Virginia Company Penalized $72,500 for Sending Funds to Somalia
Saturday August 12, 2023
Money moves at a much swifter pace and covers greater distances than it did when Bureau of Financial Institutions Commissioner Joe Face began his career as a state bank examiner forty years ago. The bureau recently turned its attention to money transfers to Somali refugee camps as part of its efforts to protect Virginians.
Back in 2021, the Bureau of Financial Institutions sought to examine the transactions of Hashi Money Wiring, a firm based in Washington state with a branch in Northern Virginia. This company primarily sends money to Somalia and Somali refugees in neighboring countries.
These examinations are routine procedures to ensure that money transfer companies comply with state laws that require them to have the financial resources to fulfill their obligations in transmitting and disbursing funds.
During the examination, Patrick Hunt, the principal financial analyst at the bureau, discovered missing or incomplete records. The State Corporation Commission, which oversees the bureau, also found that the company had provided incorrect information on nine occasions during hearings with an examiner.
Responding to the examiner’s recommendation to impose a $72,500 fine, the company’s attorneys stated, “It is important to understand that there is no reason to believe that Hashi ever had financial problems, no reason to believe that its customers were in any way jeopardized, and no reason to believe that it failed to meet BFI’s financial requirements for a money wiring business.”
Such a large penalty is unusual for a financial institutions case, including those handled by the SCC Bureau of Insurance or Bureau of Securities.
According to Face, the objective is not just bureaucratic nitpicking. He emphasized, “We conduct compliance checks for consumer protection. These days, money can be transferred instantly, unlike when I first began.”
In Hashi’s case, the bureau’s examination raised concerns about the protection of Virginia consumers’ funds when utilizing the company’s services. The bureau initially recommended revoking Hashi’s license to operate in the state, although the SCC did not follow through with this suggestion.
The bureau sought financial information to ensure that the company complied with the USA Patriot Act and the U.S. Treasury agency’s regulations regarding American economic and financial sanctions. They also wanted to know who was receiving the disbursed funds.
However, the bureau found that Hashi submitted their quarterly reports to the national clearinghouse for that data months after the deadline, and the company did not post its general ledger for a significant portion of 2020, as required. As a result, Hunt was unable to assess the company’s financial position.
Specifically, the bureau wanted to review quarterly “call reports” that detailed transaction volumes and the investments a money transmitter must possess to support their commitment to transferring clients’ funds.
State law mandates that money transmitters maintain sufficient funds to cover the total value of outstanding money orders and transfer transactions across all states where they operate, not just in Virginia.
In their appeal to the hearing examiner’s recommendation, Hashi reported transferring between $4 million and $5 million annually from their Virginia branch, with over 75% destined for Somalia or Somali refugee camps in Ethiopia and Kenya.
During the hearing, Abdulhakim Hashi, the company’s president, stated that he possessed approximately $400,000 in credit union accounts. He also revealed that the company had not had its own bank account since 2016 or 2017 when a local Washington state bank closed their account as part of a risk reduction effort.
Additionally, Hunt discovered that Hashi had surrendered its Massachusetts license due to the company’s inability to obtain a bank account. However, Hashi did not notify the bureau when they surrendered their Texas license after the state initiated revocation proceedings.
In response to these issues, the company’s attorneys attributed Hashi’s bookkeeping and financial reporting problems to the COVID-19 pandemic and claimed that they have since resolved any issues.
The SCC formally ordered Hashi to cease any violations of the state law governing money transmitters and mandated that the company maintain a $500,000 surety bond until the completion of the bureau’s next examination in 2024.
No response was received from Hashi regarding a message left at their Seattle headquarters, and their Northern Virginia phone number was out of service.