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Every year, Somali migrants around the world send approximately $1.3 billion to friends and families at home, dwarfing humanitarian aid to Somalia. Of these remittances, over £100 million comes from the United Kingdom.
However, banks and regulators are in danger of inadvertently undermining this lifeline and driving it underground, as interpretation of UK and USA money laundering and counter terrorism legislation becomes tighter and banks more risk adverse.
Barclays plans to close all UK Somali Money Transfer Operators (MTOs) will have an effect beyond the UK as many MTOs based in Europe route money to Somalia through the UK.
Somalia currently has no formal banking sector and this corridor is the only official means of getting money into the country.
To British Banks
- Barclays should extend the deadline for closing remaining MTO accounts by 12 months.
- Banks should review how they manage risk in this sector and develop specialized services for MTOs engaged in remittance.
- Banks beyond Barclays should come forward to ensure that this service continues.
To the UK Government
- Given the acknowledged social, economic and political significance of remittance transfers, the UK Government should work with the financial services sector to ensure remittances continue to flow to Somalia in the short as well as the long-term.
- The Government should lead a review of the remittance sector while ensuring that there is no interruption in money flows reaching vulnerable people.
- The FCO, DfID and HM Treasury should coordinate initiatives within Government, and facilitate dialogue between regulatory bodies, banks and MTOs.
- The Government should engage key international regulators to ensure other countries’ regulations do not adversely impact regulated remittance flows.
- The UK Government should support Somalia to establish a robust banking sector.
Somali MTOs should:
- Improve collaboration within the money transfer industry, invest in improved standards and strengthened self-regulation.
- Invest further in developing money transfer technology for Somalia.
Somali authorities should:
- Rapidly pass legislation to strengthen the Somali banking system and facilitate regulation of international transfers.
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For further research and recommendations on Somalia remittances, please read: Keeping the Lifeline Open: Remittances and markets in Somalia
More on Oxfam's work in Somalia