LONDON (Reuters) - A U.N. agency supported a Somali money transfer firm with suspected links to Islamist militants in a project that was corrupt and failed to curb the risks of money laundering and terrorist finance, a former employee said.
Ismail Ahmed, who worked for the United Nations Development Program (UNDP), said the agency’s Somalia country office had provided “critical support” to the company, Dalsan, between 2003 and 2005, including intervening on its behalf with Swiss prosecutors and U.S. regulators.
The case highlights the risks associated with the financial industry of a country widely seen as a failed state and potential breeding ground for terrorism. Somalia depends more than any other country on money remittances from abroad.
“The true cost of the fraud and corruption in this (UNDP) program is not just the funds lost but how it damaged the Somali remittance industry,” Ahmed wrote in a detailed dossier of allegations which he made available to Reuters.
“Overall, UNDP’s remittance program appears to have done more harm than good.”
UNDP spokesman Stephane Dujarric said the agency was investigating Ahmed’s corruption charges and his allegation that he was punished for blowing the whistle, including by having his contract terminated.
“Clearly UNDP takes all these allegations extremely seriously and we are in fact investigating them thoroughly,” Dujarric said. He declined comment on specific allegations but said those relating to Dalsan would definitely be investigated.
Ahmed accused the UNDP of backing Dalsan — which collapsed in 2006, leaving depositors with losses of $30 million — despite knowing of its suspected links to militant groups.
Dalsan’s co-founder, Mohamed Sheikh Osman, was once the official spokesman of Islamist movement al-Ittihad al-Islamiya, proscribed by the United States and U.N. as a terrorist group.
Chairman Abdilkadir Hashi Farah Ayro was the brother of Aden Hashi Ayro, head of the al Shabaab militant group and mastermind of an insurgency against Somali government troops and their Ethiopian allies, who was killed in a U.S. air strike on May 1.
Ahmed said in a telephone interview the UNDP, which was working to help the Somali financial industry comply with international anti-terrorism and anti-money laundering rules, backed Dalsan after another company boycotted its program.
“They were desperate to get some support from the industry,” he said. “They thought at the time it was a risk worth taking.”
Ahmed, a British national of Somali origin with an economics doctorate and over 20 years of experience in Somali development issues, worked for the UNDP from 2005 to 2007 on a program to support the Somali remittance industry and strengthen its compliance with anti-money laundering and anti-terrorism rules.
The UNDP launched the scheme in 2002 after the largest firm, al-Barakaat, was blacklisted by Washington after the September 11, 2001 attacks on the United States for funding terrorism.
In his dossier, Ahmed described support that the UNDP provided to Dalsan in Switzerland, the United States, Dubai, Britain and elsewhere. He said the UNDP’s Somalia remittance program had damaged the industry it was meant to help.
“UNDP interventions distorted the market by encouraging a number of unscrupulous and opportunistic companies to enter the market,” he wrote. This led to an unusually high failure rate for Somali money transfer companies, with around 15 collapsing between November 2001 and May 2006.
He said money transfers of about $2 billion a year to Somalia and other Horn of Africa countries remain vulnerable to money laundering and terrorist finance — channeling funds through the financial system for the benefit of militant groups.
“Two billion dollars are going through systems which are non-compliant, and that is pretty serious,” he said.
Editing by Timothy Heritage