The Guardian reported last week on some bad news for people in Somalia who rely on monetary remittances from America—and that's a lot of people:
On Friday, Merchants Bank of California is expected to close the accounts of all Somali-American money transfer companies on its books.
The bank sent out letters to customers at the end of January informing them of the decision. The bank has not responded to the Guardian's requests for comment. If it goes ahead with its decision, it would be the second time the bank has warned Somali remittance companies of pending account closures; in October 2014, the bank reversed a prior decision to close their accounts.
It's a big deal, if you are Somalian or have relatives or friends you are trying to help there:
Remittance payments to Somalia dwarf aid spending. Overseas development assistance to Somalia is $75 (£50) per capita, including both humanitarian and development aid, compared with an estimated $110 per capita in remittances entering the country, which amounts to 35% of GDP, the highest level in the world. Somalis in the US alone send more than $200m, according to Oxfam; the UK sends more than $162m, followed by Germany and the Netherlands.
But regulatory pressure is throttling the life-saving inflows. Money transfer operators, which work like Western Union, but reach remote locations at a fraction of the cost, have come under scrutiny in the past few years for potentially laundering money or funding terrorism. In response, banks have been closing their accounts.
Columnist George Monbiot, no stranger to complaining about the crimes of Western governments, has an impassioned rant on the topic in yesterday's Guardian, fingering U.S. financial regulators for a heartless crushing of a much-needed free flow of money in the name of maybe keeping some cash out of the "wrong hands":
Last Friday, after the OCC [U.S. Office of Comptroller of the Currency] had sent it a cease-and-desist order, the last bank in the United States still processing money transfers to Somalia closed its service. The agency, which reports to the US treasury, reasoned that some of this money might find its way into the hands of the Somali terrorist group al-Shabaab. It's true that some of it might, just as some resources in any nation will find their way into the hands of criminals (ask HSBC). So why don't we shut down the phone networks to hamper terrorism? Why don't we ban agriculture in case fertiliser is used to make explosives? Why don't we stop all the clocks to prevent armed gangs from planning their next atrocity?
Ridiculous? In fact it's not far off. Remittances from the Somalian diaspora amount to $1.2bn-$1.6bn a year, which is roughly 50% of the country's gross national income, and on which 40% of the population relies for survival. Over the past 10 years the money known to have been transferred to suspected terrorists in Somalia amounts to a few thousand dollars. Cutting off remittances is likely to kill more people than terrorists will ever manage….
So you take a country suffering from terrorism, massive youth unemployment and the threat of famine, and seek to shut off half its earnings. You force money transfers underground where they are more likely to be captured by terrorists. You destroy hope, making young men more susceptible to recruitment by an organisation promising loot and status. Through an iniquitous mass punishment, you mobilise the anger and grievance on which terrorist organisations thrive. You help al-Shabaab to destroy Somalia's economic life.
Foreign Policy wrote with some good background on how and why U.S. financial regulators are out to smash the Somalian remittance industry last year.
Yet another reason why cryptocurrencies are not just for libertarians, but more importantly for the un- or poorly banked across the world with access to the informational ether via smartphones or computers.
A book review by me that is in part on the ways in which the West's decisions have bedeviled Somalia will appear in the forthcoming April issue of Reason, subscribe now.