Week 6 - Required Reading Summary Flashcards
Summary of 3 documents
What are the key points from the FATF REPORT - Emerging Terrorist
Financing Risks?
AIM: - to analyse recently identified terrorist financing (TF) methods and phenomena, referred to as ‘emerging TF risks’.
Understanding how a terrorist organisation manages its assets is critical to starving the organisation of funds and disrupting their activities.
It analyses the financing activities of a range of terrorist organisations from individual
terrorists or small terrorist cells to well-established international networks such as Islamic State of Iraq and Levant (ISIL), Boko Haram and Al-Qaeda and its associates and affiliates. The organisations
considered have either been designated by the UN or under national listing regimes.
The report is summarised into the key chapters:
-INTRODUCTION / AIM (desribed above)
-FINANCIAL MANAGEMENT OF TERRORIST ORGANISATIONS
- TRADITIONAL TF METHODS & TECHNIQUES
- EMERGING TF RISKS
- CONCLUSION
FINANCIAL MANAGEMENT OF TERRORIST ORGANISATIONS.
Remember different size organisations have different financial needs. Financial management requires planning and accounting for all resources and assets that
the group controls, as well as its liabilities. Large groups may use terrorist financial managers to accumulate revenue,
establish financial shelters (such as bank accounts, front and holding entities), and oversee financial disbursements & investments. Some recruit professionals (e.g accountants).
Terrorist financial management usually happens within geographic safe havens or within secure social networks, making it very difficult to penetrate
Terrorist organisations use funds for the following broad categories:
- OPERATIONS. For specific attacks, pre op surveillance, machinary, weapons (arms / IEDs), vehicles, ID docs, living expenses / accomodation & payment for couriers etc.
- PROPAGANDA & RECRUITMENT. Internet domain names, newspapers / magazines, even purchasing TV & radio outlets.
- TRAINING.For Operatives & sympathisers in areas including, weapons training, bomb-making, clandestine communication & ideology. Funds also used to aquire land for training camps. Also virtual training.
- SALARIES. Salaries of their leadership and members, as well as for the families of jailed or deceased members.
- SOCIAL SERVICES. To establish or subsidise social institutions that provide health, social,
educational services. Done to undermine the credibility of the legitimate governments – by providing services that they say the state is neglecting & to build support within local populations.
TRADITIONAL TERRORIST FINANCING METHODS & TECHNIQUES.
These all continue to be prevalent -
still considered significant TF risks despite improvements in AML.
What are the 8 main categories of traditional ways to GENERATE REVENUE?
GENERATING REVENUE:
- Donations
- Abuse & misuse of Non Profit Organisations (NPOs). Present a risk to NPOs particularly those offering services in areas where there is terrorist activity (war zones?) - especially less established & smaller NPOs with less due dilligence / controls
- Proceeds of criminal activity. Various fraud, smuggling of goods like tobacco / cigarettes / antiquities (& assocated tax fraud), bank robbery, drug trafficking, tax crimes.
- Extorting local & diaspora populations & businesses
- Kidnapping For Ransom (KFR). A growing source of revenue
- Self funding. For small attacks can be raised by loans, savings, business income, credit.
- Legitimate commercial enterprise. E.g car dealerships and shipping, reastaurants.
- State Sponsorship. The possibility that states provide financial support is a threat to international peace & security & to the stability of regional financial & political systems - fundamentally undermines the effectiveness of FATF activities
TRADITIONAL TERRORIST FINANCING METHODS & TECHNIQUES.
These all continue to be prevalent -
still considered significant TF risks despite improvements in AML.
What are the 3 main traditional categories of how they MOVE FUNDS?
- Fund transfers through banks. Most reliable and efficient way to move funds
internationally. Includes use of NPOs bank accounts. - Money Value Transfer Systems.
Informal MVTS, may involve unregulated or less regulated channels than formal ones. E.g. informal money transfer agents, hawala (an informal money transfer system common in some parts of the world).
Migrant communities and families rely heavily on MVTS to remit
funds home; this provides a channel for commingling TF with legitimate family transfers. Makes it difficult to detect TF from normal family and community remittances. - Physical Transportation of Cash. Funds may be raised in a number of ways, often they are converted into cash to be taken to conflict zones. This is assisted by porous national borders, difficulty in detecting cash smuggling the existence of informal & unregulated economies
EMERGING TERRORIST FINANCING THREATS & VULNERABILITIES
- Foreign Terrorist Fighters (FTFs) individuals who travel to a foreign country to join and participate in terrorist activities). Not new but volume is concerning. Not a signif funding source as such, but considered one of the main forms of material support. Usuallys self fund and bring extra funds with them. Self fund by creating businesses or credit or savings / sale of assets.
