The British government is planning to create "a safe corridor for payments" to Somalia money transfer companies in the UK face closure. The Government's move comes only days before Barclays Bank is due to shut the last account held by a money transfer company and effectively bring a halt the majority of the estimated US$750 sent from Britain to Somalia each year.
Barclays, which is closing the accounts of 250 international money transfer companies claims the sector is at risk of being used for money laundering and terrorist funding and that it falls outside new regulatory criteria. Last year, the HSBC bank was fined US$1.9 billion by the US Regulator for poor anti-money laundering controls. There have been widespread calls from the Somali government, charities and international NGOs to find a solution. Now the UK Department for International Development, the Treasury, the UK regulator and the National Crime Agency have announced plans for a scheme to track payments made from the UK to Somalia.
However, the pilot project is expected to take a year and it does not address the immediate problems faced by money transfer companies in the UK which cannot send large sums of money unless they are deposited with a British bank. No other bank had offered to replace Barclays Bank. The Chief Executive of Dahabshiil, the largest of the money transfer companies involved, says the disruption of the remittances "presents an immediate and real risk to the people of Somalia. A British MP noted that "the action of shutting down Dahabshiil's accounts punishes everyone and leaves no way to send money to Somalia via legitimate routes," adding that the government and the regulator "need to come up with a solution now."