Earlier this month, Said Malin, president of Amaana Money Transfer Co. in Minneapolis, received an unexpected letter from his bank.
"Due to the ever-changing regulatory requirements and expenses," the account of Mr. Malin's business will be closed on June 20, Merchants Bank of California wrote.
"They didn't tell us a single violation or a single thing we had done" wrong, Mr. Malin said. His company processes about $3.5 million in transactions a month, about one-third of which goes to Somalia, more than any other foreign country. "Unless we find [another] bank, we will be out of business," he said.
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Amaana and the roughly eight other U.S. businesses still sending money to Somalia are collateral damage in a U.S. crackdown on money laundering.
As the Justice Department and U.S. banking regulators increase their scrutiny of potential violations, banks are distancing themselves from cash-heavy businesses that may not be illegal but could nonetheless single them out for tougher scrutiny.
Companies servicing Somalia have long had trouble obtaining bank accounts amid concerns about financing criminal activity in that country. Al Barakaat, a large transmitter of money to Somalia, that had its U.S. base in Minneapolis, had its assets seized in 2001 when U.S. officials said it served as a pipeline for funding terrorism.
But the obstacles have intensified in recent months amid the banking crackdown, threatening to shut off a main spigot of funds for Somalia.
The East African nation lacks an international banking system and is reliant on specialty businesses such as Amaana to enable Somalis in America to send money home. Somalia receives $215 million in U.S. remittances each year, accounting for around 4% of the country's gross domestic product, according to an estimate from Oxfam America Inc. and other nonprofit groups.
This year, the number of U.S. banks taking deposits from firms that serve Somalia has shrunk from more than 10 to just a handful. Even more pressing, Merchants Bank has been one of the few in that group that also is willing to execute international wire transfers for the firms.
One company, Minneapolis-based Kaah Express, has had its accounts closed by four banks this year alone, leaving it with only a handful of accounts for its 11-state network, all at relatively small banks. None of those banks cited deficiencies at Kaah Express, said compliance officer Aden Hassan. "It doesn't look too rosy," he said of the outlook for opening bank accounts. "We are worried."
The shift comes as U.S. banks, already dealing with a spate of new rules and requirements, try to avoid drawing additional regulatory attention by ending relationships that carry a heightened risk of scrutiny related to money laundering and criminal activity.
J.P. Morgan Chase JPM -0.04% & Co. has closed thousands of accounts it deemed not worth the risk over the past year, including those of foreign-government officials and check cashers, according to a spokeswoman. Capital One Financial Corp. COF +0.70%has stopped providing commercial banking services to check cashers and other cash-heavy business.Bell State Bank & Trust of Fargo, N.D., decided in February to close accounts of money-service businesses, including some that serve Somalia. The three banks said their moves weren't specifically related to concerns about Somali businesses.
Instead, bankers say the pullback stems from the money-laundering crackdown, which has made them more wary of running afoul of federal rules. In 2012, HSBC HoldingsHSBC -0.12% PLC agreed to a record $1.9 billion settlement for ignoring possible money laundering by its clients. Prosecutors and regulators are currently seeking a guilty plea from BNP Paribas BNP.FR +1.08% for allegedly helping customers evade U.S. sanctions by doing business in places such as Iran, according to people familiar with the situation.
Merchants Bank is an example of the new trend. Until recently, the Carson, Calif., lender billed itself as a specialist serving the money-service industry—with armored-car pickups, a regime for tracking suspicious transactions and the ability to handle large volumes of wire transfers, according to people familiar with the company. The bank has run into regulatory problems before: The Office of the Comptroller of the Currency in 2010 required it to beef up policies for complying with laws against money laundering.
A spokesman for the OCC declined to discuss Merchants Bank but said the agency "has imposed no restrictions on money transfers to Somalia. However, banks must have adequate controls in place to manage the risks for their products and services."
A spokeswoman for U.S. Bancorp, which is based in Minneapolis, home to a big Somali community, said it has tried for two years "to determine if there was a way for us to help" the Somali-serving money-transfer companies around its home city. The bank got close to opening an account for one, but decided against it due to issues cited by an independent auditor and "the inherent risks of doing business in Somalia," she said.
U.S. officials say their goal is to reduce risks in the money-transfer industry without shutting the industry off from the banking system. But the crackdown is raising questions among some lawmakers about whether the push is undermining another public policy goal: Fostering stability in a nation where pirates and terrorists have found a haven to disrupt U.S. interests.
"When it's more expensive and difficult for people to send money home to their loved ones, it's easier for bad actors to spread the message that America doesn't care," said Rep. Keith Ellison (D., Minn.), whose district includes more than 30,000 Somali immigrants.
Mr. Ellison wrote to Comptroller of the Currency Thomas Curry on May 9 asking him to "please do all you can" to allow Merchants Bank and others to keep the accounts open and comply with the law. A spokesman for Mr. Curry declined to comment on the letter.
A spokeswoman for the U.S. Treasury Department said Washington is looking for ways to ensure legitimate funds will continue to reach Somalia.
Write to Ryan Tracy at Ryan.Tracy@wsj.com