session title case study: disrupting the flow of illicit ... · understanding how financial...

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Case Study: Disrupting the Flow of Illicit Funds

to Terrorist Organizations

11 December 2013 | 10.45 – 12.00


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Moderator: Grahame White, ACAMS

Presenter:

Abdulrahaman Babashani, Standard Chartered BankExposing Links to Organized Narcotics Groups and Islamic Extremist Groups and

Understanding how Financial Institutions May be Involved

Muhammad Mustapha Abdul Rahman, FIU, NigeriaAnalyzing Transaction Patterns for Indicators of Terrorist Financing.

Milimo Moyo, Lloyds Banking GroupUtilizing Lessons Learnt from Real-Life Terrorist Financing Scenarios to spot illicit

money transfers.


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Exposing links to organised narcotics groups and Islamic

extremist groups and understanding how financial

institutions may be involved

DECEMBER 11, 2013

Abdulrahaman BabashaniArea Financial Crime Compliance West Africa

Standard Chartered Bank

43rd Annual AML & Financial Crime Conference, Africa

Following a protracted period of conflict, social unrest, and political instability, Africa has made considerable advances in democracy, economic growth, and development in the past decade.

Notwithstanding these advances, there is concern about the rise of terrorism and its adverse effects on peace, security, and development in the region

BACKGROUND


This is manifested by the number of terrorist attacks in some African countries that have resulted in large human casualties and the destruction of property.

The source of funding for terrorist activities has equally been of concern in the region. The phenomenon is underpinned by several factors, including

– the presence of large, informal, cash-based economies,

– political instability,

– ethnic and communal violence,

– pervasive corruption, widespread poverty,

– gross unemployment, and underemployment.

Significantly, terrorist groups and their financiers drive funds from both licit and illicit activities, and move them through formal and informal channels to support their activities.

All of these factors have adverse effects on peace, security, and development in the sub-region.

BACKGROUND


Compounding the situation is the rising radicalisation and the southward migration of terrorists and extremists, particularly members of Al Qaeda in the Islamic Maghreb (AQIM).

Indeed, there are indications that AQIM has operational bases in some African countries and has forged tactical alliances with terrorist groups such as

– Somali militant group Al Shabaab

– Boko Haram in Nigeria,

– The Movement for Oneness and Jihad in West Africa (MUJAO),

– The National Movement for the Liberation of Azawad (MNLA), and

– Ansar Eddine in Mali and Niger.

These alliances have taken the form of provision of training and logistical support to this groups.

Islamic extremists in Africa


Four main categories of typologies of methods and

techniques used by African terrorist and terrorist

groups to support terrorist activities:

terrorist financing through trade and other

lucrative activities

terrorist financing through NGOs, charity

organisations, and levies

terrorist financing through smuggling of arms,

assets and currencies by cash couriers.

terrorist financing through drug trafficking

Method of Financing Extremist

Groups


Drug trafficking was found to be an attractive source of funds for terrorist organisations, enabling them to raise large sums of money

There is evidence to suggest that terrorist groups and cells in Africa and beyond rely on proceeds from drug trafficking as a method of financing their activities.

Some South American drug cartels are shipping drugs to West Africa in order to access European markets. these organisations, predominantly based in Venezuela and Colombia, have transported hundreds of tons of cocaine, worth billions of dollars, to West African nations such as Nmigeria, Benin, Sierra Leone, and Togo

The extraction of funds from the drug trade, arms trafficking, money laundering, and credit fraud have become commonplace for several terrorist organisations

Terrorist Financing through Drug

Trafficking


Terrorists and terrorist organisations use both legitimate and illegitimate means to raise funds, and formal and informal channels to move the cash around.Security and surveillance at various national borders are weak, resulting in the infiltration of terrorists, small arms, and light weapons. Law enforcement and regulatory agencies, security and intelligence services and the judiciary lack the requisite capacity to effectively address the challenge of terrorism and terrorism financing. The inability and unwillingness of national competent authorities to effectively co-operate and collaborate, especially in information sharing, is partly responsible for the deteriorating security and increasing terrorist financing in the sub-region.

Challenges and Conclusions


Moderator:


Speakers:




Analyzing transaction patterns for

Terrorist financing Indicators

December 11, 2013

Muhammad Mustapha Abdul Rahman

Nigerian FIU


Funding of Terrorist Organizations:– Funds for actual attacks

– Cost of explosives;

– Arms and vehicles

Logistical Funding:– Personal/personnel upkeep

– Travel and accommodation

Funding Social Services:– Hospitals, Schools, medical supplies , food,

community development projects(boreholes, water wells, etc)

3 Categories of Terrorist Financing


Since they are somewhat linear type transactions;

It involves acquisition; aggregation; transmission to

organization; transmission to cell and conversion to

material for attacks.

