West wrong to shut Somali money transfer operators

By Billow Kerrow

Whilst Kenyans are indignant about the West’s resolve to haul their sitting president before the ICC and trash their sovereignty, Somalia is grappling with an economic sabotage by the West to strangle its impoverished population.

The action by US and UK banks to shut down Somali money transfer operators (MTOs) is likely to create a massive economic crisis in a country where one third of the population is already facing humanitarian disaster. With no functional banking sector, the MTOs are the banks. Western MTOs do not operate in Somalia.

Somalia receives over US$1.5 billion annually in remittances from Somalis in the diaspora, mainly Europe and the US. This amount represents nearly a third of its GDP. Forty per cent of the country’s population is dependent on these remittances, which is mainly used for basic social services such as food, school fees, medical fees, etc. In the absence of banks, MTOs also serve the business community, NGOs, international aid groups and professionals in the country.

In 2012, the last US bank shut its doors to dozens of Somali MTOs, effectively freezing transfers from that country. In the UK, the only bank providing services to these MTOs, Barclays Bank, has announced it is also shutting down the accounts for these companies by the end of this month. Before long, banks in other Western capitals are likely to follow suit. No reasons have been given for the shut down. The MTOs are fully licensed by the regulatory authorities, much like their Western competitors such as Western Union, Moneygram, etc.

The operative word is fear — the risk of MTOs being used by terrorist organisations or individuals. To date, none of the money transfer companies has been implicated in terrorism finance. There has been no breach of compliance with regulations or bank procedures. Just plain fear. To these Somali companies, it is blatant discrimination and unfair trade practice by Western banks. The MTOs have repeatedly asked the Western banks and their governments for any regulatory or legal requirement they want complied, meaning, anything they can do to mitigate the risk or enhance compliance. Nothing! Just shut down.

In Nov 2001,US President Bush shut down the largest Somali MTO, Al Bakarat, and froze its assets globally, accusing it of being “the quatermaster of terrorists” that channelled funds to Osama bin Laden. The US accused it of channelling $25m annually to Osama and vowed that its shutdown will ‘disrupt the murderers’ work’. Years later, the 9/11 Commission found no evidence of terrorism links. In 2012, the UN Security Council cleared the company of any involvement.

The largest MTO in the country today, Dahabshiil, has 24,000 outlets in 150 countries and employs over 2,000 leople. It operates in Djibouti and Somalia as a bank but it is not recognised by correspondent banks in the West. The MTOs use modern accounting systems and are seen to be more efficient and cheaper than Western money transfer companies. In a country where there are no IDs, no functional commercial banks and no functional Central Bank, these MTOs are a lifeline of the nation.

Their shutdown will lead to more hunger and desperation for an already deprived society. It will also breed resentment of the West and encourage underground money transfer that will be difficult to regulate. Rather than starve the terrorists, shutting of these MTOs may create a new lifeline for terrorists.

Overall, the implications for all countries in the region is serious. It is time Kenya and other IGAD countries urged the West to stop strangling this poor neighbour. And its time Westerners stop their duplicity against soverignity of other nations.

The writer is a political economist and Mandera County Senator