Abdullah Al-Shadli (South24 Center)

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The failure of money exchange companies in Yemen has long since ceased to be a series of isolated incidents or sporadic complaints from depositors. Over recent years, it has become one of the clearest indicators of the country's fragile financial system. Repeated closures, insolvencies, legal proceedings, and liquidations have left customers unable to recover their savings, remittances, or balances held with companies that were never legally authorized to open accounts or accept deposits in the first place.

The issue resurfaced sharply in May 2026, with circulating complaints about Al-Ittihad Exchange in Houthi-controlled areas, and Al-Muflehi Exchange in Aden, after depositors reported difficulties in recovering their funds. In Al-Muflehi's case specifically, the recent complaints intersected with an earlier decision by the Central Bank of Yemen in Aden, issued in December 2025, to suspend the licenses of several exchange companies, including Al-Muflehi, for regulatory violations. Local reports subsequently said the company had shut its doors, with depositors staging protests in Aden.

But Al-Muflehi and Al-Ittihad are only two links in a much wider issue. In Lahj, the Al-Duky Brothers Exchange case has been unfolding as a criminal matter since 2021, involving breach of trust and depositors' funds. In April 2026, the Lahj Court of Appeal issued a conviction against the company's owners, with the court noting that the firm had failed to return funds, received in both local and foreign currencies through deposits and transfers, to the rightful owners.

In Aden, Al-Omana Exchange and Financial Transfers represents a different kind of case: a court-ordered liquidation following a Commercial Court ruling (No. 198) issued in March 2023, which established a liquidation committee. By February 2024, that committee had called on creditors and debtors to submit their financial claims and later issued warnings against dealing in any assets linked to the company, including the "Aden Gate" development project, designating them as collateral for creditors' rights.

These cases were preceded by the Al-Salahi Exchange in Aden, which announced in December 2022 that it was suspending operations in order to settle its outstanding obligations before resuming business, according to local sources.

In Sanaa, media reports from April 2022 described the bankruptcy and closure of Al-Jazeera Brothers Exchange Company, which shut its headquarters and provincial branches after 21 years of operation. The company's board chairman subsequently denied the reports, making this a case of contested and unresolved accounts, one which South24 Center was unable to independently verify.

Monetary authorities were not entirely absent from this unfolding crisis. In March 2025, the Central Bank of Yemen in Aden issued a public warning to citizens, merchants, and businesses against keeping any form of deposits with exchange companies, reaffirming that their legal mandate is strictly limited to currency exchange and remittance transfers, and they are not authorized to open accounts or hold deposits. Yet the continued stream of complaints that followed made clear that warnings alone were insufficient to stop the practice or protect customers already caught in the fallout.

Why Are These Companies Collapsing?

Not all failures within Yemen's exchange sector share the same cause. Some companies had their licenses revoked by monetary authorities for violations, including currency speculation or non-compliance with Central Bank directives. Others reached outright insolvency, unable to process remittances or return balances held by clients.

Hussein Al-Bu’si, head of the Southern Exchangers' Union, attributed the recurring collapses to "a combination of factors tied to the management practices of these companies and their violations of banking regulations." He explained to South24 Center that many exchange firms were established as general partnerships, meaning partners bear full personal liability for the company's financial obligations. In the event of bankruptcy, judicial authorities are expected to identify, freeze, and liquidate partners' assets to ensure depositors are repaid.

Al-Bu'si also pointed to internal disputes between partners, and of companies investing depositors' funds in large-scale real estate and land acquisitions, despite exchange law limiting their activity to licensed banking operations. Deploying client funds into long-term projects, he noted, far exceeds these companies' financial and operational capacity, leaving them unable to provide liquidity when depositors demand withdrawals. Some companies also expanded into client financing, an activity Al-Bu'si described as "the exclusive domain of banks, not exchange houses."

Dr. Sami Mohammed Qasim, Associate Professor at the Faculty of Economics and Political Science at the University of Aden, echoed this assessment. He told South24 Center that many exchange companies "were operating in violation of the law by opening accounts for citizens despite having no legal authority to do so," and that a significant portion of deposited funds was channeled into real estate and commercial investments.

