Many individuals and organizations have written about Somalia Mobile Money Services (also known as ZAAD Service) which the three leading compa-nies of the telecommunication industry in Somalia (Telesom, Golis and Hormuud) provide. However, all existing reports on this subject seem to have been built on one another with all bearing several similarities to one another and therefore all incor-porating several misconceptions including the be-low:

1. Re the ownership of mobile money providers, all previous reporters presented Telesom, Golis and Hormuud as three distinctive and separate business entities ignorant about the history, evolution and dominant shareholder of these companies.

2. Almost all of them likened ZAAD Service to Kenya’s Safaricom M-Pesa ignorant about the fact that there exist more key differences be-tween the two than similarities.
3. All previous reporters focused only on the posi-tive aspects of ZAAD services surprisingly igno-rant about the fact that mobile money service providers in Somalia are the largest financers of Al-Shabaab terrorist group activities.

4. There is no previous reporter who told the world or Somali authorities that, because these companies are unregulated nor are they scruti-nized by Central Banks, they create money out of nothing by typing numbers into a computer thereby flooding new money into the economy. The consequences are devastating because reports published by these individuals and organizations made countering terrorist funding next to impossi-ble. For instance, in 2012 the United Nations Secu-rity Council Committee on Somalia and Eretria identified Hormuud’s largest shareholder as a prominent member of Al-shabaab. However, be-cause the internet is overwhelmed by misleading research reports that mispresent Telesom, Golis and Hormuud as separate entities, the Security Council Committee failed to notice that the same terrorist, Mr. Jimale is also the largest shareholder of both Telesom Company and Golis Telecom. Contrary to popular opinion, therefore, this docu-ment will report the unreported by unmasking the truth about and crimes committed by the so-called Somali mobile money providers.
Probably you might be wondering, “What are the basis for above arguments?” or “How am I different from previous reporters?” Well, the most important source of data for previ-ous reporters is the Company’s managers and em-ployees whereas my report is based upon a first-hand own experience- and therein lies a key differ-ence. Managers and employees will do what all managers and employees do, “keep your Compa-ny’s confidentiality”.

So, previous reporters, most of them foreigners, reported what managers and employees of the companies they were writing about told them. On the contrary, being a curious customer of these companies from the time they were established to this day and socializing with unsuspecting managers and employees, I have a first-hand experience and a track record even to slightest changes ever made to their structure or operations and every major event in their history had either a direct or an indirect effect on me.
This document will give readers an insider’s per-spective on the truth about local mobile money providers in Somalia. It aims at drawing Somali government’s and international community’s atten-tion to the criminal activities of major telecom companies in the country in order to effect an in-vestigative action to be launched which may hope-fully deprive terrorists of funding and promote ef-fective regulation of the mobile money industry and the finance industry more broadly.

1. Three companies dominate the entire telecom-munication industry across Somalia especially the GSM sector. They are Somaliland Telesom (Telesom Company), Puntland Golis (Golis Tele-com), and SC Somalia’s Hormuud (Hormuud Telecom). Each individual company is specifi-cally dominant in its geographic area of opera-tions.

2. There are numerous previous studies which re-port an inaccurate statistics about what the percentage of subscribers connected to these companies is or accounts for. For example, one study indicates that 85% of subscribers is con-nected to Telesom implying that the balance (15%) is connected to its competitors. Such statistics are not correct.
3. In Somalia, Mobile Network Operators (MNO) do not connect to each other (except Telesom, Golis and Hormuud), which limits subscribers’ ability to make calls or send SMS across differ-ent operators’ networks. This led even competi-tors’ employees and managers to use Telesom mobile in order to be able to make calls to the larger population. The same also goes for its sister companies– Golis and Hormuud competi-tors use their services thereby making the per-centage of subscribers connected to each of Telesom, Hormuud, and Golis to account for 100%. In other words, 100% of GSM subscrib-ers in Somaliland is connected to Telesom Company while 100% of GSM subscribers in Puntland is connected to Golis Telecom and 100% of subscribers in SC Somalia who are So-mali nationals is connected to Hormuud Tele-com.

4. This does not mean that they control 100 per-cent of the market share as “subscription rate” should not be confused with “market share”. In Somaliland for instance, it is estimated that for every one hundred subscribers, ten are con-nected to both Telesom and SomTel while nine-ty are connected to Telesom only. In other words, for every 100 subscribers, all 100 of them are connected to Telesom but 10 of them are also connected to SomTel. Hence, Telesom Company shares GSM revenues with SomTel and with the other competitors as well thereby making its market share to be less than 100%.
5. And the same goes for SC Somalia and Punt-land telecoms. Many subscribers are connected to more than one operator i.e. many are con-nected to both Hormuud and Nationlink or Golis and Nationlink. Nevertheles it is believed that such alternative operators obtain small share of the revenues from telecommunication industry across all regions compared to Telesom, Golis and Hormuud with each reportedly receiving 85 percent or more of the total revenues from GSM subscribers in their local markets.

