’ve closed Somali transfer accounts out of concern that the companies were engaged in money laundering or that the money could be diverted to fund terrorist activities.

The United Nations and humanitarian workers warn that shutting down the companies will have a huge impact. Aid groups such as Oxfam and Adeso, a nongovernmental organization focused on African development, estimate that the Somali diaspora sends more than $1 billion to Somalia each year.

Adeso executive director Degan Ali said the transfer companies should be allowed to continue operating, given Somalia's history.

"We need an immediate solution and what we propose is that there should be an exception in the case of Somalia because it's the only country that has experienced two famines in modern history,” she said. "It's a country that is in active conflict and people are highly food insecure."

The Somali money transfer companies function like Western Union and MoneyGram, but, because their offices and agents are scattered throughout the country, they can send money to remote places that larger operations cannot reach, according to American Banker magazine.

In a statement, British-based Oxfam said for the past few years, it has warned every regulator and official about the devastating effects of closing the last safe and legal pipelines to provide humanitarian remittances to Somalia.

The aid group also warned that an end to the transfers will worsen Somalia's humanitarian crisis and erode the gains the country has made in recent years.

Aid organizations working in Somalia, as well as the United Nations, rely on money transfers to pay their workers and implement projects, especially in small villages and towns.

Sahal Hassan, a Somali living in Nairobi, Kenya, said the U.S. government should help Somalia in creating a legal financial system.

"America, they do assist us, [but] how can they close down our only source of livelihood?” Hassan asked. “It's going to have effect on us. … If America has decided to push for the closure of banks accounts, they have to help us to establish a legal system and reform money wire transfer companies but not [leave] us in hunger and suffering."

Adeso’s Ali called for granting exemptions from those rules, at least temporarily, "as we strengthen the central banks in Somalia."

The Somali government has been preoccupied with addressing the militant group al-Shabab and moving past several months of political infighting.

Observers say there is need to put more effort into reviving and strengthening the Somali banking system to help rebuild the country's economy and ease the suffering of the population.