Tries-old cultural and commercial ties with Somalia has made Yemen the primary
source for illicit arms among Somali importers. Consignments of small arms
and ammunition from Yemen across the Gulf of Aden in a matter of hours to the north-
ern coast of Puntland, a semi-autonomous region in northern Somalia. The port city of
Bosaso, Puntland’s largest city, and commercial capital is the financial epicentre of the
illicit trade. Arms from Yemen fuel the ongoing civil conflict in Somalia, and many are
believed to be transported on throughout the broader East Africa region.
A semi-informal system of international money transfer – commonly referred to as
‘hawala’– underpins the financing of the arms trade. This study focuses on the use of
four Somali hawala money-transfer operators (MTOs) by six prominent arms dealers (or
financial proxies) based in Yemen and Somalia. GI-TOC analyzed data from hundreds of
remittance transactions involving these individuals, dating between 2014 and 2020.
These arms dealers all exploited the widespread gaps in anti-money laundering/coun-
tering the financing of terrorism (AML/CFT) controls, including the principle of ‘know
your customer’ (KYC), to facilitate arms deals between Yemen and Somalia. The arms
traffickers highlighted in this study routinely used dozens of aliases, names and spell-
ing variations. The use of proxy agents to conduct transactions on their behalf was
common. This climate of loose or non-existent oversight allowed arms dealers to make
large transactions – often in excess of federally mandated AML/CFT limits –without
fear of detection or investigation. Most notably, a prominent Yemeni arms supplier was
able to receive hundreds of thousands of dollars in remittances while under US sanction
The prominent arms dealers (or proxies for arms dealers): three importers
located in Somalia (Abdirahman Mohamed Omar ‘Dhofaye’, Mahad Isse
Aden ‘Laboballe’ and Abshir Barre Samatar) and three suppliers/proxies in Yemen
(Sayf Abdulrab Salem Al-Hayashi, Bashir Naaji Abdullahi Shujac, and Mohamed
Hussein Salad). Collectively, the three Puntland-based importers were responsi-
ble for 84% of the arms-related remittances identified by GI-TOC (approximately
US$3.1 million out of the total US$3.7 million).
A few highlights from the report:
- Puntland is the primary entry point for illicit small arms and ammunition into Somalia. Shipments are typically transported in speedboats from Yemen, or, less frequently, transhipped from dhows originating from Iran’s Makran coast.
- The report analyzes a total of 176 ‘hawala’ remittance records across four companies, detailing the transfer of $3.7 million from known arms importers in Somalia to their suppliers in Yemen.
- The largest single remittance transaction amounted to $71,000. Two-thirds of the 176 transactions were in excess of the $10,000 threshold that typically triggers AML/CFT oversight.
- The report highlights issues with KYC compliance in Somalia, which lacks a credible and widespread form of national identification or effective financial regulators. One Puntland-based arms dealer used 24 different names or name variations when transferring funds to Yemen.
- In at least two instances, ‘hawala’ remittance companies permitted the transfer of almost $20,000 to a Yemeni national under OFAC sanction for allegedly supplying arms and financial support to AQAP and IS in Yemen.
- While researching the paper, we initiated contact with a Yemeni arms supplier. Photos of weapons in his storehouse in Sana’a revealed preliminary evidence that arms (specifically, Type 56-1 rifles) reportedly provided by Iran to the Houthis may end up in Somalia.
- The paper concludes with recommendations aimed at strengthening the ‘hawala’ remittance system and preventing further abuses by criminal elements while remaining cognizant of the critical humanitarian and economic role of remittances in Somalia.
Click the link below to download the full report
Following-the-money-The-use-of-the-hawala-remittance-system-in-the-Yemen–Somalia-arms-trade
