Understanding the regional and transnational networks that facilitate IED use

Sources of funding (including self-funding) for the major groupings that perpetrate IED incidents – al Shabaab

Al-Shabaab has proven that they have the ability to diversify their financial tactics, despite military setbacks and funds from abroad drying up. Although the group makes money from the kind of activities that one associates with terrorist groups, such as raids, kidnappings and drug trade, most of the group’s finances are mainly dependent on control of cash flow, and primarily taxation of controlled territory and goods. Al-Shabaab has in recent years lost both the Kismayo port and Bakara market in Mogadishu which has meant that between $65-110 million in annual revenue, primarily from trade, has been lost. As a result of this, al-Shabaab has created their own Ministry of Finance (Maktaba Maaliya) which is responsible for developing financial strategies.[i] In general, the group has displayed an impressive bureaucratisation of their finances. At the time of writing, the primary sources of income of al-Shabaab are:

  • Taxation and extortion
  • Smuggling and drug trade

Other sources, such as external donations, provide a significant part of revenue as well, but are not as vital. This is partially due to the war in Syria and donations from abroad going there rather than to Somalia, which is another reason why al-Shabaab is increasingly reliant on taxation and trade.

Taxation and extortion

Taxes on land and businesses

Due to changing circumstances, al-Shabaab’s most reliable source of revenue is taxation on controlled territory. In fact, the group even has a Zakawat unit (tax unit), in which fighters are employed for a salary ranging from $100 to $500 per month. This unit collects detailed information on businesses operating under its control, including agriculture and livestock. These businesses’ value is assessed and taxes are imposed through a number of means: sales taxes on stores and commercial enterprises, corporate taxes on businesses (usually protection money), land tax on farmers, corporate religious tax (zakat) of 2.5 per cent on profits as well as a requirement for ad hoc contributions for jihad operations.[ii] Eyewitness account have attested to the conscientiousness with which al-Shabaab taxes people living under their control, as even vegetable sellers on the street are extorted to pay protection money to al-Shabaab. One Somali intelligence official has stated that al-Shabaab made as much as $9.5 million from taxes on farms in the Jubba valley in 2014. But it is not only businesses or people under Shabaab control who are affected, as some businesses in Mogadishu continue to pay tax to al-Shabaab rather than the Somali government. As taxation has become a more vital source of revenue, al-Shabaab has displayed a tendency to occupy territory for extended periods of time, even in Kenya.[iii]

Extortion from aid agencies

The extortive element is not only present in the corporate taxes on business, as even humanitarian aid agencies and NGOs are obliged to pay for al-Shabaab to let them through on roads and to areas in which they work. Again, al-Shabaab seems to have bureaucratised this practice, employing a Humanitarian Coordination Officer in charge of dealings with aid agencies. This officer individually vets and registers agencies and assesses at what rate they should be charged, which is often dependent on what type of work the agency conducts. Construction projects are for example charged higher than food distribution, likely because al-Shabaab can claim some of the food deliveries as theirs and gain popularity among the population. Fees to operate and distribute aid in an area may reach as high as $10,000.[iv] One official at an unnamed UN agency stated that his employer had spent 10 per cent of its project budget to al-Shabaab in 2009.[v] According to other eyewitness accounts, demands for protection money are often made through text messages on mobile phones, and money is usually transferred back on mobile phones as well.[vi] Al-Shabaab is clearly willing to profit off of foreign aid presence, even though it has accused such agencies of spreading ‘vices and immorality’ among Muslim youth, and has even attacked and killed members of such organisations.

Economic blockades

Al-Shabaab has also been known to use their economic control as a direct weapon against uncooperative villages and organisations, as they occasionally implement economic blockades on and between certain areas. These blockades, which may go on for several months, often have detrimental economic and humanitarian effects. For example, the more than one-year-long blockade of Hudur between 2014 and 2015 resulted in malnutrition rates of 32%. However, al-Shabaab usually continues to collect tax on businesses, despite them being unable to sell their products due to the blockades.

Smuggling and drug trade

Charcoal smuggling

Despite having lost important trade centres, al-Shabaab still makes a significant amount of money from smuggling and drug trade. One source of income that is frequently mentioned is Somalia’s charcoal production, which is the reason why the UN has banned the import of Somali charcoal. Al-Shabaab does not only tax coal bags before they reach harbours for export, forcing drivers to pay bribes on roads controlled by the group, but have allegedly been able to export charcoal from the port of Kismayo despite losing it to the Kenyan Defense Forces (KDF) since 2012. In fact, residents of Kismayo have testified to the KDF’s minimal attempts to quell al-Shabaab’s illegal export of charcoal and do little to provide security in the surrounding areas, insinuating that KDF forces are mainly concerned with operating the port. Testimonies from KDF soldiers have revealed that the KDF even supervise the loading of charcoal onto ships.

