By Mohamed Ahmed
MOGADISHU (Reuters) - Somalia appealed against a decision by a U.S. bank to shut down its money transfer service that serves as a lifeline for tens of thousands of Somalis who depend on remittances, saying the closure could lead to the collapse of the economy.
Sunrise Community Banks handles a large amount of Somali transfers from Minnesota to Somalia, has said it will ends its service from December 30 over fears it could risk violating U.S. regulatory and anti-terrorism finance laws.
The deadline has sparked appeals by the Somali diaspora in Minnesota, the Somali government, U.S. lawmakers and relief groups to find a swift alternative to a service in which U.S.-based Somalis send about $100 million a year back home.
The Somali government says an estimated $2 billion - a third of the country's gross domestic product - is channeled to Somalia through "hawala" or small money transfer businesses.
Somalia's prime minister has warned that without remittances, the unstable economy would face collapse and said he had written to U.S. Secretary of State Hillary Clinton urging her to intervene, according to a statement sent to media on Saturday.
Sunrise had extended its closure deadline to December 30, but said in a statement on Friday it had no choice but to discontinue the service.
"Money remittances from the Somali diasporas through the U.S. banking system must have a new solution to satisfy the important legal and regulatory requirements currently in place across the nation," it said.
"Without legal and regulatory relief, the bank must stand by its decision to close the money service business accounts on December 30."
"WORST TIME FOR SERVICE TO STOP"
In past years, other U.S. banks have shut down the service, leaving Sunrise as one of the main institutions through which the bulk of "hawalas" go through to the anarchic Horn of Africa country.
U.S. Congressman Keith Ellison, who represents Minneapolis, home to the largest Somali-American population, has appealed to President Barack Obama to find a solution that would allow for remittances flows without risking financing militancy.
"While always important, remittances to Somalia are now more crucial than ever because of the catastrophic humanitarian situation in Somalia," Ellison said in a letter signed by himself and Congressman Donald Payne, dated December 16.
In addition to the worst drought in decades, a 20-year cycle of violence has meant sustained jobs are near impossible to come by, forcing many Somalis to depend on remittances.
Hamdi Hasan, a young mother in Minneapolis who sends $300 a month to her four half-brothers and sisters, said she could not imagine how her family would survive without the stipend.
"Although it is very difficult financially for me and my husband, the money we send is the only income for them and without it they will not be able to buy food, pay rent, buy medicine, or go to hospital," she told Reuters.
Relief agency Oxfam warned it was the "worst time for the service to stop," particularly with a famine still declared in some parts of Somalia, which could have been far worse had it not been for remittances sent to families and local charities.
"Any gaps with remittance flows in the middle of the famine could be disastrous," Shannon Scribner, Oxfam America's Humanitarian Policy Manager, said.
"PROPAGANDA TOOL FOR AL SHABAAB"
Hassan Warsame, a consultant with the Somali American Money Services Association, said the closure was especially worrying because it could spur institutions in European countries and Canada and Australia to follow suit.
He warned the move could force Somalis to resort to other means, which are not as transparent and easily traceable, to send money - negating the very purpose of financing laws Washington has imposed to prevent funds from reaching groups such as the al Qaeda-linked al Shabaab militants who control large swathes of central and southern Somalia.
"I'm afraid they will resort to unsafe and untraceable ways to make that their loved ones continue to receive remittance funds needed for food, healthcare and education," Warsame said.
"Al Shabaab and other radical groups will use this action as a recruiting tool and for propaganda," he said, echoing a worry by advocacy groups.
"They can say 'Look, we are fighting this kind of government that wants to even block your people from sending money'," Dahir Jibreel, executive director of the Somali Justice Advocacy Centre in Minnesota, said.
Al Shabaab denied it received any funds through hawala and analysts say the closure will do little to dent al Shabaab's funding.
"The U.S. has decided to allow already suffering Somalis to perish," rebel spokesman Sheikh Ali Mohamud Rage said.
"It is foolish and cruel to say such money is intended for al Shabaab. The U.S. faces an economic crisis - so it wants to loot Somali wealth," Rage told Reuters on Saturday.
In Somalia, residents lamented the closure.
Shukri Abdi, a 58-year-old single mother of seven in Mogadishu said she relied on her former neighbors to send $250 each per month from Virginia and Minnesota, and used it on school fees and health care.
"If the hawala shutdown is true, it will represent a new page of war against Somalia people."
(Additional reporting by David Bailey in Minneapolis; Feisal Omar and Abdi Sheikh in Mogadishu; Writing by Yara Bayoumy in Nairobi)