United Nations investigators say an Australian citizen is helping to fund and run a "private army" for the president of Somalia's semi-autonomous Puntland region.

The Somalia Monitoring Group, a team of specialists appointed by the United Nations Security Council to investigate suspected arms embargo breaches, claims Lafras Luitingh is a leader of a group which is helping to train and equip a large militia force.

Mr Luitingh was granted Australian citizenship in 2009.

He lives in a glamorous penthouse apartment on Sydney Harbour and his neighbours are wealthy merchant bankers and socialites.

As well as the penthouse, he is a half-owner of an apartment overlooking Sydney's Bondi Beach and, according to UN investigators, he controls a string of companies and bank accounts in Australia and around the world.

When the ABC called his Sydney apartment, Mr Luitingh was not home.

The places where he does business are far removed from his idyllic waterfront homes. He is a former South African mercenary and still very much in the guns-for-hire business.

For the past two years, he has been working in war-torn Somalia.

Since the collapse of the government there in 1991, the country has been ruled by gun-toting warlords and become a haven for pirates and Islamic extremists.

There is no banking system, no border controls, and for the past two decades the UN Security Council has imposed a complete arms embargo there.

"The sanctions are about a country that already has far too many weapons, it's about stopping them from reaching Somalia, and also denying military training," said Alex Vines, a former UN arms inspector in Liberia and head of the Africa Program at Chatham House.

Embargo breach

The Somalia Monitoring Group has identified a complex web of companies, called Saracen and Sterling Corporate Services, that were hired to train and equip the largest militia group in Somalia.

Matt Bryden, who heads the monitoring group, found the companies' operations were shrouded in mystery.

"Most of the requests the monitoring group made for information about what supplies were being brought into the country, the nature of the program, Saracen either failed or refused to answer," he said.

"There were a number of large shipments of military assistance for the force, and Saracen never sought to explain what these shipments were for to the monitoring group."

The men behind Saracen and Sterling are mostly former South African mercenaries and prominent among them is Mr Luitingh.

He is a former member of special forces in the apartheid-era South African defence force and went on to join a notorious covert unit known as the Civil Cooperation Bureau (CCB).

The CCB was responsible for a campaign of bombings and assassinations of political opponents of the apartheid regime.

During hearings of South Africa's Truth and Reconciliation Commission, Mr Luitingh was named as the handler for a CCB assassin.

The assassin was jailed for life, after shooting dead an anti-apartheid campaigner in Johannesburg.

After the collapse of apartheid, Mr Luituingh and some of his former colleagues went on to form the infamous guns-for-hire outfit known as Executive Outcomes.

"Executive Outcomes is a private military company that hires mercenaries," Mr Vines said.

"It used people who had been very active in the apartheid system in South Africa to provide security services across Africa."

Mr Vines says he has studied Executive Outcomes in depth.

"Mr Luitingh has been involved with Executive Outcomes right from the very beginning, as a key fighter and officer," he said.

"He was active in Angola and Sierra Leone. In fact, he was the one who did the entry negotiations for Sandline into Sierra Leone."

PNG involvement

A few years later, Mr Luitingh offered his company's services to help secure one of the largest copper mines in the world, in Papua New Guinea.

The PNG government had been fighting a protracted conflict with rebels, which had shut down the giant Panguna copper project.

In 1997, they struck a secret deal to bring in foreign mercenaries. It became known as the Sandline affair, after one of the companies involved when the deal became public.

It brought down the PNG government and Mr Luitingh's men were held under house arrest.

At the height of the saga, Mr Luitingh spoke with the ABC's 7.30 program:

Kerry O'Brien: Lafras Luitingh, you've been in contact with your personnel in Wewak. Are you concerned about their safety? Lafras Luitingh: Yeah, I am concerned about their safety, and obviously I don't know precisely what's going on, and seeing that they are my people, we are concerned about their safety. We are not there to upset the politics, we are there to provide a service and we will give that service, a professional service, and if the people of PNG or whoever do not want us there, then we will leave immediately.