According to eyewitness accounts from Kismayo, the charcoal smuggling from the port is the result of an illicit partnership between al-Shabaab, the KDF and the Jubbaland administration of Ahmad Madobe, who was previously a member of the Ras Kamboni militia. In this partnership, al-Shabaab reportedly controls about 30% of the trade.[vii] The operation was previously overseen by Brigadier General Walter Koipaton, who has risen very fast through the ranks in recent years, demonstrated by his recent appointment as Deputy Commander of the Kenyan Armed Forces. Koipaton has worked closely with the Kismayo port manager, Abdullahi Dahil Shil, (also known as ‘Hadun’), who according to testimonies was installed in that position by his relative, former Kenyan Defence Minister Yusuf Haji.[viii] Nairobi-based trader Haji Yassin has also been pointed out as an important player in this equation. Similarly, the Jubbaland Centre of Commerce has also been accused of hosting several members who all profit off of this trade.[ix]

This suggests that the reason why charcoal is still being shipped out of Somalia, and why al-Shabaab continues to make money off of it despite a UN embargo, is due to the self-interest of KDF and the Jubbaland administration. The two may gain as much as $200 million through their combined shares in the charcoal trade. Given the seniority of the KDF personnel involved in this operation, one cannot exclude that there is knowledge and direction of this operation in high-level Kenyan cabinet positions.

Although the amount of money al-Shabaab makes on charcoal has diminished since 2012, various estimates have shown that al-Shabaab might still make as much as $15-$50 million per year on trade.[x] Estimates have even shown that one single road checkpoint can gather as much as $8 million in revenue per year. Despite the UN embargo, businesses in countries like Saudi Arabia and the United Arab Emirates (UAE) have regularly imported the product since.

Illicit sugar trade

A similar routine has been established with the illicit sugar trade between Somalia and Kenya, where sugar smuggling makes up for the failure of domestic suppliers to meet Kenyan demand. According to a Western intelligence official, two thirds of all illegal sugar enters Kenya from Somalia. Al-Shabaab plays a big role in this. The group usually charges drivers passing through roads controlled by the group, and have been said to tax as much as $1,000 per truck. These trucks then make their way to Garissa in northern Kenya through the Dadaab refugee camp. In 2011, the UN’s Somalia Monitoring Group estimated that al-Shabaab made between $400,000 and $800,000 on sugar trade, a sum which the group believes has grown significantly since.[xi]

Problematically, there have been indications of Kenyan Army complicity in sugar smuggling too. According to one report, high ranking military officials, KDF commanders and members of the Ministry of Defense are all involved in this smuggling ring, which allegedly receives protection from the highest echelons of Kenyan power.[xii] The sugar smuggled into Kenya usually arrives through the Kismayo, where according to eyewitness accounts the KDF levies $2 per bag. Apparently, 14 tonnes may leave Kismayo each week, numbers which have been corroborated by sugar traders in Dadaab and Garissa. The sugar trucks are taxed by al-Shabaab a few kilometres outside Kismayo, which grants them passage through al-Shabaab controlled territory towards Kenya. At the border, drivers usually pay around $600 to get through. Truck drivers at the Amuma and Liboi border crossings have attested that payments are made at the border to tip off police and customs. The sugar is then transported to Garissa, where it is stored before being distributed across the country.

UN officials have stated that this procedure is well known by people in President Uhuru Kenyatta’s circle. EU and US officials have also indicated that businessmen Mohammed Hussein and Sheikh Kassim are involved in the illicit sugar trade. The UN Monitoring Group, which investigates al-Shabaab’s involvement in the illicit sugar trade, has according to a UN official been reluctant to look into the cooperation between al-Shabaab and KDF as they feel that the result of such an investigation would compromise their ability to live and work in Kenya.[xiii] It should be mentioned that Kenya has denied these allegations, and has established a so called ‘sugar unit’ within its national intelligence service in order to address the al-Shabaab sugar trade issue.

Heroin smuggling

Heroin trade is also a growing source of revenue for al-Shabaab. Due to the war in Syria, many of the heroin smuggling routes from Asia have been redirected through East Africa. Although not many details are known about al-Shabaab’s involvement in the trade, the group has been known to re-sell imported heroin to criminal groups in Nigeria. This has proved a lucrative engagement, as these exchanges have enabled al-Shabaab to buy sophisticated weaponry and conduct more complex operations. Al-Shabaab’s entrance into the heroin market has also enabled them to build connections with crime rings in Kenya and South Sudan, with whom al-Shabaab have reportedly traded arms.

