Feds making it harder for immigrants to send money to family

Taxes, regulations could further destabilize Somalia

By Atra Mohamed, Minnesota Reformer

Since the start of Operation Metro Surge in December, the Trump administration has waged an economic battle on the Somali community, using the threat of detention — including of legal residents, citizens, as well as refugees who had their temporary protected status revoked — to scare away commerce in once-bustling places like Karmel Mall.

Now, the administration is extending the siege all the way to Africa, putting up new taxes and regulations on the transfer of money from Americans to Somalia.

Hamdi Issek, a nurse at a home care facility and a shop owner at Karmel Mall, said the effort to curb the practice of sending money to Somalia will have far-reaching effects. The money she sends to family in Somalia each month covers essentials such as food, rent, clothing and education for her family there, Issek said.

More than half the population of Somalia lives in poverty, defined as just over $2 per day.

The diaspora sent $1.73 billion in remittances to their families and friends in Somalia in 2023, significantly surpassing all humanitarian aid and development assistance, according to The Interpreter.

These remittances — typically small individual monthly contributions — account for approximately 16.5% of Somalia’s gross domestic product.

That means the Trump administration’s new obstacles to remittances could have the unintended effect of further destabilizing East Africa, which could in turn fuel still more migration.

The Department of the Treasury did not respond to a request for comment.

Bessent’s rules

Treasury Secretary Scott Bessent announced in January an investigation of Somali money transfer businesses after an unsubstantiated article in a right-wing journal alleged ill-gotten gains were intentionally being funneled to al-Shabaab, a Somali militant group designated as a Foreign Terrorist Organization by the U.S. government.

The allegation linking Somali Americans to terrorist organizations is false and damaging the community’s reputation, Issek said.

“We are hardworking people, and most of us worked for what we have,” she said.

On Jan. 9, Treasury’s Financial Crimes Enforcement Network, or FinCEN, issued a Geographic Targeting Order, or GTO, requiring money transfer companies and banks in Hennepin and Ramsey Counties to report to FinCEN anyone who transfers $3,000 or more to Somalia and other countries. This measure took effect on Feb. 12 and will end on Aug. 10, though it may be extended at the Treasury’s secretary’s discretion.

Ostensibly, FinCEN is investigating whether the money sent overseas came from a federal, state or local safety net program to investigate fraud. (In reality, convicted and indicted fraudsters have shown no propensity for sending their ill-gotten gains to Somalia, with its unstable government and economy.) Bessent has said in a statement, “We have traced where the money went and are examining it.” He did not specify where or how his department would do so.

Uncle Sam takes his cut

President Donald Trump’s signature domestic policy law, the One Big Beautiful Bill Act, introduced a 1% tax on money sent from the U.S. to foreign countries, which amounts to $10 per $1,000 sent.

The OBBBA’s new section 4475 went into effect on Jan. 1. The new 1% tax is in addition to the $5 transfer fee typically charged by the transfer company.

These companies are required to collect this 1% tax and pay it to the IRS quarterly or risk taxman trouble.

Paul Vaaler, a professor at the University of Minnesota’s Carlson School of Management, said this is a double standard directed at certain immigrants. Many already face obstacles that prevent them from opening bank accounts, leaving them with one option, which is using transfer money companies to send money to their relatives in their home country. “We know this law is discriminatory because it does not apply to all international transfers equally,” said Vaaler, who specializes in international business and law.

Source: Minnesota Reformer