- By Jamila TrindleJamila Trindle is a senior reporter who covers finance, economics and business where they intersect with national security and foreign policy. Her beat spans everything from the economic underpinnings of conflict to sanctions, corruption and terror finance. Before coming to Foreign Policy magazine, Jamila reported for the Wall Street Journal’s Washington bureau, covering financial regulation and economics. She has also worked as a foreign correspondent in China, Indonesia and Turkey as a freelancer for NPR, Marketplace, The Guardian and others. She moved back to the U.S. to cover the post-crisis economy for PBS in 2009.
Companies that send money back to East Africa from immigrants living in the United States may soon have to close up shop because they can’t find U.S. banks willing to wire the money for them. As Foreign Policy first reported last month, one the few remaining banks working with the small money transmitters, Merchants Bank of California, still plans to shut accounts, just not immediately. Instead of closing the accounts on June 20, they will be closed July 31.
These money transmitters are smaller versions of Western Union and MoneyGram that send money to far-flung African villages that the big guys don’t serve. They rely on banks to make the international wire transfers that actually deliver the money from the United States to an African city, where it is then distributed. It’s part of a worldwide system of informal financial transactions that make it possible for people working in developed countries to send money home to war-torn places such as Somalia, which has no functioning government or formal banking system.
Crackdowns on money laundering and terrorism financing, as well as existing sanctions, make playing middle man less attractive to U.S. banks, threatening a vital money flow that supports the economies of Eritrea, Ethiopia, and especially Somalia. For many of these mom-and-pop transmitters, Merchants was the only bank they used. Although the extension is helpful, the lack of banks willing to send money to East Africa means that many of the companies may still have to close up shop.
"No one’s under the illusion that this means the problem is solved," said Scott Paul, senior humanitarian policy advisor for Oxfam America. He traveled to St. Paul, Minn., last week to interview money-transmitter executives who’ve been affected by the Merchants shutdown. Oxfam estimates that immigrants in the United States send about $215 million home to Somalia every year.
"If we can’t find another bank, we’ll be out of business," said Said Malin, who runs a small money-transfer company. Malin didn’t want to give the name of his company because he’s worried it would discourage other banks from working with him.
A local service workers’ union and other Somali-American groups are planning a protest on June 27 in Minneapolis that they hope will draw more attention to the problem.