In the wake of September 11, the US authorities targeted informal financial networks serving people in the Islamic world for particularly severe treatment. One of these was called Barakkat, a cash-transmission network that linked expatriate Somalis living in the US with their impoverished home country. Barakkat was closed down less than a month after the outrage, causing enormous stress to the large expatriate Somali community in the US and their families in Somalia.
The US alleged at the time that Barakkat was a "quartermaster of terror" and closely linked to al-Qaeda. It later claimed it was part of the "mosaic of a terror network". But the US offered no evidence for its allegations, and no-one associated with Barakkat was accused of terrorist financing.
The Barakkat network consisted of a group of grocery shops around the US whose Somali owners accepted deposits in cash or cheques from their customers. These deposits were rarely more than $200. The individual grocers despatched the money by bank, charging a small fee to their customers, to a central bank account in Minnesota. This acted as a depository.
The funds were then despatched to Abu Dhabi where they were converted from dollars to Somali shillings. A courier then picked up the money and took it to Somalia where another network of agents arranged for the money to be distributed to recipients.
Somalia lacks a banking network and is largely off the map of money transmission services so Barakkat serves an important social need. The damage done to the country's economy when Barakkat was closed was recognized by the United Nations Development Programme, which implemented changes to Barakkat's administration and constitution. In due course, Barakkat was revived as a more formal structure. Some local observers suggest the damage done by Barakkat's closure was reduced because enterprising Somalis used the opportunity to set up alternative cash remission systems.
Barakkat had a long record of serving expatriate Somalis. It was founded in the 1980s by Ali Ahmed Nur Jamale, a Somali living in Dubai. Its initial customers were expatriate Somali workers living in the Gulf. An influx of Somalis to the west coast of the US in the 1990s led to its expansion.
Some Barakkat grocer agents in the US were charged with failing to disclose their money deposit or transmission systems to the state authorities. But these were minor offences compared with the original damaging allegations. Leonard Zawistowski, a senior special investigator of banking supervision and regulation at the Federal Reserve in Washington DC, says: "We have had a fair amount of success with rounding up these ethnics [sic] but not one of them has been connected to terrorism. I have not seen the connection between any of these ethnic quasi-Hawalas and al-Qaeda or any terrorist group.'"
