Legally registered hawala companies have served as lifeline for the Somali community following the fall of central government in 1991. Minnesota boasts the largest Somali community in the nation – about fifty thousand strong. The U.S. Treasury Department estimates that the Somali-American diaspora sends over one hundred million dollars a year.
How the hawala system functionsSince, Somalia does not have a functioning banking system, hawalas have filled the void. News of the remittance companies shutting down came as a shock to the community and rumors began to float around that there was no way of sending money to their loved ones after two weeks (before the extension). Then frantic calls from all over the world filled the phone lines: What will happen next? What can we do? Who can help us? Can this happen in America?
The hawala system is simple in its basic operations. The customer takes the amount of money he/she is sending to the local hawala company. The hawala agent records the basic information of the sender in the computer and gives a receipt to the customer. The customer also gives the name, phone number, and city of the recipient. The local hawala agent receives the money and charges a fee of about 5%, then sends the list to the designated location. The agent then deposits the money in the bank, which in turn remits the money to the hawala company headquarters, usually in Dubai, United Arab Emirates. The head office provides sufficient funds to their representatives all over Somalia. Usually, the receiving office or the sender, tell the recipient to pick up the funds. The recipient then gets the money after identity verification, such that the information of the sender matches the recipient’s. Lately, the hawala agency sends text message back to the sender that their loved one has received the money. The whole process takes twenty-four to seventy-two hours. There is transparency and documentation on both ends. If another layer of scrutiny is needed to ensure the continuity of this vital service, so be it.
Personally, I have been using the hawala system for the past fifteen years. I send monthly bills to several different families, whose livelihood depends solely on this remittance. The only time I lost money in the process was 2001 when the hawala company I was using was shut down following the horrific September 11 attacks on all of us. I used Money Gram that time. However, the money did not get to my relatives and I could not retrieve it after many attempts. This might be an isolated incident and my intention is not to vilify the company, but my point is that the hawala system is simply unmatched in its efficiency.
Critical role of hawala companies
The hawala is an age-old money remittance system that channels much needed life support to needy people in many parts of the world. The system originates in Asia and is not unique to the Somali community. Its basic premise is based on trust between the customer and the remittance agency. Hawala remittance is a matter of life or death for vulnerable destitute, sick, wounded and displaced people in Somalia. It also provides an efficient, cost-effective, fast, and reliable conduit for diaspora Somalis to help their relatives in their war-torn homeland.
The first Minnesota hawala agency opened in Marshall in the early 90s and today there are fifteen agencies with branches all over the United States. These agencies have been using major U.S. Banks such as Wellsfargo in the past, but several of the corporate banks declined to continue the services due to, as they claim, burdensome federal regulations and paperwork.
The only remaining bank that provides this crucial service is Franklin Bank, a subsidiary of Sunrise Community Banks in Minnesota. The Somali community is very grateful to Sunrise Banks, especially, Chief Operating Officer, Mr. David Reiling for his courage. We appreciate his willingness to meet with the community to find ways to address the bank’s concerns. The main fear is that extremist groups like Al-Shabab might exploit the system to channel funds. I am sure the hawala companies are willing and ready to meet all regulatory requirements to close any loopholes potentially leading to money falling into the wrong hands.
Cutting remittances is a national security threat
Somalia is a classic example of a failed state and successive Somali antagonists must take responsibility for allowing this to happen to their country. The best way to counteract extremism and piracy is the establishment of a stable legitimate functioning Somali government. The United States has invested much time and resources to meet its strategic interests in Somalia. The fact that so many Somalis have resettled here and are making remarkable progress in different arenas points to the critical role Somali-Americans will play in the future of Somalia. It is no accident that the last two Prime Ministers, Mr. Mohamed Abdullahi Mohamed and Dr. Abdiweli Mohamed Ali, and several cabinet members are from the Somali-American diaspora. Somali-Americans are in the frontline of the fight for the return of a strong, united, democratic Somalia that is at peace with itself, its neighbors, and the international community.
It will be a strategic U. S. national security mistake to close the remittances at this time.
The internationally recognized Transitional Federal Government of Somalia is engaged in a war of survival with Al-Shabab. Shutting down the hawalas will provide a propaganda victory for the hardline group. It would also precipitate in a major setback for the humanitarian work in Somalia. The United States Agency for International Development (USAID) and the Minnesota-based American Refugee Committee (ARC) continue to serve as the backbone of the relief efforts. The famine continues to threaten the lives of millions of Somalis and relief agencies utilize the hawala system to deliver aid to remote villages. Such a drastic measure would be counter-productive if the relief agencies learn that the U. S. government is cutting the lifeline of starving people. Al-Shabab will capitalize on the narrative that the U.S. is anti-Muslim – which will in turn lead to recruitment bonanza at a time they are losing popular support. The ripple effect could further undermine the gains law enforcement has made in building bridges with the vibrant Somali-American communities in the U.S. to counteract extremism. It would also undercut moderate religious voices that promote the message of integration, tolerance, and peaceful co-existence.
The hawalas must remain open as a matter of principle
Ever since Franklin Bank gave notice of closing its accounts with the hawala companies in late November, the large Somali-American community in Minnesota and beyond has been frantically scrambling to resolve the problem. There have been marathon meetings and teleconference consultations among remittance companies, Somali social and religious organizations, bank officials, elected leaders, and Federal departments to find common ground. Franklin Bank has generously extended the deadline to the end of December. So far, the hawalas and community organizations have met with Senator Al Franken and Congressman Keith Ellison, to use their good offices to work with the Treasury and State Departments to find a way to address the concerns of the banks, while at the same time protecting the national security of the United States. These efforts must continue at the Minnesota State level as well until a waiver or a method to keep these accounts open is found. On their end, Somali-Americans must repudiate the actions and tactics of violent groups and ensure that they do not find safe haven in their midst. The irresponsible actions of a few could lead to catastrophic consequences for the entire community.
I am confident that it is possible to strike a balance between national security and human rights of starving people. Shutting the hawalas is a self-defeating step that goes against the American spirit of generosity and compassion.
By Abdisalam Adam
December 18, 2011