Financial Crime World

SOMALIA’S CENTRAL BANK LAUNCHES NATIONAL PAYMENT SYSTEM TO FIGHT BANKING FRAUD

A New Era for Somalia’s Financial Sector

The Central Bank of Somalia has launched a new National Payment System (NPS) to improve the country’s financial sector and combat banking fraud. The system, implemented with the support of the World Bank, enables real-time payments between commercial banks, promoting economic growth and financial inclusion.

Types of Banking Fraud in Somalia

The lack of a functioning interbank payment system in Somalia had left the country vulnerable to various types of banking fraud:

  • Interbank Transfer Scams: Scammers would intercept transactions between banks, causing delays or losses for businesses and individuals.
  • Cash Laundering: Illicit activities were facilitated by the use of cash, making it difficult to track financial flows.
  • Mobile Money Scams: With mobile money being a popular means of payment in Somalia, scammers would exploit vulnerabilities in the system to steal funds.

Examples of Banking Fraud in Somalia

Some notable examples of banking fraud in Somalia include:

  • In 2019, a group of individuals was arrested for attempting to transfer millions of dollars from a Somali bank account to an offshore account.
  • A mobile money provider in Somalia was hacked, resulting in the theft of thousands of dollars from customers’ accounts.

National Payment System: A New Era for Somalia’s Financial Sector

The new National Payment System has already shown promising results. As of January 2022:

  • All 13 commercial banks in Somalia have been onboarded, enabling real-time payments between them.
  • The system has processed over one billion dollars in interbank payments, equivalent to almost a fourth of Somalia’s GDP.

How the National Payment System Works

The system comprises two basic elements:

  • Real-Time Gross Settlement System (RTGS): Enables the movement of high-value, time-critical payments.
  • Automated Clearinghouse (ACH): Processes lower-value payments, with obligations between commercial banks netted and settled at the end of the business day.

Next Steps for Somalia’s Financial Sector

The implementation of the National Payment System is just the first step towards a more robust financial sector in Somalia. The Central Bank plans to:

  • Expand the system to reach everyone, including the poor and others who depend on mobile money payments.
  • Extend credit to Small and Medium Enterprises.
  • Complete currency reform.