Terrorist financing

States of terror – terrorist resourcing, groups vs lone wolves

The biggest terrorist stories to hit the global media in the last few weeks have been the Charleston and Tunisia attacks, carried out by individuals, at least one of whom had set out his intentions in a published manifesto. Rather than falling FCA - gunshopprey to a particular group and shouting out their message, Dylan Roof – the Charleston massacre suspect – apparently ‘self-radicalised’ by reading various on-line sources of extremist material. There is no information, as yet, on where Seifeddine Rezgui, the gunman in the Tunisian attack, acquired the gun he used but there are some links between him and the Ansar al-Sharia group in Libya. One US media outlet asked Charleston Police how Roof was able to get his hands on a gun. “We will not discuss that aspect of the investigation”  a spokesman told the press.

Meanwhile in Egypt, the government has adopted a ‘controversial anti-terror law‘ speeding up prosecutions for terrorist related acts, laying out more severe penalties for those convicted and increasing the powers of terrorism investigators to examine bank accounts. The new law is a direct response to the killing of state prosecutor Hisham Barakat in late June.

Investigating terrorist resourcing – who supplied the weapons, how and any connections to known terrorist groups – might unearth some significant connections and information on who is behind terror attacks.

Resourcing v Financing

Research into terrorism has begun to notice a difference in approaches to investigating where the  money comes from. Changing perspectives on terrorist financing might highlight more gaps in our understanding of terrorism, why and how terrorist acts are committed.

Terrorist organisations use far more than money to maintain operations leaning on industries and infrastructure (IS has hijacked oil production in Iraq), criminal partnerships (the proceeds of crime fund terrorism too), commodities and more to generate funds. Moreover, the financial system as we know it is a minor player in some of the countries where terrorist groups thrive.

“Our understanding of terrorist financing is simplistic – funds flood the banking system, if we find it we can stop terrorists,” says Brenda Collins of ManchesterCF.

Source: Manchester CF

Source: ManchesterCF

“The resourcing concept is a much better fit with the risk-based approach (RBA) than the financing concept. The resourcing model turns the focus to the behaviour, the geographies, the industries, the materials. The financing idea often automatically pushes people towards transactions, senders and recipients.”

To learn more about the mechanics of terrorist resourcing – how different terrorist organisations resource their operations, how terror groups acquire funding channels and the red flags that can reveal terrorist resourcing networks, click here.

Mention the Financial Crime Asia blog to ManchesterCF to find out on special offers on training programs.


India: Centre gets tough on terror funds

The new BJP government is set to crack down on terror financing from across the border, holding it as one of the key steps towards beefing up the internal security mechanisms in view of impending terror threats from cross-border as well as home-grown terror outfits.

For the first time since the new government has taken charge, India has had its first detailed discussion in the multi-lateral forum over terror-financing.

Notably, India has sought cooperation of member countries to crack the financial network and fund-raising activities of Pakistan-based terror outfits and individual terrorists associated with these organisations.

The move is expected to get a boost during the fresh round of meetings where India will be assuming the chairmanship of the Eurasia Group of the Financial Action Task Force (FATF), the premier global Task Force on Counter-terror Funding Operations.

A delegation from the MHA was in Russia last week on the first leg of a two-legged tour of Russia and Europe over the issue of terror-finances.

Notably, new national security adviser Ajit Doval has regularly spoken tough on the issue of countering terror financing and the security agencies have been asked to crack down on such activities to bolster the counter-terror efforts, sources said. Combating money laundering an terror financing have remained key challenges for the security establishment in the last few years.

India has told the multilateral forum that its own customs and border guarding agencies have found that the largest source from where fake Indian currency notes are pushed into the country is Pakistan. It has also raised key concerns about extensive flow of hawala funds coming in from abroad for terrorist outfits, even as cross-border fund transfers are taking place for tax frauds.

Source: Asian Age

Nigeria: meaningless headlines in the face of barbarian acts

Nigeria Rated Highly for Curbing Money Laundering reads the AllAfrica.com headline.

Can this be the same Nigeria presided over by Goodluck Jonathan, terrorised by Boko Haram and courted by the US? More than 270 young women have been kidnapped, forced into adopting a medieval religious practice and sold into slavery while their government sits around praising itself for meaningless acts. No amount of publicity for so-called good behaviour will detract from the fact that there are vast swathes of the country which are beyond the government’s control and that it cannot be bothered to search for these young women.

