Somalia’s economy remains heavily dependent on remittances from the Somali diaspora, which the International Monetary Fund estimates account for approximately 23 per cent of Somalia’s GDP. However, examining and supervising such transactions is difficult as Somalia’s formal banking sector is nascent and underdeveloped. Concerns over the lack of a basic, functioning, regulated financial sector and weak financial regulation and oversight, including customer identification measures, have eroded international confidence in Somalia’s financial firms. In addition, until February 2016, when the Federal Government of Somalia signed the Anti-Money Laundering and Countering the Financing of Terrorism Act into law, Somalia had no laws criminalizing money laundering and terrorism financing.
The recently established Financial Reporting Center (FRC) is central to the Somali remittances and financial services industry and a cornerstone of developing a sound system of detecting and disrupting money laundering and terrorism financing in the country. A functional FRC is a key building block to a formalized financial sector, and the plan to restore the national and international payments system for Somalia.
IDLO is implementing a project that aims to build a soundly regulated financial sector in Somalia that can operate in a professional manner consistent with international standards. To this end, IDLO will assist the FRC to establish a clear identity and standard operating procedures, and will strengthen the operational capacity of the FRC through on-the-job mentorship and specially designed training programs. Finally, IDLO will strengthen the collaboration between the FRC, the police and the Office of the Attorney General around the investigation and prosecution of serious financial crimes.