A refugee and his money are soon parted

We often take for granted the security and stability that banks afford to us, as well as the ease with which we can access our assets through ATMs, bank branches, and more recently on our phones and computers.

But on top of their other hardships, many refugees usually don’t have bank accounts back in their home countries. For those who do, they often can’t take their funds with them or safely access them when they flee. The prevailing solution is to liquidate your assets and carry cash or other valuables on your person—making you vulnerable to fraud, robbery and natural threats during the often-perilous journey out of conflict zones.

Then there are those who have no money at all. Some Syrians have turned to Western Union to send payments, while one refugee I spoke to on Twitter advertised to sell his kidney online so he could pay a smuggler to help him escape the country.

Refugees also might opt to work through informal money transmitters in different parts of the world, a hawala network. But refugees as remitters or beneficiaries are particularly vulnerable to deceit by unscrupulous agents.

Syrians in particular are increasingly paying smugglers to take them to countries within the European Union, and in Turkey, a sophisticated payment system has emerged to broker human beings from there to EU member countries. This process includes the use of agents to solicit passengers for the sea journey and “insurance offices” that function as escrow agents to hold funds while the human cargo is delivered. The smugglers, of course, get paid whether the refugees survive the voyage or not.

Meanwhile, the UN and different NGOs and aid organizations are faced with myriad troubles in providing assistance from system inefficiencies to risks related to transportation. Some NGOs estimate that in places like the Ukraine, for example, “leakage” costs (read “bribes” and baksheesh) can eat up more than 35 percent of earmarked benefits. With funding for refugee populations already stretched, leakage fees are emerging as a major issue. That means a lot when humanitarian assistance isn’t enough—more than half of Syrian households living in refugee camps borrow money to feed their families.

Interestingly, if inefficiencies in refugee payment systems and administrative barriers were removed, there would be sufficient funds to manage the growing refugee populations. There’s a growing sense that more needs to be done to improve payment solutions and to employ modern financial technology. One of the challenges is to find a solution that fits multiple conflict zones, such as the e-wallet. Another is to get a consensus among many NGOs and government agencies on adoption of that solution. That’s no easy task.

In order to meet that challenge, the Digital Finance Institute started a Refugee Bank pilot project to offer financial technology from Canada to improve the payments system that it expects to be deployed in the coming months. If the pilot is successful, more than 30 percent more money can reach refugee populations, save lives and at the same time create important financial technology innovation and jobs in Canada.

Christine Duhaime is a lawyer based in Canada with aspecialized practice in counter-terrorism and money laundering law

Copyright 2015 Rogers Publishing Ltd. This article first appeared in the Winter 2015 edition of Corporate Risk Canada magazine

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