As the Yemeni rial liquidity crisis deepened in Aden and government-controlled areas in recent months, Dr. Sami noted that depositor anxiety led to a sharp surge in withdrawal demands at a time when companies simply lacked the cash reserves to meet them.

Currency speculation added another layer to the crisis. According to Dr. Sami, the unexpected appreciation of the Yemeni rial from August 2025 onward inflicted heavy losses on companies and speculators who had bet on the continued collapse of the local currency. While speculation had generated quick profits during periods of currency depreciation, it left these firms acutely exposed when the market direction reversed.

Dr. Sami also highlighted that some exchange companies had ties to political and military figures, arguing that corruption and patronage networks "were significant factors in deepening the losses and collapses the sector experienced."

Where Did the Money Go and Who Is Responsible?

For customers, the most pressing question remains the fate of their money after a company fails or closes. In the absence of any deposit guarantee scheme, depositors face a lengthy and complex legal process, particularly when company assets are insufficient, or when funds and properties were transferred to third parties ahead of the declared collapse.

Legally, the picture is more nuanced than a simple insolvency. Omar Hassan Balbehaith, a commercial law professor at Hadramout University, told South24 Center that "the characterization of an exchange company's collapse depends on the nature of each case and its specific facts." Some situations may be treated as commercial bankruptcy if the company was operating legitimately and stopped paying due to losses or market disruption. Others can cross into criminal territory, fraud, breach of trust, or embezzlement, particularly when it can be shown that a company accepted client funds while already knowing it could not repay them, concealed assets, moved money offshore, or provided misleading information.

Balbehaith noted that Yemeni law distinguishes between simple bankruptcy and fraudulent bankruptcy, with company directors facing criminal liability if assets were squandered or concealed to the detriment of creditors.

This distinction matters, because the missing money may no longer exist as cash. It may have been lost to currency speculation, absorbed into real estate and commercial ventures, transferred to accounts under other names, or moved abroad. In each scenario, the prospects for recovery depend on the availability of clear financial records, seizable assets, and swift judicial action to prevent the remaining funds and properties from being disposed of.

Balbehaith stressed that exchange companies are not commercial banks and are therefore not legally permitted to open accounts or accept deposits from the public.

Dr. Sami argued that the Central Bank of Yemen in Aden "bears a share of the responsibility," having lacked the enforcement mechanisms needed to prevent exchange companies from opening accounts for citizens. The Bank had issued multiple warnings, he acknowledged, but “lacks sufficient tools to enforce those decisions," adding that effective implementation would have required closer coordination with security agencies and the public funds prosecution office.

Balbehaith concurred that the Central Bank holds broad supervisory powers, including licensing, inspection, financial solvency reviews, suspension of operations, and the imposition of sanctions. However, he added that "if violations and complaints were recurring and the Central Bank was aware of them without intervening, its legal and administrative liability for supervisory negligence could be invoked."

Attorney Abdullah Babkyly focused on the practical options available to depositors in the aftermath of a collapse. He described the Central Bank not as a "ceremonial regulator" but as an authority with genuine legal powers to license, inspect, suspend, and penalize. He told South24 Center that a company's continued operation despite repeated complaints and warnings "may give rise to legal or administrative liability for the regulatory body if serious negligence is established."

On the question of recovering depositors' rights, Babkyly argued that the most effective course is "swift, collective legal action, filing for immediate precautionary asset freezes, obtaining travel bans on those accused, and tracing accounts and financial transfers." The urgency is real: every delay after a collapse creates a window for funds to be moved, assets transferred, or properties to be disposed of before courts can intervene.

Babkyly identified one of the greatest obstacles as the behavior of some exchange company owners in the period immediately before collapse, moving money, transferring assets and real estate into other names, or remitting funds abroad, all of which complicate the enforcement of judgments and the recovery of depositors' rights.

Between direct corporate liability, questions about the Central Bank’s oversight failures, and more than a decade of economic instability, the depositor remains the most vulnerable figure in this story. They have no access to supervisory protections, no guarantee of recovering their funds when a company fails, and no fast legal recourse, even though they are, in principle, considered partly responsible for their predicament because they disregarded official warnings against opening accounts with exchange companies and depositing funds outside of properly licensed banks.