Somalia’s Fight Against Money Laundering and Terrorist Financing: Progress and Challenges

Introduction

Somalia’s efforts to combat money laundering and terrorist financing have made significant progress in recent years. However, despite these advancements, challenges remain. The country has established a robust legal framework and institutions to tackle these financial crimes, which are crucial for preventing the flow of funds to terrorist groups.

Progress Made

The Financial Reporting Center (FRC), Somalia’s Financial Intelligence Unit, has been at the forefront of efforts to identify and track suspicious transactions. The center receives, requests, analyzes, and disseminates information on money laundering and terrorist financing, working closely with reporting entities, including financial institutions and designated non-financial businesses.

Challenges

Despite these efforts, Somalia remains vulnerable to money laundering and terrorist financing due to the lack of a “safe corridor” for international transactions. A safe corridor would allow money transfer operators outside Somalia to enhance their customer due diligence and compliance on the sending side, make settlement legs more transparent, and provide end-to-end transparency and traceability of flows.

Addressing the Challenges

To address this issue, the Federal Government of Somalia (FGS) has established a National ID working group to develop a digital ID system. The system will help ensure that IDs are accessible for all, protect users’ data and privacy, build trust in the system, and ensure its long-term sustainability.

The FGS has also signed the Anti-Corruption Law, which aims to cut short and dry up funds and resources that would have flown to terrorist groups. The law requires a whole-of-government approach and pooling of available resources and talents to reduce threats arising from the flow of corrupt funds into the hands of terrorists.

Domestic Coordination

Somalia is advancing domestic coordination by improving the operational framework of its Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regime. The country has established a National AML/CFT Strategy and a Taskforce to operationalize and enforce NAMLC directives.

The Taskforce is chaired by the Director of FRC and includes representatives from various government agencies, including:

• Central Bank
• National Intelligence and Security Agency
• Ministry of Finance
• Others

The Taskforce’s duties include:

• Identifying, analyzing, and mitigating ML/FT risks and threats
• Proposing institutional arrangements for training and capacity-building
• Reviewing legal, political, and institutional reforms necessary for an effective combat against ML/FT

Conclusion

Somalia’s fight against money laundering and terrorist financing has made significant progress, but challenges persist. The country must continue to strengthen its legal framework, institutions, and coordination efforts to effectively combat these financial crimes and prevent the flow of funds to terrorist groups.