> ## Content Index > Fetch the complete content index at: https://www.merip.org/llms.txt > Use this file to discover other available public pages before exploring further. # Remittances at Risk—Sanctions, War and Informal Finance in Yemen - URL: https://www.merip.org/2026/09/remittances-at-risk-sanctions-war-and-informal-finance-in-yemen/ - Published: 2026-09-16T11:00:41.000Z - Updated: 2026-09-16T11:00:41.000Z - Author: Narayani Sritharan - Tags: Yemen, Current Analysis, Remittances, Finance, Economy, Migrant Workers Yemeni migrant workers abroad send [billions of dollars](https://www.yemenmonitor.com/en/Details/ArtMID/908/ArticleID/156563) to Yemen every year, making remittances one of the country’s largest and most consistent sources of foreign currency. The primary corridor runs through Saudi Arabia, which accounts for an estimated[ 61 percent of Yemen's](https://www.aiddata.org/publications/from-cash-to-capital-leveraging-remittances-for-yemens-economic-future) formally recorded remittance inflows, with many Yemeni migrants employed in low-wage and informal sectors. For the households in Yemen that receive them, remittances are rarely used as savings or investment capital. They are [survival income](https://thediplomat.com/2025/01/the-hidden-lifeline-for-afghans-remittances/), the cash that sustains families in a country where wages, public salaries and state services have steadily eroded over the course of war and economic crisis. Since the Houthi takeover of Sana’a in 2014, the subsequent Saudi-led intervention and the relocation of the Internationally Recognized Government (IRG) to Aden, Yemen’s financial system has become increasingly fragmented. Rival authorities compete over monetary governance and the country is growing more isolated from global banking networks. As a result, Yemen’s remittance ecosystem has been steadily disrupted. Formal banking services remain limited outside major cities, and access often breaks down entirely in conflict-affected or rural areas. At the same time, Yemen-linked transfers are screened under sanctions and counterterrorism financing rules, making even routine remittances appear high risk to foreign banks. Yemeni banks are subject to the same screening rules and face similar complications. Sending money home has become a calculation not only of cost but of whether a transfer will clear compliance checks at all. As relationships between international and local banks have weakened and transactions face repeated screening or rejection, confidence in the banking system has eroded. As one Yemeni migrant worker in the United Arab Emirates told us in an interview in 2024, “If \[Yemen’s\] Central Bank itself has lost the confidence of commercial banks, how can we expect expatriates to have confidence in the banking sector?”[\[1\]](#%5Fedn1) That erosion of trust has reshaped how international banks, financial institutions and migrants themselves approach Yemen-linked transfers, leaving many families uncertain about the income they depend on for daily survival. ## Fragmentation, Risk and De-risking In 2016, the IRG moved the Central Bank of Yemen from Sana’a to Aden, accusing Houthi authorities of using state reserves to finance the war. Rival monetary authorities began issuing separate directives, independently managing the amount of cash available to meet expenses and overseeing financial institutions in different territories. As a result, Yemen now operates with two central bank authorities: one in Aden aligned with the IRG and another in Sana’a operating under Houthicontrol. One of the impacts of this separation can be seen in dual exchange rates across the two regions, creating stark differences. A Yemeni worker we spoke to in the UAE explained, “In the south, if you send 230,000 riyals (about $100), the recipient in Sana’a will only receive 57,000 riyals.” The exact figures shift by day and channel, but they illustrate Yemen’s bifurcated monetary system in which the same amount of foreign currency converts into dramatically different nominal amounts of riyals across territories. Fees, exchange-rate distortions and differences in purchasing power can then reduce the real value of what recipients ultimately receive. But Yemen’s financial fragmentation alone does not explain the difficulties facing remittance transfers. As confidence in Yemen’s financial institutions eroded, foreign banks increasingly treated Yemen-linked transactions as high risk. In banking, the decision to avoid transactions that could trigger sanction exposure or compliance trouble is known as de-risking. Rather than risk regulatory penalties for violating sanctions, banks may simply decline to process payments associated with jurisdictions perceived as high risk. Yemen has increasingly fallen into that category. > Rather than risk regulatory penalties for violating sanctions, banks may simply decline to process payments associated with jurisdictions perceived as high risk. Yemen has increasingly fallen into that category. Several overlapping sanctions frameworks