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Are multinationals supporting terrorist financing?

International Compliance Association

Big Compliance Conversation , Terrorist financing

French firm Lafarge, a major producer of cement, construction aggregates and concrete, is the subject of a formal investigation by French authorities over allegations of terrorist financing, violating international sanctions and committing crimes against humanity.

 

The charges relate to alleged payments of nearly €13 million made by the Syrian subsidiary of Lafarge, to the Islamic State (IS) and other terrorist groups operating in Syria. The payments were made to ensure their Jalabiya plant was kept open and operational after other French companies had pulled out of the country because of the civil war that began in 2011.

 

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The payments are alleged to have taken place between 2011 and 2014, before their merger with Swiss firm Holcim in 2015, becoming LafargeHolcim, made them the world’s largest cement maker.

 

The allegations surfaced in 2016 after a group of Syrians who worked at the plant complained on social media about how they had to fend for themselves when IS broke the arrangements that were in place and attacked the plant in September 2014.

 

Part of the arrangement between Lafarge and IS involved the terrorist group issuing travel permits to Lafarge workers and the company paying a 10% ‘tax’ to the terrorists. These ‘permits’ allowed the company’s staff to move freely inside what was, to all intents and purposes, a war zone. Documents filed in court allege that Lafarge executives often disguised their payments as ‘donations’ and relied on a pair of intermediaries, including a Syrian-Canadian consultant, to make the payments on their behalf.

 

The legal director at the European Center for Constitutional and Human Rights (ECCHR), stated that ‘the activities of Lafarge in Syria, in a context where extremely violent crimes have been committed – even right outside the factory – are a perfect illustration of how multinationals can feed conflicts.’

 

Naturally, Lafarge has attempted to distance themselves from the allegations declaring they ‘deeply regret what happened in our Syrian subsidiary and as soon as we were informed, we immediately took firm measures.’ They also confirmed that the people charged in relation to these offences are no longer with the company.

 

Eight former Lafarge executives, including erstwhile CEO Bruno Lafont, have been charged with financing a terrorist group and/or endangering the lives of others. Canadian billionaire Paul Desmarais Jr., a long-time Lafarge director, has also been questioned by police and reports in France indicate that the FBI has also launched an investigation.

 

The family of Mr Desmarais controls Montreal-based Power Corp., which, through a Belgian firm called Groupe Bruxelles Lambert (GBL), co-owned by the Desmarais family, is also a major Lafarge shareholder. Mr Desmarais and three other GBL executives have been questioned by police in relation to the case.

 

The Financial Action Task Force (FATF) set international standards for the effective implementation of measures to combat money laundering and terrorist financing. This is done through a series of recommendations from 2012 (since updated in February 2018). Their Recommendation 5 covers the terrorist financing offence and states that:

 

Countries should criminalise terrorist financing on the basis of the Terrorist Financing Convention and should criminalise not only the financing of terrorist acts but also the financing of terrorist organisations and individual terrorists even in the absence of a link to a specific terrorist act or acts. Countries should ensure that such offences are designated as money laundering predicate offences.

 

Many countries adopt the FATF recommendations when developing relevant laws and regulations, and France is no exception. The Fédération Bancaire Française confirmed their full commitment to combating the financing of terrorism, in line with the EU money laundering directives, so relevant checks will help to mitigate the possibility of these alleged offences happening again.

 

The question of how the alleged offences were originally allowed to take place remains though and suggests that the checks and controls administered for this organisation by its bank were simply not robust enough.

 

Despite the fact that LafargeHolcim has refuted the allegations, a French court will now have to determine whether the company’s actions violated international sanctions and financed terrorism. A conviction could mean up to 10 years in prison for individuals and a fine for the company. LafargeHolcim will also suffer some serious reputational damage as a result of this case, which will undoubtedly have a financial impact.

 

LafargeHolcim has been ordered to post a €30-million bond while the case proceeds, reflecting the serious nature of the charges, and, hopefully, letting other organisations operating in similarly hostile environments know that this type of cynical behaviour will not be tolerated by the authorities.

 

It will be interesting to see how this case develops in the coming months.

 

Further reading

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This article forms part of the #BigCompConvo - Join us as we explore and debate the latest challenges and issues facing you and regulatory and financial crime compliance professionals all over the world. If you’d like to contribute an article as part of the Big Compliance Conversation get in touch with us at contributions@int-comp.org

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Why not study for the ICA Specialist Certificate in Combating the Financing of Terrorism?

This course provides a foundation knowledge of the meaning of terrorist financing and proliferation, an introduction to the legal frameworks associated with global counter-terrorist financing strategy and an overview of the key terrorist financing threats and risks.

You will learn about the nature of and motivation behind terrorism; ways in which funds for terrorist organisations are gathered and processed; the risks organisations face in relation to the financing of terrorism; how organisations can identify terrorist financing risks; the relationship between money laundering and terrorist financing; and how a risk-based approach can be used to manage terrorist financing risks.


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