Written by Nitin Sane on Tuesday May 11, 2021
The nexus between transnational organised crime and terrorist financing is a contentious, ongoing topic of debate. The extent of their connection is disputed, but what is accepted is that the motivation and ideology of a terrorist differs fundamentally from that of organised criminal groups. Terrorists tend to challenge state authority and seek political change through violence, material destruction or bloodshed; organised criminals, on the other hand, are more concerned with making a profit. While investigators and analysts have observed some isolated instances of the two intermingling, it isn't easy to establish the strength or permanence of any convergence. However, it’s well-know that both flourish where poverty, corruption and repression exist, and weaken governments that fail to combat them. Seen in these terms, fighting terrorist financing and organised crime is not only a moral imperative but also central to maintaining peace, security and economic prosperity.
What characterises a terrorist is the political, or pseudo-political, nature of their motivations, a drive absent in ‘ordinary’ violent people. Because of this intrinsic incentive, terrorists see their actions as an expression of cosmic heroism, rather than actions about which they should feel ashamed.
When it comes to terrorist financing, its distinctive aspect is that it happens through both legitimate and illegitimate funds. Terrorist sponsors, however, don’t necessarily generate their revenue through illicit activities. Individuals and entities who earn income through legitimate channels may finance terrorists simply because they believe in the same cause. In addition, some honest and law-abiding citizens make donations to seemingly genuine and legitimate institutions or non-profit organisations that are secretly involved with clandestine terrorist financing operations. These qualities make the task of detecting terrorist financing extremely difficult.
Usually, financial institutions and banks position their counter financing of terrorism (CFT) units in anti money laundering (AML) departments. However, many organisations still fail to realise that detection of terrorist financing requires an entirely different skill set to spotting money laundering. The substantial difference is that in money laundering, the launderer conceals the illicit source of funds, while in terrorist financing, the financer conceals the end-use of funds. In addition, with money laundering, the launderer requires complete control over the funds. On the contrary, the terrorist financer doesn’t need control over the funds once they are handed over to beneficiaries. Finally, launderers are always conscious of their illegal actions, while terrorist financers can sometimes be innocent, unaware they’re financing terrorists.
A common hybrid model mixes CFT efforts with other control functions, ultimately undermining its efficacy to spot outliers. To secure payments, the ongoing tech trend is strongly focused on data movements. There’s a need to implement the use of these and other sophisticated solutions like artificial intelligence (AI), machine learning, and algorithms with an in-depth understanding of terrorist ideologies, psychologies and typologies. CFT teams in banks have to be exclusively dedicated to this activity, separate from other surveillance activities like fraud and AML. They need to operate in sterile environments with unfettered access to specialised third-party proprietary databases. Moreover, CFT staff should be highly skilled in using Open-Source Intelligence (OSINT) tools for carrying out complex investigations. OSINT is a multi-factor methodology for collecting, analysing and making decisions about data accessible from publicly available sources, and used in an intelligence context. Staff that handle terrorist financing alerts need an unambiguous grasp of terrorist funding patterns, particularly geographies, where transactions have taken place. Furthermore, CFTs teams also benefit from an expertise on website and email analysis (such as tracing host locations).
Key to identifying terrorist financing transactions is knowledge of terrorist networks and their operators. Consider a practical example. In Tunisia, intelligence agencies observed a specific trend of young female fighters travelling to Syria and Iraq, primarily through Libya and Turkey, to assist ISIS militant operations. Lacking market intelligence, banks were vulnerable to processing transactions related to this activity. How could banks have spotted it? By having intelligent CFT teams segregate transactions carried out by its female client base, say between the ages of 15 and 30, and near entry points to Syria.
Once this group is isolated from the general population, the institution may further narrow down on the following specific outliers for the targeted group:
The most critical factor in this scenario is the application of these filters on the complex targeted client base, in this case, female, within a particular age range, and with a focus on conflict zones and routes to Syria.
The fight against the financing of terrorism is a niche area, and requires coordinated effort, such as surveillance beyond the designing of algorithms and transaction thresholds. To gain valuable insights, it’s crucial that CFT staff in banks engage proactively with law enforcement authorities. This way, they can also stay abreast of the various modus operandi of terrorist networks. Banks and financial institutions must also foster public-private partnerships, bringing in the ‘human element’ to give themselves a fighting chance to successfully combat the financing of terrorism.
 Payvision, ‘Throwback to RiskConnect 2019’, 25 March 2020: https://blog.payvision.com/throwback-to-riskconnect-2019 – accessed May 2021
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