Flow of money from US to Somalia faces disruption

By AMY FORLITI

MINNEAPOLIS

A critical pipeline that Somalis in America use to send money to relatives in Africa faces disruption after a bank in Minnesota announced it would no longer handle the wire transfers.

Sunrise Community Banks said it would close its accounts with the Somali money transfer businesses after realizing it was at risk, and could not prevent funds from winding up in terrorists' hands.

Without Sunrise, many money transfer businesses known as hawalas said they would close Friday or next week because they can't execute transactions on their own. The shutdowns leave potentially tens of thousands of Somalis in Minnesota -- home to the largest Somali population in the U.S. -- searching for other ways to get money to loved ones in a country racked by war and famine.

"It will touch every community member," said Dahir Jibreel, executive director of the Somali Justice Advocacy Center. "Everybody is scared. Everybody is worried. And they don't know what will come."

Somalia has not had a functioning government since 1991 and has no banking system. The U.S. Treasury says it's estimated that Somalis in the U.S. send $100 million back home each year.

Because there are no financial institutions in Somalia, members of the diaspora rely on sending money through hawalas -- which require little paperwork and reach even the smallest towns. But the hawalas need banks to do the wiring for them, said Aden Hassan, a spokesman for the Somali American Moneywiring Association.

Many big banks stopped the transfers in recent years, saying they didn't have the manpower to keep up with complex rules issued in 2005 designed to crack down on terror financing. Banks faced huge penalties for violations, and many said it wasn't worth the risk. Sunrise Community Banks and its branches, which operate under different names, stepped in to fill the gap.

But a recent terror financing trial in Minnesota led Sunrise to reconsider. In that case, two Minnesota women were convicted in October of conspiracy to provide support to al-Shabab. Evidence showed the women, who claimed they were sending money to charity, used the hawalas to send more than $8,600 to the terror group, which has ties to al-Qaida.

Sunrise chief executive David Reiling said the bank wasn't involved in that case, but realized it was vulnerable. Reiling said his bank wants to continue wiring money to Somalia but has to find a way to do it that removes its risk.

"The sheer magnitude of the human need, it weighs very heavily on my shoulders," Reiling said. "Yes, we have a banking issue and we all want to ensure that money does not get into the wrong hands -- I think it's up to all of us to try to find a solution."

Reiling has met with representatives of Minnesota's congressional delegation to discuss remedies, including a possible waiver for banks.

Determining the scope of the problem is difficult. Hassan's association represents 14 money-wiring services with multiple locations inside and outside Minnesota. He also manages Kaah Express, a Minnesota-based hawala with locations in six other states. All of the Kaah Express locations route their money through Sunrise, in Minnesota, and all might have to close, he said.

Hassan said most of the hawalas in Minnesota have accounts with branches of Sunrise Community Banks, and most risk closure. There are one or two smaller hawalas who have arrangements with small banks, he said, but they also fear they could lose their accounts at any moment.

Sen. Al Franken has written to the State and Treasury departments asking officials to tell Minnesotans about other options. Franken spokeswoman Alexandra Fetissoff said those agencies believe there are still ways for Minnesotans to use banks to send money to Somalia.

The State Department did not return a call seeking comment, and the U.S. Treasury said money transmitters have indicated they have accounts with other banks.

The hawala system has been under scrutiny since 2001. After the Sept. 11 terror attacks, several money transfer businesses were closed because of security concerns, though most eventually reopened. The hawalas also feared closure years later when the major banks got out of the business.

Jibreel says if he can no longer send money directly to Somalia, he'll have to find another way to get money to his mother, who lives in central Somalia. He said she is in her 80s and in frail health, and depends on the $100 or more he sends each month to help her pay for medical bills and food.

Jibreel said he could send money to a bank in Kenya or another country, ask a third person to pick it up, then have it re-sent from there to an agent in his mother's small town. The process will cost more and take longer, he said.

"That's the only money she gets," he said. "If she cannot get that, probably she will starve to death."

Source: Bloomberg Businessweek