Who owns leading telecoms in Somalia?

6. The foregoing discussion is meant to give you a clear picture of their domination in their indus-try. Needless to say, these companies also dominate many other industries outside of the telecommunication industry. For instance, Hor-muud Telecom owns SomGas (the sole distribu-tor of household gas in SC Somalia and proba-bly across the country), Hormuud University and many other businesses which are dominant in their separate industries. At this point I am not interested to continue discussing how suc-cessful or how influential are Somalia’s three leading telecom companies; rather, I would shift my attention into the ownership of these companies- the fact that Mr. Ahmed Nur A. Jimale is the largest shareholder of each of Tel-esom, Golis and Hormuud telcoms . Mr. Jimale was the owner and former CEO of Al-Barakat Money Transfer Company which was estab-lished in 1986 but which became popular after the collapse of the Somali state in 1991 when in the absence of a formal banking system, money transfer businesses, known as Hawala, had become the only way for diaspora Somalis to send money back to home for their families and close relatives.
7. In 2001 (few months before Sep 11), Al-Barakat Money Transfer Company has expand-ed vertically and launched a new telecommuni-cation company called Al-Barakat Telecom Ltd. to exploit the previously untapped Mobile Net-work Operation industry in Somalia. Suddenly, it took control over the telecommunication markets in Somaliland, Puntland, and the South and Central Somalia by supplying the country with GSM services, fixed-line telephone and in-ternet services.

8. Shortly before September 11 attacks, the par-ent company, Al-Barakat Money Transfer, was accused by the United States of channeling funds to Al Qaeda terrorist network and follow-ing September 11 attacks, US authorities shut down its Bank’s overseas money transfer chan-nel, froze its monies and listed the Company as a terrorist entity. Although in 2009 the Compa-ny’s Swedish branch has been removed from the terrorist list, it nevertheless remained in United Nations’ list of terrorist organizations until Feb 2012.
9. The newly established telecommunication seg-ment (Al-Barakat Telecom) however not only survived during the initial shutdown of its par-ent company (Al-Barakat’s money remittance channel) but also thrived throughout 2001. Hence, Mr. Jimale got first-hand experience of the importance of diversification as an effective tool to minimize investment risks. Because Al-Barakat Telecom survived when Al-Barakat Money Transfer Company was shut down and its assets frozen, he realized that had he not channeled significant amounts of Al-Barakat Money Transfer’s funds to the investment in Al-Barakat Telecom, he would have lost every-thing. In other words, Mr. Jimale learnt that the expression, “Do not put all your eggs in one basket” has practical business applications, so if it worked for him once why not it work for him again. He immediately split Al-Barakat Tel-ecom into three allegedly separate companies. Not only that, but he also eliminated the com-pany name, “Al-Barakat” from his business world.
How Al-Barakat Telecom evolved into three companies (Telesom, Golis and Hormuud)?
10. Because it was too risky to maintain the com-pany name, Al-Barakat Telecom Ltd., the sur-viving segment had to be renamed before it too attracts US government’s attention. In 2002, Al-Barakat Telecom Company underwent major restructuring. The old strategy, “Do not put all your eggs in one basket” was once more put into practice and the company has been split into three business segments based on three distinctive geographic locations- Somaliland, Puntland and SC Somalia with Somaliland seg-ment renamed “Telesom Company”, Puntland segment renamed “Golis Telecom” and SC So-malia segment renamed “Hormuud Telecom”.
11. The only motive behind restructuring the com-pany was to dissociate Al-Barakat Telcom from Al-Barakat Money Transfer thereby diverting USA and UN attention from the survived seg-ment while also minimizing company-specific risks through forged diversification. Nothing at all is secret about the company’s ownership or motives behind its restructuring. In Puntland and Somaliland, everyone of the age of 25 year or older will tell you that Telesom, Golis and Hormuud are not new telecoms but three seg-ments of Al-Barakat Telecom.

The launch of mobile money services

12. From 2002 until mid-2009, the company has been only providing GSM services, fixed line and internet services. In 2009, Al-Barakat Tele-com (also known as Telesom, Golis or Hor-muud) launched ZAAD Service- the country’s first mobile money service. In Puntland, the new service has been introduced as Sahal Ser-vice whereas in Somaliland and S&C Somalia it was launched as ZAAD Service.
13. Telesom Company, Golis Telecom and Hormuud Telecom have excellent and permanent connec-tivity with one another. For instance, you can make calls from your Telesom Sim Card to both Hormuud and Golis mobile phones and the vice versa.

