MS. REBECCA SHEIR
I'm Rebecca Sheir and welcome back to "Metro Connection." Today we're talking dollars and cents as we look wealth in the Washington region. In just a bit we'll head to Maryland where many people are losing the wealth they have tied up in their homes. We'll find out why foreclosures in the Old Line State are dramatically on the rise. First though, when the government cracks down on financial crimes at big banks, it's targeting entities like drug cartels, terrorists and money launderers. But the thing is, these regulations are also affecting people on the right side of the law, including local businesses that serve the many thousands of immigrants who call our region home. Jennifer Strong brings us the story.
MS. JENNIFER STRONG
At the Sky Market in Gaithersburg, Paulo Martinez is sending money to a friend in Mexico with the help of store clerk Estella Vidas. Moments ago she helped a teenager send money to his mom, who also lives in Mexico.
MS. JENNIFER STRONG
When immigrants send money to someone outside the U.S. it's called a remittance. Last year people sent at least $530 billion across the globe through remittances and the World Bank says that number is conservative. It could be off by as much as 50 percent. That's because only the money sent through a professional service with bank accounts, like this one, can be tracked.
MS. JENNIFER STRONG
This is the first money transfer shop willing to talk about the process. From big chains to corner delis it's as if I'm asking people to go on record about something illicit. Manuel Orozco is an expert in remittances and a senior fellow at the Inter-American Dialogue in downtown D.C.
MR. MANUEL OROZCO
There has been an assumption of risk that by the fact that they do cross-border transfers they may be involving illegal activities.
Money transfer services are just as legal as using an ATM. In some parts of town storefronts offering these transactions are as ubiquitous as pizzerias or a dry cleaners. That's may sense, given that hundreds of thousands of local residents rely on these businesses every month. But Manuel Orozco says money transfer companies are nervous because banks are closing their accounts.
If you don’t have those bank accounts you can’t do money transfers. You also face the stigma that your business is actually shoddy. And so it creates a number of uncertainties in the business to the extent some can get out of it.
He says the federal government's crackdown on financial crimes at big banks hasn't helped. Regulators are taking aim at banks that look the other way when criminals use them to transfer money. It's called money laundering when criminal money is transferred around to hide where it came from. Bankers fear having money transfer operators as clients could get them in trouble. Manuel Orozco says that's because banks don’t really understand how these companies work. He says 99 percent of global remittances are less than $500, and the legal limit is $3,000.
Most money laundering actually occurs not in the amounts of $500, but they are in the $20,000 and plus. It doesn't pay you to use a money transfer company.
Last year banks paid record fines for not following anti-money laundering regulation. HSBC paid nearly $2 billion, in part for allowing Mexican and Columbian drug cartels to launder money. In a statement, HSBC said that, "Insuring the highest standards wherever we do business is an on-going process." But Heather Lowe at Global Financial Integrity, a watchdog group, says bankers at HSBC should have faced criminal prosecution.
MS. HEATHER LOWE
They accepted over $800 million in drug proceeds. I mean they know that this is drug proceeds. $800 million. And nobody went to jail.
The headlines were huge and politicians on both sides of the political spectrum got angry. Democratic Congresswoman Maxine Waters of California introduced a bill that would make it easier to bring criminal charges against bank employees.
REP. MAXINE WATERS
And a number of the multinational banks actively turned off the antimony laundering controls, not only financing drug cartels, but terrorists also. This is criminal activity and it needs to be looked at that way.
Lawmakers also want to make it harder to launder money in the first place. But even if none of these proposed reforms become law, all of the attention has banks looking to minimize risk, and to some, that includes not doing business with companies that process remittances.
At a fundraiser in Falls Church, members of the Somali Diaspora are gathered to raise money for victims of a hurricane. Ayan Hassan (sp?) is one of the organizers.
MS. AYAN HASSAN
He said we have good news. We have collected $15,000.
There’s no banking system in Somalia. To get this money to the people who need it Hassan has two options. Pilot and a suitcase and fly to Somalia, or drive to a storefront that does money transfers. Somalis call these stores hawala. Ishmal Aleishmal (sp?) is among the fundraiser's attendees. He's a retired U.N. economic development officer for Africa.
MR. ISHMAL ALEISHMAL
It's essential to their lives, you know. Without water so many people are going to perish. All Somalis who are abroad have immediate relatives to look after, you know. And they can be sustained through these transfers of money.
Remittances make up half of Somalia's economy, and ending them would be catastrophic. That nearly happened in the U.K. One by one, banks closed the accounts of Somali money transfer services until only one operator remained, and a British court intervened. While nothing that extreme has happened here, there’s plenty of anxiety among those who rely on these services. Guled Kassim lives in Silver Spring.
MR. GULED KASSIM
So I'm an immigrant. I came here when I was 10. I still have family overseas. And we still send money over. Uncles, cousins, aunts. So stopping that would be devastating because you really stop how families can be part of the global financial system.
He says families responsible for relatives abroad will do all they can to keep them safe and fed, even if that means going underground. I'm Jennifer Strong.
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