House bill may ease Somali remittance program worries

Bipartisan federal legislation aimed at easing roadblocks for Somali-Americans in Minnesota trying to transfer money to relatives in East Africa is on its way to the U.S. Senate.

• Read the full text of the bill

Those transfers, known as remittances, help form the backbone of the economy in Somalia. But over the last decade, many American banks quit working with Somali money transfer operators over fears of breaking anti-terrorism laws.

The bill, sponsored by U.S. Rep. Keith Ellison, passed the House last week with bipartisan support.

The remittance process made headlines in 2011 when two Somali-American women from Rochester were convicted of raising money for the extremist group Al Shabab. Amina Farah Ali later received a 20-year prison sentence for steering about $8,608 to the group in 2008 and 2009. Her co-defendant and bookkeeper, Hawo Mohamed Hassan, was sentenced to 10 years.

The convictions made a tough situation even worse for Somali remittance businesses, known as hawalas. The businesses depend on banks to operate. And in December of 2011 St. Paul-based Sunrise Community Banks, one of the last few American financial institutions to work with hawalas, got out of the business over fears of breaking counterterrorism laws.

Aden Hassan, compliance manager at the Minneapolis remittance company Kaah Express, said at a community forum on the issue last night, that the trouble with banks started long before the women's convictions. He said large financial institutions began tightening procedures around 2005.

"All the time the banks are avoiding us. Whenever we find a bank that's willing to do business with us, within a short time they get pressure from their regulators and they quit."

Hassan said his company is still transferring money to Somalia and other countries, but the situation is precarious. He said there are only two American banks still willing to facilitate the transfers.

Ellison said his measure will allow state-level examinations to be used to ensure compliance with federal laws meant to combat crimes such as money laundering and terrorism financing, as long as the states meet federal requirements.

"The banks, by and large, would like to do the transactions, but they're just not financially feasible given our current regulatory system," he said.

A year ago, U.S. Bank expressed interest in assisting with wire transfers, saying it was in discussions with Dahabshiil, a major remittance firm. But the bank says it wasn't able to open an account with the company, blaming items that came up in an independent review and "the inherent risks of doing business in Somalia."

Scott Paul, of the charity Oxfam, said a recent study showed remittances from abroad are a literal lifeline for people living in Somalia.

"We found that 40 percent of the entire country of Somalia is depending on money transfers from places like Minneapolis and St. Paul to support their most basic needs: food health care, school fees," he said. Without regulatory changes, the few remaining banks still willing to facilitate money transfers could pull out. If that happens, Paul says the business could go underground, where it'll be harder to stop illegal activity.