Somali authorities estimate that $2bn in remittances – a significant percentage of its GDP – is channelled to Somalia through hawala, or small money-transfer businesses. According to Oxfam, an estimated $162m is sent annually by the UK's Somali diaspora.
One of the UK's banks has decided to close the accounts of some Somali money service businesses (MSBs) to minimise the risk of falling foul of money-laundering regulations. This was on the basis that some money service businesses do not have the proper checks in place to spot criminal activity and could unwittingly be facilitating money laundering and terrorist financing. The bank has been asked to reconsider its decision, since Somalis do not have alternatives available to them.
One of Somalia's major money transfer organisations, Dahabshii, has brought an injunction against the bank to stop the closure of its account, with the case to be heard on 15 October.
The British Bankers Association (BBA) has called for a review of the registration and licensing requirements for MSBs and wants better regulation of the industry. There have also been calls for government leaders to look to other regulatory solutions, suggesting that the regulatory burden for monitoring hawalas be placed on governments rather than the banks, with clear guidelines to limit bank obligations and to put government officials in charge of due diligence and risk evaluation of remittance agencies.
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