UN report accuses Somali telecom firm of running unregulated mobile banking service
by Judy Maina, firstname.lastname@example.org
NAIROBI – UN investigators accuAsed a Somali telecommunication giant of running an unregulated mobile banking service and refusing to cooperate with law enforcement agencies on data and call records to enhance the security of the chaotic horn of Africa nation.
A new report by the Somalia-Eritrea Monitoring Group, an eight-member panel of independent experts that oversees compliance with U.N. sanctions on the two countries alleged that Hormuud, a multi-billion telecom company based in Mogadishu of dominating the telecommunication market, with a 45 percent market share in Somalia, in excess of 5,000 shareholders.
“The improper regulation of telecommunications companies, including money transfer service providers, may constitute a threat to peace and security in Somalia.” The report said.
According to sources in the Federal Government, Hormuud does not cooperate with regard to sharing data on money transfer records, the report said, alleging that Al-Shabaab operatives have been paid mainly through Hormuud’s EVC-PLUS money transfer service.
With a turnover of USD 1 billion per year, telecommunication companies contributed only USD 4,800,000 in taxes to the Somali government. This figure represents the contribution of Hormuud Telecom, which has an agreement with the FGS since 2014 to pay a flat fee of USD 400,000 per month, the report said.
Hormuud managers did not return to calls and emails seeking comment on the allegation in the UN report.
The report said that Hormuud, the biggest Somali telecom firm launched the first mobile money service in south and central Somalia, at the end of 2009. According to the report, the service called ZAAD was compliant with international standards for money transfer services, including with anti-money laundering regulations.
OLD vs CURRENT MOBILE BANKING
According to the UN investigators, it was mandatory that a person opening a mobile money account (ZAAD) would also attach a telephone number registered under the same name, with procedures also required the user to fill a registration form containing the following information: full name (four names), mother’s name, date, and place of birth and residence. An ID photo and the name of a family member who could vouch for the user were also required. But ZAAD only functioned for less than one year in south and central Somalia before it was closed down by the company
The company has immediately replaced it with EVC-PLUS, which offered similar services but according to the UN report was no longer compliant with international standards. EVC-PLUS is now the most popular mobile money service.
“Opening an account became much easier than before and could even be done remotely, with no physical presence of the user required, nor photo ID. Anyone can now easily open an account with a false identity.” The report said.
“The security risks induced by EVC-PLUS are very high. The system also creates opportunities for money laundering.” UN investigators alleged.
However, the rapid evolution of technology in Somalia—and people’s access to it are growing amid the absence of any government-regulated phone or Internet access, stoking the nascent revival of Somalia’s shattered economy, which shows that some complex businesses can thrive even in one of Africa’s least developed markets.
The first private telecommunications company was opened in Somalia in 1994.
The current three telecom companies operating in the south and central Somalia don’t have an interconnectivity deal that’d allow them to set prices and expand their network access.
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