How millions in terror funding flowed through SA

Loopholes in financial vigilance allowed more than R400m  — some of it believed to have funded fatal Isis bomb attacks in Uganda two years ago — to flow out of South Africa in suspicious transactions between January 2020 and March 2021. 

But despite the transactions being flagged with regulators as far back as 2020, no known action has been taken in South Africa against the alleged terror financiers or suspected money launderers.

The Hawks have confirmed to Sunday Times that a middleman for the terror funding is now under investigation.

According to experts, the lack of action by law enforcement agencies is an example of why South Africa was greylisted in February by the Financial Action Task Force, an international terror-financing watchdog.

The money was transferred, often from unregistered cellphone numbers, in tens of thousands of small amounts that fall below the legal reporting threshold. 

Senders used a remittance provider called Mama Money, which allows low-cost money transfers between African countries.

Mama Money is a non-monetary financial institution, which has no way of checking whether phone numbers are registered in terms of Rica (Regulation of Interception of Communications & Provision of Communication Related Information Act) and Fica (Financial Intelligence Centre Act) regulations.

Anti-money laundering regulations do not require declarations of the origin of funds for transactions under R5,000.

Redge Nkosi, an executive director of Firstsource Money — an economic policy research and advocacy team — said the South African Reserve Bank’s regulatory regimes around financial institutions and their operations, including acquisitions, were very tight, for good reason. 

However, these stringent regulations did not apply to operations like Mama Money. “This could definitely be one of the reasons South Africa has been greylisted,” he told the Sunday Times.

With all financial services, there is the risk of abuse. Mama Money proactively works with local and international authorities

—  Nicolas Vonthron, CEO of Mama Money

The pay-in provider for Mama Money is the fintech company Selpal, which provides point-of-sale devices to informal traders.

Selpal is now fully owned by FNB. The bank was a 33% shareholder at the time of the transactions but said it was not involved in Selpal’s day-to-day operations.

The Sunday Times is in possession of several documents relating to the suspicious money transfers, including an internal bank document and notes from Somalia’s National Intelligence & Security Agency (Nisa) probing the links to terror financing. 

Based on these documents and interviews with Mama Money CEO Nicolas Vonthron, law enforcement officials, intelligence sources, terror experts and the financing middleman — Bashir Abdi Hassan —  the Sunday Times can reveal: 

• R1.6m was sent out of the country via a Selpal point-of-sale device used by Hassan at his business in Mayfair, Johannesburg; this included $30,000 (about R540,000) transferred to Sanyu Nakitende,  who counter-terrorism experts say is the wife of Meddie Nkalubo, a senior leader of an Isis-affiliated group active in Uganda and the Democratic Republic of the Congo.  
• Hassan, who owns a company called Heeryo Trading Enterprises,  confirmed that he used Selpal and Mama Money, among other remittance services, to send money on behalf of alleged South Africa-based Isis financiers for a fee. He said he only discovered his clients were suspected Isis financiers when Somalian authorities contacted him.
• Another $10,000 was sent to Aisha Katushabe, an alleged financier for an Isis-affiliated group that carried out a bombing campaign in Uganda in 2021 in which 11 people were killed and 39 wounded. Reports compiled by Somalia’s Nisa  and Kenyan police confirm the payments from Heeryo to Nakitende and Katushabe, who were both arrested in connection with the attacks.
• A total of R413m was sent via a Selpal device from a Bangladeshi-owned internet cafe in Mayfair. Mama Money blocked the owner from using the service and reported him to the Financial Intelligence Centre (FIC) after he personally sent more than R130m out of the country.
• Between January 2020 and March 2021, a total of R6.3bn in Mama Money transactions originating in South Africa and using 56,967 different cellphone numbers were facilitated through Selpal.  The recipients of more than half these transactions were in Kenya. Others were in Somalia,  Bangladesh and Nigeria.
•  The senders were able to use unregistered cellphone numbers to register as Mama Money clients because  Rica requirements on verifying the owner of a cell number do not apply to remittance providers, only to telecommunications providers.
• Cellphone numbers were regularly  switched by senders and receivers so as not to be flagged by Selpal and Mama Money systems.

Vonthron told the Sunday Times: “With all financial services, there is the risk of abuse. Mama Money proactively works with local and international authorities and continuously invests in improving its systems and procedures to combat financial crime, which is a broader industry challenge. Mama Money has always been fully compliant with these regulatory obligations.”