One case that suggests several things about the nature of al-Shabaab’s heroin trade is the case of the MV Amin Darya, a ship intercepted on 15 July 2015 by Kenyan authorities. The vessel contained more than 800 kilograms of heroin, and the traffickers onboard had been in consistent communication with Javed Ali, an Iranian businessman based in Dubai, who according to the UN Monitoring Group has possible links to al-Shabaab. Moreover, the Dubai-based company A. Ebrahimi & Partners hired a suspect who was supposed to act as a clearing agent for MV Amin Darya once it docked in Mombasa. The vessel had also docked in Hobyo, in central Somalia, on its way to Mombasa, where it allegedly had picked up al-Shabaab gunmen who later disembarked.[xiv]

External funding

Alleged foreign sponsorship

The MV Amin Darya case is somewhat reflective of which foreign powers are usually mentioned among foreign al-Shabaab funders. Several individuals from the GCC area have been mentioned or designated as financers of al-Shabaab, including Qatari national Umar al-Nuaymi and Saudi Sheikh Abu Faid. Such indications have been corroborated by eyewitness accounts from former al-Shabaab fighters in Arabic media, who have stated that the main portion of external funding comes from wealthy Arab businessmen who sympathise with al-Shabaab’s ideology. One former fighter, Hassan Ali, stated that this type of funding rarely occurs through direct links, but often through goods shipped to and back from Somalia for which al-Shabaab reap the profits. This is in addition to the fact that Saudi Arabia and UAE have been identified as countries breaking the international ban on charcoal from Somalia. Moreover, there have been several unconfirmed reports of Iranian vessels transporting weapons and fuel to central Somalia.[xv]

Regarding state sponsorship of al-Shabaab, Eritrea has been the largest source of funds and material for the group, something which has led to a UN and EU arms embargo on the country. Eritrea has supported al-Shabaab mainly as a means to disturb neighbouring Ethiopia, with amounts allegedly reaching $40,000 to $60,000 per month. This money was reportedly funneled mainly through the Eritrean embassy in Nairobi, and was carried into Somalia via couriers[xvi]. In fact, leaked diplomatic cables from the US State Department mentions evidence of Yemane Gebreab, a senior advisor to President Isaias Afewerki, providing both funds and arms shipments to al-Shabaab between 2007 and 2009. Eritrea has also been accused of allotting their controversial ‘diaspora tax’, taxing Eritreans living abroad 2 per cent on their earnings, to militant groups such as al-Shabaab.

Although financial support from Eritrea has dwindled since 2012 (the UN’s Eritrea Monitoring Group have found no evidence for state sponsorship of al-Shabaab in 2014 and 2015), there are concerns over the country’s deepening ties to the UAE and Saudi Arabia as a result of the war in Yemen, for which the Gulf countries have asked to station troops on Eritrean soil. Besides the obvious geo-strategic advantage this provides, closer cooperation with Eritrea is believed by some to be a way of scaring Ethiopia into the GCC-aligned camp, a campaign in which al-Shabaab is seen as instrumental. It should also be noted that Qatar was in 2009 accused by the United States of funding al-Shabaab through Eritrea, something Qatar has since denied.

Interestingly, Arabic and Somali media reported in early 2016 that former al-Shabaab commander Mohamed Said Atom had been given political asylum in Qatar, something which has not been covered in Western outlets. Atom had previously been pointed out as a major arms dealer for the group in leaked US diplomatic cables, but turned himself in to Somali authorities in 2014.

Diversion of charitable funds

The GCC links are reinforced by suspicions of Islamic charitable organisations being accused of diverting funds through to al-Shabaab. These organisations include the Kuwait-based African Muslims Agency, the Red Crescent Society of the UAE, the Saudi-based al-Islah Charity, the International Islamic Relief Organisation, Dawa al-Islamiyya and the al-Wafa Charitable Society. The Islah Charity has itself received funding from two other Saudi-based charities, the Muslim World League and the al-Haramain foundation, with the latter having been designated as a terrorist organisation by the United States due to its ties to al-Qaeda.

Remittances and money transfers

Another large portion of external funding is derived from money being sent from abroad through remittance services or through the hawala money transfer system. The hawala system is a decades-old system based on honour code in which an individual gives money to a hawala agent (hawaladar), who in turn pays the same amount of money to a hawaladar on the receiving end who finally bequeaths the money to the intended payee. The hawala system is used by many in the Somali diaspora community as a means to send money to people without conventional banking accounts or computer access, and is used by several aid organisations active in Africa and the Middle East. However, hawala transfers are almost untraceable, which has made them a popular tool for terrorist groups, and so also al-Shabaab, with the US State Department identifying it as one of al-Shabaab’s most lucrative source of income. Besides direct donations from sympathisers abroad, this is also a result of al-Shabaab’s network of informers which enables the group to be aware of hawala transfers being made between parties and consequently demand tax transfer.[xvii]

