How Shadow Liquidity Sustains Al-Shabaab: From Charcoal Exports to Shell Companies

Mapping the hidden financial arteries that keep one of Africa’s deadliest insurgencies alive — from global smuggling routes to potential cryptocurrency adaptations.

Image source

Preface

This article was originally drafted and circulated privately in March 2025. Although it was not published through its initial intended outlet, I share it now to advance public understanding of Al-Shabaab’s evolving financial networks and the broader dynamics of illicit liquidity in conflict economies.

This article draws from my Shadow Liquidity Doctrine, first drafted and circulated privately in early 2025. The doctrine defines shadow liquidity and its operational twin, illicit liquidity, as strategic infrastructures that sustain modern conflict, enable gray zone operations, and maintain covert networks of power. Al-Shabaab’s financial architecture exemplifies this hidden circulatory system: an adaptive flow of capital that transcends borders, sanctions, and formal oversight.

Intro

Somali terror group al-Shabaab remains a persistent global threat despite decades of international efforts to combat its influence. With recent reports indicating the militants have established[1] checkpoints just 15 kilometers from the capital, Mogadishu, the al-Qaeda-aligned group continues to launch a dizzying array of attacks, recently striking the Somali presidential convoy and an international hotel in the capital and launching a bomb attack on a US military base in neighboring Kenya last summer – just to name a few. With the African Union Mission in Somalia (ATMIS) ending its mandate on 31 December 2024 and replaced by a scaled-down African Union Support and Stabilization Mission in Somalia (AUSSOM), many in Somalia and abroad have expressed doubts as to the mission’s future success in combating this growing threat.

Sophisticated financial networks underpin much of al-Shabaab’s regional and global threat. These networks are prime examples of what I define as shadow liquidity — hidden capital flows that function as strategic infrastructure, enabling militant and criminal actors to endure despite military or ideological setbacks.

Al-Shabaab’s sustained influence could have severe geopolitical ramifications, given the group’s sway over piracy outfits on the Indian Ocean and close ties to the Houthis and Iran. Last summer, US reports indicated that the Yemen-based and Iranian-backed Houthis had met with members of al-Shabaab to discuss mutual aid, including Houthi arms transfers and technical expertise in exchange for al-Shabaab’s efforts to ramp up piracy of the Somali coast. If successful, this move could extend the current crisis in the Red Sea by thousands of kilometers and more severely impact global shipping, especially if al-Shabaab and the pirate outfits it supports gain access to sophisticated Iranian drones, missiles, and other weaponry. In addition to these potential global ramifications, al-Shabaab poses a significant threat regionally, having carried out devastating attacks killing thousands in Somalia as well as neighbouring Kenya and Ethiopia. In this way, any future al-Shabaab gains could come at a cost to global security as a whole.

Sophisticated financial networks underpin much of al-Shabaab’s regional and global threat. The organization is by far al-Qaeda’s wealthiest constituent group, generating over $100 million USD in revenue annually, funds essential to its deadly operations at home and abroad. Although growing global scrutiny over the past year has hindered al-Shabaab’s financial operations, the group remains tactically resilient, indicating it has and will likely continue to adapt to its constrained financial circumstances. This insight explores how al-Shabaab raises money locally, has harnessed a sophisticated network of financial facilitators and investments abroad to bring money into Somalia, and how it may adapt following new rounds of sanctions by US authorities.