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By DENNIS ONYANGO
UN Moves to Save Al Barakaat
THE UNITED Nations
Development Programme (UNDP) Somalia Office is launching a
programme to formalise and legalise Somalia's largest money
transfer system, Al Barakaat, five months after the US shut
it down on suspicion of being linked to Osama bin Laden.
Afraid that the
closure of Al Barakaat – which is also the country's
largest private sector employer – may cause a new humanitarian
crisis in the war-ravaged country, UNDP plans to work with
foreign governments and Somalia's remaining money transfer
and remittance companies "to ensure that internationally recognised
procedures are followed in the flow of money in and out of
Ms Sonya Lawrence
Green, an information officer at UNDP Somalia, said the UN
agency will provide technical support to remittance companies,
currently only two, to comply with standard financial rules
and regulations and help the firms institute standard book
keeping, auditing and reporting. The agency will also help
Somalia establish a "Financial Action Task Force" to combat
The UNDP project
comes amid growing international concern that the US may have
no evidence that Al Barakaat had links with the Al Qaeda terrorist
The US labelled
Al Barakaat "the quartermasters of terror," when they put
it out of business, but now some US officials are reported
to acknowledge that the evidence of Al Barakaat's backing
for terrorism is minimal if not non-existent. Some European
countries that assisted in the operation also say that proof
of a terror link has not been established.
So far, only four
criminal prosecutions have been filed, and none involve charges
of aiding terrorists.
Al Barakat was set
up as a small remittance company in 1985 for Somalis working
in Saudi Arabia to send money to relatives back home. But
it was not until 1991 when the business took off after the
civil war sent the Somali fleeing to other parts of the world
from where they send money to relatives who remained at home.
The company was a thriving business network that offered numerous
services beyond banking. In 1995 it ventured into fixed and
mobile telephone services and started the first locally based
Internet service. It operated in 40 countries and handled
about $140 million a year from the diaspora.
In Somalia, it was
the biggest private sector employer with at least 3,000 workers.
It also planned to open a Pepsi bottling plant in Mogadishu.
The closure therefore
created a crisis of confidence in the remittance operations
and greatly affected investment and labour opportunities in
southern Somalia and crippled the construction and transportation
sectors. There have also been major disruptions in the country's
communications network, the UNDP said.
impact of the closure has been great," Ms Sonya said. "Money
was frozen in transit and large amounts of capital never reached
its destination. Many Somalis depended on these remittances.
They were the source of business and livelihood. Suddenly,
people who used to get $30 or $50 were getting nothing."
The official said
remittances were the largest source of money for rebuilding
the Somali economy. Last year, she said, remittances like
the ones via Al Barakaat provided about $550 million in 75,000
transactions while the UN system raised only about $50 million
in the same period. Transfer companies in Nairobi alone remitted
about $60 million to Somalia.
10 times what the aid agencies were able to provide for Somalia
last year. Al Barakaat was a very important sector of the
economy, especially given that Somalia is trying to rebuild.
We are not in any
way trying to prop-up Al Barakaat. What we want is an acceptable
money transfer system. International aid agencies cannot do
everything for Somalia. Somalis are trying to do more for
themselves than the international agencies are trying to do
for them," said Ms Sonya.
Based on research
that included discussions with various remittance companies,
the UNDP however admits that current money transfer systems
in Somalia do not meet "certain acceptable international standards"
of management and organisation.
The companies lack
transparency and accountability, have no consistency of complying
with host country laws and do not have pro-active plans to
identify suspicious transactions and money laundering schemes.
They also lack management structures to deal with a crisis.
UNDP says it is
consulting with Somali authorities and various transfer companies
to ensure they comply with all international financial rules,
get familiar with Financial Action Task Force against money
laundering and develop a sound "Know Your Customer" procedures.
closure destabilised exchange rates before other remittance
companies tried to fill the vacuum. But the crisis of confidence
and uncertainty raised the cost of transactions and caused
a rise in physical transfer of money in bags and briefcases,
Lately, the Wells
Fargo Bank in the US said it would close down the accounts
of Dahabshill, the largest remaining money transfer company.
The bank however has postponed the decision following UNDP’s
"The closure would
have caused a further crisis of confidence and uncertainty
in the remittance system and great hardship to Somalia," UNDP
fall into three categories. Money for supporting livelihoods
range between $100 and $500 per year per individual, that
for investment in Somalia, normally for land, houses and other
businesses is about $100,000 a year, the same as that for
conducting international trade.
With the help of
dozens of countries, the US Treasury Department froze nearly
all the company's assets, paralysing the biggest employer
in one of the poorest countries in the world.
At the time, American
officials announced that they had proof that Al Barakaat,
was providing as much as $25 million a year to Osama bin Laden's
terrorists in weapons, cash and other support.
Ms Sonya said other
countries were concerned that the money transfer system could
have been used for illegal purposes.
Al Barakaat's struggle
all this time has been to clear its name. The UNDP official
said the company promised to be open and invited US officials
to scrutinise its records. But even the bid to clear its name
is turning out to be unnecessary.
Even as the ban
on Al Barakaat continues, according to a recent report in
The New York Times, government and international relief
officials in Somalia say that the effects may ultimately be
a boon to Islamic radicals who drum up antipathy toward the
US. The officials have also questioned the sanctions, saying
their impact on the poor has been devastating.
"Thousands of Somalis
had deposits in Al Barakaat. Depositors cannot access their
funds. Businessmen cannot do business. Many are going bankrupt,"
The New York Times quoted Somalia's ambassador to the
UN, Ahmed Abdi Hashi, saying last week.
"We don't want to
be seen as defending anyone linked to terrorism. All we want
is to see the evidence."
UNDP says that following
the closure of Al Barakaat, Dahabshiil, has unsuccessfully
tried to fill the gap. "It has tried to expand, but it has
not reached everywhere Al Barakaat had reached. Al Barakaat
had penetrated into the rural areas of Somalia. That the gap
has not been filled leaves a crisis because currently, there
is no formal banking in Somalia. We want to formalise the
remittances because once that is done, there will be less
risk of such banks being closed suddenly. It will help us
keep the flow of the needed income."
US officials have
defended their action against Al Barakaat. They say they acted
on the basis of classified information from law-enforcement
and intelligence sources about the movement of funds from
Al Barakaat to Al Qaeda, and have seen indications that the
sanctions may have hurt Mr bin Laden's operations.