– A lookout for fusion and fission type transactions

– Organizational terrorist Vs lone individual cells

– Telecoms transactions

• purchase of re-charge cards thru mobile banking platforms

• Internet subscriptions

• Analysis of cell tower call records

Considerations in Analyzing

Transaction for TF indicators


Follows the traditional criteria of;

– Geography• Socio-economically deprived areas,

– Business• Petty trades to include-local tailors, grains and grocery

merchants, Junior civil servants.

• NGO’s NPOs

– Individuals• Male between ages 18-35

• Little or no western education and versed in Quranicrecitations but not jurisprudence or

Transaction Analysis in general


Indicator 1: Relatively small amounts

Indicator 2: ATM based transactions

Indicator 3: Frequent ATM withdrawals

from various locations

indicator 4: Multiple identities – dual nationalities

Indicators


Indicator 5: Use of Mobile Banking platforms

Indicator 6: Intermittent huge case lodgments,

usually below the reporting thresholds

Indicator 7: Huge inflows (usually ransom

proceeds)from government to companies

accounts

Indicator 8: payments for goods from related

accounts

Indicators continue….


One factor or develop a combination of multiple factors

Understand fund source can be from legitimate, illegitimate and/or co-mingle

Use Law enforcement records

Keep tab on News and other media outlets (simple Google alerts can help)

Keep tab on listed countries and individuals from the UN and local lists

Report any suspicion to the FIU or LEA

Conclusion


Moderator:


Speakers:




Utilizing Lessons Learnt from Real-Life Terrorist

Financing Scenarios to Spot Illicit Money Transfers

December 11, 2013

Milimo Moyo* Vice President, Compliance Testing & Training,

Lloyds Banking Group, NYC

*The views expressed in this presentation are the author’s and do not represent the views of

any organization or institution or entity.


High volume/Speed velocity (Immediate/irrevocable settlement).

Differing regulatory standards across borders: inconsistent global regulations and enforcement rules.

KYC/due diligence concerns: the parties to a money transfer may not be a direct customer of the financial institution processing the transactions.

Transaction monitoring tools for banks and other financial institutions: expectation that transaction monitoring tools are commensurate with bank’s size and risk profile.

Disposition of unusual activity: identification, investigation and reporting of suspicious activity/transactions.

Money Transfers: Challenges


Funds transfer activity occurs to or from a financial secrecy haven, or to or from a higher-risk geographic location without an apparent business reason or when the activity is inconsistent with the customer’s business or history.

Many small, incoming transfers of funds are received, or deposits are made using checks and money orders. Almost immediately, all or most of the transfers or deposits are wired to another city or country in a manner inconsistent with the customer’s business or history.

Funds transfers are sent or received from the same person to or from different accounts.

Funds transfers contain limited content and lack related party information.

Money Transfers: Red Flags

Real Life Terrorist Financing Scenarios

20

Lebanese Canadian Banks. 311 of Patriot Act (www.treasury.gov)

HSBC Mexico and Iranian terror transfers

(www.justice.gov)

Lessons: Lack of internal controls Stripping Full payment details Jurisdictional risk Due diligence measures on customers and correspondents Screening and transaction monitoring Money transfer red flags Reporting suspicious transactions or activity Information sharing and Inter agency cooperation

Filter Weaknesses: Inadequate user access management giving rise to unauthorized use.Poor rationales to support why a potential match is a false positive


Countries should ensure that financial institutions include required and accurate originator information, and required beneficiary information, on wire transfers and related messages, and that the information remains with the wire transfer or related message throughout the payment chain.

Countries should ensure that financial institutions monitor wire transfers for the purpose of detecting those which lack required originator and/or beneficiary information, and take appropriate measures.

Conclusion: Wire Transfers under

Recommendation 16 of the FATF 40


FIs should not omit, delete, or alter information in payment messages or payment orders for the purpose of avoiding detection of that information by other FIs in the payment process;

FIs should not use any particular payment message for the purpose of avoiding detection of information by any other FI in the payment process;

Subject to applicable laws, FIs should cooperate, as fully as practicable, with other FIs in the payment process, when requesting to provide information about the parties involved; and

FIs should strongly encourage their correspondent banks to observe these principles.

Conclusion: Wolfsberg Principles on

Payment Transparency


THANK YOU

Utilizing Lessons Learnt from Real-Life

Terrorist Financing Scenarios to Spot Illicit

Money Transfers

Milimo Moyo

LL.B, LL.M, CAMS


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