Somalia’s President, H.E Hassan Sheikh Mohamud, and the Prime Minister H.E. Omar Abdirashid Ali Sharmarke, are calling on the Somali People and the international community to get behind a new initiative to launch a multi-agency Special Task Force on Remittances (STFR) to support our efforts to protect Somali remittances.
The STFR has the mandate of coordinating and accelerating FGS policy and actions to address interests with respect to remittances in the context of formalizing the Somali financial sector to create a sustainable solution and a national financial infrastructure geared for growth. The composition of its membership of Government institutions, Private Banks and Remittances sectors will be announced soon.
The STFR tasks will include coordinating and accelerating the adoption into Somali law of Anti- Money Laundering and Counter Financing of Terrorism bills (AML/CFT), as well as other related financial governance and transparency measures. Above all, the STFR will be charged with the initiating of a comprehensive plan aimed at formalizing the financial sector in Somalia.
Reminding Somalia’s international partners of the centrality of Somali-led solutions in the New Deal and Somalia Compact, we emphasized it as “Somali-led, and Somali-owned and tailor-made solution for Somalia that captures all the peculiarities of a sizable challenge. But a challenge with a very good solution that will bring benefits to Somali finance ad infinitum”.
The Initiative also received ringing endorsement from the Council of Ministers. They welcomed the Initiative and threw their full weight behind national and international efforts to resolve the remittances crisis.
The President also announced the Task Force will lead government efforts on an ambitious timetable to ratify international conventions as recommended by the Financial Action Task Force (FATF).
Most significantly for long-term sustainability, the Task Force will lay the foundations for formalizing the Somali banking sector as the most durable solution to governing financial flows both in Somalia.
The issue of remittances has been catapulted to the top of the political agenda following the closure of the last of the US bank accounts handling Somali remittances from the Somali diaspora. Globally, these amount to an estimated $1.2bn-$1.6bn a year, approximately 50% of the country’s gross national income.
The two leaders also welcome and laud the efforts of Representatives of the US Congress and Senate, as well as US Somalis and NGOs who have lobbied very strongly for action on Somali remittances.
Equally timely is the release of the UN Report on Illicit Financial Flows to which Africa loses US$50bn. The report calls for commitment and leadership on all sides in addressing illicit financial flows, which undermine financial and human security in poor countries. Somalia’s leaders welcome the publication of the report whose recommendations include shared responsibility between the origin and destination countries in the governance of financial flows. This would allow countries like to Somalia to accede to from regional/global mechanisms to shore up weak national systems.
On the national framework, the President described the Task Force’s first priorities to be the elaboration of a detailed strategy, along with a consultative implementation plan on how to rebuild Somalia’s formal financial sector.
Somalia’s remittance agents, perform a vital function in the reconstruction of Somalia. They emerged as are result of almost two and a half decades of civil conflict where Somalis lost faith in public financial institutions after the collapse of the formal banking sector.
The President and PM pointed out that contrary to popular belief, both the public and private sector recognize the importance of an effective and well-regulated financial environment. The Task Force will bring include key stakeholders from the private sector. Somali business has been constrained by the emerging/nascent financial governance mechanisms. The Federal Government of Somalia is now in the process of reinforcing financial governance structures in order to support enforcement and implementation of regulations to make business a risky venture in Somalia. This in turn has hampered investment.
Remittances are a critical lifeline to millions in poverty and famine-stricken Somalia. Shutting this down, they argued, would only compound the misery of a population cowed by terrorism. Indeed, such measures were in their view counterproductive as they would have the effect of driving legitimate and financial flows deeper underground into the murky, costly and ungovernable realm of illicit finance. This would inevitably constitute a triple penalty to Somalia’s efforts to return to a responsible and accountable member of the international community.
President Hassan Sheikh Mohamud was joined by Somalis at home and abroad to urge Western governments to remove the Sword of Damocles hanging over Somali financial transfers. He argued that what is instead needed is for international partners to work with Somalia to allow it to accede to national and international financial transparency conventions and laws. Recognizing the risks in unregulated financial regimes, the President urged international partners to find an interim solution while developing the legal and regulatory framework and capacity to manage a properly supervised formal banking sector.
“Ironically we are just as much a victim of a weak regulatory environment as the Western governments that are stopping remittances flowing through their banks; we cannot ignore the supply and demand side to illicit finance. It has an impact on institutions and effectively constitutes a cause and effect; not only the result of weak institutions but, is equally culpable in the weakening of state financial institutions.”
‘There’s huge determination among Somalis at home and abroad to fight crime and corruption. My Prime Minister and I are listening and we will do our utmost to defend our interests. We owe it to our nation.”
The Prime Minister too pledged his support help create the foundations for greater fiscal transparency and accountability. He reminded international partners that supporting Somalia at this stage of its efforts to bring peace development will have wider gains that go beyond Somalia. Remittances are the key to unlocking economic growth in a country and provide capital for an incredibly innovative Somali private sector.
“Our country is hugely dependent on aid yet remittances from the Somali diaspora dwarf this, they amount to $1.2bn-$1.6bn a year, approximately 50% of the country’s gross national income. Constraining remittances will hurt the poorest in a Somalia where we have no social security system and at least 40% of our population depends on this indispensable resource to pay for education, health, housing, and to run businesses which in turn create jobs and provide income. The biggest battle in the war on war on terror will be waged on the creation and fair management of resources and on the employment front. Our people, especially the youth, have to see us and our international partners cooperating in securing livelihoods and stability for Somalis at home and abroad”
Both leaders challenged the decision to close down banks in the US handling Somali remittances as the wrong approach to addressing the problem of, for example money laundering. “The focus should be just as much on the flows out of rather than into Somalia as we are probably experiencing net losses. We will need to work with our international partners to retain our resources and pursue our stolen assets”.
Finally, the President reiterated the need for a comprehensive solution to systemic failures in financial governance in Somalia, the impact is transnational and that any solution perforce requires international cooperation.