March 21, 2023

IntelBrief: South Africa Has Emerged as a Financial Hub for ISIS in Africa

AP Photo/Themba Hadebe

Bottom Line Up Front

  • ISIS cells working out of South Africa are supporting the operational work of Islamic State more widely.
  • In 2022, the United States sanctioned multiple individuals and entities based out of South Africa for their involvement in financing terrorism.
  • In February 2023, the Financial Action Task Force (FATF) added South Africa to its ‘grey list’ due to insufficient efforts to counter terrorist financing and money laundering in the country.
  • South Africa’s difficulties in countering ISIS-financing comes at a time when it is building stronger economic ties with the Russian Federation – the most sanctioned country in the world following its illegal invasion of Ukraine.

In 2022, Islamic State claimed more than 1,500 attacks across the globe, with the Middle East (Syria and Iraq) and Africa serving as the epicenters for ISIS’s terrorist violence. In the summer of 2022, in its al-Naba newsletter, ISIS highlighted Africa as the territory where it would most likely succeed in reestablishing a territorial caliphate. ISIS affiliates and networks in Mozambique, Burkina Faso, the Democratic Republic of Congo (DRC), Nigeria, and Mali were particularly active, conducting acts of terrorism directed at civilians and security services. At the same time, but less apparent, is a network of ISIS financiers  based in South Africa who are fueling the violence on the continent. Indeed, in March 2022, the United States Government highlighted the financial activity of ISIS cells in South Africa that were specifically funding ISIS groups in DRCand Mozambique.

The March 2022 designations by the U.S. Department of the Treasury focused on the financial activities of Farhad Hoomer, an ISIS facilitator based in Durban, South Africa. Hoomer funded ISIS-DRC by engaging in a range of illicit activities, including kidnapping for ransom, extortion of businesses, and providing real estate and vehicles to ISIS operatives. Another ISIS cell member designated by the U.S. Treasury Department is based in Cape Town and trained operatives to conduct robberies, while other designated ISIS cell members based in South Africa funneled funds, technology and material goods to ISIS groups based in Mozambique and Somalia. The ISIS cells in South Africa have been adept at procuring weapons, financing, and navigating porous borders, border protection, and insufficient financial safeguards in South Africa to fuel violent insurgencies dotting the African continent.

The March 2022 designations served as a warning for South Africa to do more against illicit financing, a long-standing challenge for the government that has suffered from endemic corruption. With concerns growing about ISIS financing out of South Africa coupled by the country’s inability to curb ISIS’s cells, the U.S. Department of the Treasury will likely designate ISIS individuals and business interests in South Africa again. In November 2022, Treasury designated four business associates of Hoomer’s cell, and eight companies owned or controlled by ISIS cells based in South Africa. The March and November 2022 designations highlight the depth in which ISIS is rooted in South Africa. The front companies designated by the Treasury Department included gold trading, construction, waterproofing solutions, shoe, and jewelry companies. Additionally, according to the U.S. Department of the Treasury, Hoomer has expressed an intent to attack the United States and allies. Hoomer’s threats are not an anomaly. In 2017, the U.S. Department of State designated South African twin brothers, Brandon Lee Thulsie and Tony Lee Thulsie, pursuant to Executive Order 13224 for planning to attack the U.S. Embassy and Jewish institutions. The Thulsie brothers maintained linkages to ISIS.

South Africa’s lax attitude towards curbing terrorist financing has been noticed by the Financial Action Task Force (FATF). In a last-minute scramble to avoid being added to the FATF’s so-called “grey list” for having inadequate laws and regulations to combat terrorist financing and money laundering, the South African Government enacted anti-money laundering and terrorist financing laws on January 6, 2023. However, South Africa’s last-ditch efforts were not enough and in February 2023, the FATF added South Africa to the grey list. In large part, South Africa was added not only because of ISIS’s financing, but also because the government was slow to enact previous anti-money laundering and counter-terrorist financing (AML/CFT) related to shortcomings discovered during a 2019 evaluation of South Africa’s compliance FATF recommendations. Of those 40 recommendations, in 2019, South Africa was only fully compliant with three.

The potential implications for South Africa being added to FATF’s grey list are severe. When countries are added to FATF’s grey list, it is a notice to financial institutions, like banks and investors that the country is not a welcoming environment for business operations. Unless South Africa gets its AML/CFT house in order, it may see companies derisk and refrain from carrying out business operations in the country. This development, coupled with South Africa’s decision to retain close economic ties to Russia, which itself is under significant pressure due to its invasion of Ukraine, may cripple South Africa’s economy, the third largest (in terms of GDP based on IMF 2021 stats) on the African continent. South Africa should also expect additional pressure from countries, such as the United States, dedicated to countering Russian economic outlets. It becomes even less likely that the United States, which plays a critical role in FATF, will look the other way on ISIS financing when South Africa’s Minister of International Relations, Naledi Pandor, praised a growing bilateral relationship with Russia. Whatever the implication of its movement towards Russia, South Africa should consider stepping up efforts to combat ISIS financing – it’s the least it can do for its neighbors in Africa who continue to suffer from the influence of ISIS.