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Somalia warns of disaster if Barclays stops money transfers

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By Elaine Moore, William Wallis and Sharlene Goff

Barclay bank

Somalia has warned that it will face disaster if Barclays withdraws banking services from the country’s largest money transfer company next week.

Around half of the 10m population of Somalia and the republic of Somaliland arereliant on money sent by friends and relatives living overseas, most of which is used to pay for food and basic healthcare.

Following years of civil war, Somalia has been left without a functioning banking industry and remittances sent to the country via transfer shops and kiosks are worth about $1bn-$2bn a year, exceeding official international aid.

Barclays is the last major bank providing services to companies that operate in Somalia, and the flow of funds is expected to fall dramatically if it stops providing accounts to a number of companies that send money from the UK to Somalia.

This summer Barclays announced that it would close accounts for 250 money transmitters after coming under pressure from the regulator to ensure appropriate checks and controls were in place to avoid potential money laundering.

Of the four businesses that focus on transferring money to Somalia, three have now been terminated. The fourth, Dahabshiil, is challenging the move in court, with a hearing scheduled next Tuesday.

Barclays has been the sole account provider for Dahabshiil for 15 years and was the only major UK bank offering accounts to smaller money transmitters working in Somalia. It still provides an account for Western Union. HSBC stopped providing services to all money transmitters in 2012, none of which operated in Somalia.

“If the banks do not reverse their decision it will be a disaster for our country, which is in a fragile state, just recovering from long-term conflict,” said Mohamud Hassan Suleiman, Somali finance minister.

“We need time and we need clarity – what do the banks want? If they are afraid of something we need to know what it is . . . you cannot solve the problem until you know what the problem is.”

UK banks say they need more information from regulators about the checks they are required to perform on money transmitters.

They are particularly sensitive to anti money-laundering responsibilities after HSBC was forced by US authorities to pay $1.9bn, to settle charges that it breached money laundering rules in Mexico and Colombia and broke sanctions rules in Iran.

However, Dahabshiil said that it has not been given the chance to understand Barclays’ new criteria, and that the bank has refused its request to meet.

In a letter sent to the company and seen by the Financial Times, Barclays said its decision “is not a negative reflection of your Anti-Money Laundering standards, nor a belief that your business has unwittingly been a conduit for financial crime”.

It costs £5 to send £100 from the UK to Somalia via Dahabshiil, which has more than 286 payment locations in the country. The company is authorised by the Financial Conduct Authority but must deposit funds with a UK bank in order to send unlimited amounts.

Other companies that can be used to send money are more expensive and have fewer locations. Western Union said it had no plans to expand its branch network beyond a single location in Somaliland. “We ensure compliance at both ends and we don’t believe we can ensure that in Somalia,” said Massimiliano Alvisini, UK regional director for Western Union.

In Dahabshiil’s UK headquarters in Whitechapel, east London, Kaltun Ali became emotional when talking about Barclays’ decision.

“If they stop us sending money it will be like Ethiopia – people will starve,” she said. “There is no social security – that’s why a cleaner working in the UK who earns £30 will send home £10. I don’t know if they realise this.”

At a nearby Somali restaurant a group of men drinking tea swapped theories about why Barclays was shutting the accounts.

“Well, it could be the American government,” said Jama Abokor, a serious man in his early fifties. “That’s what some people say. Everything has become difficult after 9/11.”

His friend Dalmar Abdul pulled a money transfer slip from his jacket to show how frequently he sends money to his family. “These payments are a lifeline for so many people I actually don’t think Barclays will do this – they can’t. When they realise what will happen they will stop.”

 Source  Financial Times

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