Kidnapped by Boko Haram, abandoned by Goodluck Jonathan

Kidnapped by Boko Haram, abandoned by Goodluck Jonathan

The accolades for the Nigerian Financial Intelligence Unit came during a GIABA – Inter-Governmental Action Group against Money Laundering – meeting in Niger. GIABA is the West African regional body which ensures compliance with the Financial Action Task Force‘s (FATF) 40 Recommendations.

The Economic and Financial Crimes Commission may be doing a good job at clearing up financial crimes on a case by case basis , but they are powerless in the face of  the large scale corruption which keeps Nigerians in check.

Nigeria’s anti-money laundering and terrorist financing framework was last evaluated by the FATF in 2007, under the old ’40+9′ set of guidelines. The FATF issued new guidelines for mutual evaluations back in 2013. The fourth round of mutual evaluations will assess both the technical implementation of the 40 recommendations and how effective the implementation is. The first evaluations under the new methodology will happen in Autumn 2014. While the FATF has not yet set a date for Nigeria’s fourth mutual evaluation, hopefully the new basis will reveal more meaningful information about how effective the AML/CTF framework is.

Enhanced by Zemanta

Crypto-currencies, hawala and the spectre of terrorist financing

A new protocol which is based on the chain of trust system used in hawala has been developed and it has the potential to empower people to transact pretty much anything they want to someone else, anywhere else  in the world. (Probably not the DPRK though)


Most readers of this blog are familiar with the concept of hawala  – the ancient and paperless system of transferring funds to different locations based upon trust. The sender and the recipient trust that the agent of the other side of the world will hand over the required amount of cash to the right person. Used for centuries by the South Asian diaspora, hawala’s ease of use and cost effectiveness mean it has provided fierce competition to money remittance businesses in the past and even kept them out of the market in some communities. Why use a service that only runs from Monday to Friday and will cost you ten per cent of the transaction amount when there is something that is open 24 hours a day, reaches directly into the smallest villages and costs a fraction of the rate charged by banks for a poorer service?

Enter crypto-currencies. Although not exactly without an information trail, digital currencies maintain the data of each transaction made, but not necessarily the person who made the transaction and they are traceable. They can be bought, sold, transferred or used at any time of the day or night, during national holidays and there are no geographical limitations. Some countries have tried to prohibit digital currencies and others have restricted their use, but this has had little effect on the currencies and users with access to the web have continued to use them anyway. Jurisdictions can limit or restrict the opportunities to exchange digital currencies for fiat currency, but that will have little impact on the use of non-fiat currencies overall. As this article asks, ‘What if a government banned bitcoin and no one noticed?’

So while the US and other governments are busy wringing their hands to find solutions about how to regulate crypto-currency as if it were fiat currency, new protocols and new ways to exchange value are being developed and secured every day.

Bitcoin can be used for anything – yes, even terrorist financing

News reports issued at the end of last week focused on how the US government has designated bitcoin to be a potential terrorism threat. Or at least that is what the headlines are saying.

It looks like the US government’s Department of Defence might be calling upon the expertise of crypto-currency specialists to analyse why and how terrorist groups could useFCA - Bitcoin et al to fund terrorist attacks.  Although far from being a cryptographer nor an internet protocol developer, even I can shed some light on this one.

As Bitcoin and other crypto-currencies exist as methods of transferring funds, so they will be exploited by criminal elements to launder money, to defraud and to fund everything from buying a getaway car to financing terrorism. The point about decentralised crypto-currencies is that they exist and can be used for anything.

Enhanced by Zemanta

Terrorist financing: Spain arrests four in Iran proliferation network

Spanish law enforcement officers have arrested a group people suspected of trafficking sanctioned materials through Spain to Iran. The group FCA - SPAIN TBML ARRESTmoved dual-use goods, so-called as they can be used for civilian or military purposes and which in this case could have been used for Iran’s banned nuclear programme.

Officers received information on the purchase of two metal working machines from a British defence company in 2013. The Guardia Civil police force believes the machines were first sent from the UK to Spain to throw investigators off the scent and until they could be safely sent onto their final destination in Iran. Sending dual-use goods to Iran is in breach of international sanctions  in connection with the development of the country’s nuclear and missile programs.

