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Bank to end wire transfers to hawalas; Somali community scrambles

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The last U.S. bank to allow wire transfers to Somalia has given notice it no longer will, sending members of the Minnesota Somali community scrambling to find new ways to send money that country.

For people who want to send money to family in Somalia, there's just one way, and that is through a hawala. It's the only wire transfer service that can get money to Somalia. Each year, millions of dollars are sent by Minnesota Somalis through hawalas. For many years they've supplied the country's largest source of income.

Hawalas need accounts with banks to transfer money out of the U.S. An increasing number of U.S. banks have refused to work with hawalas. Now there remains only one — Franklin Bank.

Minneapolis-based American Refugee Committee president Daniel Wordsworth said his organization has spent the last two years trying to set up their own channels to send money securely to Somalia.

"And at all levels it was made very clear to us that Franklin Bank was really our only option. I've just confirmed it with folks in Washington that Franklin — really that is the bank."

That is why many in the Somali community panicked this week when Franklin's parent-company, St Paul-based Sunrise Community Banks, announced it would close all accounts with Somali hawalas by Dec. 14.

The action will have a profound impact on Somalia, a country struggling to recover from mass famine. Wordsworth said.

"Sunrise Bank, Franklin Bank, have really been the stalwarts in this. They've been the bank that have really made all of this possible for the last few years for Somalia," Wordsworth said. "Turning this tap off will basically switch off all of the money that can be sent from the American Somali community back to their homeland. It's really a devastating thing."

Sunrise Bank's CEO, David Reiling, said that fact weighs heavily on his shoulders. But his bank recently uncovered a vulnerability in its financial dealings with hawalas, he said.

"And that specific risk was really identified out of the recent case involving the two Somali women in Rochester, Minnesota."  

Those women, Amina Farah Ali and Hawo Mohamed Hassan were convicted in October of funneling money to the terrorist group al-Shabab that controls many areas of Somalia.

Reiling says his bank was not involved in that case. But it did raise red flags that lead Sunrise Bank to investigate. 

"Upon getting all the court documents and really poring through our own systems, we discovered that there are potential ways that really need to be considered and the risk is really too great not to shut the accounts down and find a new solution."

  Reiling would not be specific about the discovered vulnerability, because there's still a chance someone could exploit it, he said. But the vulnerability could allow someone to use the bank to send funds that end up supporting terrorism, he said.

Reiling said he met with government officials Thursday to discuss one potential solution — a waiver from the state department would offer the bank some protection. Reiling points out the state department has handed out similar waivers to humanitarian organizations working in Somalia.

  "Are there opportunities potentially for the bank to apply for the waiver? If not, how can we work with the state department or others to come up with a solution that quite frankly, takes some of the liability off of the bank, and we're certainly more than willing and would invite the government to come in and oversee this process and actually would encourage it," Reiling said.

Adan Hassan works at a Minneapolis hawala and represents the Association of Somali American Moneywiring Companies. He said banks are unfairly judging the Somali community by the actions of the two Rochester women.

  "So it's providing now an excuse for the banks to run away from their responsibilities of accommodating legal, registered and law-abiding businesses like us," Hassan said. "We think this is the final nail in the coffin of this business. And we think it's going to precipitate a humanitarian crisis in East Africa."

Hassan said hawala owners have a meeting set up with Sunrise Bank officials today. He said they'll ask for at least an extension of Sunrise's deadline.

Otherwise Hassan says their hawalas will be closed in two weeks.