Ali Jama Baqdadi, governor of Somaliland’s central bank, announced last week that an influx of counterfeit dollars had entered Somaliland first from Mogadishu and then via Ethiopia. In a public statement, he assured Somalilanders and those invested in the economy that his top priority would be to intercept the counterfeit notes in order to defend its economy. His public announcement coupled with efforts to block and confiscate the fake notes shows the seriousness of intent.

The flood of counterfeit U.S. dollars into Somaliland is likely not simply a get-rich-quick scheme; rather it appears to be “grey zone” warfare, that is, aggression launched by one state against another meant to derive advantage without crossing the threshold into war.

This is consistent with former Somali President Mohamed Abdullahi Farmaajo’s general strategy: As Farmaajo’s political and economic stewardship failed and Somalia’s security situation worsened, he sought to distract his constituents with appeals to nationalism. Instead of seeking to lift Somalia up to Somaliland’s level of peace, security, and democracy, however, Farmaajo worked to undermine Somaliland’s success. After the international community returned control over Somali air space—including that of Somaliland—to Mogadishu, for example, Farmaajo weaponized it in order to increase Somaliland’s isolation. Farmaajo and Fahad Yasin, his intelligence chief and bankroller, encouraged Abdiweli Gaas, already Puntland’s most anti- Somaliland president, to provoke border conflict with Somaliland in order to rally Somalis around the flag. Farmaajo diverted millions of dollars in aid and development money to fund a troll army to whip up anti-Somaliland sentiment online and in the Somali press.

Somaliland may not be wealthy, but both its management of scarce resources and fiscal conservatism enables business to thrive relative to its neighbors. Its fiscal success also has national security implications: Local support for Puntland’s claims to Sool and Sanaag hemorrhaged, after unrestrained printing of the Somali shilling caused Somalia’s currency to depreciate while the Somaliland’s remained stable.

Somaliland’s success is shaky, however. Lack of international recognition hobbles international finance and investment. Somaliland’s small budget and lack of foreign reserves restricts its maneuverability to shore up its currency when it is under attack.

Farmaajo and Fahad Yasin may think themselves clever for what appears to be their latest attack on Somaliland. They are wrong, however: Should foreign diplomats and intelligence services conclude their administration was behind the counterfeit dollars, they risk not only American ire but also putting Somalia in the same category as North Korea, Iran, and Hezbollah.  

On October 2, 2004, after a 15-year Secret Service investigation into counterfeiting, U.S. Federal Bureau of Investigation (FBI) and Secret Service agents raided a Panamanian ship as it arrived in Newark, New Jersey from Yantai, China. On board they found nearly $300,000 in near perfect counterfeit $100 bills. It was the first of several seizures totaling $4 million dollars, less than one-tenth of what the Treasury Department suspected had entered circulation. An investigation proved the notes’ origin to be North Korea. This in turn led the U.S. Treasury Department to sanction Banco Delta Asia, a Macao-based bank, with close ties to the North Korean regime. At the time, U.S. officials privately said that governments long considered counterfeiting an “act of war.” In 1939, for example, Nazi Germany launched Operation Bernhard to counterfeit British bank notes in order to undermine the British pound as a reserve currency.  The Bush administration believed Pyongyang’s attempt to undermine trust in the dollar was a “threat to the American people.” While Farmaajo and international officials have celebrated debt forgiveness and the ability of Somalia to solicit new loans, Somali involvement in the latest counterfeiting scheme could lead to sanctions on Somali financial institutions and government officials and risk Mogadishu’s ability to access foreign capital.

The United States has also repeatedly accused Iran of counterfeiting dollars. In 2010, for example, Iranian agents flooded Iraq with counterfeit dollars in order to bolster the electoral prospects for Tehran’s proxies. In the end, however, Iran’s actions only antagonized the Iraqi government and business community across Iraq’s ethnic and sectarian spectrum. More recently, an influx of counterfeit dollars from Iran temporarily paralyzed Afghanistan’s banking sector. In 2018, the U.S. Treasury Department found Iran was engaged in systematic efforts to undermine the international financial system.”

Iran has also provided its Lebanese proxy Hezbollah with both counterfeit U.S. dollars and the ability to print more. Here too Farmaajo and Fahad Yasin may have miscalculated: The United States and Europe target Hezbollah counterfeiting with alacrity because the group uses its dollars to fund terror, often against Western targets. Farmaajo’s regime may think they have engaged in a cost-free strategy to harass and undermine Somaliland, but if investigations show al-Shabaab utilized diverted counterfeit bills in order to fund terrorism against Western targets, or AMISOM members like Kenya, Uganda, or Burundi, both Farmaajo and Fahad Yasin could easily find themselves personally sanctioned or designated for terror finance.

Somalilanders should applaud Ali Jama Baqdadi for his fast response to counter the influx of counterfeit notes. He may have protected the integrity of Somaliland’s economy, but for Treasury officials in Washington and intelligence officials worldwide, the investigation is only just beginning. If Farmaajo is in anyway involved, he may find his recent political troubles only the tip of the iceberg.

ABOUT THE AUTHOR

Michael Rubin is a resident scholar at the American Enterprise Institute, where he specializes in Iran, Turkey, and the broader Middle East. He also regularly teaches classes at sea about Middle East conflicts, culture, terrorism, and the Horn of Africa to deployed US Navy and Marine units.

Disclaimer: The viewpoints expressed by the authors do not necessarily reflect the opinions, viewpoints of Somaliland Chronicle, and its staff. 

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