The suspects – three Spaniards and one Iranian – have been charged with belonging to a criminal organisation, smuggling dual-use materials and money laundering. Investigators raided four homes and business premises in Tarragona, northern Spain and in Palma de Mallorca in the Canary Islands. The industrial metal working machines were made by LEIFELD. Officers seized the equivalent of EUR10,000 in Iranian Rials and Euros which they suspect was earned through trafficking. The police also issued an order to freeze the assets of companies suspected of being part of the network.

Proliferation parameters

Although not mentioned in the Guardia Civil’s press release, the cash to pay for the machinery must have been channelled through the financial system somehow. FCA - SPAIN TBML METALMACHINETransactions to defence companies and for duel-use materials should be in a high-risk category and subject to enhanced scrutiny, including enhanced due-diligence for entities involved in the transactions.

Identifying dual-use materials from a transaction sheet, however, can be challenging for bank analysts who are not necessarily aware of the range of uses a gas centrifuge, for example, can be put to. Transaction monitoring software can be tuned to identify suspicious transfers within certain parameters, but where does the bank get the information from to set the parameters? Entity based parameters which include geography, type of business, beneficial owners, locations of subsidiaries, are easier to follow than new technological developments.

The Financial Action Task Force stepped up its work on ‘proliferation financing’ in 2012 when it made implementing targeted financial sanctions to comply with the United Nations Security Council Resolutions (UNSCRs) relating to the prevention, suppression and disruption of proliferation of weapons of mass destruction (WMD) and its financing one of its 40 Recommendations.  A 2010 report on the subject examines, among other areas, how practitioners can apply a risk-based approach to proliferation financing, managing transaction monitoring and analyses the pros and cons of  ‘goods based screening.’  The report notes that financial institutions are not necessarily in possession of the technical knowledge available to experts and exporters and that a list of controlled goods can be a challenge for export enforcement authorities and real time screening.

‘Goods lists, in themselves, should not be used as a basis for transaction screening by FIs, as they are difficult for those without a degree of technical expertise to interpret correctly which thus make them an inefficient safeguard.’

Reports produced on this subject by the International Chamber of Commerce provide useful information for financial institutions working on international trade transactions and examples of sanctions clauses which could appear in transactions.


Source: Guardia Civil

Enhanced by Zemanta

Terrorist financing: did it really happen like this?

Anyone who has ever picked up and read a sanctions list from OFAC or the UN should check out series three of a program called Homeland. One particular series of the show pits the simultaneous might and fragility of the secret services  – in this case the Central Intelligence Agency – against terrorists and their hidden financiers. The fictional bank is named HLBC which continued to deal with the holding company of a bank, even after the bank itself was placed on the sanctions list.

Screenshot from the TV show Homeland

Screenshot from the TV show Homeland

The show does perhaps romanticise the often uninteresting and hard work put in by analysts who sift through reams of data to find the one transaction that connects the suspect to a regulated financial institution. I have never had the chance to either sit in on a secret service analyst’s briefing (although if I had, I would not be able to tell you about it) , nor work in the sanctions department of a bank (which may also elicit silence from me, albeit for different reasons). Friends in both fields tell me that their working lives are generally not so highly charged. I still wondered if the Homeland writer’s dig at HLBC (ahem) was entirely fictional, or based on a grain of truth?

Here is how the scene panned out.

A CIA veteran, and a new young financial intelligence officer call a meeting at CIA headquarters with the head of HLBC who is surrounded by flunky executives and an aggressive legal team. When the analyst confronts the bank with the proof of their connections to a sanctioned business, the lawyers rebut with a question about the provenance of the information, nicely sidestepping the point and focusing on the irrelevant detail of how-they-got-caught, rather than what-their-actions-have caused, which in this case is a fictional attack killing several hundred CIA staff.

The bank head honcho gets angry with the analyst, for daring to suggest that he had any knowledge of the illegal transactions. Using all the might and pomp placed on his office by, no doubt, the executive flunkies surrounding him and a corporate structure which puts aggression and the ruthless pursuit of profit and personal gain above all other objectives, he thumps his fist on the table, berates the analyst and storms out of the room. We are left thinking that the meeting was a disaster.

