Banks fearful of violating anti-terrorism financing laws are shutting down money transfer services many Somali-Americans depend on to send money to family overseas, witnesses testified before a Congressional hearing on June 21, 2012. Representatives from the money wiring businesses and Somali-American communities urged lawmakers to ease regulatory burdens on banks that serve the companies used by Somalis and others to wire money to relatives abroad. The fallout from the closures has left Somali-Americans with few alternatives to send money back to Somalia, a country without a formal banking system, where millions of residents depend on such funds. The hearing, “Safe and Fair Supervision of Money Services Businesses,” was held before the House Financial Services Subcommittee on Financial Institutions and Consumer Credits.
“Entire families and villages have only one precarious defense line between them and starvation; that is, the $100 they receive from a relative in the U.S. or Europe. If that link is severed, millions will be staring starvation in the eye,” Hersi Suleiman, Geberal Manager of Amal USA, Inc, testified before the committee.
Ezra Levine, counsel for the Money Services Round Table, a trade association of money wiring businesses, joined Suleiman and other witnesses in urging Congress to limit the liability commercial banks face and help small money wire companies stay in business by passing a bill similar to one proposed by Rep. Carolyn Maloney (D-NY) in 2008. That bill would have required money service businesses to evaluate their customers and determine that they are not engaged in money laundering or terrorist financing. It would give “a safe harbor to banks. The real problem is banks are risk averse,” Levine said.
U.S.-based Somali money wiring services rely on banks to wire funds to their counterparts in Africa, who deliver the money to the intended recipients. But banks are severing ties with these companies to avoid inadvertent violation of anti-money-laundering rules, even though there are no instances of government enforcement against any financial institutions for carrying out these money transfers. In Minnesota, home to over 30,000 Somalis, a crisis erupted when Sunrise Community Banks, a local bank that facilitated most money transfers, stopped doing so on Dec. 30, 2011. Sunrise cited security and liability issues in closing bank accounts with the Somali money-transfer shops. A small number of Minneapolis-area Somali money transfer shops were later reopened, limiting the transferable amount to $500, after Sen. Al Franken (D-MN) and other Minnesota legislators voiced their complaints.
Appearing at the hearing, Rep. Keith Ellison (D- MN) said, “[B]ecause of the regulatory burden and the fear of exposure to — to risk of regulatory or even prosecutorial action, the financial services institutions, including Wells Fargo Bank, Sunrise Bank, and others, have just come to a hard-nosed business decision that they would terminate the facilitation of these transactions, although they readily admit the 99 percent of the people who do the transactions are good, decent Americans who are simply trying to help their family members.”
Scott Rembrandt, policy adviser in the Treasury’s Office of Terrorist Financing and Financial Crimes, said in a Treasury blog post that banks can safely send funds to Somalia. The Treasury doesn’t assume “money transmitters present a uniform or unacceptably high risk of money laundering, terrorist financing or sanctions violations,” he wrote.