The Bosaso Strategy: Puntland’s Gateway to SWIFT Connectivity

Bosaso is already the commercial center of Puntland. Its location on the Gulf of Aden puts it within reach of the Gulf states and some of the busiest trading routes in the region. Businesses in Puntland have long looked toward Dubai for trade, investment and access to financial services.

Yet there is a gap between the way Puntland’s economy operates and the financial infrastructure available to it.

That gap has become harder to ignore as relations between Puntland and Mogadishu have deteriorated.

For years, much of Puntland’s access to international banking and payment networks has operated through arrangements involving Mogadishu. Whatever the political arguments surrounding that system, relying on a financial channel that can be affected by political disagreements creates an obvious vulnerability for businesses.

The sensible response is not to isolate Puntland. It is to give its financial institutions more options.

One of those options should be international banking connectivity. Puntland-based banks that are able to meet the necessary regulatory and compliance standards should have the opportunity to obtain their own Business Identifier Codes, or BICs, and explore connectivity to SWIFT.

It is worth being precise about what that means. A BIC identifies a financial institution internationally. It does not, by itself, give a bank access to SWIFT or guarantee a correspondent banking relationship. Clearing, settlement, liquidity and other banking services involve separate relationships and regulatory requirements.

That technical distinction matters because the objective should not be a piece of paperwork that can be described as a “SWIFT code.”

The objective is a banking sector that international institutions are willing and able to deal with.

Getting there will require work inside Puntland. Banks will need stronger compliance departments, reliable technology, transparent ownership and governance, and systems capable of meeting international standards for customer identification, sanctions screening and anti-money-laundering controls.

None of that is particularly glamorous. It is also unavoidable. Bosaso has an advantage that cannot be created by a banking regulation: it already has a commercial relationship with the Gulf.

The UAE, and Dubai in particular, is an important destination for Puntland’s traders and businesses. The existing links between Bosaso and the UAE provide a natural foundation for expanding financial services, investment and trade.

The United States represents another opportunity. The American relationship with Puntland has been heavily focused on security, particularly because of Puntland’s location and the wider security concerns surrounding the Gulf of Aden. But security cooperation does not have to be the only area of engagement.

There is room for economic relationships as well. The UAE and the United States would not play the same role. They do not need to.

The UAE’s strength for Puntland is its commercial and financial position in the Gulf. The United States offers a relationship with another major global power, as well as potential links with American companies and institutions.