U.S. laws tar­get­ing ter­ror­ism are pre­vent­ing So­mali-Amer­i­cans from send­ing vi­tal funds back home

John Kerry used the first-ever trip by a U.S. sec­re­tary of state to So­ma­lia to ex­press con­fi­dence in the re­build­ing ef­forts of a coun­try rocked by vi­o­lence for more than two decades and to an­nounce that the U.S. is mov­ing to­ward re-es­tab­lish­ing an em­bassy in Mo­gadishu.

But this week’s so-called his­toric visit – Amer­i­ca’s top diplo­mat was con­fined to the cap­i­tal city’s air­port dur­ing his brief, unan­nounced trip due to se­cu­rity con­cerns – was ap­par­ently ab­sent any men­tion of a fi­nan­cial sys­tem many say is es­sen­tial to the coun­try’s sta­bil­ity and is be­ing crushed by overly strin­gent U.S. reg­u­la­tions.

“It was a brave move to go to So­ma­lia with­out any an­swers on money trans­fers, be­cause that’s what peo­ple want to hear about,” says Scott Paul, a hu­man­i­tar­ian pol­icy ad­viser for Ox­fam Amer­ica. “That’s what So­ma­lis are most in­ter­ested in: ‘Is my mother go­ing to be able to send me my monthly rent?’ or, ‘Am I go­ing to be able to put food on the table next month?’

“For [Kerry] to have come [to So­ma­lia] with­out a so­lu­tion to that prob­lem I think raises more ques­tions than it an­swers.”

The cut­off of re­mit­tances that the So­mali di­as­pora send to fam­ily and friends back home has in­creas­ingly gar­nered at­ten­tion from ad­vo­cates in the U.S., who say the trans­fers are a vi­tal life­line for res­i­dents of a coun­try that lacks a func­tion­ing bank sys­tem. So­ma­lia re­ceives $1.3 bil­lion each year from out­side its bor­ders – an amount to­tal­ing more than the com­bined sum of hu­man­i­tar­ian aid, de­vel­op­ment aid and for­eign di­rect in­vest­ment it gets – and re­mit­tances make up be­tween 25 and 45 per­cent of the coun­try’s econ­omy.

These trans­fers, how­ever, have been cur­tailed by stricter money-laun­der­ing reg­u­la­tions put in place in the U.S. af­ter the ter­ror at­tacks of Sept. 11. The re­stric­tions have caused sev­eral large U.S. banks to close ac­counts used by money trans­fer op­er­a­tors to send funds to the coun­try, due to con­cerns they could be used to fi­nance ter­ror­ist groups like al-Shabab.

Mer­chants Bank of Cal­i­for­nia – which was re­spon­si­ble for send­ing 60 to 80 per­cent of to­tal re­mit­tances to the coun­try – an­nounced it was shut­ting down its ac­counts in Feb­ru­ary, and First Amer­i­can Bank in Illi­nois is ex­pected to fol­low suit this week. As na­tive So­ma­l­is’ op­tions for send­ing money back home con­tinue to dwin­dle, Paul says some trans­fer op­er­a­tors have started tak­ing suit­cases full of cash by plane to the coun­try.

An al-Shabab at­tack last month at Garissa Uni­ver­sity Col­lege in Kenya that killed nearly 150 peo­ple also has caused the Kenyan gov­ern­ment to cut off re­mit­tances sent to So­ma­lis in its coun­try from both the U.S. and So­ma­lia. Kenya has a huge pop­u­la­tion of So­mali refugees who have fled their coun­try’s vi­o­lence, but in or­der to re­main in op­er­a­tion, Paul says So­mali money trans­fer com­pa­nies there have to prove they are not sup­port­ing So­mali ter­ror­ism – some­thing he also says is nearly im­pos­si­ble.

Hu­man­i­tar­ian or­ga­ni­za­tions like Ox­fam Amer­ica, along with mem­bers of Con­gress, have been press­ing the Obama ad­min­is­tra­tion for U.S. ac­tion on the is­sue, but a so­lu­tion re­mains elu­sive. Eleven mem­bers of Con­gress sent a let­ter last week to Kerry, Trea­sury Sec­re­tary Ja­cob Lew and Na­tional Se­cu­rity Ad­viser Su­san Rice say­ing that re­mit­tances must con­tinue to flow for the coun­try to de­velop.

