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 organizations, regulators, and governments for some time now and was aptly summarized by then-head of the International Monetary Fund Christine Lagarde in 2017:
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[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 compliance professionals can utilize 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 organization 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, and financial consulting firms, all of which highlighted risks and promoted strategies. 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, among 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 emphasized by the 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,” the guidance reads. “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:
- the looting/theft and subsequent sales of arts and antiquities;
- through the sale of counterfeit goods;
- via the trading or sale of virtual assets on video games;
- through the use of virtual currencies; and
- via betting, online gaming, and casinos.
Another major challenge is differentiating terrorist funding from legitimate money. In 2018, the U.S. 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), U.S. 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 overemphasized. 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 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 analyze 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. The use of artificial intelligence, machine learning, and big data enable 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 analyze 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 the local, national, or international level, each play their own pivotal role.
In 2018, the FATF published the U.K.’s Mutual Evaluation Report for the year, in which it stated “a strength of the U.K.’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 U.K. 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 U.K.’s largest cross-sector fraud sharing database—and five law-enforcement agencies.
Further to this, on Oct. 31, 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 the JMLIT and the NECC emphasizes the importance the U.K. places on collaboration as a tool to stem terrorist financing.
On an individual level, collaboration within an organization is equally as important. This can be done in a number of ways, such as:
- through sharing concerns, trends, or information with team members or other areas of the business;
- by ensuring the organization doesn’t work in silos by collaborating on procedures or just through sharing knowledge with wider teams; and
- through collaborating with other organizations or with authorities through the use of Suspicious Activity Reports (SARs).
On Nov. 8, the NCA released its SARs Annual Report 2019. The figures showed 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 proactively identified and escalated to the National Financial Investigation Unit and the Counter Terrorism Unit. The submission of these SARs could quite easily have contained information that helped to prevent a potential terrorist incident, with the U.K.’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 offenses such as human trafficking and other more traditional money laundering offenses. With both skills being highly transferable, they should be seen as essential “must haves” in every compliance professional’s toolkit.
The International Compliance Association is a sister company to Compliance Week. Both organizations are under the umbrella of Wilmington plc.
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