Somalia’s already fragile economy is under threat from global de-banking of money transfer operators (MTOs) according to Joint Agency Briefing Note issued by three non-governmental organisations.

Adeso, Oxfam and the Global Centre on Cooperative Security recommend that banks should work harder to manage Somalia’s MTO risks internally so that vital remittances from the Somali diaspora reach the East African country.

The report entitled ‘Hanging by a Thread’ notes the inter-reliance of remittance flows, trade finance and Somali markets.

Every year, Somalia receives approximately US$1.3 billion in remittances from the Somali diaspora, accounting for 25-45 per cent of its economy and exceeding the amount it receives in humanitarian aid, development aid, and foreign direct investment combined.

But de-banking is threatening this lifeline according to the report. This year, US-based Merchants Bank closed all accounts with Somali MTOs. It was responsible for transferring an estimated 60-80 per cent of remittances from the US.

Similarly, Westpac Bank – currently the only remaining Australian bank servicing Somali MTOs – has announced that it will close remittance accounts soon. Last year, the UK’s Barclays Bank also closed accounts of Somali MTOs.

Rather than de-banking MTOs on a wholesale basis, banks should formulate internal risk assessment policies and procedures, recommends the report.

It says banks should issue context-based risk approach guidelines and consider reviewing special cases, such as Somalia, and differentiate between sub-jurisdictions that may offer more safeguards

Indiscriminate closures
The report also recommends that banks should endeavour to maintain accounts of companies that facilitate remittance transfers to Somalia

At a minimum, banks should not close Somali MTO accounts indiscriminately or on the basis of casual impressions of conditions in Somalia.

The Joint Agency Briefing Note can be found here: