Enlarge This ImageU.S. Bancorp (USB) and Wells Fargo (WFC) have been dragged into an international fight that could cost them thousands of customers.
A group that represents thousands of Somalis living in Minnesota is demanding the two banks provide them remittance services by Friday or they will close their accounts. Since December most Somalis there have been unable to wire money to family and friends back home because the community bank that handled the bulk of those transactions ceased the service. It blamed the difficulty of compliance with U.S. anti-money-laundering rules.
The Minneapolis-St. Paul area — where U.S. Bancorp and Wells combined hold more than half of the market share — is home to one of the largest Somali populations outside of the war-torn country. If anyone can help reopen the remittance lines, it is these two banks, the Somali leaders say.
"They are among the biggest banks nationwide, and we want them to take the lead," Abdirahman Muse, a community organizer, said in an interview. "We bank with them, we do business with them here, but we need them to help us find a solution to this humanitarian crisis."
Bank officials say they sympathize with the plight of the expatriates but that there is no clear way to process the payments comfortably within federal rules.
"We recognize there is a tragic situation in Somalia and we have a large community here that wants nothing more than to send money safely to their families," Tom Joyce, a spokesman for U.S. Bancorp, said in an interview. "We have a responsibility to the nation and the regulators to adhere to the laws and ensure that the money that gets transmitted ends up in the right hands."
Risky Transactions
The problem lies in Somalia's money-services businesses. Remittance there is done through a loose network of MSBs known as hawalas. U.S.-based hawalas work with banks to wire the money to hawalas in Somalia.
However, the country in the horn of Africa has no functioning government or banking system, and the hawalas are unregulated. U.S. government officials worry that such intermediaries assist in funding terrorism. Though a U.S.-based Somali might send money to help feed his family, the fee the hawala in Somalia collects might fall into dangerous hands.
As much as $1.6 billion flows into the country of 10 million people through remittance annually, according to the Central Intelligence Agency's website. The Star Tribune in Minneapolis, which has extensively covered the Somali remittance issue, has cited a United Nations figure that says $100 million is sent annually from the United States.
The Treasury Department, however, says that such businesses have also handled transfers to Al-Shabaab, an international terrorist group.
In October, two Somali women in Minnesota each were convicted on a conspiracy charge for sending money through remittance to Al-Shabaab. The women, both of whom are U.S. citizens, raised money by going door to door in Somali communities in the U.S. and Canada, telling donors they were doing so for the poor and needy, the Federal Bureau of Investigation says.
Shortly after the convictions, University Financial Corp. — an $822 million-asset company in St. Paul that does business as Sunrise Community Banks — suspended services to the hawalas; it had worked with them for three years.
2. But, as Mikhail states, after one reads the Regulation E Foreign Remittances being issued by the Consumer Board , most banks may have to drop foreign remittances altogether