contribute to the perception of Yemen’s risk. The UN Security Council established a [Yemen sanctions regime](https://main.un.org/securitycouncil/en/sanctions/2140#current%20sanctions%20measures) in February 2014\. The regime authorized targeted travel bans and asset freezes against individuals and entities deemed to threaten the country’s stability or obstruct its political transition [following the 2011 uprising](https://dppa.un.org/en/yemen) and the negotiated departure of longtime president Ali Abdullah Saleh. In April 2015, [Resolution 2216](https://main.un.org/securitycouncil/en/s/res/2216-%282015%29-0) expanded the regime to include a targeted arms embargo and additional designation criteria. The United States has maintained a separate [Yemen-related sanctions program](https://ofac.treasury.gov/sanctions-programs-and-country-information/yemen-related-sanctions) since 2012, using targeted financial measures against individuals and entities accused of destabilizing the country. Additionally, US counterterrorism measures against the Houthis have intensified. In January 2024, amid Houthi attacks on commercial shipping in the Red Sea and Gulf of Aden, the State Department labeled the group as a Specially Designated Global Terrorist. The Houthis said their Red Sea campaign was linked to the war in Gaza and that they were targeting [Israeli-linked shipping](https://digitallibrary.un.org/record/4079905/files/S%5F2024%5F731-EN.pdf). In March 2025, the United States went further, redesignating the Houthis as a [Foreign Terrorist Organization](https://ofac.treasury.gov/faqs/1219). For banks processing international payments, these overlapping sanctions and counterterrorism frameworks increase the perceived risk of handling Yemen-linked transactions, even when those payments are legal. The consequences are practical and immediate. Transfers are more frequently rejected, and even routine remittances face long delays. For many dollar-denominated transactions, such as wire transfers, import payments and letters of credit, Yemeni banks rely on correspondent banks—foreign banks that process cross-border payments on behalf of Yemeni institutions—based in regional financial hubs like [Bahrain](https://www.sbyb.net/en/about) and the [UAE](https://www.tadhamonbank.com/upfiles/reports/TIIB1673.docx). When those relationships tighten or end, transfers that once moved predictably begin to fail. These ties have thinned in stages. International banks began reassessing their exposure to Yemen as early as the 2011 Arab uprisings, and that retreat accelerated sharply after the war in Yemen escalated in 2014. Sanctions decisions affecting individual institutions can also ripple outward across the entire system. A Yemeni banker, speaking at a February 2025 roundtable convened by government bodies in Aden to discuss Yemen’s remittance economy, described sanctions as “contagious.” “They impact the reputation of the entire system,” he said, making foreign banks more cautious about any Yemen-linked payment, even when the institution involved is not one that is directly sanctioned.[\[2\]](#%5Fedn2) For example, on January 17, 2025, the [US Treasury](https://home.treasury.gov/news/press-releases/jy2794) imposed sanctions on Yemen Kuwait Bank for Trade and Investment, alleging it provides financial support to the Houthis and enables illicit activity through Yemen’s banking system, including money laundering and fund transfers. The treasury issued an authorization, [General License 32](https://ofac.treasury.gov/recent-actions/20250117), to allow certain transactions to be wound down through February 16, 2025\. After this episode, transactions from other banks that were not sanctioned began to be rejected by foreign banks. In this environment, a single enforcement action can raise the perceived risk of nearly any Yemen-related payment, regardless of its purpose. ## Informal Channels and the Search for Reliability When banks step back, the effects extend beyond whether a transfer clears sanctions compliance checks. Even transfers that succeed can lose value once they reach recipients in Yemen, particularly if they must be converted at unfavorable exchange rates or routed through additional intermediaries. Faced with this uncertainty, households and migrants seek ways to protect the value of their transfers. Many families rely on hawala, a broker-based transfer system operating outside formal banking channels. A sender gives cash to a hawalaagent abroad, and a partner agent pays the recipient in Yemen, often within hours. Hawala’s structure shields it from some of the pressures facing formal banks. Because settlements do not rely on direct cross-border wire transfers, they are less immediately vulnerable to correspondent banking breakdowns or compliance-related delays. The same features that make hawaladifficult to monitor also make it resilient when formal financial channels narrow. But Hawala is not risk-free. It depends on trust between agents rather than formal deposit guarantees, so customers have little recourse