Merchants Bank of California : ” Financial accounts for the Somali remittance companies will close on February 6″.
Washington ( Foreign Policy (blog) + DIPLOMAT.SO) – Somali-Americans could find it much harder to send money back home to friends and family after next week.
Merchants Bank of California, which handles 60 to 80 percent of the remittances sent to Somalia from the U.S., announced this week it is dropping the accounts of companies that transfer money on behalf of Somali immigrants in the U.S.
“We regret to inform you that the bank has decided to exit its relationship with you at this time,” Merchants Bank wrote in a termination letter emailed Tuesday, a copy of which was obtained Friday by Foreign Policy. The accounts will be closed on Feb. 6.
Merchants has been one of the few banks still willing to make transfers that allow people in the U.S. to send hundreds of millions of dollars in remittances to Somalia every year. The money transmitters, like smaller versions of Western Union or MoneyGram, collect the payments and bundle them together, but need a bank to handle the international wire transfer. For many of the largest money transmitters, mostly based in Minnesota, Merchants Bank was the only one willing to make the wire transfer necessary to get the money from Somali-Americans working in the U.S. back to their families — many of whom count on the cash infusions to survive.
Amid a broad crackdown on terror financing and money laundering, banks are hesitant to send money into Somalia, which after years of war and conflict, doesn’t have a functioning central bank.
Merchants Bank first notified customers of a problem last May, in a letter first reported by FP. When Merchants agreed to keep the accounts open, it signaled that a compromise was reached between the bank and its regulators, who are concerned the money could end up in the hands of terrorist groups like Al Shabaab.
It’s unclear what precipitated this week’s letter. However, banks have been under constant pressure to monitor their dealings with cash-intensive businesses like check-cashing operations and money transmitters. Many have decided that the profit they take in is not worth the cost of compliance.
Humanitarian advocacy groups and other non-government organizations argue that the U.S. government should designate a public channel — perhaps using a Federal Reserve bank — that can handle remittances to Somalia.
“It’s really a matter or whether humanitarian and security conditions in Somalia are important enough to the Treasury Department to act,” said Scott Paul, a senior advisor for Oxfam America.
“There need to be assurances that government is not going to let the worst case scenario come to pass,” Paul said.
The Somali money transmitters have been struggling since 2005 to find banks that will work with them. The issue came to a head at the end of 2011, when Somalia was suffering from famine and the main bank serving the Somali community in Minnesota, Sunrise Community Bank, decided to close the accounts that connected the Somalis to their home country.
The money transmitters found new banks to work with at the time, but have lived with the constant threat that they’ll be dropped. It’s unclear that any new bank will step in to take Merchants’ place this time.For more news and stories, join us on Facebook,Twitter , or contact us through our Email: firstname.lastname@example.org, email@example.com