Somalis win UK court reprieve on Barclays money transfers

by Katy Migiro | @katymigiro | Thomson Reuters Foundation
Wednesday, 6 November 2013 11:56 GMT

A man carries bundles of Somali shillings after visiting a foreign exchange bureau at Bakara open air market in Mogadishu October 8, 2013. REUTERS/Omar Faruk

Image Caption and Rights Information

Court order to Barclays Bank to keep open the account of one Somali remittance company is a lifeline for many Somalis, but shows how far their country is from having a fully functioning economy

NAIROBI (Thomson Reuters Foundation) – The UK high court has ordered Barclays Bank to keep the account of the Somali remittance company Dahabshiil open, securing a lifeline for millions of Somalis who depend on remittances from relatives abroad.

The temporary injunction, issued on Tuesday, will remain in place until a trial is concluded in 2014.

 “The ruling provides a small window of opportunity for Somalis living in the UK to send money home to loved ones in one of the poorest countries in the world,” Oxfam campaigns and policy director Ben Phillips said in a statement.

“However, this does not solve the problem - a long-term fix is needed to safeguard hundreds of thousands of people relying on the money for food, medicines and education.” 

Diaspora remittances of some $1.5 billion a year are Somalia’s biggest foreign currency earner, accounting for one-third of the country’s economy and two to three times the amount provided in aid.

An estimated 40 percent of Somalis – more than four million people – receive remittances from family and friends overseas. Remittances from Britain, most of them sent through Dahabshiil, are worth an estimated $160 million a year.

TERRORIST FINANCING                                                                            

Barclays is the last major UK bank providing money transfer services to Somalia, which does not have a functioning banking system because of  its long-running civil war. Virtually all major United States banks have already stopped offering remittance services to Somali companies.

In May, Barclays announced that it planned to close the accounts of around 80 remittance companies for fear that funds might end up in the hands of groups branded as terrorists. Its July closure deadline has been extended several times because of protests.

Barclays said in an emailed statement that it was “disappointed” by Tuesday’s ruling because of the well-known risks of money laundering and terrorist financing in the money service business sector.

The British National Crime Agency estimates that more than $1.6 billion is laundered through UK-based money service businesses each year.

Aid agencies called on the British government to work with banks to find a long-term solution.

In September, the government announced a range of measures to ensure that remittances continue to flow, including the creation of safe corridors for payments from Britain to Somalia.

The Department for International Development is developing a pilot project to create secure remittance channels, tracking payments at the sending, clearing and receiving stages.    

“That’s a step in the right direction,” Degan Ali, executive director of Adeso, a charity that works in Somalia, said in a statement. “The last thing we want to see in Somalia is a famine or even a deterioration of the humanitarian situation.”      

There is no longer famine in Somalia following four good rainy seasons, but 870,000 people – more than 20 percent of the population – still need food aid. One in six children are acutely malnourished.

Our Standards: The Thomson Reuters Trust Principles.