Nairobi (5 April 2002) – UNDP Somalia welcomes the news that, following its recent consultations with all involved parties, the Wells Fargo bank in the USA has delayed its decision to close down the accounts of Dahabshil, Somalia’s largest remaining money transfer company, which could have caused great hardship to thousands of Somalis who depend on remittances from abroad for their livelihoods.
Following the events of last September 11, Somalia’s money transfer companies have come under increasing international scrutiny, and the threat of sudden closure. The US Treasury froze the funds of the largest operator, Al Barakat, last October. If the accounts of Dahabshil – the next largest – were closed, the combined impact on Somalia’s economy could be grave. Already there has been a crisis of confidence in remittance operations, a slow-down of private sector investment and labor opportunities, reduction in construction and transport activities, and the loss of a major source of income to some poor households.
“Somalia’s remittance sector is critical to the economy, but there are also legitimate international concerns about the system,” says Andrea Tamagnini, UNDP Somalia Country Director. “To meet both needs, UNDP Somalia launched a project to legitimize remittance services offered by the Somali money transfer companies and eventually bring them under internationally established banking rules and regulations.”
Somalia has been without any commercial banking and financial institutions since the overthrow of Siad Barre’s government 11 years ago. Available statistics show that the three major money transfer companies handle yearly some 750,000 money transfers to Somalia worth US $ 500 million, benefiting more than half the Somali population of some 6.5 million people. Current remittance operations are reliable, efficient and inexpensive, but they fall short of certain acceptable international standards of organization and management, including lack of consistency in compliance with host country laws, rules and regulations, and absence of pro-active plans to identify suspicious transactions and money laundering schemes.
UNDP Somalia’s action plan includes consultations with remittance companies, local authorities in Somalia, and other concerned governments and parties to formulate short and long term solutions.
In the short term, UNDP Somalia will provide technical support to the remittance companies to ensure compliance with all international financial rules and regulations including standardized bookkeeping, auditing and reporting, conducting due diligence, developing risk management programs, and familiarizing management with the Financial Action Task Force to combat money-laundering, among other measures.
In the longer term, the need for international regulated banking is critical in the reconstruction of the Somali economy and financial services, to provide retail banking, corporate banking, and loans for commercial and social development. UNDP Somalia will provide technical support to Somali authorities and private entrepreneurs for private investors to establish commercial banks, develop the necessary legal framework to regulate them and enforce those rules, and train workers.
For further information, please contact:
Sonya Laurence Green, Information Officer, UNDP Somalia
Tel: +254-2-448-434, Fax: +254 2 448439, Email: firstname.lastname@example.org