That is, until the next day when the bank boss and his entourage look over the evidence again, pick up their toys and put them back in the pram, and dutifully send over all of the requested data to the secret service for scrutiny.

Can anyone on the inside tell me if it actually happens like this? I really hope so.

Enhanced by Zemanta

A look at Boko Haram’s financing

Terrorist financing: how Boko Haram funds its operations.

Enhanced by Zemanta

Money Jihad

Boko Haram has enough money to buy its own artillery now according to Voice of America. Analysts interviewed by VOA said there probably isn’t enough funding within Nigeria for buying heavy weapons, indicating that much of Boko Haram’s funding comes from abroad. Several revenue sources were named:

Foreign sources

  • West African piracy
  • Drug smuggling
  • Unrest from the Arab Spring has created and weapons trafficking “highway” to Nigeria

Domestic sources

  • Bank robberies
  • Stealing from the Nigerian military

In addition to the Boko Haram bank robberies, previous Money Jihad coverage has shown that zakat has been funneled by Boko Haram supporters through Nigerian banks to fund terrorist operations.

View original post

CTF/Hawala: India-US crack down on Pakistan terror financing networks

India and the US held a side meeting at the Financial Action Task Force (FATF) plenary last week  to finalise plans for cooperation on identifying and closing down sources of funding to Pakistan terrorist groups. No details have yet emerged on which funding channels are being used to send money to terrorist groups which may be in Pakistan or are using Pakistan as a base for funding.

The FATF’s latest report on terrorist financing focused on the use of hawala, the traditional South Asian underground method of transferring money between cities and across international borders. Briefly, the FATF claims hawala is open to exploitation by FCA - Hawalaterrorist financiers for several reasons, principally:

  • a lack of supervisory will or resources
  • settlement across multiple jurisdictions through value or cash outside of the banking system in some cases
  • the use of businesses that are not regulated financial institutions
  • the use of net settlement and the commingling of licit and illicit proceeds.

A lack of supervisory resources and commitment to effective regulation seem to be the largest sources of concern vis a vis hawala.

This was underlined by news from the Australian Crime Commission’s Project Eligo operation last month, which identified terrorist financing channels built on the back of trafficking and selling narcotics between South America, Australia and the Middle East. The funds in the Middle East were then channelled back to South America to pay for more drugs. This could have been achieved via formal or informal remittance systems.

That said, it is worth remembering that the hawala network is vast, based on trust and used by millions of South Asians to remit money home. A friend of mine regularly received legitimate payments for group tours of India from elderly travellers via a hawala operator ensconced in a jewellery store. What is more, the term hawala is rarely used. Most people refer to the system simply as money transfer.

India-US join hands to crack down financial network of Pak group

New Delhi: India and the US have joined hands to crack down on the financial network and fund-raising activities of Pakistan-based terror outfits.

“India and USA have agreed to work together to crack the financial network and fund raising activities of Pakistan-based terror FCA - TerrorFinanceoutfits and individual terrorists associated with these organisations under the Framework of Indo-US Bilateral discussion,” Minister of State for Home RPN Singh informed Lok Sabha in reply to a written question.

The India-US bilateral meeting, held on the sidelines of the Financial Action Task Force (FATF) in October 2013, facilitated exchange of such information between concerned agencies of both the countries.

Singh said India and the US have also agreed to have cooperation between their agencies in fighting against counterfeit currency and illegal financial transactions under the aegis of the India-US Homeland Security Dialogue.

A sub group of “illicit finance, illegal smuggling of cash, financial fraud and counterfeiting” has been formed to work with the areas of information exchange, capacity building and technical/ research cooperation.

“US Homeland Security and Indian agencies are working together to investigate sources of material and technologies used in the production of FICN,” he said.
Source: ZeeNews 

Enhanced by Zemanta

Terrorist financing: Indian Maoist finances partly channelled through banks


The New Delhi based Institute for Security and Defence Analysis has published an insightful breakdown FCA - Naxalitesinto how the Naxalites of the Communist Party of India, aka the Maoists, acquire and spend their funding. While some of the estimated INR140cr (USD43m) they receive stays in cash, some is invested in real estate and some is deposited into bank accounts. ISDA analysts have also not ruled out the possibility of the Naxalites receiving foreign aid.

