Several major banks that have been providing accounts for the businesses — known as hawalas — say they won't do that anymore. They cite new federal regulations designed to keep better track of such services.
Many of the dozen money-transfer businesses that cater to Somalis in the Twin Cities have received letters from banks advising them that their accounts will be shut down, according to the Somali Justice Advocacy Center, which arranged a meeting this week with Sen. Norm Coleman's office.
"The only way money flows in (Somalia) is through these businesses," said Abas Mohamed, a volunteer for the center.
Some of the hawalas have already closed. Others have been given deadlines later this year, the agency said.
Though it's not clear how many of the businesses have or will actually close, the closures have the potential to restrict the flow of money from Somalis in Minnesota to their families in Africa. Many Somalis living here claim the hawalas are the only way they can send money back home.
"My dad lives in northeast Somalia, and there is a little store that has a business with a money transfer," Mohamed said. "He can just stop by and get $100 from me." Mohamed became aware of the shutterings when owners of the businesses began contacting the center.
Some immigrants send money to their families through money orders, which are sent through the mail and can cost more than money-transfers. But most Somalis won't use money orders, in part, because they can't count on the security in their chaotic homeland, Mohamed said.
In April 2005, regulators issued guidelines for banks to use in offering accounts for businesses that wire money, such as determining the market served by the businesses and making sure the businesses have proper licensing. The regulations were part of a strengthened Bank Secrecy Act, according to Tess Rice, general counsel for the Edina-based Minnesota Bankers Association.
Rice said the guidelines have made it difficult for banks to offer the accounts because of the time and manpower required to manage them. And if the large banks don't have the wherewithal to comply with the guidelines, small banks likely wouldn't either, she said.
"There was a big outcry after this guidance went out — about the level of work that would have to go into these, and the fact that banks then become a de facto regulator," she said.
The Somali agency provided The Associated Press with three letters that banks have sent to the businesses this year.
TCF Bank sent a letter to Tawakal Money Express in Minneapolis on Aug. 14, saying it was closing its account with the business because of "substantial new federal regulatory requirements imposed on banks."
A letter from Wells Fargo to Dahab-Shil Inc. in Minneapolis, dated July 25, cites the new regulations in saying it was closing the Dahab-Shil account.
A spokesman for TCF confirmed that the bank's money transfer accounts were being closed. A Wells Fargo spokeswoman said the bank sponsors programs to make sure money transfer accounts comply with regulations but wouldn't comment on whether specific accounts were being closed. A spokesman for U.S. Bancorp, which has also provided accounts for Somalis, said the bank was still offering accounts for some money transfer businesses.
The Somali Justice Advocacy Center said Monday that eight businesses had received letters saying their accounts would be closed. Omar Jamal, who operates the center, said Tuesday that all 12 of them have been told they would be shut down.
About 20 Somalis met with Coleman aides Monday. Luke Friedrich, a spokesman for the senator, said the Somalis and Coleman's aides discussed a possible delay of the closings.
"We don't know if this means it will close all of them down," Friedrich said. "We haven't determined that. But the concern we heard is that, in effect, it will shut down the wiring between here and Somalia."
It's not the first time Twin Cities-based hawalas have faced closure. In the wake of the Sept. 11 terrorist attacks, several money transfer businesses were closed because of security concerns, though most eventually reopened.
