The Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

Tens of thousands of hard-working Americans at risk of losing ways to send money home

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Remittances to Somalia amount to approximately $1.3 billion a year, 16 percent of which comes from the United States. Photo: http://bit.ly/1skat6C

The Money Remittances Improvement Act could change this. The bill passes the House and moves to the Senate.

Scott Paul is a senior humanitarian policy advisor at Oxfam America. 

I work two jobs so I can help my mother-in-law pay for her healthcare in Somalia,” a Somali-American named Mohamed once told me. He continued, “But the US government and the banks, it seems like they don’t want to let me help her.”

Mohamed sends his mother-in-law $60 every month, and every month he worries that it will be the last month that the money will get through. The only legal and transparent means to send money to most areas in Somalia are Somali-American money transfer operators (MTOs), and they area are perilously close to losing all of their access to banking services.

If that happens, the flow of remittances from tens of thousands of Somali-Americans like Mohamed to their loved ones could be reduced and forced underground, where Mohamed’s hard-earned $60 for his mother-in-law would be more vulnerable to diversion by criminal networks.

Last night, the House of Representatives took a small but important step towards improving those fortunes when it passed Congressman Keith Ellison’s Money Remittances Improvement Act. It is a modest proposal, eliminating duplication in the regulation of MTOs, reducing regulatory burdens on the MTOs, and freeing up federal regulators to focus their attention on specific money laundering risks. On the whole, it should help change the perception of MTOs as high-risk customers for banks and, ultimately, lead to better access to banking services for them.

At the moment, Somalia simply can’t take an interruption in remittance flows. 2.9 million Somalis are in humanitarian crisis. Fewer than one in four people in Somalia have access to adequate sanitation facilities. Babies in Somalia are at higher risk of dying there on the day of their birth than any other country in the world.

Maintaining remittance flows isn’t going to help Somalia emerge from its protracted crisis – that will require bottom-up peacebuilding processes that are inclusive of women, comprehensive security and justice sector reform, and effective public financial management, among other things. But with 40% of Somalis depending on remittances to meet their basic needs, any disruption in remittances would sink the country even deeper into emergency.

The key to maintaining these flows is access to banking services for the MTOs that service the US-Somali corridor. It’s worth mentioning that, while the US-Somali corridor is particularly crucial, it is not unique in many respects. MTOs servicing migrants and diaspora populations sending money from the US to their friends and families all over the world are regularly experiencing bank account closures.

MTOs are critical links to financially-excluded communities and the unbanked poor all over the globe, with remittances to developing countries totaling over $400 billion. This is more than three times greater than Official Development Assistance, and so the entire developing world has a stake in the ability of MTOs to operate in the US.

The Money Remittances Improvement Act isn’t the most far-reaching legislation, but it is the most widely supported (including by Treasury Secretary Jack Lew) and, most importantly, it is the one that has actually worked its way through the House. The Senate should waste no time in passing this commonsense legislation.

Once that’s done, Congress should take up a broader effort to reform regulation of money transfer companies and the banks that serve them. Give Mohamed, the millions of remitters like him in the US, and their loved ones abroad the peace of mind they deserve.

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  1. ktel333@yahoo.com'Kevin Zellmer

    Don’t punish legal and helpful money services in the process of preventing money laundering.

    Reply
    1. Believesonamy4ever@gmail.com'Becky Ren

      People send money home to solve poverty issues, and what’s wrong with that? It’s better than deforestation to create room for palm trees and its precious palm oil to make profit, and also destroying habitats for orangutans!!

      Reply
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