“As fi­nan­cial in­sti­tu­tions con­tinue to exit this mar­ket, the po­ten­tial for a large-scale dis­rup­tion of re­mit­tances for So­ma­lis in­creases. Re­mit­tances are a vi­tal source of in­come for So­ma­lis,” the let­ter said. “While some re­mit­tances still ap­pear to be reach­ing So­ma­lia, the cur­rent sit­u­a­tion is un­sus­tain­able for the long term. Rout­ing re­mit­tances through tra­di­tional fi­nan­cial in­sti­tu­tions pro­vides greater trans­parency and se­cu­rity, bet­ter not only for those send­ing and re­ceiv­ing re­mit­tances but also for en­force­ment of rules against ter­ror­ist fi­nanc­ing.”

While in Mo­gadishu on Tues­day, Kerry urged the So­mali peo­ple to fol­low through on hold­ing de­mo­c­ra­tic elec­tions in 2016, say­ing the coun­try’s po­lit­i­cal chaos has al­lowed ter­ror­ist groups to thrive.

But State De­part­ment of­fi­cials de­clined to say whether the sec­re­tary of state dis­cussed the re­mit­tance is­sue as he met with the coun­try’s pres­i­dent and prime min­is­ter, in­stead telling U.S. News in a state­ment that of­fi­cials are “ac­tively work­ing across the U.S. gov­ern­ment to con­sider var­i­ous op­tions to ad­dress the prob­lem and im­prove in­for­ma­tion-shar­ing be­tween So­mali money trans­mit­ters and U.S. banks.”

“The lack of a reg­u­lated fi­nan­cial sec­tor in So­ma­lia is a sig­nif­i­cant fac­tor con­tribut­ing to this dif­fi­culty,” the state­ment says. “The Fed­eral Gov­ern­ment of So­ma­lia (FGS) should fo­cus on build­ing in­sti­tu­tional ca­pac­ity, pass­ing leg­is­la­tion, and im­ple­ment­ing reg­u­la­tions and safe­guards re­quired to lay the foun­da­tions for a reg­u­lated fi­nan­cial sys­tem. We are in ac­tive dis­cus­sions with the So­mali au­thor­i­ties on how we can help them build such a sys­tem.”

Paul says block­ing re­mit­tances is coun­ter­pro­duc­tive to the U.S. aim of re­duc­ing ter­ror­ism in the coun­try, be­cause many young So­mali men de­pend upon them to sur­vive.

“His­tor­i­cally in So­ma­lia when peo­ple have no other source of in­come, it tends to be armed groups that pick up slack and of­fer the best source of sta­ble in­come,” Paul says. “So it does strike me as pretty prob­lem­atic that there’s such a strong push around coun­ter­ing vi­o­lent ex­trem­ism and gen­er­ally around sta­bi­liz­ing and bring­ing peace to the coun­try, and still no so­lu­tion to make sure that peo­ple get a re­li­able source of in­come that does­n’t re­quire them to go and fight.”

Rep. Keith El­li­son, D-Minn., whose dis­trict in­cludes Min­neapo­lis and has a large pop­u­la­tion of So­mali-Amer­i­cans, has been ad­vo­cat­ing for a swifter ad­min­is­tra­tion re­sponse to the re­duc­tion in avail­able re­mit­tance sources. He and Rep. Adam Smith, D-Wash., have held meet­ings on the is­sue with ad­min­is­tra­tion of­fi­cials, but no steps have been taken to re­verse the clo­sures of So­mali ac­counts.

Smith, who also rep­re­sents a dis­trict that’s home to many na­tive So­ma­lis, says he and El­li­son are in con­sis­tent con­tact with the ad­min­is­tra­tion on the is­sue, but have no fur­ther meet­ings sched­uled.

“We have got their at­ten­tion. For the longest time it was viewed as not that big of an is­sue, but I think peo­ple are be­gin­ning to un­der­stand the im­pact – it’s just now they ac­tu­ally need to act,” Smith says. “It’s not com­pli­cated. They just need a fi­nan­cial in­sti­tu­tion in So­ma­lia that they trust.”