Terrorist financing in Southern Africa

The document examines the application of global anti-money laundering and combating the financing of terrorism (AML/CFT) regimes in Southern Africa. It argues that 'one-size-fits-all' international standards, designed for developed formal banking systems, are often inappropriate for the region's cash-based economies and can hinder financial inclusion. The author finds that evidence of actual terrorist financing in Southern Africa is scanty, suggesting that development should take priority over the costly implementation of these complex measures.

• International anti-terrorist financing standards are often ill-suited for Southern Africa because they assume a formalised banking system, whereas the region is dominated by informal economic sectors. In Tanzania, only 6% of the population use banks for depository purposes, while in Malawi the figure is 4%, and in Angola and the Democratic Republic of Congo, it is less than 1%.
• The 'Know Your Customer' (KYC) obligations required by international standards are practically difficult to implement in Southern Africa due to a lack of formal identification and residential documentation. Challenges include the absence of national identification systems, birth certificates, and fixed residential addresses in rural areas or informal settlements.
• Strict AML/CFT regulations may inadvertently discourage the 'unbanked' population from entering the formal financial system due to intrusive documentation requests. In South Africa, asylum seekers, particularly from the Somali community, are often unable to open bank accounts because their temporary permits lack the 13-digit identity number required by Fica regulations.
• Developing countries in Southern Africa face pressure to adopt international AML/CFT measures despite a lack of evidence that terrorism is a significant threat to them. This 'persuasion' is often enforced by international financial institutions (IFIs) like the World Bank and IMF, which may only do business with compliant banks, thereby disadvantaging small local banks.
• The USA PATRIOT Act imposes a significant financial burden on small Southern African banks by prohibiting US banks from opening correspondent accounts for foreign banks that lack a physical presence, employees, or regulatory supervision in the US.
• Evidence of actual terrorist financing within Southern Africa is described as scanty and mostly anecdotal. While there were allegations regarding the use of tanzanite in Tanzania and diamonds in Angola to fund al-Qaeda, investigators found no evidence of such connections.
• Detecting terrorist financing is more difficult than detecting money laundering because the funds involved are often small and may originate from legitimate sources, making them behave like 'ordinary money'. Rules-based detection systems struggle to set thresholds that distinguish these activities from legal transactions without risking the blacklisting of innocent charities.
• The establishment of Financial Intelligence Units (FIUs) is a costly exercise that only Mauritius, South Africa, and Zimbabwe have fully implemented in the region. Some countries, like Namibia, have considered integrating FIU functions into central banks to save resources, despite potential conflicts of interest.

APA

Hübschle, A. (2007). Terrorist financing in Southern Africa. Institute for Security Studies. https://issafrica.s3.amazonaws.com/site/uploads/Paper132.pdf

Chicago

Hübschle, Annette. Terrorist financing in Southern Africa. Institute for Security Studies, 2007. https://issafrica.s3.amazonaws.com/site/uploads/Paper132.pdf.

Wikipedia

{{cite report |last1=Hübschle |first1=Annette |title=Terrorist financing in Southern Africa |publisher=Institute for Security Studies |date=January 2007 |url=https://issafrica.s3.amazonaws.com/site/uploads/Paper132.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{hbschle2007terrorist, author = {Hübschle, Annette}, title = {{Terrorist financing in Southern Africa}}, institution = {Institute for Security Studies}, year = {2007}, month = jan, url = {https://issafrica.s3.amazonaws.com/site/uploads/Paper132.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }