Opinion : Somalia’s AML/CFT Journey: From Legal Compliance to Effective Implementation Subheadline:

MENAFATF and Somalia’s Evaluation Journey
The Middle East and North Africa Financial Action Task Force (MENAFATF) is the regional FATF-style body responsible for strengthening and assessing AML/CFT systems among its members. Somalia became a member in 2018 and has participated in its mutual evaluation and follow-up processes.
Somalia’s planned mutual evaluation was affected by security and political circumstances that prevented the scheduled on-site process. MENAFATF subsequently applied an alternative technical compliance process. At its 40th Plenary in Amman on 7 May 2025, MENAFATF adopted Somalia’s Technical Compliance Report.
The report became an important reference point for identifying remaining legal, institutional and operational weaknesses.
From Technical Compliance to Effectiveness
The Financial Action Task Force (FATF) establishes global standards for combating money laundering, terrorist financing and proliferation financing. Its evaluation methodology distinguishes between technical compliance and effectiveness.
Technical compliance considers whether the necessary laws, regulations and institutional frameworks exist. Effectiveness asks whether those systems actually work and produce intended outcomes.
This distinction is crucial for Somalia. Legislative reform is only one stage of compliance. The stronger test is whether institutions identify and manage risks, supervisors conduct risk-based oversight, financial intelligence supports investigations, prosecutors pursue financial crime, and criminal proceeds are traced, seized and recovered.
Understanding Somalia’s Financial Crime Risks
Somalia’s National Risk Assessment 2022 provides the principal national basis for understanding the country’s money laundering and terrorist financing risks. It identifies a high overall level of ML/TF risk and highlights vulnerabilities associated with terrorism and terrorist financing, informal financial channels, cash-based economic activity, weaknesses in customer identification and beneficial ownership information, and limited institutional capacity.
It also identifies weaknesses in investigation, prosecution, cooperation and asset recovery, alongside vulnerabilities connected to predicate offences and financial and non-financial sectors.
The National Risk Assessment should therefore remain a practical tool for allocating supervisory, investigative and regulatory resources rather than simply a document prepared for an assessment exercise.
The 2025 Reforms and Remaining Gaps
The 2025 technical compliance assessment recognised progress in Somalia’s legal and institutional development but also identified important deficiencies, including weaknesses in beneficial ownership transparency, risk-based supervision, law enforcement capacity, financial intelligence, asset recovery, inter-agency coordination and supervision of DNFBPs.
Because the planned on-site effectiveness assessment was not completed through the original process, the 2025 outcome should not be presented as a full assessment of operational effectiveness. It was primarily a technical compliance milestone that clarified the reforms Somalia needs to implement and the areas where stronger evidence will be required.
Law No. 40 of May 2025 and Beneficial Ownership Regulation LR.167 strengthened the statutory framework. But beneficial ownership information must also be accurate, current and accessible, while reporting entities must be able to verify ownership and control structures.
The amended framework must similarly translate into effective customer due diligence, enhanced due diligence, transaction monitoring, suspicious transaction reporting, record keeping, sanctions screening and internal compliance programmes.
Financial Institutions and DNFBPs
Financial institutions and DNFBPs are the practical testing ground for Somalia’s AML/CFT framework. Banks and money transfer businesses must understand customer, product and transaction risks and apply controls proportionate to those risks.
DNFBPs also require effective supervision because property transactions, company formation and professional or commercial services may be used to conceal or transfer illicit proceeds.
Authorities need clear supervisory mandates, sector-specific guidance, risk-based inspections and proportionate enforcement. Compliance should be measured through actual institutional behaviour rather than the existence of policies alone. Institutions should demonstrate that they can identify suspicious activity, escalate risks, report appropriately and ensure that senior management actively manages financial crime exposure.
Preparing for the Next Evaluation Stage
Somalia has strengthened its legal readiness, but operational readiness requires sustained implementation and evidence of results.
The FRC needs to demonstrate useful financial intelligence and effective dissemination. Supervisors need evidence of risk-based oversight. Law enforcement agencies and prosecutors need stronger financial investigation and prosecution capacity. Competent authorities need effective mechanisms for tracing, freezing, seizing and confiscating criminal assets.
Somalia should also maintain reliable statistics and documented evidence showing how national risks are being addressed. Kenya’s continued FATF increased-monitoring status provides a useful regional reminder that legislative reforms alone do not eliminate strategic deficiencies.
Somalia’s preparation should therefore focus on measurable institutional performance rather than simply adopting additional rules.
What Somalia Should Do Next
The next priority should be a single, measurable national implementation plan linked directly to deficiencies identified by MENAFATF. Each weakness should have a responsible institution, a legal or operational action, a deadline and a measurable result.
First, Somalia should update and operationalise its national risk assessment and ensure its findings inform sectoral risk assessments. Second, beneficial ownership information should become easier to establish, verify, maintain and access through reliable registries and stronger customer due diligence requirements.
Third, supervision should become genuinely risk-based, including across DNFBPs. Fourth, Somalia should strengthen the quality and use of suspicious transaction reports and improve cooperation among the FRC, regulators, investigators, prosecutors and courts.
Fifth, financial investigations should focus more strongly on tracing proceeds, asset recovery and confiscation rather than treating conviction as the only endpoint.
Finally, Somalia should build a culture of documented compliance. Institutions should be able to demonstrate what they assessed, why they made a decision, what action they took and what result followed.
Somalia has made significant progress in building its AML/CFT framework. The next stage is more demanding: proving that the framework works.
The country’s success will ultimately be measured not by the number of laws and regulations adopted, but by whether institutions can turn those rules into effective supervision, credible investigations, stronger financial integrity and measurable results.

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Avv. Omar Khalif Abdi is a licensed lawyer, policy strategist, and legal drafter at Somalia’s Ministry of Justice and Constitutional Affairs.
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The opinions expressed in this article are those of the writer and do not necessarily reflect the views of Dawan Africa.