Kampala. Terrorists are using a string of local businesses across the East African countries from which they reap millions of dollars they use to finance their terror missions in the region, according to findings in the Financial Intelligence Authority report.
These findings are contained in the report on National Risk Assessment of money laundering and terrorism financing in Uganda. The report says the terrorist deal in both lawful and prohibited businesses.
The report says the main funding sources include extortion, misuse of non-profit organisations (NPOs), engaging in natural resources/wild life crimes, ransoms, piracy, illegal trade in sugar, fuel, charcoal, human and wildlife trafficking.
The terrorists benefit from remittances from Somali nationals operating in Uganda and other countries in the region.
According to the report, when the Somalis outside Somalia send money to their relatives back home in al-Shabaab controlled areas, the remittances are taxed by the militants who use the proceeds to finance their terror operations.
The report names other means of revenue generation for the terrorists as drug trafficking, extortion and trading in precious metals.
The report names three terror groups in the region as the biggest threats. They are; al-Shabaab, Allied Democratic Forces (ADF) and Lord’s Resistance Army (LRA).
The volume of terrorist financing, according to the report, is estimated at $100m (about Shs360 billion) for all terrorist groups in the region.
According to the report, al-Shabaab’s main source of funding includes piracy, extortion in form of illegal taxation, trade, foreign remittances, donations, migrant smuggling and wildlife crimes.
According to the findings, it is believed that many businesses operated by the Somali community in Uganda such as “money exchange and remittance companies” and fuel stations send money to Somalia, which are taxed by al-Shabaab when received within territories under its control.
Somali community speaks out
However, Mr Hassan Hussain, the chairperson of the Somali community in Uganda, denied claims of terrorism financing through remittances back home.
He said all the money they send back to Somalia is cleared by the Central Bank before it is remitted to Somalia.
“That’s untrue. We get permission from the Central Bank, We have passed through all the processes fulfilling all the conditions. I don’t know where these people got this information from,” Mr Hussain said.
He said they have been working closely with the security agencies in Uganda and the Somali community has different executive committees that handle issues affecting Somalis in Uganda.
Mr Hussain said their stay has been peaceful and they have not received any threat from the local community here or external threat from al-Shabaab.
For example by 2014, the report says al-Shabaab was generating in excess of Shs1.5 trillion ($400m) annually in trade with foreign countries, which included the United Arab Emirates, Dubai and Kenya through sale of sugar and charcoal.
The group has also been earning $25m (about Shs90.6b) annually through taxation, according to the report.
Piracy probably earned the biggest share of revenue for the al-Shabaab estimated at between $339m and $439m (about Shs1.23 trillion and Shs1.6 trillion) as of 2013.
Although it did not name particular individuals or organisations, the report says al-Shabaab receives a lot of financial donations from its diaspora community, including those in Uganda.
The report, for example, indicates the funds used to execute the July 2010 twin terror bombings in Kampala originated from the UK.
It says the funds were wired from UK through a forex bureau in Nairobi, Kenya. The money was picked from the bureau (name withheld) by one of the terrorists who proceeded to Kampala to finalise the terror mission.
Though the report did not name the person or the group that sent the money, it says the funds were promptly received in Nairobi and one of the masterminds of the attack proceeded to Uganda for the attack.
The attack left 76 people dead and dozens of others injured at Kyadondo Rugby Grounds and Ethiopian Village Restaurant in Kabalagala, both in Kampala.
Fourteen suspects were charged over the twin bombings and nine were convicted.
The report says LRA’s main sources of revenue include wildlife crimes, minerals, extortion, looting and state sponsorship by the Khartoum government.
The report further states that the Allied Democratic Forces’ main sources of funds include trade, real estate business, wildlife crime, illegal mining, state sponsorship and donations from NPOs.
It says the ADF received $22,811 (about Shs82m) from a NPO in the UK. The organisation is not named. It says in 2015, the ADF staged road blocks in eastern DR Congo and obtained $80,000 (about Shs289m) to fund its activities.
According to the report, ADF also runs real estate, car bonds and transport businesses in Kenya. The report says ADF also has real estate businesses in Tanzania, where it derives income to carry out its terror activities in Uganda and DR Congo.
Banking sector registers lowest risk
The analysis of terrorism financing shows that the risks of running terrorism financing is very low in the banking sector.
The higher risk was cited in other types of financial institutions such as forex bureaus and Mobile Money transfer firms, real estate and in some financial inclusion products. The report says there has been one case of alleged terrorism funding related to a bank.
According to the findings, the terror financing risk among NGOs is medium, although there are some NGOs that are currently being investigated for suspected involvement in terrorism financing.
Firms dealing in insurance and security exchanges also present a lower inherent terrorism financing risk.
Currently, in the financial sector, the higher terrorism financing risk is posed by less regulated/supervised types of financial institutions, particularly forex and Mobile Money transfers.
Uganda has a legal framework, which was recently enhanced by the enactment of Anti-Terrorism Regulations.
However, terrorism financing being a new offence, the quality of intelligence generated for this specific crime is still at formative stage.
The report recommends that while there are significant strengths in the anti-terrorism framework, more focus should be placed on terror financing intelligence and investigations, and effective implementation of preventive measures by accountable persons.
Mobile money transfers
The analysis of some financial inclusion-related products, particularly Mobile Money international remittances and Mobile Money person-to-person transfers shows that the vulnerability of mobile money products to terrorism financing risk is high.
This is due to the rapidity of transactions as well as cross-border services that facilitate these transactions.
The report says for money transfers that have transaction thresholds of between Shs4m to Shs5m per day, the risks of terrorism financing are much higher. One can receive the upper limit amount daily and in a week the accumulated sum is high. Customers can also hold multiple SIM-cards and accounts of Mobile Money with the same or different network operators. Although these products are subject to anti-money laundering requirements, the implementation of the regulations is uneven and ineffective.