The Naxalite Maoists in India are a paramilitary group, born in West Bengal and now predominant in  poor areas of Chhattisgarh, Odisha and Andhra Pradesh and which supports a radical, left-wing, Maoist political ideology and aims to overthrow the government of India. The group is an illegal entity, banned in several states and nationally under the Unlawful Activities (Prevention) Act in 2009. The ban means that Maoists can be arrested, they are barred from holding public meetings, their offices – if found – will be sealed upon arrest and any assets will be frozen.

Despite their treatment as a terrorist organisation, the Naxalites have a rigorous structure of accountability. The Maoists adopted a protocol in 2007 called “Our Financial Policy” which lays down in detail where funding emanates from, how money is to be spent and where it is to be kept. Funds are collected from various sources, including:

  • Government Works and Schemes
  • Industry and Businesses
  • Social Institutions
  • Infrastructure
  • People
  • Membership Fees
  • Supporters/Sympathizers
  • Revolutionary Taxes in cash and kind
  • Fines on Defaulters

Corrupt officials, the Public Works Department, contractors, the mining industry and the collection of tendu leaves, which are used to make the traditional Indian “beedi” cigarette, have all generated funds for the Maoists. Maoists collect a “revolutionary tax” from people, local businesses and families. This can be in the form of extortion and people may feel threatened if they do not pay. There appear to be levies imposed on anyone who is late with a payment. This week, reports hit the Times of India about Naxalites demanding INR2lakh (USD3,226) from a doctor in Bihar  and threatening him with serious consequences if he does not pay.

To combat extortion and the payment of “revolutionary tax”, the Indian government is ran a radio campaign. In September last year,  All India Radio – the national radio station – started to play jingles and advertisements urging villagers and indigenous community groups to distance themselves from the Naxalites and join the mainstream.

There is no evidence yet to suggest that the Maoists are investing money in businesses or in the stock market. The report author claims that funds are spent on the black/gret market to acquire weapons, ammunition and explosives.

The organizations sprawling and secretive nature forces it to manage liquid assets carefully. At any one time, at any level of the organization, only two people will know where the money is stored. Cash is kept with trust-worthy “fronts” who sympathise with the group, funds are given to real estate agents presumably to invest or secure as well as hold. ISDA reports that some Maoists have bought vehicles for supporters, they have converted money into gold “biscuits”  and pack large amounts of notes into polyurethane bags which are kept in metal boxes, in tanks and stored in forests. There have also been cases of depositing funds into bank accounts, a senior military officer told ISDA.

Source: ISDA report



Enhanced by Zemanta

Are diamonds a launderer’s best friend?

If they are good enough for Monroe and Beyoncé, then they must certainly be good enough for the international money FCA - Monroelaunderer. The Financial Action Task Force’s latest report provides analysis of money laundering and terrorist financing using the diamond trade as a cover. Diamonds are attractive to money launderers for several reasons: they are currency and a means of storing wealth, money can be laundered through the stages of the diamond trade, they lend themselves to trade based money laundering, opaque offshore centres and free trade zones are often associated with diamonds and smuggling.

From the report: “Belgium and Israel have significant cases relating to diamond dealers and diamond trading companies,  whereas the US identified as a retail market show more laundering through jewellers. Several intelligence gaps still remain due to the lack of cases from several African mining counties and financial hubs such as the United Arab Emirates.”

Conflict diamonds, gems mined in countries in conflict, civil war or which are the subject of sanctions, are mined by slaves and sold to fund arms and other supplies to keep a trigger happy and press ganged army on its feet, as popularised in the movie Blood Diamond. In Lord of War, the dramatisation of Viktor Bout’s life, the protagonist accepts diamonds in exchange for arms sales to teenage paramilitaries in Sierra Leone.

A number of changes to the so called legitimate diamond trade in the past 15 years have prompted concerns from observers about the potential and actual exploitation of the business by those wishing to move money and remain out of sight from transaction tracking software.

The diversification of the diamond sector geographically, from traditional centres such as South Africa, Belgium and the Netherlands, towards an increased dominance by Indian, Chinese and Emirate (Dubai) trading centres has created new flows of precious stones and cash, which could provide opportunities for terrorist financing and cleaning the proceeds of crime.

The report includes red flags, typologies and analysis of ML/TF in the diamond trade.

This video gives a good reminder of where diamonds come from and why, despite these ugly truths, people still keep buying diamonds.