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Pirate ransoms=property boom in Nairobi?

January 9, 2010

One of the projects that I’m working on (with Mora Johnson, DFAIT Canada) is conflict-financing, or as Mora would say, the follow-the-money approach. Find out where the money is coming from, where it’s going, and seize it when it enters any part of the international financial system. There are many systems set up to deal with this already, largely because various terrorism regulations already require it– at the international and country level.

FATF (Financial Action Task Force) has already been set up to deal precisely with this type of situation– Kenya would be a great case to see how well these regulations work.

Property prices in Nairobi are soaring, and Somali pirates are getting the blame.

The hike in real estate prices in the Kenyan capital has prompted a public outcry and a government investigation this month into property owned by foreigners. The investigation follows allegations that millions of dollars in ransom money paid to Somali pirates are being invested in Kenya, Somalia’s southern neighbor and East Africa’s largest economy…

In a neighborhood of Nairobi now called “Little Mogadishu” because of its Somali community, large business and apartment buildings have sprung up. A similar explosion of real estate development can be seen in higher-income areas of the city.

Somali pirates have been paid more than $100 million in ransoms the last two years, said Roger Middleton, a piracy expert at the London-based think tank Chatham House. The average ransom is also up, from $1 million per vessel a year ago to about $2 million today.

Pirates in Somalia say they invest their ransom money outside their war-torn country, including in Kenya. One pirate who gave his name as Osman Afrah said he bought three trucks that transport goods across East Africa. A second pirate, who only gave his name as Abdulle, said he’s investing in Kenya in preparation for leaving the pirate trade. Full story.

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