- Social Media Fundraising. Spread propaganda globally and in live time. To attrract and use sympathisers. Large scale organised fundraining can be carried out on social media and messaging apps. Also crowdfunding websites which can be exploited. Funds can be raised overtly or under the guise of humanitarian aid.
- New Payment Products & Services. Incl. Crypto, pre-paid cards, internet based payment services (e.g. CashU, Paypal)
- Exploitation of Natural Resources & smuggling. Oil / gas (seeking to control & operate local gas or oil infrastructure to sell at a lower rate). Also seeking to exploit mining sector
OVERALL CONCLUSIONS
- Understanding how all types of terrorist organisations, whether large territorially-
based or small cells operating autonomously, need, use and manage funds is critical in detecting, preventing and sanctioning terrorist and terrorist financing activity - Traditional terrorist financing methods and techniques continue to present significant TF risks.
- Further work is required on the ermerging risks
- The FATF Recommendations provide the necessary AML/CFT framework to address the TF risks identified but effective implementation of these standards is key.
- Importance of genuine private/public
partnerships to enhance awareness of, and responses to, emerging TF risks. - Financial intelligence is a necessary component for all counter terrorism activities
Summarise the FATF REPORT
Financing of the Terrorist Organisation Islamic State in Iraq and the Levant
(ISIL)?
AIM: Given the rapid development of the terrorist organisation Islamic State in Iraq and the Levant (ISIL), there is a need to understand those funding requirements and associated TF risk. This shows a snapshot of the revenue sources and financial activities of ISIL.
This looks at SOURCES of funding, MOVEMENT of funds & other assets, & issues for further consideration & cooppration
Summarise the 5 main sources of funding for ISILs.
Remember they are inconsistant funds & change based on availability of economic resources and the progress of coalition military efforts against ISIL
(1) illicit proceeds from occupation of territory, such as bank looting, extortion, control of oil fields and refineries, and
robbery of economic assets and illicit taxation of goods and cash that transit territory where ISIL operates
(2) kidnapping for ransom
(3) donations including by or through non-profit organisations
(4) material support such as support associated with FTFs
(5) fundraising through modern communication networks.
Summarise the first main funding source.
- ILLICIT PROCEEDS FROM OCCUPATION OF TERRITORY INCLUDING EXTORTION
AND THEFT
ISIL manages a sophisticated extortion racket by robbing, looting, and demanding a portion of the economic resources in areas where it operates.
This includes:
1.1 BANK LOOTING, EXTORTION AND HUMAN TRAFFICKING. Controlling the bank branches in Iraq where it operates. Also bank robberies in other territorys (e.g Syria). Also human trafficking - human slave auctions - women & children.
1.2 CONTROL OF OIL AND GAS RESERVOIRS. Operating in E Syria and W & N Iraq allows ISIL to control numerous oil fields from which it continues to extract oil for its own use, its own refining & for onward sale or swap . Also Petroleum smuggling
1.3 EXTORTING AGRICULTURE. Taking portions of crops, confiscating farm machinary and renting it back (estimate that ISIL operate in 40% of Iraq’s wheat growing areas. Or taking contol of farms & workers by violence
1.4 OTHER RESOURCE EXTRACTION AND PRODUCTION. Phosphate mines, cement plants (smuggling routes not as established as petroleum)
1.5 CULTURAL ARTEFACTS. Both through selling looted artefacts and taxing
traffickers moving items through ISIL-held territory.
1.6 ILLICIT TAXATION OF GOODS AND CASH THAT TRANSIT TERRITORY WHERE ISIL OPERATES
1.7 SALARY PAYMENTS TO IRAQI GOVERNMENT EMPLOYEES - ISIL tax up to 50% in ISIL held territory
Summarise the second main funding source:
- KIDNAPPING FOR RANSOM
ISIL has reportedly kidnapped hundreds of individuals, including local Iraqis, Syrians and members of ethnic minorities, as well as Westerners, and East Asians.
Some ISIL used them to extract ransom payments, while others are brutally
murdered to send a political message.
