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| Terrorist financing: the need for a new mindset |
|
Terrorist
financing baffles banks and law enforcement. The fact that
small sums of money are used to finance a bomb sends MLROs,
police and intelligence running for cover.
The fallacy in most thinking is that terrorist finance is a
subset of money laundering. In fact, we need a new methodology.
Terrorist money delivers a service. Unlike private sector cash,
it does not seek to reproduce itself.
Warning bells triggered
by the movement of money are not a necessary part of the terrorist
system. If they are used, it is only incidental. Law enforcement
must not rely on those bells ringing.
Terrorist finance requires
a new model, a new mindset. |
Four Basic stages
between funder and bomber
1. Making the
money
2. Moving the money
3. Distributing the
money
4. Spending the money
Level One: the terrorist
group must make money to acquire the materiel for its nefarious
activity
Level Two: the terrorist group must move the money
from the sources of the funds to the people on the ground
Level
Three: people on the ground move the money between themselves
to ensure the money is in the right place to buy airlines tickets,
pay rent and so on
Level Four: the money is dispensed on the
goods required for the ultimate terrorist act.
Level One:
Making the money
Terrorist money is made in two ways. First,
donations can be acquired from wealthy individuals supportive
of their cause. Noraid, in the United States, enabled the Irish
Republic Army to maintain an extended campaign. Political opponents
to the Saudi regime undoubtedly support Al Qaida and other
Islamic groups.
Wealthy sponsors may support terrorist groups to
attain their own political ends. Osama Bin Laden and his
heirs continue to fund Al Qaida. The sponsor is both financial
supporter and political inspiration. That makes him more
visible and more palpable target.
Terrorist groups create their own fund-raising
corporations. The Tamil Tigers have a strong foothold in the
world's canned fruit industry, owning and running companies
across Asia and Europe. They seek to operate in the legitimate
economy in poor countries where their clout is greatest.
Terrorist
groups also operate with organised gangs in the drugs industry,
in Afghanistan or the diamond industry in West Africa. Money
from criminal operations is siphoned into terrorism, where
gangleaders see a shared interest.
Level two: Moving the
money
Criminal or terrorist money is most vulnerable
when it is on the move. Terrorist money does not stand still.
It must reach terrorists in the theatre of terrorism. Money
starts to become vulnerable to surveillance.
Disguises
for money on the move take many forms. The use of the charitable
institution to act as a package for terrorist money is best
known. Law enforcement agencies are investigating how charities
can be abused.
Charities
Charities provide an
apparently innocent front to slip under the radar screen
of enforcement agencies. Charities are also conduits for
moving money around the world. Charities managed by genuine
agencies can have genuine funds diverted for criminal purposes.
Money raised by not-for-profit organisations set up for non-violent
political purposes can be diverted into terrorist activities
without alerting administrators. Details about beneficial
ownership and the control of charities are frequently opaque.
Charities like the Benevolent Foundation are notorious. It
raises funds in places where Islamic support is greatest
and dispenses them in parts where terrorist support is most
rife.
The presence of criminal money within genuine charities,
no less than bogus charities, should trigger red lights.
An unknown charity that arrives on the scene in a suspicious
part of the world or a change in the movement of funds by
an existing charity will attract suspicion. Finally, financial
ties between criminals, terrorists and charities will sound
loud warning bells.
Corporate structures
Corporate
structures owned or controlled by a sponsor of terrorism
will serve as a funding source and as a front and legal and
accounting structure for moving criminal money.
The tools
and disciplines designed to sniff out money laundering pertain
to the identification of terrorist finance.
The international
fruit packaging company that grows its fruit in the Middle
East and moves that fruit to the UK for packaging and sale
has a genuine physical presence. It obtains receipts from
fruit sales in the UK. Sales may be over-stated and product
diverted into a separate or shadow company selling fruit
on the black market to fund a terrorist group.
Level Three: Distributing the money
This
company acts as a potential terrorist banker, distributing
funds under the cloak of the shadow company around terrorist
'sleepers'. These are dormant terrorists merged into the
background, before being activated.
Anonymous bank cards
have been used to finance operatives on the ground, eliminating
the risk of a link between financial recipients and donors.
Credit cards issued in a tax haven or ATM cards with pre-programmed
balances are the favoured tool.
Paper trails are the enemy
of secrecy. Cash is the classic commodity for the terrorist.
It carries its own risk An individual found with a significant
amount of cash on his person is a terrorist as well as drugs
suspect.
Hawalah or informal systems of funds transfer are
suspected conduits for terrorist money across borders. They
provide anonymity, secrecy and flexibility within an ethnic
group. Financial authorities have yet to fully map, let alone
regulate this secretive and nebulous sector.
Asian, Chinese,
Latin American, East African and Eastern European communities
harbour their own hawalas. Fax or email transmissions by
agents are virtually invisible, almost cost-free and unregulated.
Level
Four: Spending the money
Those who handle terrorist
money are unlikely to involve themselves in terrorism. The
mastermind of terrorist finance, like the drugs financier,
keeps a sealed compartment between the money and the purchasers
of explosives, timers, detonators and weaponry. Occupations
in civil society give them some patina of day-to-day plausibility
to acquire their funds, fix their financial arrangements.
Low value goods like explosives are still prerequisites of
a bomb, and have still to be bought. So money must still
reach the illegal explosives market.
While financial intelligence
agencies follows cash trails, military and trade intelligence
follows the market in physical materiel. A pincer movement
should result. Money must be seized before it can be used.
Conclusions:
The role of Banks, Government, and Security
Money is
essential for the terrorist enterprise. But all trace is
lost as soon as the explosion occurs. Terrorist money must
be found before the bomb. The retrospective traces revealed
by the anti-money laundering tools are of limited use.
Countering
terrorist financing depends on the elements of the financial
system working together with a reduced bureaucratic burden.
Legal, administrative, technical and personal relationships
are critical. It also depends on the intelligent use of databases
and published blacklists. The risk of repeated false positives
has given them a bad name.
Insights into the logistics and
geographic structures of global terrorists are at a premium.
The expanding offshore world toughens the enforcement task.
Petty dictators are able to hide their wealth in lawless
unregulated territories. Sudan was Bin-Laden's first hidey-hole
outside Saudi Arabia. Afghanistan was Bin-Laden's second
base. Regulation in both is as good as non-existent.
Terrorist
groups understand tax and legal loopholes at least as well
as our tax and corporate accountants. Knowingly or unwittingly,
some of our best brains are working for groups linked to
groups, linked to terrorists.
Networks between unlikely elements
in the private, public and political classes need to be unravelled
if terrorist financing is to be stanched. Societies own structures
hold the clue to unravelling the financing of these crimes
of our times.
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