Somalia

**Legal Test Used (e.g., Howey test equivalent):**

**Absence of Specific Test:** There is no publicly available or established legal test in Somalia equivalent to the Howey Test for determining whether a crypto token constitutes a security. The regulatory environment for advanced financial instruments like crypto securities is not yet developed.

**Implied Approach:** Should the CBS or another financial authority need to categorize a crypto asset, they would likely revert to broad definitions within existing (albeit limited) financial legislation concerning investment contracts, collective investment schemes, or financial instruments. However, this is largely hypothetical as no such specific application has been outlined for crypto. Their primary concern has been the *existence* of crypto rather than its specific classification within a security framework.

**Which Tokens Are Considered Securities:**

**General Prohibition/Caution:** As there is no specific classification test, there is no official list of tokens considered securities. Instead, the CBS has generally viewed all cryptocurrencies with skepticism, warning against their use.

**Potential Implication:** If Somalia were to develop such a framework, it's plausible that tokens resembling traditional investment contracts (e.g., those issued in an Initial Coin Offering (ICO) with an expectation of profit based on the issuer's efforts) would be treated as securities. However, this remains speculative.

**Registration/Exemption Requirements for Token Issuers:**

**No Specific Framework:** There are no specific registration or exemption requirements for crypto token issuers in Somalia because the regulatory environment does not formally recognize or facilitate such activities.

**Implied Prohibition:** Any entity attempting to issue a crypto token that could be construed as an investment product would likely face immediate scrutiny and opposition from the CBS, potentially being deemed an unauthorized financial activity.

**No Specific Rules:** Similar to issuance, there are no specific rules governing the secondary trading of crypto tokens as securities.

**Discouragement of Trading:** The CBS's warnings extend to engaging in crypto trading activities generally, highlighting the risks involved. Any platform facilitating such trading would operate outside the formal regulatory perimeter and could face intervention.

**Lack of Publicized Crypto-Specific Securities Enforcement:** There have been no widely publicized or specific enforcement actions directly related to the *issuance or trading of crypto tokens as securities* in Somalia. This is largely due to the absence of specific legislation and the nascent stage of the financial sector.

**General Warnings:** Enforcement has primarily taken the form of general warnings issued by the CBS to the public and financial institutions, advising against dealing with cryptocurrencies. These warnings typically highlight risks such as volatility, lack of consumer protection, and potential for illicit activities. If actual fraud or illicit financing involving crypto were discovered, it would likely be pursued under general criminal law or anti-money laundering regulations, rather than specific crypto securities laws.

**Central Bank of Somalia (CBS) Website:**

While the CBS website is the official source for financial regulation in Somalia, you will not find specific laws or guidelines on crypto securities classification. Their announcements typically focus on general financial stability, banking supervision, and monetary policy, often including warnings about unregulated activities like cryptocurrency.

**None specifically for cryptocurrency custody.** Since cryptocurrencies are not recognized as legal tender or regulated financial products under a specific framework, there are no licenses issued specifically for providing crypto custody services. Any entity operating in the broader financial sector would need to comply with general financial services licensing requirements from the Central Bank of Somalia, but these do not cover virtual asset custody.

**Segregation of Client Assets Rules:**

**None specifically for cryptocurrency assets.** In the absence of a specific regulatory framework for crypto custody, there are no mandates for the segregation of client digital assets from a custodian's proprietary assets.

**None.** Highly technical and specific mandates like cold storage are absent, given the lack of any broader crypto regulatory framework.

**No specific definition for crypto custodians.** The concept of a "qualified custodian" for digital assets, as defined in more advanced jurisdictions, does not exist within Somalia's current regulatory landscape.

**No public information suggests pending legislation specifically targeting cryptocurrency custody.** While the Central Bank of Somalia and the government are interested in leveraging financial technology for development, particularly in areas like remittances, their primary focus regarding digital assets has been on financial stability and anti-money laundering (AML) concerns rather than comprehensive regulation of crypto products or services like custody. There have been discussions and exploration of blockchain technology, but this hasn't translated into specific custody rules.

**Resolution 751 (1992):** Established the UN Security Council Committee pursuant to Resolution 751 (1992) and 1907 (2009) concerning Somalia and Eritrea, which oversees the arms embargo.

**Resolution 1844 (2008):** Imposed targeted sanctions (travel ban, asset freeze) against individuals and entities undermining peace and reconciliation in Somalia, violating the arms embargo, or obstructing humanitarian assistance.

