Tag Archives: MoneyGram

A Break in the Remittance Campaign Comes from the Somalian Hawala Crisis!

Hawala in Minneapolis, St. Paul

New Orleans   ACORN International’s Remittance Justice Campaign has begun to pick up steam.  A private member’s bill to cap rates has now been introduced in Queen’s Park for the Ontario provincial government.  Similar efforts are being pushed in British Columbia and later this year legislators have committed to introducing measures in Honduras and perhaps even Mexico once the election fever settles down today.   The hardest nut to crack has been in the United States, but we may have a break from an unexpected quarter:  32,000 Somalians in Minnesota.

The failed state of Somalia in the wake of its civil war sent refugees around the world, including the United States, and particularly the Twin Cities area.  There is currently no banking system in Somalia which makes transmitting remittances from relatives in the USA back to desperate relatives in Somalia very difficult.  Somalians have been using the largely informal hawala system which is a critical piece of the money transfer system especially in India (where it is illegal), other south Asian countries, and some parts of Africa.  According to an excellent story by Miriam Jordan and Erica E. Phillips in the Wall Street Journal, about $100 million is moving through federally licensed US-based Somali hawalas.  ACORN International had done a report recommending the expansion of hawalas because their cost is usually less than 1.5% rather than the more predatory pricing of Western Union, MoneyGram, and of course the banks.  Most money transfer organizations (MTOs) are licensed at the state and provincial level, so it was a revelation to us to find that hawalas were under federal jurisdiction and licensing in the USA, contrary to our earlier research.

The crisis is that mainline US-based banks in the wake of the banking regulations implemented post-9/11 ostensibly in the name of homeland security, have increasingly been refusing to handle transactions for hawalas.   “U.S. banks are permitted to deal with hawals, typically small businesses that have anti-money laundering, reporting, and record keeping obligations in the U.S.”  This is unique since many hawalas have operated for centuries on the basis of trust and personal handling with no records.  U.S. banks are bridling now because of concerns that the money might be funneled to terrorist groups.  Families are demonstrating, especially in Minnesota because their families are “starving” without being able to receive the remittances.

Representative Keith Ellison (D-Minnesota) is drafting legislation to deal with this crisis.  Representative Carolyn Maloney (D-NY) has attempted to deal with this issue in the past.   Scott Rembrandt of the US Department of Treasury’s Office of Terrorist Financing and Financial Crimes has argued that the hawalas should not be shunned, which raises hopes as well.  According to the Journal he says that the Treasury “doesn’t assume money transmitters present a uniform or unacceptably high risk of money laundering, terrorist financing or sanctions violations.”  Such a position would seem to point, not surprisingly, at the larger banks like Wells Fargo and U.S. Bancorp as being overly cautious and therefore squeezing Somalians and others desperate for reasonable relief for high costs and for workable solutions.

Deborah Bortner, a regulator in Washington state, correctly notes that without a system that works legally to transmit money, “it’s going to go underground,” which is exactly what is happening with many hawalas around the world and precisely one of the arguments that ACORN International has made about the need for regulations in this area.   We can only hope that this crisis will finally force all of our voices to be heard and allow progress for immigrants families and migrant workers who are desperate for remittance justice.

Ad from Western Union steering folks away from hawalas


Ontario Bill a Big Step Forward for Remittance Justice Campaign

ACORN members Amadeo Flores, left, regularly sends money to his elderly parents in Spain, while Rohan Jagroo has been wiring money to friends and family in Trinidad for 17 years.

New Orleans     After a year of stirring the pot in one country after another about the crime of predatory price gouging of migrant and immigrant workers through ACORN International’s Remittance Justice Campaign and our multiple reports exposing these abuses, ACORN Canada has led the way to the next step having secured a sponsor for legislation that would finally put a hard cap on money transfer organizations and the rates they charge.   A member’s bill is being introduced today in Toronto at Queen’s Park in the Provincial Parliament by NDP’s rising star, MPP Jagmeet Singh (Bramalea-Gore-Malton).

Simply put, the text of the bill indicates that it would amend the Consumer Protection Act in Ontario to require that MTO’s like Western Union, MoneyGram, and a host of others cannot exceed 5% in charges for remittances.  A Toronto Star article yesterday pictured one of the ACORN members, Amadeo Flores, originally from Spain, and Rohan Jagroo from Trinidad, and detailed the thousands of dollars that they were fleeced over many years of wiring money to friends and families in their home countries.  In their cases the charges to these established routes were more than 10%, though ACORN International studies have shown that the full package usually exceeds 20%.

Nonetheless the G-8, including Canada, the United States, United Kingdom, and others, joined by the World Bank, have called for a cap on the cost of such transfers of only 5% and that is what the Ontario legislation is demanding.  Many banks have even higher rates than some of the MTO’s but those are national banking matters subject to federal legislation in countries like Canada and the United States, so we will continue pushing on those fronts.

Similar legislation is planned for British Columbia and later in the year for Honduras.  ACORN Italy has this on its agenda for later in the year as well.  With research support from the Clinton School of Public Service in Little Rock, we are deepening our survey, research, and policy initiative currently in Mexico with the help of a full-time summer researcher on the ground with ACORN Mexico in la Neza right now.

What’s at stake?  Billions that could dwarf the collective foreign aid budgets of all the developed countries back to the developing world.

This campaign is entering a new and important stage and building momentum for huge changes that could make an amazing difference to lower income families and their communities around the world.