The mercenaries were eventually expelled from PNG, but Mr Luitingh made a lot of money.

"His name also appeared on a bank account in Hong Kong where the PNG government deposited $US13 million as part of the payment for that particular contract," Mr Vines said.

"This is normal, standard kind of practice for these types of companies. Different accounts are opened and used for different transactions, it's all about maximising the financial flow... These are definitely not transparent organisations."

Violation

Around two years ago, Mr Lafras and his South African partners set up in Somalia.

According to a report by the UN Monitoring Group, they were there to "assist, train, equip and supervise security forces in violation of the Somalia arms embargo".

In the semi-autonomous Puntland region, they built a force of more than 1,000 men equipped with planes, helicopters and more than 80 vehicles.

Funding of around $50 million came from Abu Dhabi.

Somali tribal leaders, and the South Africans training the force, claim it is an anti-piracy coast guard, but UN investigators say it is an unaccountable private army.

"The program is the largest scale military program in Somalia, second only to the African Union peacekeepers in Mogadishu," Mr Bryden said.

"The program has established what is essentially a private army for the president of Puntland.

"It operates without coordination or oversight. Because of its size and scale, it represents a danger to peace and stability. It fundamentally changes the balance of power in the north-east of Somalia."

'Financial hub'

Mr Luitingh is using a string of companies registered around the world, but according to UN investigators, Australia plays a central part in their operations.

Australian records show Mr Luitingh registered the company - Australian African Global Investments - in 2006.

It has branches in South Africa, Uganda and other African countries and is involved in logistics, transport and chartering planes and ships.

The Australian company was registered by Taurus Financial Services in Sydney.

Mr Luitingh's connection to Australia runs deeper. The ABC has learned that in June 2009 he was granted Australian citizenship.

"I would hope that the Australian authorities would be able to demonstrate on what criteria it was that Lafras got Australian citizenship," Mr Vines said.

"Was there an investigation of his past, especially his time back in South Africa during the apartheid period?"

According to the UN report, Mr Luitingh is "using Australia as a financial hub for money transfers... in connection with his activities in Somalia".

They state around $2 million has moved through his corporate and personal accounts in Australia since the project started.

Sanctions

The ABC has made numerous attempts to contact Mr Luitingh directly, without success.

His lawyers declined an interview on his behalf, saying he was a private man who is extremely publicity shy.

They claim the Somali militia force is a transparent, legitimate operation in line with UN resolutions to combat piracy in the region.

But in their most recent report to the UN Security Council, the monitoring group labels Saracen's operations "the most brazen violation of the arms embargo by a private security company", and they recommend that Mr Luitingh and his associates have sanctions applied to them without delay.

"They have three parts - the first is a travel ban, the second is an assets freeze, and the third is known as a targeted arms embargo, which means it's prohibited to deal in military equipment, weapons, arms and ammunition with an individual who has been designated," Mr Bryden said.

The UN Security Council has not yet decided on the recommendation for sanctions, but if they are adopted it will be up to Australian authorities to enforce them, which could bring Mr Luitingh's operations here to a grinding halt.

"Security Council sanctions are binding under international law, and Australia has comprehensive formal legal frameworks in place to implement them," said Professor Ben Saul from the University of Sydney law school.

"If it's an Australian company registered here, or a person who ordinarily lives here and comes back from time to time, that obviously makes the person much more susceptible to law enforcement action here."

As far as the UN investigators are concerned, they have made it clear they believe Mr Luitingh and his associates are breaching the arms embargo.

"We have engaged with the leadership of Saracen for the duration of the program, with their legal representatives, with the relevant authorities supporting the program, and despite that engagement, despite the warnings and advice the monitoring group provided, they persisted," Mr Bryden said.

"And after almost two years of operations, the group felt that it was time to bring this to the attention of the Security Council and to call for action."