Minneapolis (DIPLOMAT)- Millions of Somalis will find it easier to receive money from relatives abroad after the US Senate approved the Money Remittances Improvement Act earlier this month. The Act that was signed by President Barack Obama on August 8 reduces the restrictions non-bank companies, such as money transfer firms, that provide international remittance services.
US legislators have said that the Act will particularly make it easier for Somalis in states such as Minnesota to send money to their families in the war-torn horn of Africa country that is struggling to rebuild.
Census data put the number of Americans of Somali origin in Minnesota at 32,000 in 2012.
Democratic Party representative Keith Ellison from Minnesota, who sponsored the Bill, said that the law would make the life of his constituencies easier, giving them much needed relief at sending cash back home.
“Remittances are a lifeline for the loved ones of many Minnesotans. This bill will simplify the process by which families and businesses send money home. I look forward to the President signing this bill into law,” said Ellison prior to the president assenting the Bill.
The law is meant to make it easier for migrant workers to send the much needed money back home while maintaining certain safeguards.
Stringent laws are meant to discourage money laundering and to avoid the funding of terrorist groups such as Al Qaeda linked Al-Shabaab, which has been a thorn in the flesh for Somalia, and neighboring countries Kenya and Uganda.
The civil society has been lobbying for laws to be relaxed, arguing that money sent home is often a lifeline for many families.
A study by Oxfam found that while the US government has to display prudence, very tight rules amount to playing Russian roulette with the lives of thousands who rely on relatives in the US to send money to buy food and medicine.
The study titled Keeping the Lifeline Open Remittances And Markets In Somalia found that in 2012 Somalis in the US sent $215 million to their friends and family in Africa, which is nearly the same amount that the fragile state received in donor funding from the US that year.
Keeping The Life Line Open
“Many Somali families continue to rely on remittances to meet their most basic needs. With roughly a quarter-billion dollars of direct, community-level support at stake, all parties involved – Somali authorities, the US government, banks, and Money Transfer Operator (MTOs) – must ensure that members of the Somali diaspora in the United States can send their money to Somalia as long as they are willing and able to do so,” the report said.
Banks and other companies are however reluctant to relax rules due to tough penalties they stand to face if they are found to breach the laws that are meant to stop funds flowing to finance terrorist activities, drug and human trafficking.
Standard Chartered recently agreed to pay a $300 million fine for failing to report suspicious transactions linked to Iran while HSCBC was fined $1.2 billion in 2012 for a similar offence.
Despite the restrictions and the lack of a formal financial system the country still has a functioning money transfer system, known as the Hawala.
Experts on regional security say that ironically the administrative chaos has given birth to an efficient money transfer system.
“That is why a money transfer system that is more efficient and elaborate than the more formal systems like Western Union has been developed,” Atunga Atuti, the director of the East African School of Human Rights and who has done studies on regional security in the horn of Africa told AFKInsider.
Atuti added that until the country is able to stand on its feet, remittance will continue to flow and anything that makes this easy is a welcomed since the state is at the moment not able to provide the basics.
“With the return of a semblance of organized central authority and lack of capacity to levy taxes as other governments do, remittances from Somali diaspora play an important role in addressing deficits in the provision of services for most households,” Atuti added.
“That is why sending a relative; son, daughter, uncle, auntie abroad for many Somali families is an important lifeline.”
Source: The DIPLOMAT