Government bans remittance services in wake of Garissa massacre

The Government of Kenya announced this week a ban on several remittance services. The remittance firms were among individuals and entities alleged to finance terror in an official list published Wednesday by the police.This comes in the wake of a brutal attack on students at Garissa University College,that resulted in at least 147 casualties. The Somali militant group, Al Shabaab considered a terrorist outfit by the Kenyan government claimed responsibility for the attack. The government appears to be of the view that the proscribed money transfer systems are widely used by Al Shabaab’s sympathisers and financiers.
The services are said to be popular among businessmen in Nairobi’s Eastleigh district. Somali money transfer services typically charge lower commissions than larger services. Fees are often in the range of 3–4% for amounts over USD 1000, significantly lower than the 7.1% — 7.2% percent charged by Money Gram,
Dahabshiil, literally “gold smelter” is probably the most well known of these services. The service has a prominently placed outlet on Kimathi Street, Nairobi.
Founded in Burco, Somalia in 1970, the firm grew quickly to become the largest of the Somali diaspora’s money transfer services. Currently headquartered in Dubai in the United Arab Emirates, Dahabshiil claims over 24,000 outlets and nore than 2000 employees in 144 countries. Dahabshiil claimed revenues of over USD 300 million in 2009. Once a general trading concern, the firm found success in the remittance business during the 1970s, benefitting from growing numbers of Somali migrant workers in the Gulf sending money back home. The service used a trade based Franco Valuta system to great effect in the face of government foreign exchange controls in Somalia. Under the Franco Valuta system goods are imported,and proceeds from their sale are sent to migrant’s families.
Dahabshiil opened it’s first office in London in the late nineteen eighties, quickly gaining currency among Somalis who had moved to Britain fleeing the Somali civil war.
Dahabshiil is no stranger to controversy. There have been internet reports that a Dahabshiil money transfer agemt was detained in Guantamo Bay from 2002 to 2009. The firm is said to have hired a lobbying and PR firm to manipulate Google rankings to ensure that the results did not feature prominently in search results. In 2011, popular Somali musician and politician Saado Warsame is reported to have released a protest song “Dhiigshiil ha dhigan” (loosely “Don’t Use Dahabshiil”).In the song Warsame refers to Dahabshiil as a “blood smelter”.
The firm struck a deal last year with Barclays Bank after a long running dispute with the bank. In May 2013, Barclays had announced that it would terminate the accounts of Dahabshiil, along with numerous smaller Somali remittance services. The move was reportedly sparked by regulatory compliance and terror financing concerns
Critics dismissed the ban as a knee-jerk reaction, noting that the money transfer operators were fully compliant with Central Bank rules and guidelines. As of the time of publishing this, Dahabshiil was still on the list of licensed money remittance providers on the Central Bank of Kenya website.
United Nations estimates put the value of remittances sent home from the Somali diaspora at around USD 1.6 billion every year.