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Somalia: ‘Follow the money’ is not enough. Why terrorist financing is hard to come by 0

In the midst of the search for new concepts in countering terrorism and preventing violent extremism, the financial lifeline of terrorist networks is in the focus. No terrorist organization, neither al Shabaab nor Daesh or Boko Haram is able to operate without resources, including money. As with most regular armed groups, fighters have to be paid, equipment needs to be purchased and if the group aims at controlling territory – financial cushions are even more important. While putting the focus on illicit financial flows it is however important to manage expectations. By Annette Weber, SWP, German Institute on International and Security Affairs.

As with all financial transactions in the shadow, illicit financial supply for terror networks are opaque and mostly undocumented or registered. Not unlike the work on organized crime, filtering illicit financial flows to terrorist networks is a work of sysiphonian dimensions hardly wielding the expected results. Nevertheless, the Financial Action Task Force of the UN, Security Council Resolutions 2195 (2014), UN Sanction mechanisms and other instruments are in place, actively defying the illicit transactions.

It is useful to differentiate the various channels:

  1. Like any armed oppositions, jihadist organizations have supporters who sponsor their operations. Direct financial transactions through mobile or laundered money are hard to trace, yet tracking money through the banking system is possible.
  2. Jihadist organizations are sometimes part of organized crimes networks and generate money through the smuggling of contraband, drugs, diamonds, ivory, the trafficking of people and arms and by kidnapping for ransom. These networks are large, well connected but can be internationally traced by global oversight organizations, yet enforcement of laws is difficult.
  3. Income generated by jihadist organizations by raising taxes, collecting fees on road blocks or engaging in trade is well documented. Jihadist groups who can collect taxes normally also control the territory which makes any law enforcement difficult.

In order to engage in a successful counter strategy on illicit financing of terrorist activities, the differences in structure and local ties of each jihadist groups is of importance. To exemplify this, Somalia and the jihadist group al-Shabaab will be examined to show the difficulties in tracing illicit flows despite all the efforts.

Local grievances – international connections

Jihadist organizations in Africa have a number of factors in common, however, their local origins and specificities should not be overlooked. As a general rule, most jihadist groups feed on local conflicts in combination with extremely weak (Somalia) or neglecting states (Northeastern Nigeria, Sahel). Local grievances, marginalization and the lack of access to power and resources are drivers to almost all conflicts. The moral legitimation for the use of violence in jihadist ideology along with forced recruitment are additional factors explaining the growing number of followers of jihadist movements. But the followers and actors of a jihadist organization, such as al-Shabaab or Boko Haram are different and instruments to de-radicalize need to be tailored to these differences. Somali followers of al Shabaab might be intrigued by the payment – apparently 500 U$ are paid per month by al-Shabaab for its fighters – while for diaspora and foreign fighters, the global jihad and the ability to revenge the perceived war against Muslims are drivers to join. The ability to provide for one’s family is not only a different mobilizer than the goal to erect a kalifate, but also requires different instruments to counter violent extremism.

The example of al Shabaab shows the complexity of any response to violent extremism.  ‘Following the money’ appears as a direct yet non-violent response which hits as hard as a military operation but does not target bystanders and civilians – however, as in the case of Somalia these lines are shifting. A comprehensive approach is needed, taking into consideration the different actors, the political environment as well as the limitation of military, economic or legal instruments separately.

Even if illicit financial supply lines are investigated and proven, it requires a functioning state apparatus, independent judiciary, sustainable economy and strong societies to stop these supply lines – none of it currently available in Somalia.

How much does al Shabaab own?

Jihadist organizations such as al-Shabaab do not publish their budget, their financial support or their tax-revenue. Yet, just like a government, al-Shabaab does collect taxes. The reports of the UN Monitoring Group on Eritrea and Somalia, established to follow the link between al-Shabaab and the Eritrean government, show in 2011 – on the height of their operations – a revenue of 70-100 million US-Dollars for al-Shabaab. In comparison, the 2011 GDP of Somalia was roughly 68 million US-Dollars.

Allegedly al Shabaab extorts 10% from humanitarian organizations’, they tax more than 4000 businesses operating on the Bakarat market, piracy tax was estimated to be 15-20%, then there is the income from road blocks and taxation for livestock trade. Moreover al Shabaab is collecting money through charities, via the internet, through friendly organizations, such as al Hijra Youth Center in Kenya, according to the UN. Al-Shabaab is involved in the sugar trade to Kenya, was leading the charcoal trade from Somalia to the Gulf, had revenues collected from Somali pirates and was given direct donations by individuals from the Gulf, however only one Quatari based supporter, channeling 250.000 U$,  is in the US treasury designation order.

In addition to this al Shabaab is accused of being involved in the ivory trade from the Central African Republic, South Sudan and Kenya as well as in smuggling of contraband from the Far East to East Africa. The UN Monitoring Group alleged that until 2011 al Shabaab commanders were involved in arms trades with Eritrea, as well as roughly 40-60.000 U$ monthly channeled through Eritrean embassies in the region. Chatham house reports are alerting to a multimillion U$ shadow business on the Gulf of Aden, including smuggling, trafficking and money laundering.

Lastly, the amount of remittances from the Somali Diaspora to Somalia is estimated to be 1.4 billion U$ annually, how much of this is directly wired to al-Shabaab or sent to relatives  in al Shabaab controlled territory who extort taxes cannot be established. Lastly there is the money taken from the official budget of the Somali government by corrupt civil servants and those who are government as well as Shabaab. With a government heading the corruption indices and subnational powers acting outside of the central state legislation, the Somali political culture is hardly an archetype of accountable financial management.

Compared to many economies in the region, al-Shabaab is flexible, diversified and quickly adapting to a changing environment.

The instruments

The difficulties with illicit financial support of terrorist activities are manifold; the intransparency of the transactions is enabled by the interwovenness of jihadists in all aspects of politics, economy, trade, security and society at large. International cooperation and exchange of information is crucial, however given the absence of an infrastructure of governmental financial institutions, including a Financial intelligence unit (FIU), enforcement is not very likely. There are, however, possibilities to tackle the flow of finances for terrorist operations through Financial Intelligence (FININT) and the Financial Action Task Force (FATF). These instruments are expedient to follow the money through the data gathering of the financial service industry. To dry out the financial cushion of al- Shabaab, the approach would have to be much more diversified, taking into consideration their diversified business model as well as the real existing grievances driving people to support the organization.

Annette Weber is Senior Fellow at the Middle East and Africa division of the German Institute on International and Security Affairs (SWP).

© Afronline, Addis Fortune (Ethiopia), Le Pays (Burkina Faso), Les Echos (Mali), L’Autre Quotidien (Benin), Le Nouveau républicain (Niger), Le Calame (Mauritania).

 Picture cover: Simon Maina/Getty Images

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