Barclays has backed down in its attempt to close the account of Africa’s biggest remittances provider, and agreed to maintain banking services until the company is able to find a replacement lender.
Dahabshiil, which remits hundreds of millions of dollars back to Somalia each year, said it had agreed a settlement to its injunction against Barclays on “mutually acceptable terms”.
Barclays had tried to shut down the company’s account, which it has run for 15 years, over concerns that the money transmission sector was at risk of being used for money laundering and terrorist funding, and did not meet new regulatory requirements.
Following years of civil war, Somalia has been left without a functioning banking industry and remittances sent to the country via transfer shops and kiosks are worth about $1bn-$2bn a year, exceeding official international aid.
Barclays is the last major bank providing services to companies that operate in Somalia, and the flow of funds is expected to fall dramatically if it stops providing accounts to a number of companies that send money from the UK to Somalia.
But the bank came under pressure to reverse its decision from a variety of sources including the Somali government, Somali-born British athlete Mo Farah and the charity Oxfam.
On Wednesday, Dahabshiil said: “As part of the agreement, there will be a transition period to allow Dahabshiil to end its banking relationship with Barclays and move to alternative arrangements. In the interim, we are putting in place alternative arrangements which will avoid any disruption in service to our clients.”
Barclays declined to comment.
Dahabshiil said it would work with the UK government and the British Bankers’ Association on their plans to create a safe corridor for payments made between the UK and Somalia.
By Martin Arnold in London