For the sake of Somalia, Barclays must not close its money transfer system

To do so could herald a humanitarian crisis in the long-suffering region

Related Topics

The Horn of Africa is no stranger to hardship. Four droughts and crises have struck during the last decade, with over a quarter of a million people thought to have died during the famine in 2011. When images of suffering and despair appeared on our television screens, the British people responded with characteristic generosity – tens of millions of pounds were raised by the Disasters Emergency Committee in a matter of weeks.

So why is one of Britain’s biggest banks, Barclays, about to take a decision that could trigger a humanitarian crisis in Somalia and end up taking another deathly toll on the country?

The story starts in Mexico where the Sinaloa cartel managed to use HSBC banking operations to launder over $800 million in drugs money. US authorities fined the bank $1.9 billion for this and other breaches. Serious questions have been raised about HSBC’s approach to managing the risks of operating in a country well known for illegitimate operations. The bank applied a low-risk rating to its operations and failed to put sufficient resources into its compliance department, meaning that drug lords were able to get away with their money laundering operations and send up to $7 billion from Mexico to the US without anyone batting an eyelid.

Of course once the $1.9 billion fine hit the headlines plenty of eyebrows were raised – including in the boardrooms of major banks like Barclays. In a rush to mitigate the sort of risks the HSBC experience exposed, Barclays have announced their decision to close the accounts of money transfer agents, 75 per cent of whom have operations in Somalia. It’s decision which will drive many of them out of business.

Somalia is one of the hardest environments on earth within which to operate. Most other banks got out a while ago, meaning there is no formal banking sector and even major aid agencies like Medecins Sans Frontieres have had to pull out because they can’t do their job.

Al-Shabaab and other armed groups will seek to subvert aid resources wherever possible.

.  So it is not necessarily easy to comply with EU and US legislation that hands out hefty punishment for not carrying out due diligence in making sure money doesn’t fall into the wrong hands.

Viewed as a purely commercial decision the profits made from a few money transfer agents are unlikely to be enough to justify a gamble where the stakes run into billions of dollars.

Unfortunately for Barclays this isn’t just a commercial decision.

The recent political history of Somalia, coupled with its maritime heritage, means that Somalis are spread far and wide across the world. Well over 100,000 people live in Britain who were born in Somalia, many of whom regularly send money to friends and relatives in Mogadishu and beyond. They use money transfer agents (Hawala), with effective networks across the whole of Somalia meaning the money moves fast to its intended recipients.  Most of these transactions involve small amounts of money but once in the hands of Somali citizens the cash has far higher purchasing power, enabling families to buy food, send their children to school and access healthcare. The transactions add up – it is estimated that the total is over $1.3 billion annually. That sort of money makes a difference.

The odds may be stacked against them, but Somalis have been able to lead an economic recovery of sorts – the economy grew by over 2 per cent last year. But if you take away a billion dollars a year the situation changes and many families can no longer afford food, clothes, school or a visit to the doctors – and the cash economy is driven underground.

ODI research published this week shows how a group of charities, including Oxfam, were able to disburse over $90 million across Somalia during the Horn of Africa famine – reaching almost 1 million people. Experts who were asked to monitor the project praised the hawala, stating how they helped disburse funds effectively in a way which compares favourably with other forms of aid. Where the experts spotted signs of corruption, the charities were able to take steps to tighten up their due diligence and reduce any diversion of funds to next to nothing.

If charities can manage to monitor their use of cash transfers, surely banks can too? This is the point that ODI Director Kevin Watkins makes in his letter to the board of Barclays Bank criticising a decision which he characterises as "an unwarranted threat to some of the world’s most vulnerable people". Barclays has bowed to pressure by extending the deadline for its final decision to the end of September.  It may yet find itself cast as hero or villain - but in the search for a satisfactory solution, the clock is ticking.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Guru Careers: Software Developer

£35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...

SThree: Trainee Recruitment Consultant / Resourcer

£18000 - £23000 per annum + Commission: SThree: As a Trainee Recruitment Consu...

Ashdown Group: UI Developer - (UI, HTML, CSS, JavaScript, AngularJS)

£25000 - £40000 per annum: Ashdown Group: UI Developer - (UI, JavaScript, HTML...

Day In a Page

Read Next
The PM proposed 'commonsense restrictions' on migrant benefits  

So who, really, is David Cameron, our re-elected ‘one nation’ Prime Minister?

Andrew Grice
Time travel: Thomas Cook has been trading since 1841  

A horror show from Thomas Cook that tells you all you need to know about ethical consumerism

Janet Street-Porter
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?