**Resolution 2662 (2022):** Renewed the arms embargo and various other measures concerning Somalia, including the asset freeze and travel ban.

**Resolution 1267 (1999), 1989 (2011), 2253 (2015):** These resolutions establish the ISIL (Da'esh) and Al-Qaida Sanctions Committee (often referred to as the 1267 Committee), which maintains a list of individuals and entities associated with Al-Qaida (including Al-Shabaab) and ISIL, subject to asset freezes, travel bans, and arms embargoes.

**Compliance Requirement for VASPs:** VASPs must screen all their customers and transactions against the **UN Security Council Consolidated List**, which includes individuals and entities designated under the 1267/1989/2253 (ISIL/Al-Qaida) regime and other Somalia-specific lists. Any match requires immediate blocking of funds (asset freeze) and reporting to relevant authorities.

UN Security Council Consolidated List: https://www.un.org/securitycouncil/content/un-sc-consolidated-list

UN 751/1907 Committee concerning Somalia: https://www.un.org/securitycouncil/sanctions/751

UN Security Council Resolution 2662 (2022): https://undocs.org/S/RES/2662(2022))

**Global Terrorism Sanctions Regulations (GTSR):** Implemented under Executive Order 13224, this program targets terrorists and those who provide support to terrorists or acts of terrorism. Al-Shabaab and many of its leaders and financiers are designated under this authority.

**Global Magnitsky Human Rights Accountability Act:** Authorizes sanctions against foreign persons involved in serious human rights abuse or corruption. While not Somalia-specific, it could apply to individuals linked to abuses in Somalia.

**Somalia Sanctions Program (E.O. 13572):** Imposed sanctions on individuals undermining peace and reconciliation in Somalia, providing support to terrorist groups, or violating the arms embargo.

**Compliance Requirement for VASPs:** U.S. persons and VASPs subject to U.S. jurisdiction must screen all their customers and transactions against OFAC's **Specially Designated Nationals and Blocked Persons (SDN) List** and other OFAC sanctions lists. Any property or interests in property of designated persons must be blocked, and U.S. persons are generally prohibited from engaging in transactions with them.

OFAC Sanctions Programs and Country Information (Somalia): https://home.treasury.gov/policy-issues/financial-sanctions/sanctions-programs-and-country-information/somalia-related-sanctions

OFAC Specially Designated Nationals (SDN) List: https://home.treasury.gov/policy-issues/financial-sanctions/specially-designated-nationals-and-blocked-persons-list-sdn-human-readable-lists

Executive Order 13224 (Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism): https://www.federalregister.gov/documents/2001/09/25/01-23963/blocking-property-and-prohibiting-transactions-with-persons-who-commit-threaten-to-commit-or

**Council Decision (CFSP) 2010/231/CFSP and Council Regulation (EU) No 356/2010:** These legal acts implement the UN arms embargo and targeted sanctions (asset freeze, travel ban) against individuals and entities undermining peace, security, or stability in Somalia or violating the arms embargo.

**EU Global Human Rights Sanctions Regime:** Similar to Global Magnitsky, allows for sanctions against individuals and entities responsible for serious human rights violations and abuses worldwide.

**Compliance Requirement for VASPs:** VASPs subject to EU jurisdiction must screen their customers and transactions against the **EU Consolidated Financial Sanctions List**. Any match requires immediate asset freezing and reporting to national competent authorities.

EU Sanctions Map (search for Somalia): https://www.sanctionsmap.eu/#/main

Council Regulation (EU) No 356/2010 (as amended): https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:02010R0356-20220623

EU Consolidated Financial Sanctions List: https://www.sanctionsmap.eu/list (downloadable lists available)

**Automated Screening:** Implement robust automated screening tools to check all customer identities (KYC/CDD data) and transaction counterparties (beneficiaries, originators) against the UN, OFAC (SDN, etc.), and EU consolidated sanctions lists *in real-time* or near real-time.

**Adverse Media Screening:** Incorporate adverse media screening to identify any links to sanctioned entities or individuals not yet officially listed, but publicly known for illicit activities.

**Beneficial Ownership:** Conduct thorough due diligence to identify the ultimate beneficial owners (UBOs) of corporate entities to ensure they are not sanctioned.

**Ongoing Monitoring:** Continuously monitor customer profiles and transactions against updated sanctions lists.

**Enhanced Due Diligence (EDD):** Due to Somalia's designation as a high-risk jurisdiction by bodies like the Financial Action Task Force (FATF), VASPs are required to apply EDD to all customers and transactions connected to Somalia. This includes gathering additional information on the source of funds/wealth, purpose of transactions, and the nature of the business relationship.

