07/31/2013 08:34 am ET Updated Sep 30, 2013

Somalia's Lifeline Under Threat

In the midst of Somalia's 2011 famine and its worst drought in decades, Oxfam's Somali partners called on us not to find more money for their emergency programs, but to raise alarm that the stream of money Somalis receive from family and friends abroad was in danger of drying up.

Fear of U.S. anti-terror and money laundering laws was leading American and international banks to close the bank accounts of U.S.-based money transfer operators, sometimes indiscriminately.

Today, as more accounts are being closed, Somali families are facing the possibility of being unable access funds from friends and relatives that they desperately require to meet basic needs, threatening to stress some to the breaking point and cause substantial disruption to Somalia's economic recovery and growth.

So together with Adeso, an African humanitarian organization, and the Inter-American Dialogue, Oxfam took an extensive look at the threats facing Somalia's remittance system. We found a system under threat.

Somali migrants send home approximately $1.3 billion in remittances each year -- more than Somalia receives in humanitarian assistance, development assistance and foreign direct investment combined. About 20 percent of the total comes from Somalis based in the United States, who send approximately $214 million -- almost the equivalent of one year of U.S. foreign assistance to Somalia -- to families and friends each year.

Bank accounts in the United States, which are necessary for the transactions to go through, have been hard to come by for Somali money transfer operators, who are the main financial link to a country that has been all but cut off from the international banking system for decades. U.S.-based banks, as well as international banks, are afraid of U.S. anti-money laundering laws that penalize banks for failing to prevent illicit transactions by their customers.

In fact, our research shows that U.S. banks are closing the bank accounts of Somali money transfer operators at twice the rate of their Latin American counterparts, and without offering any justifications.

Why is this happening? We believe that many U.S. banks think of Somalia as a risky destination and don't even bother looking into the checks and processes that companies have in place to prevent money laundering.

While the Treasury Department has assured banks that they could open accounts for high-risk money transfer companies, provided they do their due diligence, Treasury auditors' scrutiny of banks and money transfer company accounts and the threat of multimillion-dollar fines often sends a different message.

Banks have mostly avoided discussing the issue. What is most worrying is that many banks have refused to talk with the money transfer companies, which have been asking how to improve their compliance systems to prevent their accounts from closing. With lives at stake, we think banks can do better.

Somalia's recovery and stability are extraordinarily fragile. And many Somali families continue to rely on remittances to meet their most basic needs. Ultimately, putting the remittance system on strong footing is going to take a concerted and collaborative effort from all parties involved -- Somali authorities, the U.S. government, banks, and the money transfer operators.

With roughly a quarter billion dollars of direct, community-level support at stake, all stakeholders must work to ensure that members of the Somali diaspora in the United States can send their money to Somalia as long as they are willing and able to do so. Their poor and vulnerable families deserve nothing less.