Somalia to Introduce New Bank Notes to Counter Fake Notes and Address Inflation

The Department of Justice (DOJ) in the United States has today announced the arrest of Anatoly Legkodymov, a Russian national who is founder and majority owner of Bitzlato, the crypto exchange.

Legkodymov arrest comes after being charged with operating an exchange that facilitates various cyber crimes by not implementing all required regulations.

According to a statement, Legkodymov has been ‘conducting a money transmitting business that transported and transmitted illicit funds and that failed to meet U.S. regulatory safeguards, including anti-money laundering requirements.’

“Today the Department of Justice dealt a significant blow to the cryptocrime ecosystem.

Overnight, the Department worked with key partners here and abroad to disrupt Bitzlato, the China-based money laundering engine that fueled a high-tech axis of cryptocrime, and to arrest its founder, Russian national, Anatoly Legkodymov.”

– General Monaco, Deputy Attorney, United States

The crypto exchange, registered in Hong Kong and had became popular in Africa, is alleged to have processed more than $700 million dollars’ worth of illicit funds, including millions in ransomware proceeds

“As alleged, Bitzlato sold itself to criminals as a no-questions-asked cryptocurrency exchange, and reaped hundreds of millions of dollars’ worth of deposits as a result. The defendant is now paying the price for the malign role that his company played in the cryptocurrency ecosystem,” said Breon Peace, a US attorney.

This was reiterated be an FBI Assistant Director-in-Charge, Michael J. Driscoll.

“As alleged today, Legkodymov knowingly allowed Bitzlato to become a perceived safhaven for funds used for and resulting from a variety of criminal activities.”

According to the US officials, Bitzlato has marketed itself as requiring minimal identification from its users, specifying that ‘neither selfies nor passports [are] required.’ On occasions when Bitzlato did direct users to submit identifying information, it repeatedly allowed them to provide information belonging to ‘straw man’ registrants, they say.

As a result of these deficient know-your-customer (KYC) procedures, Bitzlato allegedly became a haven for criminal proceeds and funds intended for use in criminal activity.

Hydra Market

Bitzlato is implicated in the Hydra Market, a darknet marketplace that was the source of various illegal activities.

According to the U.S system, Hydra Market was Bitzlato’s largest counterparty in anonymous cryptocurrency transactions.

Hydra is described as an illicit online marketplace for narcotics, stolen financial information, fraudulent identification documents, and money laundering services that was the largest and longest running darknet market in the world.

It is alleged that Hydra Market users exchanged more than $700 million in cryptocurrency with Bitzlato, either directly or through intermediaries, until Hydra Market was shuttered by U.S. and German law enforcement in April 2022.

Bitzlato also received more than $15 million in ransomware proceeds.

Bitzlato is also accused of providing customer support to customers who requested support for transactions with Hydra.

“Today’s actions send the clear message: whether you break our laws from China or Europe—or abuse our financial system from a tropical island—you can expect to answer for your crimes inside a United States courtroom.”

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Somalia is to become the second African country after Nigeria to unveil new banking noes in 2023, reports indicate.

Similar to Nigeria, Somalia is taking the direction to mop out counterfeit bills and excess cash in circulation in the East African nation. The move is also intended to address inflation by reducing liquidity, according to the Somalia Central Bank Deputy Governor, Ali Yasin Wardheere.

Not all notes are being replaced though, only the high-value currency notes that were last printed in 1991 before the country experienced civil war. Designs for the notes were previously released in 2018 when the Central Bank of Somali initially expected to complete the exercise.

Somalia releases design of new banknotes to be printed this yr. The samples released are 5,000 and 10,000 which will be the biggest banknotes. The only banknote that is now used is the 1,000 Somali Shilling, which buys a cup of tea. Govt says $41m is needed to print the money. pic.twitter.com/s5sf7tYrqV

— Harun Maruf (@HarunMaruf) June 9, 2018

The phase out of the old notes is already in motion, as officials seek to rid the country of fake notes, which have seen many resort to the use of American dollars.

The Central Bank of Somalia also wants to expand by opening branches across the country. New branches are expected in the capitals of all federal member states by June 2023, including major cities like Garowe, Baidoa, and Kismayo.

The branches will also be responsible for maintaining the value of the new money that will be printed by the central bank.

Besides Somalia, Nigeria is another country currently phasing out old notes to address counterfeits. In November 2022, the Central Bank of Nigeria unveiled new notes, marking the first time in 19 years that the country is redesigning its currency with the replacement of the current N1,000, N500, and N200 notes.

“In recent years, the CBN has recorded significantly higher rates of counterfeiting, especially at the higher denominations of N500 and N1,000 banknotes,” said the Central Bank Governor, Godwin Emefiele.

Nigeria’s new notes are also expected to cut off access to the money used by kidnap-for-ransom gangs which are thought to be reliant on the cash outside the banking system.

However, some locals who spoke to CNN expressed dissatisfaction with the new notes indicating no significant difference between the new notes and the old ones, describing the supposedly re-designed banknotes as a mere color revamp.

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