Somalia's remittance crisis eclipses news of first US ambassador since 1991
A crackdown on transfers to Somalia to block Al Shabaab funding has had a major impact on Somali-American communities. Lawmakers are working on a contingency plan to prevent a potential humanitarian crisis.
Omar Faruk/ Reuters
For the last three weeks, Ali Eishe has been scrambling to find a way to send money to his nieces and nephews in Somalia.
From his home in Columbus, Ohio – host to the second-largest Somali population in the US — he sends up to $200 a month. The money comes from his small teacher's salary, and he's done this since his brother died in 2012, leaving 12 children behind.
But all that changed late last month when California-based Merchants Bank officially closed the accounts of all its Somali-American money transfer company clients, after years of pressure from financial arms of the US government. It's a move that Somalis, human rights groups, and development NGOs claim could spur a humanitarian crisis by cutting off the East African country’s primary flow of monetary aid.
The news came weeks before President Barack Obama nominated Katherine Simonds Dhanani last Tuesday as the first US ambassador to Somalia in nearly 25 years. The post has been vacant since Somalia collapsed into chaos in 1991.
The two events were not coordinated. Yet, for the hundreds of thousands of Somali-Americans who still have deep connections to their motherland, the scuttling of Merchants Bank transfer business sends mixed messages about the US's plans for progress in Somalia. The ambassadorial nomination was trumpeted as a sign of US commitment beyond humanitarian aid and intelligence assistance. But, the Somali government has little influence beyond the capital of Mogadishu.
“With Merchants Bank stopping, the entire country will turn into a refugee camp," Mr. Eishe says. "It is a total disaster.” Hundreds of millions of dollars flow from the US to Somalia in the form of remittances each year.
Following the bank's announcement, US lawmakers issued a letter to Secretary of State John Kerry demanding a meeting. They say the current situation could throw Somalia and its “already vulnerable economy deeper into crisis.”
A spokesperson for Representative Keith Ellison, the Minnesotan Democrat who drafted the letter, confirmed for The Christian Science Monitor that the first of what is likely to be a series of behind-closed-doors meetings was held last Thursday.
Though the meeting was seen by many as a step in the right direction, attendees "were frustrated when no specific solutions were offered," says Mike Casca, spokesperson for Rep. Ellison, quoting a source familiar with the meeting. "It was clear more work needs to be done between the National Security Council and relevant agencies to keep the remittances lifeline open."
Last man standing
At the end of its run last month, Merchant’s Bank was hosting more than two-thirds of small enterprises —historically known in Somalia as hawalas— that collect and distribute money from Somali communities in the US.
These hawalas are responsible for an estimated $215 million in aid to families in Somalia from the US each year, according to a joint report by Oxfam, Adeso, and the Inter-American Dialogue. It almost matched US humanitarian funding for the combined 2014 and 2015 fiscal years at about $230 million, USAID reports.
The US government’s argument against bank transfers is that Somalia’s informal banking infrastructure, years of civil war, and ongoing insurgency by extremist group Al Shabab creates fertile ground for money laundering and funding terror groups. But Eishe disagrees.
“How can the money I send each month support Al-Qaeda or Al Shabab?” he asks. "It is only enough to provide my family one meal a day."
Over the past 14 years, more US banks began clipping their wire transfer services to Somalia in the face of preemptive patrolling by government bodies like the US Treasury. Financial institutions can be penalized if they don’t meet strict money laundering protocols.
Regulators say they aren’t trying to stop the flow of legitimate money to Somalia, but they have put increasing pressure on banks to monitor their business for money that could be going to terrorist groups like Al Shabab.
A United Nations report from 2011 claims that Al Shabab receives between $70 to $100 million a year through taxation, extortion, and other means which often target money transfer businesses within Somali territory, or funds from diaspora communities.
Despite major setbacks in 2014, Al Shabab militants continue to wage a deadly insurgency against Somalia's government. The group remains a threat in the entire East African region.
Michael Zwirn, director of Resource Development at African Development Solutions, or Adeso, says its important to note that no Somali money transfer operator has ever been convicted of sending money to an illicit entity by the United States.
For Hassan Omar, the director at the Somali Community Association of Ohio, who relied on Merchants Bank's service to send money to his sister in the Dadaab refugee camp in northern Kenya, the stresses shared by the Somali-American community are unlikely to ease until a solution crystallizes.
“We could see the death of an entire nation,” Mr. Omar says. “We’re talking about genocide.”