Reprieve for Somali remittance firm

The British-Somali money transfer company Dahabshiil Holdings Ltd has won a further stay of execution in its legal battle to stop Barclays Bank from closing its account, a move which, it says, would effectively put it out of business. It had claimed that the decision was discriminatory and anti-competitive.

The High Court in London on 5 November granted an injunction which would prevent the account being closed until a full trial can be concluded, something which is not likely to happen until sometime next year.

Dahabshiil is by far the biggest of the money transfer services which Somalis living in the UK use to send money home to their families, since Somalia has no conventional banking service.

It also transfers money for aid agencies and other organizations working in the country, and transfers money for businessmen to finance imports into Somalia and Somaliland. Banks have been refusing to operate accounts for these transfer services, because of concerns about money laundering and terrorism. A number of smaller companies have already lost their bank accounts, and can only now transfer money through intermediaries. Dahabshiil's account with Barclays was the last one still operating in a major British bank.

After the ruling, the chief executive of Dahabshiil, Abdirashid Duale, said: “We are extremely pleased that the Court has recognized the strength of our case. It is also good news for all our customers who are reliant on us to transfer money safely to the Somali region and all other countries in which we operate.”

Oxfam, which has campaigned against the account closure, also welcomed the ruling, although it pointed out that the injunction was only temporary. “The ruling provides a small window of opportunity,” said Ben Phillips, director of campaigns and policy. “However, this does not solve the problem - a long-term fix is needed.”

"The ruling provides a small window of opportunity but does not solve the problem - a long-term fix is needed"

Meanwhile, Barclays has said that it will appeal against the ruling.

“Barclays made a legitimate decision to exit these businesses based upon the well-known risks of money laundering and terrorist financing in the money service business sector. The risk of financial crime is an important regulatory concern and we take our responsibilities in relation to this very seriously,” it said in a statement.

The irony is that the registered money transfer companies are fully regulated by the UK government and are reasonably transparent. Without them, Somalis would undoubtedly still send remittances home, but they would have to go through informal and unregulated channels which would increase the risk of money going to terrorist organizations.

Worried about this prospect, the government convened a meeting of all concerned agencies. This resulted in an action plan, including asking the Department for International Development (DFID) to work on setting up a “safe corridor” pilot for Somalia, along the lines of a system already working for Pakistan, which would track payments right through - from sending through clearing, to the recipient eventually getting their money. But that is not likely to be in place for at least a year.

Degan Ali, Executive Director of Adeso, a humanitarian and development NGO working in Somalia, described the injunction as “very good news for Somalia, for Somalis living abroad, and for anyone who cares about the country’s future.”

“That being said,” she added, “we should not lose sight of the bigger issue, and we need to continue to work towards finding a long-term solution. The UK government recently announced a range of actions intended to ensure that remittances continue to flow, including the creation of safe corridors for payments to Somalia, and that’s a step in the right direction. Now more than ever there is a need for the government, banks and money transfer operators to sit down at the same table and find a durable solution so that the flows of money can continue in ways that will satisfy all parties.”