The news that Merchants Bank announced to end of its business with remittance companies seems to have left thousands of African immigrants in Minnesota bewildered — and scrambling to find an alternative.
According to various reports, the California-based bank, which handles the majority of money wiring services from the United States to Somalia, Ethiopia, Kenya and other countries, will terminate the accounts today, Friday, Feb. 6.
“We regret to inform you that the bank has decided to exit its relationship with you at this time,” Merchants Bank stated in an e-mail last week. This means, thousands of Minnesota East African immigrants could find it hard to send money to their loved ones abroad.
Immigrant communities have strong ties with the families, friends and relatives they left behind in their native counties — and remittances from these immigrants are often used to fund basic necessities back home.
This closure will affect many African immigrants in Minnesota and elsewhere in the U.S. For example, a 2013 report describes what remittances mean to those in Somalia who have suffered from a prolonged civil war and chaos.
The report states: “Remittances are a lifeline for many Somalis, providing them with a means to meet their immediate needs for food, shelter, clothing, and other basic necessities as well as open and sustain small businesses, send children to school, and invest in their communities.”
The report adds that Somali immigrants throughout the world send approximately $1.3 billion to their loved ones in Somalia — and about $215 million of that money comes from the Somali immigrants in the United States.
The report continues: “These flows, facilitated by Somali-American money transfer operators, represent a significant share of Somalia’s economy and help reduce Somalia’s reliance on assistance from foreign governments and international organizations.”
“Ending remittances to Somalia is catastrophic for thousands of people in Minnesota and their family members who depend on the money their families send home to put food on the table and send their kids to school,” Rep. Keith Ellison said in a statement posted on Facebook.
In recent years, however, U.S. authorities have learned about local cases involving money-laundering schemes, where people used remittance companies to funnel finances to the Somali-based Al-Shabab, an Islamist group linked Al-Qaeda.
At a time when an international crackdown against terrorism financing and money laundering is underway, U.S. banks are cutting ties with money transfer operators.
The money wiring system has became popular in the 1990s after civil war erupted in Somali — with the government collapsing and all the formal institutions vanishing, including the central bank.
Ibrahim Hirsi can be reached at ihirsi@minnpost.com. Follow him on Twitter at @IHirsi.
too bad…caught in the middle…
Don’t knock the Merchants Bank…This is a direct result of
federal anti-terrorist direction to minimize or eliminate terrorist financing from the US.
We don’t know and can’t tell how much of this money is being diverted to terrorist causes…
unfortunately for the recipents…they will pay the cost to get a legitimate , properly regulated money transfer system set up.
We are protecting US citizens first…I have no problem with that….
What about bitcoin?
I’ve seen some positive rumblings about bitcoin being used to cut the banks out of the remitance process altogether, with companies like BitPesa facilitating the process in Africa. In theory, someone converts dollars to bitcoin, sends their coin anywhere in the world, where it is then converted to the local currency. Supposedly this reduces money transfer fees significantly as well. Realistic or worth investigating?
I’m sure things will work out. There are plenty of options such as Western Union.
Probably not
Exchange rates fluctuate for virtual currencies even more wildly than hard currency. Many people have lost 50%-75% of their initial investments over the last year alone because of the market.