if money is delayed, lost or withheld. Many migrants describe adopting a “send dollars, receive dollars” strategy. The idea is simple. Migrants send funds in dollars through hawala networks and exchange houses, and families receive dollars in Yemen rather than riyals that may lose value overnight. Exchange houses—licensed money transfer businesses that sit between formal banks and informal brokers—offer foreign currency and transfer services while still relying on banking relationships to move money internationally. They can provide dollar liquidity, but many households rely on brokered networks like hawala instead because they are more likely to deliver US dollars consistently when banking connections are weak. Receiving hard currency can help households avoid sudden losses when conversion rates differ across territories or when cash shortages force unfavorable exchange terms. That uncertainty also shapes how migrants decide when and how to send money. In [our broader study](https://www.theigc.org/publications/cash-capital-leveraging-remittances-yemens-economic-future) of Yemen’s remittance economy, 90 percent of surveyed migrants said ease of procedure influenced their choice of transfer channel, while 40 percent said their choice depended on whether the recipient would have immediate access to cash, particularly in rural areas. Regulations in sending countries can also drive migrants to use informal channels. In Saudi Arabia, [transfer activity](https://fa.gov.sa/ar/Documents/MoneyExchangeandTransferFinal20231214.pdf) is governed by customer due diligence requirements and income-based limits set out in regulatory guidance. These requirements set restrictions on how much or how often money can be sent or require documentation such as a valid residency permit, an employment contract or a salary certificate that many Yemeni migrants cannot easily provide. Women frequently face higher documentation requirements, often because financial and administrative systems assume a male guarantor or applicant is involved. In some areas, particularly those under Houthi control in northern Yemen, women must rely on a male relative to complete transactions. > Women frequently face higher documentation requirements, often because financial and administrative systems assume a male guarantor or applicant is involved. In the end, decisions are not only about exchange rates or regulations. They reflect a deeper question of trust: whether people believe the financial system will deliver their money safely and on time. Mistrust is reinforced by a persistent cash crunch. Liquidity shortages mean that even when transfers arrive on paper, funds may not be available for withdrawal. As one interviewee told us, “even if money is sent to the bank—\[they\] don’t have enough cash to distribute the remittances.” When people fear their money may become stuck in the banking system, they avoid depositing it in the first place. As a participant at the February 2025 roundtable in Aden warned, “The danger is imminent for everyone. There is an urgent need to facilitate cash flow, both domestically and internationally.”[\[3\]](#%5Fedn3) ## Obstacles to Reform In February 2025, the Central Bank of Yemen, the Executive Bureau for the Acceleration of Aid Absorption and Support for Policy Reforms and the International Growth Centre convened a roundtable discussion in Aden, bringing together participants from banks, exchange companies and government institutions. Several participants expressed concerns over how current conditions are discouraging expatriates from sending money through formal channels for savings or investments. Instead, they lamented, remittances are largely spent on day-to-day needs. Rather than tightening restrictions, they urged policymakers to create dedicated investment opportunities, including expatriate-targeted investment funds and special economic zones, intended to help migrants preserve the value of their remittances against inflation and exchange rate losses.[\[4\]](#%5Fedn4) Discussions of mechanisms and incentives for investment, however, are overshadowed by the current realities of Yemen’s struggling economy and its human impact. In a country with high inflation, [17.1 million people](https://reliefweb.int/report/yemen/yemen-who-health-emergency-appeal-2026) are food insecure while 37.4 percent of Yemenis were [multidimensionally poor](https://hdr.undp.org/sites/default/files/Country-Profiles/MPI2024/YEM.pdf) in 2022 (measured by access to a range of basic necessities), with another [22.5 percent considered vulnerable](https://hdr.undp.org/sites/default/files/Country-Profiles/MPI2024/YEM.pdf). Remittances that might once have been saved or invested are now used almost entirely for daily consumption. [Our study](https://www.aiddata.org/publications/from-cash-to-capital-leveraging-remittances-for-yemens-economic-future) estimates that roughly 75 percent of remittances are spent on food, rent and healthcare, reflecting how little room many households have to treat these transfers as savings