**Prohibition/Restriction on Services:** Some VASPs may choose to entirely prohibit services to individuals or entities located in Somalia, or to restrict certain types of transactions, given the elevated risk and compliance burden.

**IP Address Blocking/Geolocation:** Utilize geolocation tools to identify and potentially block access from IP addresses originating in Somalia, especially if the VASP has a strict "no-service" policy for the region.

**FATF Recommendations for Virtual Assets:**

The Financial Action Task Force (FATF) sets global standards for AML/CFT. Its **Recommendation 15** (on new technologies) and the subsequent Interpretive Note specifically apply to Virtual Assets and VASPs.

**Travel Rule:** VASPs must comply with the FATF's "Travel Rule," which requires originating VASPs to obtain and transmit certain customer information (name, account number, physical address, unique transaction ID) to beneficiary VASPs for transactions above a de minimis threshold (currently USD/EUR 1,000). This applies to all cross-border virtual asset transfers, including those involving Somalia.

**Risk-Based Approach:** VASPs must adopt a risk-based approach, meaning higher-risk jurisdictions like Somalia warrant more rigorous controls.

FATF Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers (June 2019, updated March 2023): https://www.fatf-gafi.org/content/fatf-gafi/en/publications/Fatfrecommendations/Guidance-RBA-virtual-assets-2023.html

**Developing Regulatory Framework:** Somalia's financial regulatory landscape is still maturing. As of my last update, there isn't comprehensive, specific legislation explicitly governing cryptocurrencies, digital assets, or crypto exchanges. Enforcement actions typically rely on a clear legal basis.

**Limited Regulatory Capacity:** While the Central Bank of Somalia (CBS) and the Financial Intelligence Unit (FIU) are working to strengthen the financial sector, their capacity to monitor, investigate, and enforce complex regulations related to emerging technologies like cryptocurrency might be limited compared to more established financial jurisdictions.

**Focus on Core Financial Stability and AML/CFT:** The primary focus of Somali financial authorities remains on strengthening the traditional banking sector, improving anti-money laundering (AML) and combating the financing of terrorism (CFT) frameworks, and attracting foreign investment. Cryptocurrency, while gaining attention globally, may not be a top-tier enforcement priority unless it directly intersects with major money laundering or terrorism financing concerns in a publicly identifiable way.

**Lack of Public Reporting:** Even if minor actions or warnings occurred against specific individuals or entities, the transparency and public reporting mechanisms for such financial enforcement actions in Somalia are not as developed as in many other countries.

**General Warnings:** The CBS has issued general warnings to the public about the risks associated with investing in or using cryptocurrencies. These warnings typically highlight volatility, potential for fraud, and the lack of consumer protection due to the unregulated nature of these assets.

**Emphasis on Traditional Financial Modernization:** The CBS is focused on modernizing Somalia's financial sector, including developing new financial institutions laws and strengthening mobile money regulations, which are far more prevalent for day-to-day transactions and remittances in Somalia than cryptocurrencies.

**Ongoing Efforts in AML/CFT:** Somalia is actively working with international partners, including the Financial Action Task Force (FATF), to improve its AML/CFT regime. While this indirectly creates an environment where new financial technologies like crypto would eventually need oversight, it hasn't yet led to specific crypto enforcement actions.

**Central Bank of Somalia Official Website:**

The CBS website is the primary source for official statements, press releases, and legal frameworks. Regularly checking this site would be necessary for any future developments.

Central Bank of Somalia Website (Note: Direct links to specific crypto warnings are not always static and might be embedded in news sections, but the website is the official channel).

The International Monetary Fund (IMF) regularly publishes reports on Somalia's economic and financial sector reforms, including discussions on financial stability, AML/CFT, and digital payments. These reports often highlight the CBS's priorities.

Example (general search for recent reports): IMF Somalia Country Reports

**World Bank Reports on Somalia:**

Similar to the IMF, the World Bank provides insights into financial sector development in Somalia.

Example: World Bank Somalia Overview

**News Articles Discussing Somalia's Financial Sector:**

Reputable financial news outlets sometimes cover discussions about financial regulation in Somalia, though often focusing on mobile money or traditional banking.

Example search terms: "Somalia mobile money regulation," "Central Bank of Somalia financial sector."