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NEWS
RELEASE
UNDP HELPS AVERT
SHUTDOWN OF SOMALI REMITTANCE FLOWS
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: sonya.green@undp.org