Geneva-Based Global Initiative Affirms Money Laundering Report Against Somalia Remittance Firm

Somalia’s Hawala system has been influential in reaching millions of people who remain largely unbanked. According to local regulations in Somalia, individuals can send or receive up to $300 without undergoing rigorous background checks through mobile payments.

Many Somalis receive payments sent via MTOs through their mobile phones even though MTOs and mobile money services are run by different entities.

But Somalia doesn’t have national ID data and the Global Initiative report claimed some senders and receivers may have used variations of their names to dodge scrutiny.

The organisation did admit that the complex number of networks involved in wiring and final payment of the money may make it difficult for parent companies to detect errant partners.

“As a result, parent companies may often be unaware of lapses in anti-money laundering/countering the financing of terrorism (AML/CFT) compliance amongst its agents or franchisees.

“GI-TOC stands ready to meet with representatives of Amal Express and/or Iftin Express to share the details of the report’s findings and its recommendations on addressing AML/CFT compliance gaps.”

Amal officials said they’re cooperating with authorities and use a system called World-Check to flag transactions involving persons listed as high risk.

The World Bank estimates that just about 15 per cent of the 15.5 million Somalis have bank accounts, leaving the Hawala system as the main service for transmitting the estimated $1.3 billion sent by the Somali diaspora every year.

It advised the Somali government to begin developing a robust identification system to eliminate the loopholes.

“An effective identification system would help narrow the significant financing gap in Somalia and address de-risking issues,” it said in a report titled “Rapid Growth in Mobile Money”.

“Better mobile money regulation and a robust identification system are closely connected and need to be developed in parallel.”

HAWALA

Hawala has been faulted as the invisible financing system of form of money dealing & funds transfer that spans the globe. It is one of the channels for Terrorists funding in.

Investigations have found that hawala money has reached both terrorists and separatists from abroad. The highest remittances have been from Saudi Arabia, United Kingdom and, of course, Pakistan.

How It Works

The racketeers procure foreign exchange abroad from different sources & arrange payments in targeted country through their henchmen or paid employees.

It happens the other way also, viz, certain persons in the country specialize in arranging payments abroad & either by themselves or through their alias in targeted country arrange payments in currency equivalent to the foreign exchange which had been procured by their men abroad.

Often a code-word is provided to both parties which the sender conveys to the recipient anywhere in the world and the amount can be collected after disclosing the code-word.

The terror groups still find hawala to be their best bet since it is safer compared to legal banking. It is very difficult to crack this trail as the persons involved in the transfer change after every two or three transactions.

Latest investigations by UN Security Council also implicates Amal. The investigations found that Al-Shabaab generated approximately $13 million in  four case studies alone. In only 10 weeks, the zakat account controlled by Al-Shabaab showed deposits of $1.7 million, with the entire balance being transferred onward during that period.

The investigations found that Al-Shabaab generated approximately $13 million in these four case studies alone. In only 10 weeks, the zakat account controlled by Al-Shabaab showed deposits of $1.7 million, with the entire balance being transferred onward during that period.

Despite territorial losses and increased aerial strikes targeting the group, Al-Shabaab operates multiple checkpoints across Somalia, extorts businesses in numerous cities and holds multiple bank accounts to facilitate its system of “taxation”. The Panel assessed that the group is in a strong financial position and is generating a significant budgetary surplus, investing these funds in various enterprises, including property purchases and market investments in Mogadishu.

The Federal Government of Somalia is developing a financial disruption plan to address Al-Shabaab’s systematic use of domestic financial systems. The Panel’s systematic approach to understanding Al-Shabaab’s financial systems may support disruption programming. The current Somali financial sector is limited to eight reporting banks.

The financial Reporting Centre notes that it receives reports from eight banks (Amal Bank, Amana Bank, Dahabshil Bank, Daryeel Bank, International Bank of Somalia, My Bank, Premier Bank and Salaam Somali Bank) while the Central Bank of Somalia reports that there are currently 11 licensed banks.
2 Registration fee ranges from $200 t

As Somalia transitions to formal financial systems, all operators can expect to be exploited by Al-Shabaab, which has consistently operated a flexible business model and is likely institution agnostic. The Panel’s investigations focused on the manner in which Al-Shabaab operates, detailing specific organizational mechanisms that serve to enable a fuller understanding of this exploitation.

According to a UN Security Council report, Somalia’s Islamist insurgents are moving millions of dollars through the formal bank system and appear to be investing in businesses and real estate offering a rare glimpse into their finances.

The report included details on two bank accounts held at Salaam Somali Bank, founded in 2009 as part of the Hormuud group of companies, raising questions about Somalia’s capacity to enforce a 2016 law aimed at curbing terrorist financing.

The bank said the panel had not provided them details, so it was unable to verify. “The Panel’s report makes no allegation of misconduct against Salaam Somali Bank,” it said in a statement. “There has also been no instance where Salaam has opened an account for a sanctioned individual or entity.”

Somalia’s Financial Reporting Center, which oversees compliance laws against money laundering and terror financing, said it is investigating the allegations against Salaam.