Financial Crime World

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

Introduction

MOGADISHU, Somalia - As Somalia continues to rebuild its economy, the country is facing a growing threat from money laundering and terrorist financing. Despite efforts by international actors, including the World Bank, to establish a “safe corridor” for financial transactions, the lack of a secure system for physical money transports leaves Somalia vulnerable to abuse.

Progress in Strengthening AML/CFT Regime

In recent years, Somalia has made significant progress in strengthening its anti-money laundering and combating the financing of terrorism (AML/CFT) regime. The country passed the AML/CFT Act in 2016, which established key institutions, including:

  • National Anti-Money Laundering and Financing Terrorism Committee (NAMLC): Responsible for coordinating efforts to prevent money laundering and terrorist financing.
  • Financial Reporting Centre (FRC): Somalia’s Financial Intelligence Unit (FIU), responsible for:
    • Receiving, requesting, analyzing, and disseminating information concerning money laundering and terrorist financing
    • Investigating financial crimes
    • Issuing regulations and guidelines for reporting entities

Challenges in the Fight Against Money Laundering and Terrorist Financing

Despite these efforts, Somalia still faces significant challenges:

  • Corrupt activities: Continue to offer opportunities for money launderers and terrorist financiers to raise and move funds and resources.
  • Lack of secure system for physical money transports: Remains a major vulnerability.

Addressing the Challenges

To address these challenges, Somalia’s President recently signed an anti-corruption law, paving the way to:

  • Cut short and dry up funds that would have flown to terrorist groups
  • Implement this law requires a whole-of-government approach and pooling of available resources and talents

Additionally, Somalia is working to:

  • Develop a national identity document (ID) system: Enhance customer due diligence and compliance on the sending side and make settlement legs more transparent.
  • Build a coalition against corruption: Advance domestic coordination in its AML/CFT regime.

Conclusion

Despite these efforts, Somalia still faces significant challenges in its fight against money laundering and terrorist financing. The country must continue to work with international partners to strengthen its AML/CFT regime and protect its financial system from abuse.