14. In the same way, you can use the money in your Telesom ZAAD account to pay your bills or buy goods and services in Puntland, SC Soma-lia or Somaliland– and the same goes for the other two. In other words, you can transfer money from your Telesom ZAAD account both to Golis and Hormuud customers and vice ver-sa. This way, users can go anywhere in Somalia and still use the balance in their ZAAD account without any delays or difficulties and without switching from one service to another. This fur-ther proves that these telecoms are one com-pany with three names. Therefore, now that I have established the fact that all three compa-nies (Telesom, Golis and Hormuud) are the same Al-Barakat Telecom Ltd., I will use Al-Barakat Telecom to refer to all three compa-nies. Where necessary, I will also refer to them by their camouflage or separate names. In the same way, I will only use ZAAD Service to re-fer to both ZAAD and Sahal services.
How mobile money works in Somalia

15. With ZAAD mobile money service (aka ZAAD Service), users can pay bills, make purchases and pay employees, perform instant money transfer to another person and recharge airtime credits. It can be made with small payments such as USD ten cents to large payments in the thousands of dollars simply by dialing a three-digit number, followed by a PIN, the recipient’s phone number and the amount of the pur-chase. The entire process takes less than 10 seconds.
16. But before customers/users can use it to pay bills or make purchases, they must have a pos-itive balance in their ZAAD mobile account. To accommodate millions of users, ZAAD Service providers have established a large number of Mobile-Money-Stores (MMS) across all villages, towns, districts, roads and major markets of the country. Thus, to perform a cash-in into their Mobile accounts, users simply go to near-est MMS, handover some US dollars and ask for the equivalent amount in US dollars to be de-posited into their account. Within seconds, the user receives a text message confirming the deposit and indicating the new ZAAD account balance after the new deposit is added to the user’s account. In addition to MMS, users in Puntland and Somaliland can also go to some tens of thousands of independent moneychang-ers known as currency exchangers. By follow-ing a procedure similar to that of MMSs, users bring cash to moneychangers and ask an equivalent amount to be deposited in their mo-bile accounts.

Al-Barakat Telecoms Flood New Money into the Economy
17. ZAAD Service is not available exclusively to customers. Like customers, service providers (Telesom, Hormuud and Golis) also make pay-ments to vendors and employees with ZAAD service. Unlike customers, however, these pro-viders do not need to have a positive ZAAD ac-count balance in order to make a payment with ZAAD service. When making a payment to their vendors, employees or creditors, ZAAD Service operators simply type numbers into a computer, hit the RETURN key and the payee receives SMS message confirming the transfer to his mobile account.

18. Therefore, the electronic digits in the users’ ZAAD Service accounts do not represent a spe-cific pile of cash sitting in the provider’s ac-counts nor do they represent an actual cash payment made by the company. Every month Al-Barakat Telecoms (Telesom, Hormuud and Golis) make payments to some 10,000 employ-ees and hundreds of vendors with ZAAD Ser-vice. However such payment transactions do not effect on the Company’s accounts. For in-stance, if the company had cash balance of $3,000,000 and it paid its employee $500,000 via ZAAD Service, the company’s cash balance would not change i.e. it will remain to be $3,000,000 rather than $2,500,000. This indi-cates that, by paying its employees, the Com-pany created $500,000 of new money out of nothing!

19. Mobile money in Somalia therefore created an unregulated alternative to the traditional bank-ing system- a system in which there are mil-lions of subscribers and hundreds of thousands of businesses involved in this so-called ZAAD Service with authorities failing to recognize that they had allowed the power to create money to slip into the hands of unregulated terrorist enti-ties, namely, Al-Barakat Telecom (aka Telesom Company, Golis Telecom and Hormuud Tele-com).
20. If you still cannot believe the fact that such criminal activities take place behind closed doors, let me give you a real life example. In 2012, Telesom Company fired one of its ZAAD service operators. The employee while still serving on a notice period made a deposit of $10,000 in his mobile account when his coworkers were performing their sunset prayer. He went out before other employees came back from Mosque and then with the help of an ac-complice, he immediately cashed-out all $10,000 from three different mobile money stores (MMS) then within an hour or so, the perpetrator fled from Somaliland to his hometown in Khatumo State. Although the po-lice later apprehended the perpetrator, his mis-sion went off without a hitch and he succeeded to create USD 10,000 out of nothing by typing numbers into a computer. This is a true inci-dent and to this day, internet posts by the per-petrators’ supporters while he was behind bars and following his trial for fraud can be found here, here, and here.
21. How can Al-Barakat Telecom (Telesom, Golis, and Hormuud) commit such a crime and then walk away with it? Well, two factors have per-mitted Al-Barakat Telecom to be able to create and supply new money into the financial sys-tem. The first factor relates to the regulatory vacuum in which they operate- the fact that these companies operate in an entirely unregulated environment. In Somalia there is no ex-isting regulatory framework for the oversight and supervision of ZAAD Service transactions nor is there a central bank with effective mone-tary policy to help control the supply of money into the economy or stop companies and indi-viduals from committing financial crimes. These telecoms therefore took advantage of the weaknesses of state institutions.

