Somali banking under scrutiny

On a normal day, Dahab Shiil would serve some 300 customers in Mogadishu, with transfers totaling $60,000 to $70,000. But ever since the US closed down this company's main competitor, Al Barakaat, in part of its campaign to freeze terrorists' funds, business has more than doubled, with an additional $100,000 in transactions every day.

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"I am not happy with the closure of Barakaat, but this is a business," says Ali Jama Ahmed, the general manager of Dahab Shiil.

Earlier this month, the US government accused Barakaat of funneling millions of dollars to Osama bin Laden and his Al Qaeda network, an accusation the company denies.

The business - known traditionally as hawala - is coming under scrutiny since the Sept. 11 attacks. Hawala is a system of transferring funds through the use of promissory notes. It is used throughout the Islamic banking industry because it is in line with Islamic principles. A Somali taxi driver working in Seattle can pay a fee to deposit his paycheck at a local office, and a relative in Somalia can withdraw the funds.

Some observers argue that shutting down remittance companies will cut the legs out from under a meager Somali economy, reduce the government's tax revenue at a time when it's trying to bring stability, and ultimately drive people into the arms of terrorist groups out of anger over their economic hardship.

But the US Treasury Department says Barakaat has been exploiting the system, funneling some $25 million a year from customer fees to Mr. bin Laden's network. On Nov. 7, police raided Barakaat offices in five US states with high Somali populations, seized their records, and froze their assets. Officials in Canada and the United Arab Emirates - where Barakaat is based - did the same, with help from the US.

US officials say they have strong evidence of a long-running link between Barakaat and Al Qaeda, but under new counterterrorism legislation have yet to make their evidence public.

Barakaat is Somalia's largest company and the closest thing to a conglomerate. It is a telecommunications provider and postal service, and it's even building a Pepsi bottling plant. Barakaat's biggest source of remittances is Somalis in the US.

Barakaat officials say their financial operation is merely a system for Somalis working overseas to send money to relatives, a kind of Western Union for a nation without a functioning central bank. They deny accusations that the company's Somali founder, Ali Ahmed Nur Jumale, knows bin Laden personally.

"One hundred percent, we have nothing to do with that," says Barakaat spokesman Mahmoud Mohamed. Terrorist groups "are transferring millions, and we don't have that kind of system."

Barakaat officials say their business competitors may have fed misinformation to the US, but they refuse to name any competitor. "We believe that sooner or later, the United States will realize this was misleading information," says Mr. Mohamed.

The company handles about $140 million in hawala transfers yearly, managers say. Service charges range from 2 to 5 percent, and its annual profits total $700,000.

While US officials describe hawala as a shadowy business with no paper trail, Barakaat showed journalists computer records with the names and contact details of hundreds of senders and recipients. Mohamed says they would be happy to do the same for US officials.

Mr. Jumale created Barakaat in 1986 as a money-transfer system mainly for Somalis working in the Gulf. But it took off after 1991, when Somalia and its banking system collapsed, and more of its citizens settled around the world.

"We filled the gap because there was not a government, there was not a bank, and people on the outside still wanted to send money to help their people here," says Mohamed.

But the US closure means Barakaat owes $6 million to depositors in its Mogadishu bank, and another $184,000 in unpaid transfers, officials say. Subsequently, its international telephone service was stopped by US-based Concert Communications, a joint venture between AT&T and British Telecom, which cut off 25,000 subscribers.

"It's a great mistake against the Somali people," says Abdi Samad, a clothes merchant who says he had $30,000 deposited with the company. "I'm not angry with Barakaat, but I'm angry with the Americans."

As he waits amid the throng at Dahab Shiil for $100 sent monthly by his nephew in Australia, another man, Abdi Ahmed, says he's worried the US will close down other remittance companies. "We will be isolated from the world," he says.

While President Abdiqassim has said the government will investigate Barakaat's records, Mogadishu's police chief, Abdi Hassan Awaale, a member of the president's recently established counterterrorism task force, says he has received no order to do so. Besides, adds Mr. Awaale, "We don't believe there is any link [between Barakaat and terrorism]."

There is, however, a link between Barakaat and the year-old transitional government established little over a year ago in Mogadishu. The company has been one of the main financial backers of Mr. Abdiqassim's government. Some people claim that the accusations against Barakaat are part of the complex web of Somali politics, with fingers pointed at warlords who oppose it. In turn, the warlords say the government is supported by Islamic terrorist groups, and that Barakaat is part and parcel.

No one is sure if the closure of Barakaat will doom Somalia's meager economy. According to United Nations estimates, annual remittances to Somalia total about $500 million, more than it earns from any other economic sector and 10 times the amount of foreign aid it receives.

But one Western diplomat downplays the impact of Barakaat's closure, arguing that other companies exist. "Don't believe for a minute the Somali people won't find an alternative within a week."

Osman Abdullahi has found one. He says he's not worried about the $200 his brother sends monthly from Minnesota, where he repairs computers, to support eight relatives. "I just go to Dahab Shiil," he says with a shrug and a smile.