He said Mama Money compiled a suspicious transaction report and flagged it with the FIC in 2020.

Approached by the Sunday Times, the FIC said its mandate “does not encompass conducting inquiries or criminal investigations”.

“The FIC conducts analysis of reports on transactions and other reports submitted by accountable institutions,” it said.

“The financial intelligence reports produced from analysis are used by law enforcement, prosecutorial authorities and other competent authorities in their investigations, prosecutions and applications for asset forfeiture. Furthermore, confidentiality provisions in the FIC Act prevent the FIC from disclosing whether it has or has not received any reports from institutions.”

Hawks spokesperson Katlego Mogale confirmed that the unit is investigating Heeryo Trading for “suspicious transaction reports received from financial institutions”.

“The Directorate for Priority Crime Investigation is working closely with other law enforcement agencies,” said Mogale. “There are no arrests made yet and no further information can be provided as the matter is still under investigation.”

Nadiah Maharaj, chief risk officer at FNB, told the Sunday Times the bank first acquired a 33% equity interest in Selpal in 2018. It had “no direct involvement in the company’s day-to-day operations”, she added. 

“After satisfying all our regulatory requirements, our 100% acquisition of Selpal was approved in December 2020. This acquisition was part of our advanced efforts to improve financial inclusion and enterprise development in local markets.

"The aim was to use Selpal’s platform to accelerate the integration of informal enterprises into the formal financial system and reduce dependence on cash.

“Selpal was not a payment remittance service. It was one of the multiple collection channels used by third-party remittance service providers such as Mama Money, alongside retailers and mobile service providers,” said Maharaj.

“Selpal’s records confirm that the specific transactions in question occurred before our acquisition was approved in December 2020.”

An investigation by FNB’s internal audit department in the first half of 2021 warned of the risks in the system. The document, seen by the Sunday Times, notes: “Vault transfers between store traders may aid … in the concealment of transaction trails and the flow of funds, resulting in potential breaches of AML [anti-money laundering], CFT [combating terrorism funding] and SARB [Reserve Bank] regulations, and Selpal being held liable, resulting in fines, penalties and reputational damage.”

The report was referred to Selpal executives for comment, who conceded: “This is a huge risk.”

The internal audit concludes, after breaking down the R6.3bn in transactions between January 2020 and March 2021: “The above points would suggest that store traders are operating in larger groups and that there may be an attempt to conceal the transaction trail and the flow of funds from its original source before a Mama Money transaction is processed.”

A note at the end says: “Based on this document we need to immediately and urgently report to the regulators.”

FNB did not respond when asked if this ever happened. The Reserve Bank said it could not comment “on any institution-specific matters”. Former Selpal CEO and co-founder Stephen Goldberg, who sold his shares to FNB, referred queries to the bank.

The agreement between Mama Money and Selpal ended in November last year, almost two years after FNB fully acquired ownership. Vonthron said the partnership “was no longer commercially viable”.

A database of Selpal transactions shows R1.61m was transferred through Heeryo Trading.  It was some of these transactions that caught the attention of anti-terror investigators in Somalia, Kenya and Uganda.

Hassan, who is originally from Somalia, explained how he transferred and received  money.

They began coming to my shop in 2019. They were looking for a business they could use to send and receive money. They wanted to send money to and from Somalia, Kenya and Uganda

—  Bashir Abdi Hassan

He said he was approached by two suspected Isis funders, whose names are known to the Sunday Times, to do the transfers.

Hassan told the Sunday Times he had received $400,000 from an Isis financier in Somalia,  Abdirizak Mohamed Abdi Jimale, between 2019 and 2020.  Jimale has since been jailed in Somalia. 

Hassan, who describes himself as a “simple, honest businessman”, said: “They began coming to my shop in 2019. They were looking for a business they could use to send and receive money. They wanted to send money to and from Somalia, Kenya and Uganda.

“They came to me and asked if they could use my bank account in Somalia, Salaal bank account. They said they had money in Somalia, they wanted to send the money to here [South Africa] and elsewhere. They asked if they could do this. I said yes. I would be paid between 2% and 5% of every transaction.”

Nisa agents believe that in this way Isis was able to fund operations in Somalia, Kenya, the DRC, Tanzania, Mozambique and Uganda.

Authorities in Kenya, Uganda and Somalia did not respond to requests for comment.