Somali remittances: Dahabshiil granted Barclays reprieve

Somali money transfer firm wins temporary injunction preventing Barclays from cutting its banking services

Dahabshiil, the remittances company, will be able to maintain an account at Barclays after winning a temporary injunction at the high court, keeping a financial lifeline open for millions of Somalis in the Horn of Africa.

The court's decision was welcomed by charities and the Somali prime minister, who called for a long-term solution. "As Somalia continues to recover from two decades of unrest, these remittances remain an essential source of income for more than half of all Somalis," Abdi Farah Shiridon said. "To many these remittances pay for a basic standard of living."

Barclays expressed its dismay at the unexpected verdict and said it would lodge an appeal. "We are very disappointed at today's decision and we will be appealing," said a spokesman. "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."

The interim injunction has the effect of preserving Dahabshiil's banking arrangements with Barclays until the conclusion of a full trial. The Somali firm was also awarded the costs of seeking the injunction. It is unclear when the full trial will happen but Barclays is keen for it to take place as soon as possible.

Barclays, the last major bank providing remittance services to Somalia, announced in May that it planned to shut down the accounts to about 250 money-service businesses, initially setting a 10 July deadline, citing concern over falling foul of money-laundering regulations.

But after an outcry from Somali remitters, academics and some MPs, who claimed the bank's concerns were exaggerated, the deadline was pushed back. Dahabshiil, which sought an injunction to stop Barclays from shutting it down, claimed the British bank was abusing its dominant position by proposing to end the relationship without objective justification, and by treating Dahabshiil differently from other customers.

Somalis living in the UK send more than £100m a year for food, healthcare and education to relatives in the Horn. Somalia is particularly dependent on money-service businesses as it lacks a formal banking system after decades of war.

Annual remittances from the UK amount to more than £15bn worldwide, with up to 65% flowing to developing countries. The UK has one of the largest money-transfer markets in Europe and the largest number of money-transfer operators.

Oxfam's director of campaigns and policy, Ben Phillips, said: "The ruling provides a small window of opportunity for Somalis living in the UK to send money home to loved ones in one of the poorest countries in the world. However, this does not solve the problem – a long-term fix is needed to safeguard hundreds of thousands of people relying on the money for food, medicines and education."

Laura Hammond, head of development studies at the School of Oriental and African Studies, also stressed the need for a long-term solution. "There is a need to push ahead with efforts that have recently been announced by the government to review regulations and procedures for ensuring compliance to better safeguard the remittance corridor in the medium to long term," she said.

"This crisis was brought about through a severe lack of trust, understanding, and information on the part of many involved in money transfer, and the review of procedures must stay on track in order to create a more transparent and accountable system."

After a meeting in September, chaired by senior officials from the Treasury and the Department for International Development (DfID), the government announced several steps to deal with the fallout from Barclays' move. The measures included a planned "safe corridor" for transferring money between the UK and Somalia.

The pilot scheme will be developed to test and establish audit mechanisms to track payments at the sending, clearing and receiving stages of the remittance process. DfID will work with the World Bank to support the development of the mechanism and train money-transfer operators in Somalia over the next 12 months.

Article Source : http://www.guardian.co.uk
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