A complex finance network that includes everything from fake charities to kidnapping has supported the East African militant group al-Shabab's activities over the past few years. It’s difficult to know specifics because the group doesn’t exactly file quarterly reports, but experts say these sources of capital have been essential to al-Shabab’s growth, and will be much harder to wipe out.
Islamist militant group al-Shabab is battling the U.N.-backed government in Somalia and is suspected of links to a string of attacks in neighboring Kenya.
U.S. airstrikes this week in Somalia targeted the group's leader, Ahmed Abdi Godane, in an effort to deal a “significant blow” to the militant group responsible for large amounts of violence in the region, and best known for its attack on Kenya’s Westgate shopping center that killed 68 people last year.
While his death leaves a leadership void to be filled, the group depends on much more than the men leading it.
While the group has been around for nearly a decade, things began to change in 2012. They were forced out of many major cities and a vital port, which meant al-Shabab had to start looking elsewhere for financial support. Members once had control of the vital port city of Kismayo, where they profited from millions of dollars worth of charcoal exports. But in 2012, Kenyan forces ejected them, dealing a major blow to their finances.
“That entire area provided so much money to Al-Shabab, and when that was taken away from them they absolutely had to diversify to find other ways of receiving funds,” Roger Carstens, a senior fellow in Foreign Policy Research Group's Program on National Security, said.
The steady stream of income helped keep the group organized and under control. But as international attention and pressure from local military forces increased, the group has become less coordinated.
“It’s much harder to have firm control when you’re militarily challenged,” Carstens said. “It’s been harder for them to maintain control since 2012.”
Like other regional militant groups, members are known for charging protection fees and "taxes" on local businesses and NGOs operating in the area.
Somalia’s telecom sector has been unregulated for decades, which means the prices are low and opportunities are big for entrepreneurs. But as Money Jihad reports, this means elders and local businessmen are negotiating with huge operators like Arabsat. Gulf news also reported that many middlemen overcharge so they can pay off al-Shabab members.
The New York Times reported last year that al-Shabab has a team of “white-collar militants” who use elaborate taxation schemes to extract money from farms and businesses.
But even without local money, al-Shabab has been supported from the outside for some time.
There are reports that the Eritrean government was sending them money and resources, which forced the U.N. to impose sanctions in 2009, citing concerns that “Eritrea has provided support to armed groups undermining peace and reconciliation in Somalia.” In 2012, the U.S. also sanctioned a handful of military officers that supposedly worked closely with al-Shabab in the past.
But beyond the state sponsors, the militant group has other ways of getting money from abroad. “The two major things would be al-Qaeda- affiliated groups and sympathizers within the diaspora,” Daveed Gartenstein-Ross, senior fellow at the Foundation for Defense of Democracies, told International Business Times.
Records show that members of the Somali diaspora have been sending money home from various locations around the world -- including the United States. For example, in 2011 two Minnesota women received prison sentences for soliciting donations in Somali neighborhoods around the U.S. and Canada “under the false pretense that the funds were for the poor and needy,” according to the federal indictment.
In 2012 Godane released a video in which he “pledged obedience” to Ayman al-Zawahiri, head of al Qaeda, after the two groups had been working together for a while, according to the BBC. While the connection was primarily ideological, al-Shabab was likely seeking other benefits as well.
“Al-Shabab was kind of the poor brother, in need of foreign fighters, finances and expertise,” Carstens said.
A lot of attention has been drawn to poaching in recent months. Rhino horn and ivory are valuable commodities that have not escaped the attention of groups like al-Shabab, which reportedly facilitates trade to buyers in the Middle East or China.
“The organization has the financial means to sustain an IED terror campaign in large part because of ivory wealth,” wrote Jeremiah Foxwell, a global security researcher at John Hopkins University, in a Feb. 17 report.
They are also reported to deal in commodities. Kenyans consume 800,000 tons of sugar every year, according to the Kenya Sugar Board, but only produce 500,000 tons domestically. Consequently, more than $1.2 billion of Somalia-produced sugar is imported into Kenya every year, though much of it is not declared, and has been a sweet opportunity for Al-Shabab. “The trade proceeds, especially from the sugar imports, are going to the coffers of the militant group,” said Mohammed Maalim, Country Comissioner in Garissa, Kenya, to a local paper.
In 2012, the U.N. reported that 10,000 bags of contraband sugar were sold every day at lower prices. For example, a regular bag costs roughly $58 while a smuggled bag costs $53. The benefit of trading actual commodities is the lack of a paper trail. And it’s easier to transport sugar secretly than it is vast amounts of money through wire transfers.
It also doesn’t hurt that weapons can be easily concealed in those bags.
“Not only is trade diversion difficult to detect, it is also versatile in that it allows funds to remain in numerous countries without serious injury to the authorities,” wrote Donald deKieffer, a former General Counsel to the U.S. Trade Representative. This method “has serious implications for terrorist financing in that it enables terrorist groups to successfully raise and hide funds while evading government scrutiny.”
Underlying these and other transactions is the “Hawala,” a unique type of money transfer that requires no big banks and leaves no trace. The system, whose name translates roughly as a remittance, is a quick and cheap method to transfer money around the world.
“The very features which make hawala attractive to legitimate customers --- efficiency, anonymity, and lack of a paper trail --- also make the system attractive for the transfer of illicit funds,” reads a report from the U.S. Treasury Department.
A hawala involves a network of people in different locations. A customer pays one agent, who sends a message to another agent, who then pays the recipient the same amount. Often, transactions are done within a day, and records don’t show names or other specifics.
The Kenyan Ministry of Finance suspects that more than $70 million is transferred this way, though there is no way to be sure.
This simple solution is just one of many ways Al-Shabab, like other terrorist groups, is trying to get around the authorities -- at least when it comes to money.