22. Another factor that granted Al-Barakat Telecom the power to create new money and avoid de-tection is linked with the users’ tendency to maintain positive account balances. Users do not frequently cash-out mobile money but ra-ther keep balances in their account and use this money to perform transfers, purchases or make payments thereby allowing it to circulate indefi-nitely. For instance, a ZAAD service employee told me that on 30 October 2015, in Telesom alone, 70% of ZAAD users had a positive bal-ance in their mobile account, $59 on average while some 66% of users had a positive aver-age balance of $58 in their mobile accounts throughout the year. I multiplied this by some 700,000 active users and then found, USD 26,796,000. This is not all of it because during the same period, 92% of some 16,000 retail businesses had maintained a positive average balance of $571 throughout the year- giving raise to additional 8.5 million US dollars!
23. Due to the above, Telesom alone, which is just one segment of the three sister companies, could have in 2015 created USD 35 million of new money and supplied it into the economy. Now think about how much of new money, when combined, can Telesom, Hormuud, and Golis create or have created in the last six and half years. The newly created money will re-main circulating in the system without effecting providers’ physical cash flows as long as Al-Barakat Telecoms exist and customers are will-ing to continue maintaining such huge balances in their mobile accounts. For instance, had the perpetrator, instead of cashing out, kept the stolen $10,000 in his mobile account or had he used it to perform transfers or make payments, it would not have led to a decrease of Tele-som’s cash balance and the newly created $10,000 would have indefinitely remained in circulation passing from one user to another.

24. Many organizations and individuals who write about mobile money in Somalia often likens ZAAD Service to Safaricom’s M-Pesa system. Such writers are surprisingly ignorant about the fact that unlike Kenya’s Safricom, Al-Barakat Telecoms operate in unregulated environment and that their financial activities are shielded from the Central Bank’s scrutiny. They cannot be scrutinized because there are no local bank-ing laws to regulate nor there exist strong state institutions to do that. Let alone regulating, the hosting governments (Somaliland, Puntland and SFG) cannot even access their records or levy taxes on their revenues. Another differ-ence is that in the case of M-Pesa, customers’ cash-in and cash-out ratio is almost equal whereas customers’ cash-in and cash-out ratio is reportedly 0.2 to 1 for Al-Barakat telecoms. In other words, M-Pesa’s customers immediate-ly cash out and do not maintain positive bal-ances in their mobiles account whereas Al-Barakat’s ZAAD service users indefinitely main-tain very large account balances in the system.
25. With government supervision and without hav-ing customers who are willing to maintain enough account balances, M-Pesa is not in an enabling position in which it can create new money out of nothing. Even if it does, custom-ers will at the end of the day demand physical cash and Safaricom shall pay the company’s cash for customers’ mobile account balances. On the contrary, every new dollar that Al-Barakat telecoms create will indefinitely circu-late in the system, hence- it will serve as a long-term loan except that it does not bear an in-terest nor does it have a due date or claimants. This increased the amount of money in the economy, pushing up prices and, among other problems, destabilizing financial system throughout the country.
Mobile money: A major source of funding for Al-Shabaab

26. There is no doubt that, on the one hand, mo-bile money services brought financial inclusion to Somali citizens across the country. On the other hand, ordinary citizens are not the sole or even major beneficiaries of Al-Barakat mobile money services. As a matter of fact, Al-Shabaab terrorist group are the true beneficiar-ies of this unregulated, money-creating and terrorist-controlled ZAAD Service thus making Al-Barakat Telecoms (Telesom Company, Golis and Hormuud) the largest financiers of Al-Shabaab activities.

27. The UN Security Council Committee on Somalia and Eretria confirms this argument. In the Se-curity Council Committee report (S/2011/433) , Mr. Jimale is identified as one of Al-Shabaab’s chief financiers and is ideologically aligned with Al-Shabaab.

