The Cable

Feds Choke Off Vital Somali Lifeline

Rules designed to keep money out of the hands of terrorists could soon cut off support to millions of ordinary East Africans too. Last week, another financial institution -- Merchants Bank of California -- started closing accounts belonging to companies that collect money from African immigrants in the United States and send it to Somalia, Eritrea, Ethiopia, and other African countries.

The money-transmitter companies function like smaller versions of Western Union and MoneyGram, but they can send money to far-flung African villages that the big guys don't serve. They rely on banks to make the international wire transfers necessary to get the money there. It's part of a worldwide system of informal financial transactions between residents of impoverished countries and the friends and relatives living abroad who regularly send them money. The World Bank estimates that immigrants will send home $436 billion this year.

Merchants Bank sent out letters terminating its relationship with at least 20 money transfer businesses in Minnesota that serve the Somali immigrant community. In a May 8 letter viewed by Foreign Policy, the bank said it was closing the account of Amaana Money Transfer Co. due "to the ever-changing regulatory requirements and expenses imposed upon Merchants Bank of California." The financial institution said that Amaana's account would be closed on June 20 and that the remaining balance would be sent as a cashier's check.

The move is the latest in a string of account closures -- affecting everyone from porn stars to foreign diplomats -- as banks try to rid their books of customers that regulators might consider risky. Adult film actress Leyton Benton said she has decided to sue JPMorgan Chase, according to the Daily Mail, for suddenly closing her account in a sweep designed to rid the bank's books of accounts linked to industries that regulators consider risky. And José Antonio Ocampo, a former finance minister of Colombia, told the Financial Times that he is asking the Consumer Financial Protection Bureau to forbid "such discriminatory and arbitrary practices" after JPMorgan Chase dropped him. The bank said it was closing accounts of current and former non-U.S. officials to cut compliance costs.

Banks say they are simply responding to increasing scrutiny from regulators and to the skyrocketing fines being levied against them for banking fraudsters, criminals, and terrorists. U.S. prosecutors, for instance, are pushing for French bank BNP Paribas to pay more than $3 billion, a new record, for violating sanctions that prohibit financial transactions with Iran and other countries, according to the Wall Street Journal. That would top the $1.9 billion HSBC paid in 2012 to settle charges that the bank's lack of rigorous oversight led it to do business with Mexican drug cartels and blacklisted people in Iran and Libya.

Somalia presents a particular challenge. With no functioning government or central bank, the war-torn country has no formal banking system. That lack of oversight, combined with the U.S. intelligence community's concerns that banks could be used to send funds to blacklisted militants, makes Somalia one of the riskiest places to which to transfer money. In March, when Bell State Bank closed accounts that belonged to money transmitter Kaah Express, the bank's security officer told the Associated Press that it made the move because of the risk of massive fines. Two Somali-American women from Minnesota were sentenced to decades in prison last year after they were convicted of sending money to terrorist group al-Shabab. No banks or money transmitters were implicated in that case, and none of the money-transfer businesses whose accounts have been terminated are accused of any wrongdoing.

Yet the desperate situation in Somalia is also what makes the remittances all the more crucial to Somali family members who receive payments from U.S.-based immigrants. Rep. Keith Ellison (D-Minn.), whose district includes the country's largest Somali-American population, is asking bank regulators not to get in the way of his constituents sending money home. "Please act quickly to avoid exacerbating the humanitarian crisis in Somalia," Ellison said in a May 9 letter to Comptroller of the Currency Thomas Curry. Merchants Bank dropped the Somali money transmitters in response to concerns raised by examiners with the Office of the Comptroller of the Currency (OCC), according to people familiar with the matter. A spokesman for the OCC declined to comment. Merchants Bank of California did not respond to requests for comment.

The Somali money transmitters have been struggling since 2005 to find banks that will work with them. The problem came to a head in 2011 when Sunrise Community Bank, which many of the companies relied on, started closing accounts. Wells Fargo dumped them as well. Now, many of the companies have only one or two banks left that will transfer money for them.

"It's kind of a strangulation for us," said Aden Hassan, who works for Kaah Express and acts as a spokesman for the Somali Money Services Association.


The Cable

Dem Lawmaker Dismisses U.S. Warnings of Israeli Espionage

U.S. intelligence officials have a blunt warning for lawmakers, including California Democrat Brad Sherman: allowing Israelis to enter the United States without visas could make it easier for Jerusalem to spy on American soil. Sherman says Israel should be allowed into a visa waiver program anyway. 

