Module 10: Financing Terrorism Flashcards
International watch lists / ‘terror’ lists
(EU, UN, UK, US (OFAC, Office of Foreign Assets Control), SDN, Special Designated Nationals)
Risk profile of terrorism
1) Diversion of funds: Part of the money goes to terrorism.
2) Bogus organizations: Money goes to terrorism instead of the advertised matter.
3) Redirection: Funds reach victims, but through terrorist organizations
International AML/CFT response:
1) Increase record keeping and traceability,
2) harmonize definitions and methods enforcing AML law,
3) engage with private sector
Costs vs damage
Much damage can be done at relatively low costs.
Where are laundered funds required for?
To maintain networks and infrastructure.
Logistical needs —> opportunities to deter, detect and disrupt. Attack, track and interfere = very effective.
Specify the direct and indirect costs
Direct operational:
1. Costs of the attack
2. Salaries, living expenses (Subsistence) and communications
3. Training, travel and logistics
4. Shared funding
Broad operational:
1. Maintaining charities
2. Mass media outlets
How do terrorist groups raise funds?
- Direct or state-sponsored support
- Use of charities, incl sham charities
- Legitimate (cash businesses)
- Criminal activity
- Social welfare fraud
- Employment (or employed supporters), e.g. zakat
- Smaller, self-funded networks
- People bringing in savings
Why are charities and non-profits particularly attractive to terrorist organizations?
- Public trust
- Access to large funds
- Cash intensive
- Global organisation
- Outlets close to areas with active terrorism
- Lightly regulated
- Varying standards of record-keeping
- Risks can be underestimated by financial institutions
How are funds moved?
- Financial system
- Physical movement
- International trade systems, alternative remittance systems such as Hawala
- Offshore, safe havens, failed states and state supporters
- Charities
Explain the Hawala system
Transfer money between UK and Pakistan through Hawala:
1. Bring money to UK hawaladar.
2. Hawaladar UK and and Pak settle accounts through payment or trade
3. Receiver goed to hawaladar in Pakistan with code and receives money
Explain how moving money through financial and trade system works?
- Money and Value Transfer Systems (MVTs); any electric and wire transfer system –> leave traces
- Invoice fraud, incorrect valuations, trading without business reality
- Cash couriers
- Alternative Remittance Systems (AMS)
- Charities
Non-traditional financial institutions
- Currency exchange
- Cheque cashing services
- Money transfer agents
- Travel / travelers cheque sellers
- Casino and gaming clubs
- Alternative Remittance systems
Notes for the investigator:
- Search for historical records
- Know the risk profiles
- Unusual transactions involving charity
- Financial back-trail using basis stuff
- Financial links can assist other methods
