Somalia Struggles to Stem Money Laundering and Terrorist Financing

MOGADISHU, SOMALIA - Somalia’s efforts to combat money laundering and terrorist financing have been hindered by a lack of progress on implementing key measures, according to the country’s Financial Reporting Center (FRC).

Challenges in Combating Money Laundering and Terrorist Financing

Lack of Progress on Implementing Key Measures

The FRC’s latest annual report highlights several challenges facing Somalia in its fight against money laundering and terrorist financing. One of the main issues is the absence of a “safe corridor” for international money transfers, making it difficult for financial institutions outside Somalia to enhance their customer due diligence and compliance.

Limited Government Oversight

Financial institutions in Somalia are still operating largely outside government oversight, despite efforts by the Federal Government of Somalia (FGS) to improve regulation. The FGS has established a national ID working group to develop a digital ID system, which is expected to improve transparency and traceability of financial flows.

Corruption Remains a Major Obstacle

Corruption remains another major obstacle, with the President signing an anti-corruption law aimed at cutting off funds and resources used by terrorist groups. However, implementing the law requires a whole-of-government approach and pooling of available resources and talents.

Progress Made in Implementing AML/CFT Regime

Despite these challenges, Somalia has made progress in implementing its anti-money laundering and combating the financing of terrorism (AML/CFT) regime. In 2016, the country passed an AML/CFT law that criminalizes money laundering and terrorist financing, established key institutions such as the National Anti-Money Laundering and Financing Terrorism Committee (NAMLC), and created a Financial Intelligence Unit (FIU).

Key Institutions and Initiatives

• 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, and enhancing domestic coordination.
• The agency has also established an AML/CFT Taskforce to operationalize and enforce its directives.
• The FRC plays a key role in addressing money laundering and terrorist financing challenges, undertaking systematic collection and analysis of data associated with money transfers, documenting suspicious transactions, and providing strategic intelligence to increase risk awareness.

Conclusion

Somalia’s efforts to combat money laundering and terrorist financing are crucial to rebuilding the country’s financial system and restoring its credibility in the global financial networks. Addressing these challenges requires a whole-of-government approach, improved domestic coordination, capacity building, and raising adequate financial resources.