Somali Money Transfers End with Arms Dealers

Somalia has not yet undertaken an evaluation relating to the implementation of anti-money laundering and counter-terrorist financing standards. The country’s financial system is informal, operating mostly outside of government oversight, either via the black market or unsupervised money remittance firms (hawaladars). 

In 2001, federal investigators from the Federal Bureau of Investigation (FBI), Central Intelligence Agency (CIA), and Treasury and State departments took action against AlBarakaat, a Somali-American company that they alleged to have channeled funds to an armed group in Somalia. Ultimately, FBI agents reported that the available evidence left them with many suspicions, but no direct, unequivocal link. 

A report into Somalia's popular money transfer systems has found that more than $3.5m ($2.7m) in cash has been moved between suspected weapons traffickers in recent years.

The Global Initiative Against Transnational Organized Crime alleges that a prominent Yemeni arms supplier was able to receive hundreds of thousands of dollars in remittances despite being under US sanctions.

The findings could further hinder attempts by Somali transfer companies to work with international banks which fear flouting anti-money laundering regulations.

In response to the report, four Somali companies told the Reuters news agency that they did their best to comply with global regulations.

The federal government of Somalia currently does not regulate payment systems. Despite the fact that compliance issues lie with oversight of transfers, the Central Bank of Somalia does not keep any official records of this sort. Thus, it is difficult to trace money transferred to or from Somalia.