Financial Crime World

Somalia’s Fight Against Money Laundering and Terrorist Financing Faces Hurdles

Despite progress made in recent years, Somalia’s efforts to combat money laundering and terrorist financing continue to face significant challenges.

Vulnerabilities in Financial Institutions

The country’s financial institutions are vulnerable to abuse by money launderers and terrorist financiers, according to the Financial Reporting Center (FRC) annual report. The FRC has identified a need for a “safe corridor” to:

  • Enhance customer due diligence and compliance on the sending side
  • Increase transparency in settlement legs
  • Provide end-to-end traceability of flows

Challenges and Gaps in Enabling Environment

Large gaps remain in the enabling environment, and several risks need to be addressed. These include:

  • Corruption: remains a major obstacle to Somalia’s efforts to combat money laundering and terrorist financing
  • Lack of digital identity system: the government has established a national ID working group to develop a digital identity system, but large gaps remain

Progress in Combating Money Laundering and Terrorist Financing

The FRC is working to advance domestic coordination in the fight against money laundering and terrorist financing. This includes:

  • Improving operational frameworks
  • Capacity building
  • Raising adequate financial resources

The government has also established a national AML/CTF committee and taskforce to oversee the implementation of the anti-money laundering and counter-terrorism financing law.

Institutional Development

AML/CFT Act 2016

The AML/CFT Act 2016 made money laundering and terrorist financing a government priority in Somalia. The act established key institutions, including:

  • National Anti-Money Laundering and Financing Terrorism Committee (NAMLC)
  • Financial Reporting Centre (FRC)

NAMLC Role

The NAMLC is responsible for:

  • Developing a national AML/CFT strategy
  • Providing funding for capacity building
  • Setting strategic priorities for the FRC
  • Establishing information sharing gateways
  • Enhancing domestic coordination

The committee consists of all relevant stakeholders entrusted with implementing the AML/CFT national strategy.

FRC Role

The FRC is an independent national agency responsible for:

  • Receiving, requesting, analyzing, and disseminating information concerning money laundering and terrorist financing
  • Addressing ML/FT challenges
  • Working closely with reporting entities, including financial institutions and designated non-financial businesses

FRC’s Vision and Mission

The FRC’s declared vision and mission are to become a trusted and exemplary agency in support of a robust financial system hostile to financial crimes and to help rebuild Somalia’s financial system and restore its credibility in the global financial networks.