Financial Crime World

Somalia’s Money Laundering Methods Revealed: A Critical Analysis of the Country’s AML/CFT Regime

Introduction

A recent study by Abdirahman Hassan Hersi has exposed the loopholes in Somalia’s antimoney laundering (AML) and counter financing of terrorism (CFT) regime. The research, which compared Somalia’s regime with Malaysia’s, found that Somalia’s laws are counterproductive in combating money laundering and terrorist financing.

AML/CFT Regime Weaknesses

The study identified several weaknesses in Somalia’s AML/CFT regime, including:

  • Inadequate regulatory agencies: Somalia’s regulatory agencies lack the necessary capacity and resources to effectively enforce AML/CFT laws.
  • Lack of collaboration with international standard setters: Somalia has failed to collaborate with regional and international standard setters, such as the Financial Action Task Force (FATF), which has hindered its ability to combat money laundering and terrorist financing.
  • Inadequate regulations for digital currencies and mobile money: Somalia’s laws are inadequate in regulating digital currencies and mobile money, making it difficult to track and prevent illicit financial transactions.

Comparison with Malaysia

The study compared Somalia’s AML/CFT regime with Malaysia’s, which is a benchmark for compliance with integrity-related standards. The results showed that:

  • Malaysia has a more effective AML/CFT regime: Malaysia has implemented laws and regulations that are more effective in combating money laundering and terrorist financing.
  • Malaysia has closed loopholes in the law: Malaysia has taken steps to close loopholes in its laws and regulations, making it harder for individuals and organizations to engage in illicit financial activities.

Recommendations for Improvement

The study provides several recommendations for improving Somalia’s AML/CFT regime, including:

  • Strengthening regulatory agencies: Strengthening Somalia’s regulatory agencies will require increasing their capacity and resources.
  • Improving collaboration with international standard setters: Somalia should collaborate more closely with regional and international standard setters to ensure that its laws and regulations are aligned with global best practices.
  • Regulating digital currencies and mobile money: Somalia should implement laws and regulations that effectively regulate digital currencies and mobile money.

Conclusion

The study highlights the need for effective reforms to combat money laundering and terrorist financing in Somalia. The recommendations provided offer a roadmap for improving the country’s AML/CFT regime, which is critical for promoting financial stability and security.