Terrorism/Terrorism Finance – CTF Update on IS/AQ

UN Resolution

During a meeting held on 31 January 2019 at the UN Security Council, titled “Preventing and Countering the financing of terrorism,” chaired by the French delegation, it announced it was committed to mobilising the CTF effort and was expecting to bring forward a new CTF resolution in the coming weeks to the UNSC. Delegations attending the meeting were joined by international groups and a few experts, providing an update on the stats of IS and AQ and the CTF response. Following are some of the highlights:

The 1267 Monitoring Team via the analytical support and sanctions monitoring team re IS and AQ reported that they believe that:

• IS retains US$50-300 million making it an enormously wealthy terrorist Group notwithstanding its loss of territory. It is believed to be protecting its cash reserves through a combination of smuggling across borders for safekeeping investment in legit business and some hiding of cash in Iraq and Syria. Remaining sources of revenue include extortion kidnap and other other criminal activity. Also that IS priorities are looking to thwart future economic reconstruction in areas where territory has been lost in Iraq and Syria

• The use of unregistered/ unregulated MSB’s are the most prevalent means of initiating funds transfers involving IS and AQ including maintaining a long standing reliance on cash couriers

• On new payment technologies, concerns are consistently raised by member states (in Countries at risk) as to the importance of breaking down barriers to inclusion in the financial system and the importance therefore of new payment technologies which do not require access to formal banking relationships. The challenge is to support innovation and inclusion whilst also enforcing appropriate CDD, and other AML/CTF controls in these new product offerings. including Screening Monitoring and reporting of suspicious activity.

• The exchange of intelligence between private sector and enforcement bodies will only grow in importance as innovation and technology drive change in how money changes hands and crosses borders.

The US delegation made a number of telling and important contributions for example stating that: “whilst IS is no longer holding the territory to generate 100’s of millions of doll ars in revenues the organisation still generates revenues from extortion, kidnap and ransom and infiltration of legitimate businesses.” The US delegation confirmed that AQ employs similar funding sources. The US delegation made a number of additional points, namely that Countries needed to criminalise and prevent payments of ransom, which had been agreed by UN resolutions but not yet adopted in enough countries. The US also raised concerns around digital financial tools, stating, “the US notes that digital financial tools have created new opportunities to move store and launder their proceeds..and we should already watch these to stop terrorists using new and emerging technologies” reminding that in October 2018, the FATF called on Countries to assess and apply AML/CTF approaches to these ..and urges all member states to take these steps.

The UK delegation presented 3 areas of work it felt the UN Security Council should do more to encourage and promote: namely i) existing sanctions resolutions should be fully implemented; ii) identifying emerging risks and trends on a global level and sharing best practices; and iii) identifying capacity gaps and providing technical assistance.

The German delegation made the following statements of interest – “public private partnerships are important but that legislation is needed so FI’s can operate on solid ground.” And that “Balance between privacy and transparency, respecting human rights and the rights of consumers are extremely important in this regard and we must not sacrifice our data protection standards but we would fail if we tied the hands of Law Enforcement in their investigations against terror networks – so to strike the balance is essential.”

The Belgium delegation wanted to highlight an important distinction between micro and macro financing of terrorist activities. Attacks in Europe in recent years, according to Belgium were most often “carried out by lone actors and the financial means required to carry out such acts were very small. The perpetrators most of the time do not have any financial link whatsoever to any terror organisation or network.” This micro financing can be distinguished with macro financing, where Belgium is seeing the rise of “hybrid multi criminal organisations that combine political objectives with criminal activity with profit as there motive.” Another point Belgium though was important was that, “systematic exchange of information is crucial,” whilst respecting the regulatory framework on data privacy. This includes the private sector working together Belgium also had concerns over new payment systems and looked for the international harmonisation of relevant regulatory frameworks.

