Remittance funds sent by the diaspora are often noted as a lifeline for Somalia, comprising a significant component of the economy and covering the costs of basic necessities such as food, education, and health care for millions of Somalis. Beyond providing vital support for short-term sustenance needs, many members of the Somali diaspora view sending remittances as a cultural tradition and a personal contribution to the rebuilding of their communities, including investment in the growth of business enterprises, financial stability, and economic development across Somalia.

Although Somali diaspora populations are globally dispersed, one commonality is the use of money service businesses (MSBs), or hawalas, to send funds to family members in Somalia. These remittance corridors vary in terms of the sending and recipient jurisdictions, but Somali MSBs globally have come under increased scrutiny for anti–money laundering and countering the financing of terrorism (AML/CFT) vulnerabilities. This increased scrutiny has led banks to close numerous MSB accounts across the world, a practice referred to as “de-risking” or “de-banking.”

This policy brief examines the Danish-Somali remittance corridor against the backdrop of recent MSB bank account closures, including those in the United Kingdom and the United States. It provides insight into MSB operations and remittance sending practices in Denmark, as well as background on the Somali diaspora there. The brief was informed by a combination of desk research and field consultations with Somali community members in the Danish cities of Aalborg, Aarhus, and Copenhagen. The brief offers recommendations to key actors including Danish AML/CFT regulatory authorities, Somali MSBs, and Danish financial institutions holding Somali MSB bank accounts, with the objective of preventing similar account closures in Denmark.

For additional information about this brief, please contact Danielle Cotter at dcotter@globalcenter.org.

Understanding Bank De-Risking and its Effects on Financial Inclusion

Tracking Progress:  AML/CFT Developments in East Africa and the Greater Horn

Capitalizing on Trust:  Harnessing Somali Remittances for Counterterrorism, Human Rights, and State Building

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