It is estimated that $1.2 billion is sent to Somalia each year through remittances and hawala transfers, thus providing a vital lifeline for the poor country. Most remittances are wired through firms based in the Gulf area. One Dahabshiil (the money transfer service used by 95% of all aid agencies present in Somalia) employee, South African Abdirizak Mowlana, was arrested in Nairobi for having abused his position to funnel money through to al-Shabaab, although Dahabshiil denied any affiliation with him. The American branch of Dahabshiil was in 2015 sued by a Somali-American man who claimed that the firm had helped fund the assassination of his mother, Somali singer and politician Saado Ali Warsame. It should be noted that Dahabshiil was one of the 13 money transfer services that were shut down by Kenyan authorities in 2015, but was reopened a few months later due to harsh criticism from humanitarian aid agencies. The other services were Kendy, UAE Exchange, Amal, Iftin, Kaah Express, Amana, Juba Express, Tawakal, Bakaal, Hodan, Continental and Flex.

It would be wrong to blame hawalas and money transfer agencies for terrorist funding, and shutting down the services would have detrimental effects for Somalia. However, there have been cases in which personnel within money transfer agencies have been complicit in al-Shabaab funding, for example Missouri in the United States where an agent helped his client to hide the natures of their transactions by using fictitious names and phone numbers. There have also been cases of al-Shabaab funding through these systems discovered in Finland and Norway. In 2016, Norwegian police seized $1.4 million in undeclared cash at Oslo airport, which according to Norwegian media was going to be shipped to Somalia through the United Kingdom by a Somali hawala agent.

Although transfers to al-Shabaab from abroad may be difficult to detect, some cases have led to restrictions on money transfers. Somalia has also introduced new money laundering legislation aimed at more efficiently monitoring funds sent to al-Shabaab. This, along with the fact that many people in Somalia’s diaspora have simply lost faith in al-Shabaab’s ideology (which was more nationalistic than Salafi-jihadi in its inception) and tactics, has made money transfers from abroad a less integral part of al-Shabaab’s funding.[xviii]

Other sources

Telecom market

There are suspicions about Somalia’s telecom industry directly funding al-Shabaab and facilitating their operations. The Somali telecoms market has been unregulated since 1991, resulting from non-existent government oversight which in extension means that they have been able to evade taxes (only Hormuud Telecommunications pay regular income tax to the Somali government) and failed to cooperate on surveillance issues. There have been accusations of these telecom companies sending the money they gain from not paying taxes to groups serving their aims, as well as failing to provide the intelligence they could on militia movements through their mobile networks. Al-Shabaab has on several occasions been able to strong-arm telecom companies into shutting down their internet services, as well as executing telecom workers they have believed to ‘side with the state’, demonstrating the problematic role played by the Somali telecom industry.

Illicit mining and ivory poaching

Al-Shabaab has also started to engage in illegal mining in the Democratic Republic of Congo (DRC). The group has allegedly joined hands with Ugandan group ADF/NALU in exporting minerals out of the DRC through illicit mining networks. Ivory poaching has also been raised as a significant source of income for al-Shabaab, and although the group has traded illegal ivory this remains a relatively small source of revenue, which would only suffice to finance small operations and occasional IED attacks.[xix]

This post is part of the report, “Understanding the regional and transnational networks that facilitate IED use”. To see the sections of the report please go here. This research was undertaken with assistance from the NATO Counter-IED Centre of Excellence.

[i] Tom Keatinge, “The role of finance in defeating al-Shabaab”. RUSI Whitehall report 2-14. First published November 2014.

[ii] Tom Keatinge, “The role of finance in defeating al-Shabaab”. RUSI Whitehall report 2-14. First published November 2014.

[iii] UN Security Council, Somalia Monitoring Group annual report 2015.

[iv] Keatinge, “Finance”.

[v] Valter Vilkko, “al-Shabaab: from external support to internal extraction”

[vi] UN Security Council, Somalia Monitoring Group annual report 2015.

[vii] Journalists for Justice, ”Black and White: Kenya’s Criminal Racket in Somalia”, November 2015.

[viii] Journalists for Justice, ”Black and White: Kenya’s Criminal Racket in Somalia”, November 2015.

[ix] UN Security Council, Somalia Monitoring Group annual report 2014.

[x] UN Security Council, Somalia Monitoring Group annual report 2015.

[xi] UN Security Council, Somalia Monitoring Group annual report 2015.

[xii] Journalists for Justice, ”Black and White: Kenya’s Criminal Racket in Somalia”, November 2015.

[xiii] Ibid.

[xiv] UN Security Council, Somalia Monitoring Group annual report 2015.

[xv] UN Security Council, Somalia Monitoring Group Annual Report 2015.

[xvi] Keatinge, “Finance”.

[xvii] Vilkko, ”al-Shabaab”.

[xviii] Keatinge, ”Finance”.

[xix] Keatinge, ”Finance”.