Uncovering Trade-Related Money Laundering and Financial Networks in the Horn of Africa

Trade-based money laundering (TBML) in the Horn of Africa occurs across open borders and informal networks, affecting Ethiopia, Somalia, Eritrea, Djibouti, and Sudan. Using macroeconomic data, trade records, social network analysis, and interviews, the article illustrates how practices such as trade misinvoicing, commodity smuggling—particularly gold, fuel, and livestock—and informal value transfer systems enable money laundering. Key methods include employing third-party intermediaries, exploiting free zones and diaspora routes, and leveraging country-specific vulnerabilities, such as Ethiopia's market risks, Somalia's clan-based IVTS, Eritrea's covert pathways, Djibouti's role as a transit hub, and Sudan's patronage linked to extractive industries. TBML remains a widespread challenge worldwide; enforcement in one nation often shifts illicit activities elsewhere. Money launderers adapt to evolving global AML/CFT regulations. To combat TBML effectively, strategies should include regional cooperation, enhanced trade transparency, reform of customs procedures, and the development of community-based IVTS that extend beyond enforcement.