At Large

The Somali-Kenya Connection

Where does all the pirates' ransom money go?

By 11.6.09

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The insurance companies won't tell you; the shipping companies won't tell you; and, of course, the Somali pirates don't say a word. What is not talked about is the amount of money being made by the Somali piracy entrepreneurs -- and then what they do with it. One thing is clear: Kenya is a major factor.

If the exact figures involved in the piracy activity are not available, the count of hijacked vessels is more easily obtained. The International Maritime Bureau has reported that through the first nine months of this year 32 ships have been taken by the Somalis. Quoting the same sources, the New York Times last May reported that in the previous 18 months Somali pirates "have netted as much as $100 million by hijacking dozens of ships…"

The insurance companies and private ship owners easily can calculate what their vessel and cargo is worth. The kidnapped crews are priced relative to the political pressure of their families and governments on the victimized firms. Sources insisting on anonymity in the relevant insurance concerns suggested that depending on rank and nationality/ethnicity individual ransoms run from $1,000 to $100,000 (European captain level). The crew and cargo of November 2008's Saudi super tanker hijacking were reportedly ransomed for $3 million last January. That figure was considered a bargain by the ship's owners and its insurers.

Less important than actual profit figures of Somali piracy is what is done with the money. Anyone who has traveled to Kenya recently can get a rather good idea. In the better sections of Nairobi there are several high-rise office and residential complexes. According to local journalists, many of the newer buildings were financed for the most part by Somali investors. The profits from piracy would appear to be well handled.

This is not to say the community of Somalis in Kenya generally have not also benefited. The Eastleigh section of east Nairobi, heavily populated by Somalis, is booming as a result of a complicated web of private financial transfers that expedite sale and purchase of smuggled goods avoiding taxes. The Barclay's Bank branch in Eastleigh is open seven days a week to provide full service. No other bank in Nairobi operates on this every day schedule.

Kenya has long been known for its weak prosecution of illegal money laundering. For that reason large amounts of cash from Somali sources find their way into real estate investment and commercial factoring. What was once a nice little business of small scale commercial financing by non-African Kenyans of Lebanese, Syrian, Greek, Indian and Pakistani background is now an activity dominated by internationally connected Somalis.

It is not surprising that local counter-terrorism officials see the tightly related Somali community in Kenya as the primary conduit for monies headed for Islamic jihadi groups. Unfortunately the job of penetrating these networks has been extremely difficult and  electronic surveillance is inhibited by an extensive courier system.

There is a seeming natural political outreach in a situation where substantial sums of illegal funds proliferate -- and Kenya is no exception. Kenyan politics has long been marked by political corruption. The Somali moneymen have found these activities to be particularly useful to their working interests. Multilateral trade operations combined with regional financial connections make a perfect cover for weapons commerce.

In the same manner as the trade in illicit military supplies, the covert transfer of monies for the maintenance of jihadi groups in the Middle East and elsewhere worldwide is facilitated through the Somali diaspora. The informal network of Islamic money transfer, the hawala, stretches globally and provides a trustworthy yet clandestine system of financial manipulation. Somali piracy is only one source of funding, though it has become a major supplier in recent years.

The Kenyan authorities are well aware of the growth of the independent economic system within the traditional Kenyan environment, but there is little that can be done about it. To a certain extent there are banking and commercial elements in this East African country that are just as happy that the Somali connection exists.

Kenya's economy, no longer the envy of the region, has become reliant on the dynamics of its Somali immigrants and the money that pours in from their nefarious activities along the Horn of Africa. For Kenya the Somali phenomenon cannot be lived with -- and yet at this stage Kenya does not seem to be able to live without it!

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About the Author
George H. Wittman writes a weekly column on international affairs for The American Spectator online. He was the founding chairman of the National Institute for Public Policy.