Hawala, a lifeline back home

(KMSP) - It’s a ritual repeated hundreds, if not thousands of times every day in Minnesota: Somali-Americans stepping into small storefronts to send money to family halfway around the world.

Standing inside one of the money exchange businesses in a Somali mall in south Minneapolis, Abdigani Mohamed, who works as a security guard, is sending $200 to an uncle in Somaliland.  

“It’s a lot of money back there," he said. "He’s got 16 kids."

Jamal Omar got a call that morning from his brother in Ethiopia who had a sick child.  

“His son is very sick. He needs surgery. So I send $100,” he explained. “This is the only way to get money to him, to help my family.”

In the East African community, these businesses are known as hawala. More than a dozen of these businesses operate in Minnesota, and many, like Dahabshiil, base their U.S. operations in the Twin Cities.

A bit like Western Union, the money is usually available overseas within 24 hours, with the hawala charging a six percent processing fee. An official I.D. or passport is needed to send money, and if it is over $2,000, a Social Security number as well.

BROADER CONTEXT NEEDED

And yet, some in law enforcement and outside the community are suspicious.  

“A lot of people don’t understand and think the money is going somewhere else,” said Mohamed. 

That suspicion was amplified for some by a recent FOX 9 investigation. The report was based on a dozen well placed, confidential government sources, who said money from daycare fraud in Minnesota was getting laundered through the hawala, and ending up in suitcases of cash flying out of Minneapolis-St. Paul International Airport.

The report further said that in remote areas of Somalia, the terror group Al Shabaab might be getting a cut.  

Political candidates in Minnesota, including gubernatorial candidate Jeff Johnson, seized the story.  In a Johnson political ad, a woman unloads groceries in a kitchen while venting about politics, and says, “…and now money for daycare is going to terrorists in Somalia.”

Right wing extremist groups also hijacked the story. In a YouTube video for a group called Third Rail Politics, the announcer claims the money may have even contributed to the death of a U.S. soldier.

“Money transferred and stolen from Minnesota taxpayers and delivered directly to Somalia,” says the announcer.

“The entire country is obsessed with Minnesota,” said Jaylani Hussein, executive director of the Council on American Islamic Relations (CAIR).

Hussein believes the story failed to place the money transfer businesses in the broader context, allowing extremist groups to manipulate the narrative.  

“I believe they are conflating facts,” said Hussein. “But the story did not give them any room or any information to hold them to that. So there was a lot of ambiguity in the story and that’s what they manipulated.”

MONEY USED TO SUPPORT RELATIVES

“My mother lives in small town 700 miles from Capitol of Somalia, Mogadishu,” said Dahir Jibreel, a former Chief of Staff to the President of Somalia. “There is no Wells Fargo. There is no U.S. Bank.” 

Jibreel said he supports 50 family members back home, including his 90-year-old mother.

“It’s a remote area with no bank. The only possibility money can reach her is by hawala,” said Jibreel.

According to The World Bank, it is estimated Somalis living around the world, what’s known as the Somali Diaspora, send more than $1.4 billion dollars a year back home. It’s estimated that flow of money could account for a quarter of Somalia’s GDP.  The money also goes to relatives living in Kenya, Ethiopia, and Djibouti.

And that money goes far. The relief agency Oxfam estimates that a $1 can buy two pounds of rice, $5 can provide a 22 lb. bag of flour, and that a $100 is enough to feed a family of eight for a month.

During a famine in 2014, when U.S. government restrictions cut off money through the hawala, a quarter million people died from starvation.

“Instead of stopping the money going to Somalia, we should be helping,” said Mohamed Abdi, a manager with the International Bank of Somalia whose family lives in Minnesota. 

WHY SUITCASES OF CASH?

Asked why Wells Fargo can’t transmit money to the International Bank of Somali, Abdi paused for a moment and said, “Good question.”

The answer begins in 1991, with Somalia’s civil war, lasting more than two decades.  It left the country with little financial infrastructure and no central banking system. 

In an attempt to get money to rural areas, Somalis began to rely on ancient banking practices of the hawala, in which credits, debts, and remittances, are tracked among hundreds of affiliates with actual currency only occasionally trading hands. 

After 9-11, the U.S. government cracked down on the money transfer businesses because of fear of money laundering and terrorism. In Minnesota, two Somali American women from Rochester were convicted in 2010 of sending $8,000 to Al Shabaab, disguised as charity through the hawala. 

In the last few years, U.S. banks, strapped with more burdensome regulations, have been closing the accounts of the money transfer businesses, essentially stopping the hawala from making simple wire transfers overseas.  

“They don’t want the compliance issues, the auditors. They closed the accounts,” said said Abdulaziz Segule, president of Somali American Money Services, a group representing the money transfer businesses.  

The solution to that problem was to send money by couriers, carrying suitcases of cash.  A lot of cash. According to government sources, $100 million left Minneapolis-St. Paul International in carry-on suitcases last year, often bound for Dubai in the United Arab Emirates (UAE), an international banking hub and the home base for many of the hawala.  

The couriers declare the money at the TSA checkpoint and fill out a Homeland Security form. It’s all perfectly legal.

“The only way we can ship the money is through couriers,” said Abdulaziz Segule, president of Somali American Money Services, a group representing the money transfer businesses.  

The average transfer of money sent via the hawala is just $225, said Segule.

“All this money is already known,” said Jaylani Hussein of CAIR.  

“It’s known by the hawala, known by banks, and known by the U.S. government,” said Hussein.  

Still others believe there is never a guarantee that in rural areas of the country, via extortion or others means, someone with nefarious intent may be getting a cut.  

“It’s true. You have to be realistic,” said Mohamed Abdi of the International Bank of Somalia. “But the thing is, 99.99 percent of the money goes to the right people,” Abdi claimed.  

That’s because people hear from relatives as soon as the money arrives, usually via a social media network.  And they know for certain they will hear from them if the money doesn’t arrive.  

Abdislan Abdulle, who works two jobs in order to send money to his mother who lives in Oman, said he gets a message from his mother on WhatsApp, as soon as the money arrives. 

“Communication has become easier with the technology,” said Abdulle.  “But the money, it’s hard.”