Dismantling Somalia's Remittance Pipeline
Dismantling Somalia's Remittance Pipeline
This article also appears on ZNet.
The continued functioning of the remittance pipeline is “essential for Somalia's immediate survival and long-term development,” concludes a new Oxfam report, which emphasizes the “crucial role” of Somali-Americans and the money-transfer institutions they rely on to send life-saving funds back home. Despite its importance, “the Somalia remittance pipeline is under serious threat,” the report warns. Its precarious state is a result of a Washington-led effort to prevent Somalis in the diaspora from providing aid to their home country, one of the lesser-known developments that have come out of the “war on terror.”
The importance of the remittance sector for Somalia is not over-stated. International remittances are said to “float” the economy. In an impressive expression of solidarity, less than a million Somalis in the diaspora remit somewhere between $1 and $2 billion annually, making remittances the largest contributor to the country's GDP. Some forty-percent of the population relies on these transfers, which are used to cover basic expenses, like food, medical expenses, and education. For perspective, Somalia receives more in remittances in an average year than the level of humanitarian assistance provided by foreign governments in 2012, a year when assistance was irregularly high as a result of the 2011 “epic” drought in the Horn of Africa and the famine it triggered in south-central Somalia.
As the Oxfam report shows, a significant portion of remittances comes from the more than 100,000 Somalis living in the United States, the third largest destination for Somali international migrants (after Ethiopia and the UK, respectively). Their contributions make up nearly 20 percent of the total remittance flow, roughly $215 million annually. This amount approaches the total humanitarian and development assistance the U.S. government allocated to the country in 2012.
For Somalis who rely on foreign assistance for daily survival, their kin in the diaspora offer a crucial benefit over U.S. government assistance: They don't stop the flow of funds at the worst possible times and with disregard for the consequences. This is a very real concern for Somalis, who are intimately familiar with Obama's humanitarian practice.
In the years leading up to the 2011 food-crisis/famine, the U.S. pulled the plug on humanitarian assistance to the country and then criminalized humanitarian relief in the south-central region. These benevolent acts, along with Al Shabaab's ban on Western aid agencies, effectively dismantled the humanitarian relief system in the region—a major cause of the famine which claimed an estimated 260,000 lives, according to a new mortality study.
Somalis in the diaspora don't manifest such cruelty. Thus, any threat to Somalia's remittance pipeline should be seen as eroding an important buffer against the boom and bust cycles of foreign government assistance to the “failed state.”
“Financial War on Terror”
The pipeline has been threatened ever since the opening shots of the “war on terror.” In November 2001, the Bush administration, with “junk intelligence” in hand, shut down Al Barakaat, the largest remittance company providing services for Somalia at the time. It alleged the company was being used to funnel money to Al Qaeda, a violation of the Patriot Act.
The closure was “hailed by the government and the media as a resounding success,” writes Ibrahim Warde in his devastating critique of the “financial war on terror,” The Price of Fear: The Truth Behind the Financial War on Terror. This reaction is especially revealing in light of the circumstances at the time of the decision. Just two weeks before the closure, the UN announced that 300,000 Somalis faced immediate starvation due to drought and food shortage. Fortunately, the decline in remittances caused by the closure was not as severe as predicted, as other companies filled the void. When the administration withdrew the charges a year later for lack of evidence, the media and elite opinion barely took notice. Somalis, on the other hand, paid close attention, naturally feeling that “there was a strong sense of the injustice done to the company and the country,” Warde explains.
Al Barakaat couldn't survive. One of the companies that filled its void was Dahabshiil, Somalia's current largest money transfer business. It's the target of the latest attack on the remittance pipeline that has come out of the West.
The major British bank, Barclays, is reportedly planning to close its account with Dahabshiil. The company is a member of the Somali Money Services Association (SOMSA), a UK trade body for the money transfer industry. According to SOMSA, twelve of its members have lost their accounts in the UK. The five remaining members face “imminent” shutdowns, the BBC reports.
Barclays' closure of Dahabshiil “will cut a lifeline for essential services in Somalia,” says Philippe Lazzarini, the UN's top humanitarian official in Somalia. Lazzarini's statement is echoed in a letter signed by over a hundred Somali and international scholars who have called on the UK government to intervene on behalf of the company and the many who rely on its services, a proposition which was rejected.
Laura Hammond, a scholar specializing on the Horn of Africa, discusses the likely impacts of the closures in her recent article: “members of the diaspora living in the UK and many other European countries [will] be unable to legally send money to Somalia, many aid agencies will also have difficulty,” as they rely on Dahabshiil to make payments inside Somalia. “The timing of this decision could not have been worse,” she explains.
[J]ust when the country has formed the first government to be internationally recognized in two decades, when piracy is at a historic low, and the al Shabaab insurgents seem to be weakening, the main channels by which remittances, foreign investment and international aid funds flow to reach those who need them are in danger of being closed down.
Barclays cited the “risks of the sector” as the reason for the closure and denied that the company has “unwittingly been a conduit for financial crime.” Notwithstanding Dahabshiil's clean record, the sector-wide “risks” are that money transferred to Somalia may “unwittingly” facilitate “money laundering and terrorist financing,” hence why Barclays closed the account. Orwell would be impressed.