or investment capital. > Our study estimates that roughly 75 percent of remittances are spent on food, rent and healthcare, reflecting how little room many households have to treat these transfers as savings or investment capital. The roundtable participants discussed a range of practical measures for strengthening formal transfer channels, such as lowering costs and expanding access beyond major cities. Some also discussed how greater integration with regional payment platforms like [Buna](https://one.buna.co/the-organization?utm) could facilitate these goals and reduce reliance on informal channels. Buna is a cross-border payment platform owned by the Arab Monetary Fund that [links banks](https://www.gib.com/en/gib-saudi-arabia-enhances-payment-solutions-joining-buna-platform?utm) across the Arab region, allowing them to settle payments more directly and in multiple currencies. For Yemen, the [appeal](https://www.theasianbanker.com/updates-and-articles/cross-border-payments-in-the-middle-east-become-more-inclusive) of greater integration with Buna is clear. Fewer intermediaries can mean lower fees, faster settlement and fewer points where transfers are delayed or rejected. Yemen-linked payments routed through such systems would still be subject to sanctions screening, anti-money laundering checks and counterterrorism financing requirements, while participating banks would remain responsible for compliance. New payment infrastructure might streamline transactions, but it cannot solve the broader political and financial conditions that make Yemen-linked payments risky. Other proposals by roundtable participants focused on institutional reforms within Yemen itself, including simplifying bank procedures, clarifying financial regulations across territories and improving transparency around fees and exchange rates. Participants acknowledged that competing monetary authorities and ongoing conflict make such measures difficult to implement consistently across Yemen’s fragmented territories. Without these steps, however, even improved regional payment links may struggle to gain traction for everyday use. At the same time, participants recognized the central role of informal networks to Yemen’s financial system. Across these debates, one theme consistently emerged: Migrants and their families will not use formal channels unless they are fast, predictable and trusted. A migrant we spoke to in the UAE sends home smaller amounts more frequently because he does not trust the system to deliver on time. But that mistrust is not simply a function of how institutions operate. It is produced by a financial landscape shaped by ongoing war, competing sovereignties, regional interventions by actors such as Saudi Arabia and the UAE and international sanctions and compliance regimes. That uncertainty is again intensifying. In August 2026, the [UN Special Envoy for Yemen warned](https://osesgy.unmissions.org/en/node/136496) that the country faces its most serious risk of returning to large-scale conflict since the 2022 truce. Renewed fighting between the Houthis and Saudi Arabia as well as Houthi attacks on regional shipping threaten to draw Yemen further into a wider regional confrontation. In this context, informal channels have become not a temporary stopgap but an embedded response to persistent political and financial uncertainty. \[**Oshin Pandey** is a program manager at AidData working on migration, development finance and international financial flows, and was a researcher on an IGC/AidData project examining Yemen’s remittance economy.\] \[**Narayani Sritharan** is a development economist at AidData whose research focuses on forced displacement, remittances and development finance in conflict-affected settings. She led the IGC/AidData project examining Yemen’s remittance economy.\] SUPPORT MERIP All of MERIP's analysis is provided without paywalls! Make a donation now to help us keep it that way. [DONATE NOW! ](https://www.merip.org/donate/) --- [\[1\]](#%5Fednref1) The authors conducted virtual interviews with Yemeni migrant workers in fall 2024, including with workers based in the United Arab Emirates. The interviews were conducted under an IRB-approved human subjects protocol, and participants are not identified by name in order to protect confidentiality. [\[2\]](#%5Fednref2) Yemeni banker, remarks at “The Role of Remittances in the Yemen Economy: Challenges and Opportunities for Economic Recovery,” a roundtable convened by the Executive Bureau for the Acceleration of Aid Absorption and Support for Policy Reforms, the International Growth Centre and the Central Bank of Yemen, Aden, February 26, 2025\. Authors’ notes. [\[3\]](#%5Fednref3) Roundtable participant, remarks at “The Role of Remittances in the Yemen Economy: Challenges and Opportunities for Economic Recovery,” February 26, 2025\. Authors’ notes. [\[4\]](#%5Fednref4) “The Role of Remittances in the Yemen Economy: Challenges and Opportunities for Economic Recovery,” Aden, February 26, 2025, roundtable summary and authors’ notes.