Week 10 - ML & Terrorist Funding

Question 1

Background

Answer 1

After 9/11 renewed interest in financing of terrorism.

9/11 operational costs were approx $400 to $500k

Some sources of funds wewre traced & 2 key things identified:

• ML was central
• Use of charities

AML responses to this:

• FATF updated their guideliens to add 9 special CTF points.
• International Watch Lists created
• Goal for AML investigators is to deter, detect, disrupt
• FATF produced a series of typologies for TF

Question 2

International Terror ‘Lists’

Answer 2

International Terror ‘Lists’

EU: Persons, groups, entities involved in
terrorist acts
UN: Individuals/Entities associated with Al- Qa’ida/Taliban/ Daesh(IS) etc.
US: Office of Foreign Assets Control (OFAC)
UK: List of terrorist organisations

Older term was Specially Designated Global
Terrorists (SDGT), now called Specially Designated Nationals (SDN) List

Can download the lists, they are updated regularly

Many banks build there AML / CFT complienece system on these lists. Basically if you are on these lists then financial institutions will not do business with you - good disruption.

These SDN lists may include things like full names, passport info, bitcoin addresses

Question 3

What is our aim in CTF?

Answer 3

Terrorists require funds. This provides opportunities for LE to deter detect & disrupt them.

• Attack their sources of funds
• Track the movement of funds
• Interfere with their ability to use the funds (e.g.by SDN lists, asset freezign & seizure)

Financial disruption is a very effective tactic to fight terrorism.

Question 4

Why do terrorist organisations need funds?

Answer 4

2 main areas:

DIRECT OPERATIONAL requirements: The direct cost of attacks. Includes
- salaries, food, living costs, communications (phones), travel, training, welfare, false docs
- vehicles, weapons, bombs & bomb making equip. maps, surveillence equipment.

BROAD OPERATIONAL requirements: Maintaining charities, admin functions, mass media - social media domains, equipment

Question 5

Why are charities / non profit organisations particularly attractive to Terrorist Organisations?

Answer 5

• Public holds trust in them
• access to large funds
• cash intensive
• global organisations
• outlets close to areas with active terrorism
• lightly regulated compared to other organisations
• varying standards of record keeping
• risks relating to charities can be underestimated by FI and LE

Money is obtained from either diverting funds from the genuine charity, or use of bogus organisations, or often the charity money reaches the intended victims (vulnerable) who then have it taken by TOs

FATF consider the use of charities to be a crucial weak point.

Question 6

Other ways terrorist organisations are funded

Answer 6

• private donations when people join them (all their savings for example)
• state sponsored support
• legitimate businesses (esp those using high cash amounts)
• smaller self funded networks
• criminal activity:
  Social welfare fraud, VAT fraud, credit card fruadtobacco / fuel smuggling, kidnapping, extortion, drug activity, weapons trade.

Question 7

How do terrorist organisations move funds?

Answer 7

Trend towards methods that avoid reporting mechanisms from traditional FI (AML)

• Physical movement of cash
• internation trade
• offshore - safe havens like narco states
• charities
• alternative remittances systems (Hawala)

The risks involved in moving the funds provide investigative opportunities for us.

Question 8

Moving funds through financial and trade systems

Answer 8

Use of non traditional financial institutions.
Money & Value Transfer Systems MVTs means ANY electonic or wire systems. Can be used

Could also be MSBs like western union.

Cash couriers (easy to evade AML / CFT safeguards, no audit trails , becomming more common in drugs gangs too)

Casions and gaming clubs

Alternative remittance (Hawala). Hawala is just one system. Ancient and informal used in many ethnic communities.
example. UK person (A) wants to send 50,000 to person B in Pakistan.
Person A goes to UK Hawaladar and pays the money. Hawaldar gives person A a code.
Person B goes to Hawaladar in pakistan with a code and gets the money. The Hawaladars settle their accounts (between UK and Pakistan through trade e.g. goods sent to UK or settle directly - no records of each transaction)

With trade systems VAT carousel fraud & invoice fraud are common)

Question 9

Terrorist Funding - Notes For Investigators

Answer 9

• always begin by seraching for historial STRs / CTRs / Customs intel
• know risk profiles - e.g. account that has wire transfers out occuring immediately after large cash deposit and Money Transfer Agents
• Watch for unusual transactions involving charities
• establish the financial back trail through the basic investigation.
• Look at the supply & logistical structure of the organisation, how were flights, hotels, supplies, travel, etc paid for. Financial links can help map the structure of TOs.