The China delegation informed on a number of areas where it was focussing and considered important such as “a focus on the natural connection between terrorist financing and other illegal financial activities including money laundering and tax evasion.” and that ”member states should establish robust and comprehensive supervision systems, and smooth coordination and cooperation mechanisms, facilitate data sharing across sectors, and strengthen co operation in a more effective effort on cross border financial crimes including terrorist financing.” China also raised some important points around new payment methods, where it stated that with “the rapid expansion of internet finance – experience in China of self service financial service makes it more difficult to identify users, online payments increases the difficulty of tracking down transactions and the complexity of transactions by multiple accounts conceals the true purpose of transactions and bring challenges” to CTF. As a response China informed that on January 1st 2019 new regulations had come into force to require internet financial institutions, to establish internal AML/CFT controls to identify customers and report suspicious transactions.

The Russia delegation highlighted concerns over new payment methods, stating they had seen, “increasing evidence that IS are using electronic payments systems and cryptocurrencies to collect donations” and they reported they believe “IS is investing in foreign companies in tourism and agricultural sectors.” The Russians also reported that they believe AQ has an increasing capacity as its financial situation continues to grow even stronger. Finally the Russian delegation informed that as part of the Eurasian Group of Countries a Foreign Terrorist Fighter profile had been developed and this tool was available to now assist FI’s and LE in the region to identify FTF’s.

The Swiss delegation were the only delegation to actually talk about the results in seizure of assets that they had delivered. Since 2008 -2017 Switzerland had blocked CH250K they believe is connected to terrorism / terrorism financing. The Swiss made another point, reminding member states that whilst CTF actions are important, international humanitarian actors need to be protected and allowed to continue their efforts even in difficult areas, of course provided they are carrying our legitimate activities, but cautioned CTF actions should not be counter productive in this regard.

There were other contributions, including from South Africa, Nigeria, & Kenya and from Qatar, Jordan, Lebanon, Egypt and Kuwait in the Middle East and from Canada, Poland & Liechtenstein where commitments to continue the fight to combat terror financing were made and a number of important points made, including by a number of Countries concern over the use of human trafficking as a source income, and various initiatives taken by respective countries. Contributions also came in from FATF and

Important expert guests also made telling contributions, including from RUSI and Western Union. RUSI as part of its continuing assessment of effectiveness of the response to CTF, highlighted “one useful metric” being the Outcome & assessment of the effectiveness of Countries CTF system, noting “that FATF are reporting “60% of the 70 Countries so far evaluated required major or fundamental improvements, a near 2/3rds failure rate after 20 years of focus on CTF hardly represents success.”

Conclusions that emerge from RUSI research included:

• countries and regions need to do more, for example Countries largely lack CTF policies and responses that reflect real threats and not conceptual threats and that these will be different for Countries in one Region to those in another. One initiative commended is the “annual SE Asian CTF Summit, a collaborative year round operational initiative working from the bottom up to identify terrorist financing threats, and mitigation strategies, instigating working groups that are in frequent contact and actively developing CTF responses between Countries in the region.”

• CTF will remain a priority for the foreseeable future, “we will need to address crypto currencies, the use of social media for crowdfunding, illicit trade, the risk of extreme right wing groups, activity on the dark web and new payment methods.”

• CTF responses will be truly effective only by “fully engaging the private sector both formal and informal, using financial intelligence to stop terrorists.”

These 3 points and conclusions were expressly endorsed by the UK delegation at the meeting.

Western Union provided an insight into their business and how they manage CTF risks..”WU stated that, “terrorism and terrorist financing is one of the top threats faced by WU, however TF is unusually difficult to detect or predict through data analytics, since most TF behaviour that we see in out network does not differfrom ordinary financial activity, indeed it might more accurately be described as financial activity by terrorists as opposed to terrorist financing per se.” WU also stated that, “several years ago we set up a rapid response unit, that reacts to terrorist events very quickly and provides immediate insight into active investigations. We know that this kind of activity has at least in some cases helped additional terrorists before they carry out more attacks.”

At the end of the meeting the experts were asked for any final remarks and RUSI made an important one, stating that there had been lots of words at the meeting but delegates should remember that terrorism can be defined as “propaganda of the deed” and that in CTF combatting terrorism and “deeds were necessary and these were not simply implementing new laws and ratifying treaties” but ivy identifying the particular terrorist threat and coming up with a plan to address the threat. A fine sentiment upon which to close the meeting.

For details on UN Resolution 2462/2019 passed unanimously on 28th March 2019 see here.

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