South Africa under scrutiny for alleged terror financing

South Africa has thus far remained untouched by Islamist attacks. With a well-established three-decade-old democracy and a respected financial system, the nation has maintained its stability. However, experts warn that this most industrialized country on the continent has emerged as a significant hub for jihadist financing in Africa.

“South Africa is open hunting ground,” Pretoria-based counter-terrorism expert Jasmine Opperman told MMC Correspondent.

According to experts, South Africa has become a gathering point for Islamist financiers who channel funds into the hands of terrorist organizations. This recognition on an international level highlights a significant shift for a country that has typically flown under the radar in terms of extremist activities, apart from occasional alerts issued by the US embassy. However, analysts from Africa, Europe, and the United States widely agree with Opperman’s assessment.

Concerns initially arose when the US government imposed sanctions on several South Africans, accusing them of belonging to an Islamic State (IS) cell. These individuals were allegedly involved in facilitating the transfer of funds to IS branches across Africa, providing technical, financial, or material support to the terrorist group, as stated by the US Treasury in November.

Some analysts have suggested that jihadist financing flourished because South African authorities grew complacent at the lack of visible Islamist activity.

“I don’t think South Africa realised it. It was the Americans who said, ‘something not okay is going on in your country,'” Hans-Jakob Schindler, director of the Counter-Extremism Project think-tank, told MMC Correspondent.

“The entire government is now facing a challenging task,” he remarked.

In a notable development, South Africa was placed on the “grey list” by the Paris-based Financial Action Task Force (FATF) in March of this year. FATF, an international watchdog combating money laundering and terrorist financing, highlighted monitoring and prevention gaps in illegal financial activities as the reasons behind this decision. Experts point to a combination of factors, including a functioning financial system, civil liberties, porous borders, corruption, and criminality, which have created favorable conditions for Islamist groups to raise funds within South Africa.

Significant amounts of money are sourced from organized crime syndicates that engage in activities such as drug and precious minerals trafficking, as well as kidnapping for ransom. Extortion, facilitated through fake Tinder profiles to lure victims, is also prevalent. Police statistics reveal a doubling of kidnapping cases to 4,000 between July and September of the previous year compared to the preceding quarter, indicating the extent of organized crime in South Africa, as highlighted by Opperman.

To evade detection, the funds are then transferred to Islamist cells across the continent using small remittances that avoid suspicion. An investigation conducted by a South African weekly newspaper, the Sunday Times, revealed that approximately 6.3 billion rand ($342 million) was wired from South Africa to Kenya, Somalia, Nigeria, and Bangladesh between 2020 and 2021 using nearly 57,000 unregistered phone SIM cards in mobile money transfers. Additionally, the hawala system, an informal payment method based on trust that is harder to trace compared to bank transfers, is also utilized to divert funds.

While some money sent abroad may genuinely be intended to support families, the exact amount raised by jihadists remains unclear. However, experts believe that they have access to abundant funds, likely exceeding their immediate requirements, as stated by Schindler. Internal documents from the Islamic State (IS) indicate that, of the funds raised on the continent, 50 percent is allocated to the IS in Somalia, while 25 percent is distributed among cells in Mozambique and the Democratic Republic of Congo, with the remaining balance going to the central IS organization.

One of the individuals identified by the United States as a leader of an IS cell is Farhad Hoomer, aged 47 and based in Durban. He was sanctioned last year for his alleged increasing involvement in facilitating the transfer of funds from the top of the ISIS hierarchy to branches across Africa. However, concrete evidence is still awaited to substantiate these claims.

Hoomer denied being an IS cell leader, telling MMC Correspondent by phone from Durban that he “was surprised” by the sanctioning. “I’m waiting for the proof. It’s one year waiting for the proof,” he said.

Hoomer was arrested by South African police in 2018 for allegedly planning to deploy improvised incendiary devices near mosques and retail shops. Authorities brought dozens of charges against him, which were however later dropped.

Tore Hamming, a fellow at the International Centre for the Study of Radicalisation, told MMC Correspondent those involved in jihadist financing were “pretty well-known extremist figures from South Africa who have been active in the extremist milieu for a good number of years.”

The jihadists capitalise on “open financial structures”, he added.

Martin Ewi, a regional organised crime observatory coordinator with the Pretoria-based Institute for Security Studies, said a number of individuals were currently being investigated, with detectives “digging” up cases as far back as 2017.

“Terrorists have exploited the country’s democratic nature… to use it as a hub for mobilising financing” and other resources, Ewi told MMC Correspondent.

In a recent note the US-based intelligence and security think-tank Soufan Center concluded that South Africa has “emerged as a financial hub for ISIS in Africa”, using another name for IS.

-* ‘Increase in funding’ *-

According to the Soufan Center, jihadist cells based in South Africa are providing broader support to the operational activities of the Islamic State (IS). These findings come at a time when Africa is increasingly becoming a preferred sanctuary for the extremist group, following the loss of the “caliphate” in 2019 due to international counter-offensives led by the United States in Iraq and Syria. IS has experienced significant growth in Africa, expanding its presence from the Sahel region to Lake Chad, the Democratic Republic of Congo (DR Congo), Mozambique, and Somalia.

Schindler emphasized that Africa has gained importance for ISIS over the past five years, with South Africa playing a role in international terrorism for more than a decade. Ryan Cummings, an analyst from the Signal Risk security advisory firm based in Cape Town, highlighted intelligence evidence suggesting that South Africa served as a conduit for Somalia’s Al-Qaeda-linked Al-Shabaab to transfer funds after the 2013 Westgate mall attack in Kenya’s capital. Cummings further noted reports indicating an increase in funds flowing from South Africa to Mozambique and the IS affiliate in the DR Congo.

-* Strengthening laws to combat terrorism *-

South Africa is now actively working to address its placement on the FATF grey list. In recent months, the government has expedited the passing of several legislative measures, including those focused on anti-money laundering and combating the financing of terrorism. On May 19, Security Minister Khumbudzo Ntshavheni informed lawmakers that her office, in collaboration with other agencies, will continue developing and implementing measures to ensure that South Africa does not become a platform for planning, facilitating, or carrying out acts of terrorism. Their efforts also aim to prevent the acquisition, movement, storage, and use of funds in support of terrorism within the country.