Only spoilers win if Barclays shuts shop for remittances
There will be many losers if, at the end of this month, Barclays enforces its decision to close shop for the Somali money transfer agencies holding accounts with the bank. Barclays is the last of the UK banks to respond with such caution to stringent anti-money laundering regulation introduced since 9/11. Because it has been, until now, the only bank willing to continue risking sanction, the remittances it handles have become a vital lifeline for Somalis.
Diaspora Somalis send about $1.3bn back home every year, roughly $500m of which comes from the UK. This is the only source of income for many Somalis. In the absence of a functioning banking system, aid agencies depend on the transfer agencies to get cash to where it is needed. Moreover, cash transfers, according to research to be published this week by Britain’s Overseas Development Institute, have been more effective than food aid in saving lives during recent famines, and are less likely to be diverted. Yet Somali agencies, which use an innovative system of trust to transfer funds, are being punished for the tiny fraction of clients who use their services to finance terrorism and launder ill-gotten gains.
Barclays has extended its deadline for closing the Somali accounts to the end of September. It should extend again to allow time for governments, aid agencies and transfer agencies to work together to find an alternative. In the interim, the onus will be on the UK and other European governments to engage more effectively with the US to ensure that the application of the US Patriot and Bank Secrecy Acts, and the 2010 Executive Order on Somalia, do not have such dire, if unintended, consequences.
As things stand, hundreds of thousands of Somalis will lose their only source of income, remittances will be driven underground where benevolent funding will be even harder to distinguish from illicit flows, and Barclays’ reputation will take a hit. The aid agencies and western governments attempting to strengthen Somalia’s fragile recovery after 22 years of civil war will also be deprived of an essential tool for promoting stability. It is hard to imagine a greater victory for those in Somalia attempting to spoil the peace.
Source: Financial Times