Somalia calls for help to keep remittances flowing from Britain
* Many Somalis depend on remittances worth $1.2 bln a year
* Barclays says fears funds may end up with "terrorists"
* Central bank governor say remittances a "lifeline"
MOGADISHU/NAIROBI, June 24 (Reuters) - Somali money transfer businesses asked the British government to stop Barclays bank from closing their accounts in Britain, a move Somali officials and bankers said threatens remittances.
Diaspora remittances are Somalia's biggest foreign currency earner and many of its 10 million people rely on the $1.2 billion or so sent to the nation every year.
A Somali official said on Monday cutting that "lifeline" could hurt fragile efforts to stabilise a nation battling an Islamist insurgency. Somalia analysts said it could encourage the use of illegal and untraceable routes if other channels were blocked.
Barclays said in a statement it was stopping offering banking services to some Somali transfer firms due to fears funds might end up in the hands of "terrorists" in a nation that is slowly emerging from two decades of civil conflict.
"It is recognised that some money service businesses don't have the proper checks in place to spot criminal activity and could therefore unwittingly be facilitating money laundering and terrorist financing," it said without naming the firms.
Somali Central Bank Governor Abdusalam Omer told Reuters in Nairobi that Somalis in Britain sent an estimated $500 million a year in remittances, a vital stream of funds now threatened.
"It's a lifeline. Probably one quarter of Somalia's GDP is from remittances," he said. "There are about 2 million people who receive some support from the diaspora and that goes into buying food, shelter, medicine, schooling."
In Mogadishu, where commercial banking disappeared in the early 1990s after the fall of dictator Mohamed Siad Barre, firms such as Dahabshiil fill the gap offering money transfer services used by Somalis and international agencies sending cash.
Dahabshiil, one of Somalia's best known firms with agents in Britain and offices in Dubai and other African states, said it had been told its Barclays account would be closed.
Dahabshiil Chief Executive Abdirashid Duale told Reuters that stopping remittances "sends the wrong signal about the recovery that the country needs." He called for the U.S. and British authorities to step in to help reverse the decision.
More than 100 Somalia-focused researchers and aid workers on Monday also signed a letter urging Britain to work with Barclays to find a way to work with Dahabshiil and other firms.
"This (cut in service) will only encourage people to send funds through illegal, unsafe, and untraceable channels, thereby potentially making the problem of support to proscribed parties much more serious," said the letter.
The Somali Money Services Association (SOMSA) said 12 of its 17 Britain-based members had lost accounts with major banks in Britain, such as Barclays and London-based HSBC.
HSBC said it was pulling out from offering services to money transfer firms globally, adding this policy began last year.
"We shall not survive if Britain stops the money flowing," said Anab Mire Hussein, a mother of nine with a snack kiosk in Mogadishu. "I live on monthly cash from my son in London."