By Chris Cumming – American Banker
Somalilandsun – The last Australian bank providing remittances to Somalia stopped this week, mirroring similar pullouts by U.S. banks that have endangered a crucial source of financial support for the African country.
Westpac Bank ceased providing banking services to Somali remittance companies on Tuesday, according to the nonprofit Oxfam.
Westpac, Australia’s second-largest bank, announced plans to close the accounts of money-transfer companies last year, but extended the deadline in response to pleas by members of the Somali diaspora. Money sent from Somalis living abroad is a crucial part of the country’s economy, accounting for as much as one-third of the national income, Oxfam said.
Banks have cut off money-transfer companies in response to growing concern about money laundering and sanctions violations raised by financial regulators worldwide. Authorities in some countries view Somalia, which has not had a central government since 1991, as a high-risk location for terrorist financing and money laundering.
The Treasury Department’s Operation Choke Point hasmade banks in the U.S. skittish about dealing with Somali firms, and that has had reverberations worldwide, said Scott Paul, Oxfam’s senior humanitarian policy adviser. Money transfers to Somalia are usually denominated in dollars, so foreign banks typically pair with American correspondent banks to send the funds — but willing correspondent banks have lately become harder to find. The last U.S. bank to provide Somali remittances, Merchants Bank in California, stopped in January under regulatory pressure.
The account shutdowns “are a complex problem that has to do with the situation in Somalia and with banks’ derisking globally, but we have heard that [foreign] banks’ concerns stem from U.S. regulation and enforcement,” Paul said.
The flow of money into Somalia has slowed following Merchants Bank’s shutdown of its Somali accounts, and is likely to slow further after Westpac’s withdrawal, he said. Some remittance companies have resorted to transferring cash into the country.
U.S. regulators and members of Congress have met to discuss ways to make it possible for Somali expatriates to send money home, but no solution appears imminent, Paul said.