Money Transfer System Used to Arm Militants in Kenya

The Dahabshiil offices in downtown Mogadishu. Dahabshiil is the biggest hawala company in Somalia and across the world Somalis use the unregulated transfer system to send money back to family in Somalia. Credit: Ahmed Osman/IPS
  • by Miriam Gathigah (nairobi)
  • Wednesday, October 16, 2013
  • Inter Press Service

"A lot of weapons are being transferred without moving them physically, in the same exact way that money is transferred without moving it physically," Hussein Aden, a hawala broker from Garissa in Kenya's North Eastern Province, told IPS.

Hawala, an undocumented system, works when a client pays a broker or "hawaladar" the money they wish to transfer. The broker then calls his counterpart at the transfer destination authorising the payment. The broker on the other side usually pays the recipient with his own funds, charging a commission of up to two percent. But this system is now being used to transfer arms.3

"There is a network of hawala brokers who send weapons without moving them, exactly the same way they do with cash. We have hawala traders in Somalia with a network in East Africa and the Horn of Africa," Issa Khalif, a hawaladar in Nairobi's Eastleigh, told IPS.

Weapons from Russia and Ukraine are being shipped into Somalia and distributed to the rest of East Africa, according to Ibrahim Ahmed from local NGO Northern Kenya Caucus, which seeks to improve the lives of residents in northern Kenya.

"Hawala is attractive for weapon smuggling," Ahmed told IPS.

He said that the porous border between southern Somalia - which until recently was a stronghold for the Islamist extremist group Al-Shabaab - and Kenya's North Eastern Province was one way that arms were entering Kenya.

Khalif said that Al-Shabaab and its sympathisers were using the system to buy these already-smuggled arms for their counterparts in Kenya and other East African countries.

Khalif explained that all someone in Somalia had to do was give their local broker the weapons they wanted to transfer and a broker in Nairobi would then provide the recipient with weapons already in their possession "without moving the original pistols."

Francis Mugatha, an immigration official at the Kenya-Somali border, told IPS that hawala was being "exploited, particularly in the trade of weapons. The gun business is thriving in areas such as Nairobi's Eastleigh suburb."

He added that Al-Shabaab was also using the traditional system to fund their operations.

"They continue to use a network of ‘hawaladars' to fund their operations, such as paying for Al-Shabaab trainees. Further, this is how Somali militia groups in North Eastern Province are being financed," Mugatha said. IPS has reported that a growing number of Kenyan Somalis, who are sympathisers of Al-Shabaab, were setting up their own small militia groups in the Kenyan province thanks to the porous border between the two countries.

The system has come under scrutiny in Kenya as it recently emerged that Al-Shabaab, which carried out an attack that killed scores of people at the Westgate Shopping Mall in Nairobi on Sep. 21, were able to plan and execute the attack undetected by security forces here because they used unregistered SIM cards.

And security officials are now calling for the untraceable system of hawala to be firmly regulated in order to prevent further terror attacks here.

"Cracking down on unregistered SIM cards is only addressing the communication part, but we need to hurt the terrorists by blocking routes where their money moves. At this time in the country, it is very dangerous to have money moving around unregulated," Yusuf Muhamed, a high-ranking police officer here, told IPS.

The Central Bank of Kenya (CBK), which monitors incoming and outgoing foreign exchange, outlawed the use of hawala at the end of April by releasing guidelines that include requiring operators of cash remittance firms to register with the bank and pay a five million shilling (58,800 dollars) licensing fee. Operators also have to maintain a minimum core capital of 20 million shillings (235,300 dollars).

"Hawala money is getting into the pockets of Al-Shabaab … we need an immediate crackdown on hawala brokers and we need to use Somalis who are against terrorists to smoke out this network of traders, the same way Somalis assisted in driving out Al-Shabaab out of southern Somalia," Muhamed said.

A CBK official told IPS on condition of anonymity that the hawala cash remittance system was not the issue, but the fact that it was unregistered and undocumented was against the law.

"Mobile phone money transfer systems operate within set rules, so should hawala. At the moment, there is no body, so hawala continues to thrive,"the official said.

Recently, the United Kingdom's Barclays bank announced that it would no longer provide services to hawala money transfer companies, and services are expected to shut down on Oct. 16.

According to Kenya's Ministry of Finance, there is no official data on the amount of money transferred through hawala but the government estimates that remittances average 70 million dollars a month.

Ahmed said that a lot of money from the Somali community living abroad, especially those from Kenya, Sudan, Ethiopia, Eritrea and Djibouti, was being transferred to families in Somalia.

"In the past year alone, Somalis abroad sent 142 million dollars to their Somali relatives. This was more than the foreign aid sent to Somalia in the same year," Ahmed said.

But people like Abdi Dida, a Somali living in Kenya's Eastleigh area, have no choice but to use the informal payment system of hawala to send money back home to their families even though there are no registered "hawaladars" in Kenya, and using the system here is hence illegal.

Somalia has only rudimentary banking services. Regional mobile transfer systems such as M-Pesa do not work in the country. Aid agencies, including the United Nations, are said to use the system to distribute aid in the war-torn country.

"Hawala is a part and parcel of the life of a Somali," Dida told IPS.

An official from the ministry of internal security told IPS: "Operators of cash remittance systems must register with CBK and pay for a licensing fee, if these ‘hawaladars' have nothing to hide, they should abide by the law. Otherwise they will face the full force of the law."

But Ahmed said that demonising hawala and linking it to Al-Shabaab was not a solution.

"Blaming hawala for terrorism in the country is missing the point. What is to blame is corruption. Those foreign terrorists said to have executed the Westgate attacks passed through borders before coming into Kenya. They bribed someone to get in." He added that the Kenyan government should find ways to regulate the system.

© Inter Press Service (2013) — All Rights ReservedOriginal source: Inter Press Service

Where next?