28. Al-Barakat Telecoms (aka Telesom, Hormuud and Golis) are the largest source of funding for Al-Shabaab whereas ZAAD Service is the main and most effective method in which this crimi-nal entity transfers funds to the terrorist group and through which terrorists in turn distribute funds to their members.

The ultimate deception: elimination of identi-fication procedures
29. Still exercised in Somaliland and Puntland, Al-Barakat (Telesom, Golis and Hormuud) tele-coms’ customer policy initially required owner-ship of an official identity card (ID) to use the service. Therefore, all ZAAD mobile money us-ers across the country were subject to identifi-cation procedures that confirm their legitimacy. In other words, all three mobile money provid-ers (Telesom, Golis and Hormuud) required that every user’s proof of identity together with a photo of the user be entered into the User Registration Server and digitally stored.

30. This procedure had several advantages. First, it protected senders from transferring money to a wrong recipient because before executing the transaction the service displayed intended re-cipient’s name and required the sender to con-firm that the money is to be transferred to Mr. or Ms. XYZ. For example if John Johnson wants to transfer $900 to Mr. Iceman’s ZAAD ac-count, the service would ask, “Are you sure to send $900 to Mr. Iceman?” As he confirms the transfer, Mr. Iceman will receive a text mes-sage confirming that he has received $900 from John Johnson. This allowed both authori-ties and providers to check the identity of any registered user every time the customer per-forms a cash-in or a cash-out thereby protect-ing the risk of the service being used for crime or misconduct behavior. Second, in the event when a caller threats you on the phone (as Al-Shabaab does to terrorize citizens), it was easy for the victim to identify the caller’s full name using his mobile phone. Third, if police confis-cates the mobile phone of a suicide bomber, the confiscated mobile would lead authorities to identify every user who received from or sent money to the deceased terrorist. Even without obtaining his mobile phone, if the police identi-fies the face of the terrorist it could still go to Al-Barakat and ask his data including his call-logs and mobile phone transactions.
31. This identification procedure not only compro-mised Al-Shabaab’s anonymity but also led to the arrest of many members of the group. Re-portedly, Al-Shabaab called Mr. Jimale, the dominant shareholder of all 3 Al-Barakat tele-coms who is also a prominent financer of the group, for a meeting. At the meeting, Al-Shabaab demanded that ZAAD Service identifi-cation procedures be terminated. However, it was too risky for Mr. Jimale to end the identifi-cation procedure by himself because it would have raised difficult questions from both the government and the public. Therefore, it was agreed that, “Al-Shabaab shall ban the public from using Hormuud Telecom’s ZAAD service and then Mr. Jimale shall relaunch the service but without identification procedures”.
32. It did not take too long neither parties to im-plement their deceitful strategy and fool the world. Shortly after the meeting, in 2010, Al-Shabaab warned people not to use Hormuud’s ZAAD service. In the next day, Mr. Jimale ter-minated the service but within few days re-introduced it as EVC-Plus – another version of ZAAD Service except this time there is no any customer policy requiring ownership of an offi-cial identity card (ID) to use the service and all users are 100% anonymous. You can buy your Sim Card in the open market and start using EVC-Plus right away. Hence, while transactions may be traceable, even Hormuud itself cannot identify the actual user of its EVC-Plus. Howev-er, because Al-Shabaab is not active in these regions, Somaliland Al-Barakat (Telesom) and Puntland Al-Barakat (Golis) still use customer identification procedures.
32. This criminal enterprise, namely Al-Barakat Tel-ecom (aka Telesom, Golis and Hormuud) not only fooled the world but also granted ruthless terrorists the power to create money out of
nothing and then use that money to terrorize and slaughter citizens of this country.

33. There already exists a damning evidence re the crimes that this enterprise commits against hu-manity. For instance, on 17 February 2012, the UN Security Council Committee on Somalia and Eretria has, pursuant to resolutions 751 (1992) and 1907 (2009) concerning Somalia and Eri-trea, added the largest shareholder of all three sister companies (Mr. Jimale) to the list of indi viduals and entities subject to the travel ban, assets freeze and targeted arms embargo im-posed by paragraphs 1, 3 and 7 of resolution 1844 (2008). According to their report, the Se-curity Council Committee identified Hormuud Telecommunications as being one of the single largest financiers of Al-Shabaab, which includes large lump-sum payments to Al-Shabaab in the hundreds of thousands of dollars and these pay-ments to Al-Shabaab were facilitated by Jimale. The UN Security Council Committee report (S/2011/433) is available here

34. The Security Council Committee has done a wonderful job however, it is very worrying that it has not yet recognized that Mr. Jimale is also the largest shareholder of Telesom and Golis telecoms.