How to disrupt Al-Shabaab revenue streams in Somalia

A Somali al-Shabaab fighter. The group has carried out beheadings in Somalia before but they are rare in Kenya. Photograph: Ismail Taxta/Reuters

MOGADISHU, Somalia - The Al-Shabaab extortion racket continues to expand, despite efforts by the federal government of Somalia to destroy channels that are used by the group, which still controls large swathes of rural central and southern Somalia but has since lost a sizeable portion following the latest operation.

A study done by the Africa Center of Strategic Studies notes that the group has been doing formal banking necessitating the recent action by the government of Somalia to implement Anti-Money-Laundering and Countering the Financing of Terrorism Act in 2016 which requires financial institutions to report transactions that exceed $10,000.

But despite the act being in operation, many money transfer firms fear reporting those who make transactions of more than $10,000 for fear of retaliation by Al-Shabaab. It is through these institutions Al-Shabaab transacts money gotten through Zakat imposed on business people, especially in the transport sector.

The UN Office on Drugs and Crime has provided the government of Somalia with technical support on disrupting al Shabaab’s financing sources, methods of storage and transfer, and illegal taxation systems, the report notes.

However, the federal government has been slow to curb al-Shabaab’s exploitation of the financial system beyond targeting al-Shabaab financial officers and “taxation” checkpoints via conventional military operations.

For years, Al-Shabaab has shown effectiveness and efficiency in the collection of revenue, at times more than the federal government, further stabilizing the empire. The lack of proper identification, coordination, regulatory, enforcement, and political will continues to give the militants a loophole to extort money from locals.

For the government to effectively block revenue collection by the militants, the Think Tank says, Somalia should prioritize the professionalization of the government’s infiltrated agencies, particularly the entities responsible for financial, intelligence, and judicial functions, which are at the forefront of shutting down al Shabaab’s financing and money laundering.

For this to happen, it adds, the country requires more than just financial sector development but also better criminal investigatory work, improved law enforcement, and a change in culture within the federal government and federal member states toward transparency, accountability, and citizen service delivery.

Experience from other parts of the world dealing with mafia-like influence shows that these patterns can be reversed. However, this will require sustained political will as well as incentives and protections to engender popular cooperation with the government against al Shabaab’s expansive revenue generation schemes.

Early this year, President Hassan Sheikh Mohamud announced that over 70 mobile money transfer firms and 250 bank accounts linked to Al-Shabaab activities were closed down, marking the beginning of the crackdown on the financial sector. The group makes up to $120 million annually according to the most recent report by the United Nations.

According to the UN, over $24 million is diverted to purchasing of sophisticated weapons from abroad especially Yemen, another war-torn country in the Middle East. The weapons help the group to effectively face the national army and foreign troops who have been fighting for decades to liberate several parts of the country.

President Hassan Sheikh further maintains that business owners found culpable of remitting taxes to Al-Shabaab will have their trading licenses revoked, another strategy to control financial flow. In a statement published by the group's allied media houses, Al-Shabaab claimed it finances violent extremists outside Somalia, noting their contributions in Mozambique and Nigeria.

The second phase of operations against Al-Shabaab by the military has kicked off in different parts of the country as the government maintained hard stance against the militants.

Already, the US and other international partners have pledged to invest on Al-Shabaab defectors to motivate the national army in pursuing ultimate goal of crushing the militants.


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