UNSC resolution 2161 (2014) - prohibition on providing funds to individuals and entities on the Al-Qaida Sanctions List,
including ISIL, also applies to the payment of ransoms.
Summarise the 3rd main funding source:
- DONATIONS INCLUDING BY OR THROUGH NON-PROFIT ORGANISATIONS
(NPOS)
Minimal compared to other sources, but have recieved some funding from regional private donors. Could increase in importance for ISIL as other sources of revenue diminish.
Also NPOs raising funds for recipients in a third country which are or are suspected to be part of an organisation structure that engages in violent or paramilitary activities. And interception of cross boarder NPO funds - relatively isolated risks.
Summarise the 4th main funding source.
- MATERIAL SUPPORT TO INCLUDE FOREIGN TERRORIST FIGHTERS (FTFs)
Material support = “financial assets, economic resources, property of every kind.” (FATF def).
FTFs = elatively small, but important source of funding for ISIL. Includes FTFs collecting money in their home country for travel; FTFs traveling with funds and Diasporas sending funds to support FTFs. May also incl brining equipment with them.
FTFs are more significant in terms of manpower than financial wealth.
Summarise the 5th main funding source.
- FUNDRAISING THROUGH MODERN COMMUNICATION NETWORKS
Social media, crowdfunding, from sympathisers
Summarise the 4 main methods of MOVEMENT AND USE of FUNDS & OTHER ASSESTS
- FINANCIAL INSTITUTIONS (Syria & Iraq)
In an effort to prohibit ISIL from exploiting Iraqi banks to access the international financial system,the Central Bank of Iraq issued instructions to financial institutions incorporated in Iraq to prevent wire transfers to and from banks located in ISIL-held territory. Banks moved headquarters away from ISIL held territory. Most major financial institutions internationally have probably severed their ties with major banks in Syria, particularly in ISIL-held territory, making it difficult for ISIL to gain access to the regulated international financial system via Syria-based banks. - MONEY AND VALUE TRANSFER SERVICES (MVTS). Many Iraqis & Syrians do not hold bank accounts, rely on often unregulated MVTS companies for sending, or receiving payments from, local or foreign counterparts. ISIL can abuse this system of transferring money, especially as the bank branches under its control have lost their access to the international financial system.
- SMUGGLING (CASH, GOLD OR OTHER VALUABLE ITEMS) via individuals entering the region. Includes ‘smurfing’ of spliting large amounts among differnt individuals
- FINANCIAL MANAGEMENT AND EXPENDITURE OF FUNDS AND ASSETS
substantial expenses associated
with attempting to fund and administer government-like social and economic programs within the territory it occupies (e.g needs to provide basic necessities, such as food, water, electricity to the local population). Also payment of fighters - monthly salaries. Also oil pipelines & infrastructure to build, maintain & rebuild after strikes.
ISSUES FOR FURTHER CONSIDERATION & COOPERATION
Taking into consideration that
the 2013 FATF Methodology addresses the effectiveness of AML/CFT systems, jurisdictions should ensure that these TF-related recommendations, which have an important role in the disruption of
ISIL funding, are being fully implemented by:
1. DISRUPTING FINANCIAL FLOWS (need greater international cooperation)
2. DEPRIVING ISIL OF ITS RESOURCES Incl. targeted financial sanctions, supressing oil sale & counter smuggling, tackling kidnapping for ransom by not allowing funds to be paid - e.g The United Kingdom’s (UK) Terrorism Act 2000 prohibits the provision of funds to terrorists under
any circumstances. Also need to prevent the flow of foreign terrorist fighters travelling to the conflict zones to join terrorist groups.
3. PREVENTING ISIL FROM ABUSING RELEVANT SECTORS. Incl financial sectors - measure to protect banks - minimixe assets held in Iraq. Re culteral artifacts UNSCR 2199 (2015) calls on member states to
prohibit cross-border trade in Iraqi and Syrian cultural property and other relevant items illegally removed from Iraq and Syria
4. STEPS TO LIMIT HUMANITARIAN CONSEQUENCES FOR POPULATION. The Syrian crisis is the largest, most complex humanitarian emergency of our time. Distinguishing between legitimate and illegitimate donations is a challenging task. It is important that efforts and measures aiming at combating terrorist financing should not affect legitimateprovision of humanitarian assistance to vulnerable populations.
