Money transfer company granted reprieve in remittance wrangle.
The British-Somali money transfer company Dahabshiil Holdings Ltd has won a further stay of execution in its legal battle to stop Barclays Bank from closing its account, a move which, it says, would effectively put it out of business. It had claimed that the decision was discriminatory and anti-competitive.
Barclays announced plans to close the accounts of several money transfer companies, including Dahabshiil, in May, but Dahabshiil sought an injunction preventing Barclays from closing its account, on the grounds that it was abusing its dominant position.
Dahabshiil’s account with Barclays was the last one still operating in a major British bank, and on November 5th, the High Court in London granted an injunction which would prevent the account being closed until a full trial can be concluded. It must now maintain services to Dahabshiil until a new hearing – expected some time in 2014.
The importance of remittances to Somali has been underlined by the intervention of Somali President Hassan Sheikh Mohamud, who said in October that his government was watching events in London “with great concern”.
Barclays asked to appeal against the injunction, but that request was rejected.
“Barclays made a legitimate decision to exit these businesses based upon the well-known risks of money laundering and terrorist financing in the money service business sector. The risk of financial crime is an important regulatory concern and we take our responsibilities in relation to this very seriously,” it said in a statement.
Somalia has no conventional banking service, and Dahabshiil is the largest provider of remittance services to the 100,000 Somalis living in the UK. Remittances from the UK to Somalia total more than £100m a year, according to Oxfam, and campaigners say they provide a lifeline to Somali families with no other source of income and no access to conventional banking services.
Oxfam suggests remittances on average account for 60% of recipients’ income, with about £1bn a year coming in from Somalis in countries around the world. Only Somalis in the US send back more each year than the UK’s Somali community.
Dahabshiil also transfers money for aid agencies and other organizations working in the country, and transfers money for businessmen to finance imports into Somalia and Somaliland. Banks have been refusing to operate accounts for these transfer services, because of concerns about money laundering and terrorism. A number of smaller companies have already lost their bank accounts, and can only now transfer money through intermediaries.
Reacting to the ruling, Dahabshiil chief executive Abdirashid Duale said: “We are extremely pleased that the Court has recognized the strength of our case. It is also good news for all our customers who are reliant on us to transfer money safely to the Somali region and all other countries in which we operate.”
Oxfam, which uses money transfer operations to fund its activities in Somalia, also welcomed the ruling. It has been campaigning against the account closure, and its director of campaigns and policy, Ben Phillips, said the ruling provided “a small window of opportunity”, although it was only a temporary injunction and did not solve the problem. A long-term fix was needed, he said.
The charity’s call for a permanent solution was echoed by Somalia’s Prime Minister Abdi Farah Shirdon, who urged: “Governments, the money remittance sector and all key stakeholders must now work together to find a permanent legitimate and transparent solution that keeps open this vital lifeline.
Degan Ali, Executive Director of Adeso, a humanitarian and development NGO working in Somalia, agreed that a long-term solution was needed. She said the injunction was “very good news for Somalia, for Somalis living abroad, and for anyone who cares about the country’s future”. “That being said,” she added, “we should not lose sight of the bigger issue, and we need to continue to work towards finding a long-term solution.
The UK government recently announced a range of actions intended to ensure that remittances continue to flow, including the creation of safe corridors for payments to Somalia, and that’s a step in the right direction. Now more than ever there is a need for the government, banks and money transfer operators to sit down at the same table and find a durable solution so that the flows of money can continue in ways that will satisfy all parties.”
Faced with the threat to the system by which they support their families back home, the UK’s Somali community has mobilized on an impressive scale. Rushanara Ali, the MP for Bethnal Green and Bow in east London, who has many Somali constituents, had been one of those leading the campaign.
She told a recent public meeting on the issue: “Everyone understands that banks are under pressure from US regulators, but what we are asking is not unreasonable – simply that there should be a proper, safe way of getting money to loved ones around the world… But let me tell you, the UK government would not have taken an interest in this issue if you hadn’t exercised your political muscle.”
Protesters had lobbied Barclays Bank on a fleet of bicycles, handed a petition with more than 100,000 signatures to the prime minister’s office, and persuaded one of Britain’s best known sportsman to be the face of their campaign, with Somali-born double Olympic gold medal winner Mo Farah saying he too uses the money transfer services to help support his relatives back in Somalia.
The presence in Somalia of militant groups such as al-Shabaab has raised concerns that money transfer services could also be used to fund terrorism. Somali pirates also remain a problem.
The irony – not lost on the UK government – is that the demise of large, visible, regulated companies like Dahabshiil will only result in money going through less visible channels, potentially forcing the money transfer business underground, helping supporters of terrorism while increasing the risk for Somalis who simply want to support their families.
Oxfam’s Ed Pomfret says it does not make sense to say you want more control and transparency, while closing down the only regulated channel. “The only result will be more money moving in suitcases.”
“It will be the perfect opportunity for those who want to send money to Somalia to fund terrorism or enable money laundering,” said Laura Hammond, a development expert at London’s School of Oriental and African Studies. “It creates a black hole for accountability.”
Tom Keatinge, a former banker who worked on a government study of the issue, says it all goes back to the attack on the World Trade Centre and that the present situation is “collateral damage from a regulatory environment which has gone way out of control since 9/11”.
Keatinge told the UN humanitarian and news anlysis service, IRIN that banks like Barclays are not so worried about falling foul of British regulation; this is all about the United States. “I think if you look at the dominant pressure that global banks feel, that pressure is from the US. And access to the US market, the dollar market, is the lifeblood of many banks. So from that you can deduce that while the UK regulator is important, the existential regulator is the US.”