"I support it," said Rep. Brad Sherman (D-Calif.) in an interview. "And I'm knowledgeable about all the arguments on either side."

For years, Israel has requested entrance into the U.S. Visa Waiver Program, which allows the citizens of foreign nations to enter the United States and stay for 90 days without having to secure a visa at a U.S. consulate. The request had been held up due to a number of concerns, including statistics showing that Israel bars significant numbers of American -- especially those of Arab descent -- from entering the country.

But in recent months, members of the U.S. intelligence community have briefed lawmakers on a new concern: Israel's entrance into the program would exacerbate the ongoing problem of aggressive Israeli espionage in the U.S. According to Hill sources, the interagency briefings were led by the Office of the Director of National Intelligence in conjunction with the State Department and the Justice Department.

Sherman, who attended a classified briefing on the subject, said excluding Israel from the program due to espionage concerns made little sense.

"America spies on just about everybody," he said. "And we have counter-espionage folks who operate on the assumption that everybody's trying to spy on us."

He argued that barring countries from the visa program does little to prevent espionage because foreign spies could easily gain access to a tourist visa if needed. "I've gotten lots of briefings on lots of subjects, and certainly no one has convinced me that the Paraguayan intelligence service would have any difficulty getting a tourist visa for one of its operatives," he said, using the South American country as an arbitrary example.

Arab-American groups, who've long argued that Israel shouldn't be allowed into the waiver program because of allegedly discriminatory visa policies, consider the espionage concerns another reason not to support a visa waiver exemption bill.

"I think Congressman Sherman is completely out of touch with other policymakers, his constituents and our own State Department," said Maya Berry, executive director of the Arab American Institute. 

Sherman said he's unsurprised by criticisms of his position -- adding that he's received attacks that he places Israeli interests over American ones before -- a charge he denies. 

"There are anti-Israel people out there and anti-Semites out there who say Brad Sherman is Jewish so we shouldn't trust him," said Sherman. "I've dedicated the last 18 years of my life at least to American security and that'll never be good enough for the anti-Semites."

Word of the U.S. concerns about Israeli spying efforts burst into the public view in recent weeks following dueling reports in Roll Call and Newsweek. "No other country close to the United States continues to cross the line on espionage like the Israelis do," read the report. The stories cited renewed concerns about the snooping, especially in the area of industrial espionage.

Israel has rejected those accusations. "As former head of (Israeli military) intelligence, I wasn't allowed to spy in the United States whatsoever," said Israeli Defense Minister Moshe Yaalon during a press conference on Thursday. "And as defense minister I don't allow to spy in the United States whatsoever."

Besides Sherman, other supporters of an Israeli visa waiver have kept quiet about whether the espionage warnings have changed their positions on the legislation.

Rep. Ted Poe (R-Texas), a co-sponsor of Sherman's Visa Waiver for Israel Act, did not respond to multiple requests for comment. Florida Republican Ileana Ros-Lehtinen, who authored a non-binding resolution in support of Israel's entrance into the program last year, also did not respond to requests for comment. Democratic Senator Charles Schumer of New York, a vocal supporter of adding Israel to the list, also refused to weigh in.

In the House of Representatives, the committee with jurisdiction over the Israel waiver issue is the Judiciary Committee, chaired by Rep. Bob Goodlatte (R-Va.). Goodlatte declined to weigh in on the subject of spying, despite the fact that he's been briefed by officials on the topic, but said he remained opposed to carving out an exemption for Israel until it gets into compliance with U.S. immigration rules. "Once Israel satisfies these requirements, I would warmly welcome their participation in the program, so that we can further bolster the strong relationship between our countries," he said in a statement.

The Senate Foreign Relations Committee, meanwhile, is poised to take up the U.S.-Israel Strategic Partnership Act, a legislative grab bag of pro-Israel provisions, but it remains unclear if the bill's final language will admit the Jewish state into the visa waiver program, a move that would anger prominent U.S. Islamic groups.

"If Congress does not drop its proposed Israel visa waiver exemption it will affirm Israel's treatment of U.S. Muslims and Arabs as second-class citizens," Robert McCaw, the government affairs manager at the Council on American-Islamic Relations, said in a statement.

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