Written by Jon Prentice on Thursday November 21, 2019
The pernicious strength of terrorism is its element of surprise: just when you think it’s disappeared, it rears its ugly head. A proven and effective method of preventing it is disrupting the financial networks used to fund it. This has been known to organisations, regulators and governments for some time now, and was aptly summarised by the then head of the International Monetary Fund (IMF) Christine Lagarde in 2017:
[With terrorism] becoming more pervasive in our societies, it is our collective responsibility to choke off the financial flows—both large and small—that enable terrorists to inflict unspeakable suffering on individuals, families, and communities.
How, though, is this best achieved? And what are some of the important key skills that compliance professionals can utilise in their day to day roles to detect and disrupt the financing of terrorism?
Lagarde’s comments were made at a Financial Action Task Force (FATF) plenary meeting in June 2017; a year later and the organisation was setting out a strategic priority to improve upon and update general understanding of terrorist financing risks in February 2018.
This was followed up in July 2019 by the release of the Terrorist Financing Risk Assessment Guidance, which was itself buttressed by similar reports issued by national governments, financial institutions, law enforcement, financial intelligence units (FIUs) and financial consulting firms, all of which highlighted the risks and promoted the strategies that should be Examples include the European Parliament’s Virtual Currencies and Terrorist Financing: Assessing the Risks and Evaluating Responses, RUSI’s white paper Social media and Terrorist Financing and the United Nations Office on Drugs and Crime’s Guidance Manual for Member States on Terrorist Financing Risk Assessments, amongst many others.
Combatting terrorist financing – the challenges
Much like traditional money launderers, terrorist financers are constantly adapting the ways in which they exploit the financial system in order to avoid detection, something emphasised by FATF in its Terrorist Financing Risk Assessment Guidance:
Terrorists regularly adapt how and where they raise and move funds and other assets in order to circumvent safeguards that jurisdictions have put in place to detect and disrupt this activity. Identifying, assessing and understanding terrorist financing risk is an essential part of dismantling and disrupting terrorist networks.
Some examples of the more obscure methods being used to finance terrorism include:
Another major challenge is differentiating terrorist funding from legitimate money. In 2018, the US Department of the Treasury stated in its National Terrorist Financing Risk Assessment that ‘due to the nature of terrorist financing (often legitimately-sourced funds later used for illicit activity), US banks face challenges in distinguishing terrorism-related financial transactions from licit activity’.
With (the concept of terrorists being able to fund activities using small amounts of money) growing, the ability to quickly distinguish terrorist financing from licit activity is crucial. This is where we introduce our key skills which can help to overcome these challenges: strong analytics and collaboration.
The analytical approach
The importance of strong analytical skills cannot be over-emphasised. Traditionally, human intervention has played an integral role in the detection and reporting of terrorist financing.
This has predominantly been seen at a transaction monitoring or customer due diligence (CDD) level, where critical thinking and strong analytics can be the difference between detecting an anomaly or allowing it to pass through the system, noticing unusual patterns and trends, or flagging potential terrorist financing through obscure means.
Being able to analyse data sets and customer information and activity to create links and networks for reporting to authorities, is a highly-valuable transferable skill that should not be underestimated.
But will the emergence of new technologies for tasks such as transaction monitoring make analytical skills redundant?
It is common knowledge that technology is playing an increasingly more prominent role in day to day compliance activities, in particular when it comes to transaction monitoring, with the use of artificial intelligence (AI), machine learning and big data enabling vast quantities of data to be scanned far more quickly than human beings can manage. However, this does not detract from the importance of human analytics and the need for humans to be able to analyse data provided to them, whether this be through technology or manual intervention.
The importance of collaboration
Collaboration is another key, transferable skill that is essential in the fight against terrorist financing. Whether this is collaboration at local, national or international level, each play their own pivotal role.
In 2018, FATF published the UK’s Mutual Evaluation Report (MER) for the year, in which it stated that ‘a strength of the UK’s system is the close co-operation and collaboration that goes into all ML/TF risk and threat assessments’, which sets a strong tone for a collaborative approach to fighting terrorist financing within the region.
In 2015, the UK set up the Joint Money Laundering Intelligence Taskforce (JMLIT), which is described by the National Crime Agency (NCA) as ‘an innovative model for public/private information sharing that has generated very positive results since its inception in 2015, and is considered internationally to be an example of best practice.’
The taskforce consists of over 40 financial institutions, the Financial Conduct Authority (FCA), Cifas – the UK’s largest cross-sector fraud sharing database – and five law-enforcement agencies.
Further to this, on 31 October 2018 the NCA launched the National Economic Crime Centre (NECC), aimed at ‘building wider partnerships across the public sector, with regulators and the private sector.’
The establishment of both JMLIT and the NECC emphasises the importance the UK places on collaboration as a tool to stem terrorist financing.
On an individual level, collaboration within an organisation is equally as important. This can be done in a number of ways, such as:
On 8 November 2019 the NCA released its SARs Annual Report 2019. The figures showed that during 2018/2019 a total of 20,132 SARs were submitted in relation to terrorism and terrorist financing related concerns. Of these, 1,909 were pro-actively identified and escalated to the National Financial Investigation Unit (NTFIU) and the Counter Terrorism Unit (CTU). The submission of these SARs could quite easily have contained information that helped to prevent a potential terrorist incident, with the UK’s most senior counterterrorism officer, Neil Basu, revealing in September 2019 that 22 attacks had been foiled in just over a year.
More and more importance is being placed on analytics and collaboration as tools to combat the financing of terrorism, as it also is with combating other offences such as human trafficking and other more traditional money laundering offences. With both skills being highly transferable, they should be seen as essential ‘must have’s’ in every compliance professional’s toolkit.
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