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Immigrants Worry About Crackdown On Businesses That Send Money Home

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Western Union is one way that immigrants in the U.S. send billions of dollars a year to their home countries.
Richard Allaway: http://www.flickr.com/photos/16287002@N00/6845522191/
Western Union is one way that immigrants in the U.S. send billions of dollars a year to their home countries.

A remittance may be the most common financial transaction you've never heard of.

That's what it's called when an immigrant sends money to someone living in a different country. More than a million immigrants call the D.C. region home, and the Inter-American Development Bank estimates 90 percent have made one of these money transfers. Last year, global remittances were valued at $530 billion.

That may not be all of it, though: the World Bank says that number is conservative and could be off by as much as 50 percent, mostly because only the money sent through a professional service with bank accounts can be tracked.

In some parts of the region, storefronts offering these transactions are as ubiquitous as pizzerias or a dry cleaners. That makes sense given that hundreds of thousands of local residents rely on these businesses every month.

But now the federal government is cracking down on financial crimes, and as part of the effort it has started going after banks that look the other way when criminals use them to transfer money. That's having an effect on immigrants who rely on the banks for remittances.

Manuel Orozco, an expert in remittances and a senior fellow at the Inter-American Dialogue, says that money transfer companies are nervous because banks are closing their accounts.

“If you don’t have bank accounts you can’t do money transfers. You also face the stigma that your business is actually shoddy, so it creates a number of uncertainties in the business to the extent some get out of it,” he says.

According to him, those banks don’t really understand how these companies work. He says 99 percent of remittances are less than $500, and the legal limit is $3,000. “Most money laundering actually occurs not in the amounts of $500, but in the $20,000 and plus,” he says.

Large banks, including HSBC, paid record-sized fines of billions of dollars in 2013 for not following anti-money laundering protocols. Some lawmakers want to make it easier to bring criminal charges against individual bank employees who break these laws, in addition to the institutional fines.

All of the attention has banks looking to minimize risk, and to some, that includes not doing business with companies that process remittances.

In Falls Church, members of the Somali diaspora raised $15,000 for victims of a hurricane. There’s no banking system in Somalia, so to get this money to the people who need it the organizers have few options. Either they must fly with the money to Somalia, or use a storefront that handles money transfers. Somalis call these stores hawala.

Remittances make up half of Somalia’s economy, and ending them would be catastrophic. Yet, that nearly happened in the United Kingdom. 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 in the U.S., there’s plenty of anxiety among those who rely on these services. Guled Kassim lives in Silver Spring and sends money to family living overseas. He says stopping remittances would be devastating. “Because you really stop how families can be part of the global financial system. Then they would go into the dark," he says, "and that’s the thing you don’t want.”

Kassim says families responsible for relatives abroad will do all they can to keep them safe and fed — even if that means going underground.

[Music: "Yes! I Am A Long Way From Home" by Mogwai from Singles & Duplicates ]

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