Too Weak To Protect
These risks have been artificially imposed by Washington. Since the closure of Al Barakaat, the regulatory environment in the United States has become increasingly hostile to Somali-American transfer companies. As a result, over the last ten years U.S. banks have been closing Somali accounts at an alarming rate. The closures are based on a “general aversion to risk rather than . . . any specific concerns regarding their compliance practices,” according to the Oxfam report. Washington has taken the lead in institutionalizing anti-terror financing regulations at the international level.
Barclays' decision comes after U.S. authorities fined the British financial giant, HSBC, almost $2 billion for its role in facilitating money-laundering by “terrorists,” “rogue nations,” “drug kingpins,” and other nefarious actors. In this case, U.S. authorities addressed the bank's “egregious” criminal conduct with the health of the financial sector in mind. They chose not to indict HSBC; doing so would “jeopardize one of the world’s largest banks and ultimately destabilize the global financial system,” the New York Times reported at the time. Here, “destabilize” means threaten the profits and dominance of the giant financial institutions, which, incidentally, are responsible for “eating out the modern market economy from inside” (Martin Wolf). The decision to protect the giant banks from the “rule of law” confirmed the government's commitment to upholding the dual doctrine, “too big to fail is too big to jail,” as aptly stated in a New York Times editorial.
The doctrines don't extend to the weak. Accordingly, in the eyes of Western officials, the institutions and networks responsible for the functioning of Somalia's remittance pipeline, except the big banks, are sufficiently “small” – weak and insignificant – to force into failure. The same goes for those who rely on the “lifeline.”
U.S. “Material Support” for Terrorism
Washington's expressed concern is that the money transfers may somehow “benefit” Al Shabaab. Anyone familiar with recent events in Somalia can see the irony here. For one, Al Shabaab has been the primary benefactor of U.S. policies towards Somalia since 9/11. The militant coalition was catapulted into dominance after a devastating U.S.-backed Ethiopian intervention in late 2006. The intervention created a political vacuum which Al Shabaab gladly filled. Before these events, the terrorist threat in Somalia was minuscule. It also resulted in a modern phenomenon that we may refer to as the “Iraqization of Somalia”—the rapid migration of foreign jihadists that follows U.S.-led or -orchestrated aggression. Indeed, the inflow of foreign jihadists within Al Shabaab is a key factor for the coalition's radicalization. This migratory phenomenon is one of the key causes for what the State Department recently identified as a more “geographically dispersed terrorist threat,” practically an admission of failure.
Adding to the irony is the selective nature of Western attempts to choke off the financing of terrorism. As Anna Lindley, a scholar who has studied the Somali remittance systems, has noted, “Warlords who terrorized the civilian population of Mogadishu for years used a wide range of money transmission mechanisms with no call for sanction on service providers from the international community.” Even worse, the U.S. provided direct financial support for warlords to wage a campaign of terror in the streets of Mogadishu. From 2003 to 2006, CIA-financed warlords carried out assassinations and renditions on the streets of the capital. The policy plainly qualifies as “material support” for terrorism once a literal, instead of propagandistic, definition of the crime is adopted.
It's difficult to see how dismantling formal remittance institutions will weaken Al Shabaab. There's reason to believe it could have the opposite effect.
In December 2011, the Sunrise Community Banks in Minneapolis, one of the major Somali hubs in the United States, closed the accounts of Somali-American money-transfer organizations. The Oxfam reports claims this decision had two effects. First, it interrupted money transfers to Somalia at a time when the famine was still ravaging lives. (To no avail, humanitarian organizations urged the Obama administration to provide assurances to Sunrise that it would not face legal ramifications for performing wire transfers.) Secondly, the bank's former clients began sending money through indirect (and more expensive) channels. As the Oxfam report states, the use of indirect channels “reduces the transparency of transactions and compromises the ability of the US government and Somali authorities to monitor and regulate the transfer of funds.” It's easy to see how Al Shabaab could exploit informal remittance channels.
Bankrupt responses to terrorism are easier to justify when the victims they generate are regarded as worthless; they come at a lower perceived “cost.” Until people of conscience change this calculation, U.S. and other Western policymakers will continue “getting Somalia wrong”; eroding the few lifelines keeping the fragile society alive in the process.
 “Between ‘Dirty Money’ and ‘Development Capital’: Somali Money Transfer Infrastructure Under Global Scrutiny,” African Affairs 108:433 (2009): 519-539.
 See Jeremy Scahill, Dirty Wars: The World Is a Battlefield (New York: Nation Books, 2013).
Stephen Roblin is a Baltimore-based activist and writer. He is a member of the Indypendent Reader collective and the International Organization for a Participation Society (IOPS). He also teaches a bi-weekly writing workshop for Baltimore's new street paper, Word on the Street. Roblin's writing focuses on US foreign policy towards the Horn of Africa. He has written for ZNet, ZMagazine, Truthout, and other publications.