Decoding Al-Shabab’s fiscal empire: A silent war in Somalia

[Deeq A.]

MOGADISHU, Somalia (Caasimada Online) – Despite efforts by the Somali federal government to disrupt the financial channels used by Al-Shabab, the extremist group’s extortion racket continues to expand.

The militant organization controls large parts of rural central and southern Somalia. However, it has lost some territory in recent military operations.

The scope of Al-Shabab’s financial empire

According to a study by the Africa Center of Strategic Studies, Al-Shabab has established a formal banking system, prompting the Somali government to implement the Anti-Money Laundering and Countering the Financing of Terrorism Act in 2016.

This legislation requires financial institutions to report transactions exceeding $10,000. However, many money transfer firms fear retaliation from Al-Shabab and avoid reporting such transactions. T

he group primarily relies on money obtained through Zakat, an Islamic form of taxation imposed on businesses, particularly in the transportation sector.

The United Nations estimates that Al-Shabab generates up to $120 million annually. Over $24 million of this revenue is funneled into purchasing sophisticated weapons from abroad, especially from war-torn Yemen.

These weapons enable the group to effectively confront the national army and foreign troops.

Challenges to disrupting Al-Shabab’s finances

The UN Office on Drugs and Crime has provided technical support to the Somali government to disrupt Al-Shabab’s financing sources, storage and transfer methods, and illegal taxation systems.

Despite this assistance, the federal government has struggled to curb the group’s exploitation of the financial system beyond targeting Al-Shabab’s financial officers and “taxation” checkpoints through conventional military operations.

Al-Shabab has displayed effectiveness and efficiency in revenue collection for years, often surpassing the federal government.

The lack of proper identification for the population, coordination, regulatory enforcement, corruption, and political will has allowed the militants to continue extorting money from locals.

Recommendations for combating Al-Shabab’s financial networks

To effectively block the group’s revenue collection, the Africa Center of Strategic Studies suggests that Somalia should prioritize the professionalization of infiltrated government agencies.

This includes those responsible for financial, intelligence, and judicial functions, crucial in shutting down Al-Shabab’s financing and money laundering.

Achieving this objective requires more than just financial sector development.

It also necessitates improved criminal investigatory work, enhanced law enforcement, and a shift in culture within the Federal Government of Somalia and the five Federal Member States toward transparency, accountability, and citizen service delivery.

Experience from other regions dealing with mafia-like influence shows these patterns can be reversed.

However, this requires sustained political will, incentives, and protections to encourage widespread cooperation with the government against Al-Shabab’s revenue generation schemes.

Recent government actions and ongoing operations

Earlier this year, President Hassan Sheikh Mohamud announced the closure of over 250 bank accounts and 70 mobile money transfer firms linked to Al-Shabab activities.

The group is known to finance violent extremists outside Somalia, including Mozambique and Nigeria.

President Hassan Sheikh also stated that business owners found guilty of remitting taxes to Al-Shabab would have their trading licenses revoked as part of a strategy to control financial flow.

The military has initiated the second phase of operations against Al-Shabab in various parts of the country, with the government maintaining a hard stance against the militants.

The United States and other international partners have pledged to invest in Al-Shabab defectors to motivate the national army to pursue the ultimate goal: crushing the extremist group.

As the Somali government and its allies continue to battle the militants, disrupting Al-Shabab’s financial networks remains crucial to weakening the group’s power and influence in the region.

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