Terrorist financing is a major issue around the globe as governments face the challenges of COVID-19 and the economic disaster that it created. Counter Terrorist financing attempts to combat the means and methods terrorists use to finance their activities. Developing countries around the world are not only grappling with gaps in their economies, but they are also facing huge gaps in their legislative agendas and regulatory enforcement capabilities. Identity verification is becoming a standard to identify those involved with terrorist groups. National identity card verification is one of the fundamental ways watchlists provide risk profiles for individuals during onboarding.
Many developing countries lack basic necessities for their citizens and thus, black markets and illegal financial transactions may be the only way citizens of these countries can make ends meet. Bad actors, fraudsters, and terrorist financiers make use of the systemic gaps that exist within the economies of developing countries. In this blog article, we’ll go over how nations are combating terrorist financing around the world and 5 current efforts to end terrorist financing in developing countries.
Terrorist activities are financed in one or more of the following ways:
- Traditional fiat (hard currencies such as cash)
- New payment methods (bitcoin, cryptocurrencies, or ripple)
- Intermediaries (funding is sent through intermediaries, who often may be unaware of their role in terrorist financing schemes)
- Trade-based money laundering
While there are many strategies criminals use to finance terrorist activities and terroristic groups, there are usually always three steps any efforts to finance these individuals or groups contain.
The Terrorism Financing Process
Similar to money laundering, terrorist financing can be broken down into three distinct steps that each have their red flags and cues which can alert law enforcement and bank employees of potential terrorism financing.
The Terrorism Financing Process
Combating Terrorist Financing involves understanding each group (and individual bad actor) may engage in one or more methods to funnel funds through or contribute to terrorist activities but generally still need to follow the steps that follow:
Step 1: Raise Funds For Terroristic Activities or Groups
The first step in the financing of terrorism or terroristic groups includes raising funds. This could be done in a variety of ways depending on the size, location, and nature of the funds.
Here are a few of the funding sources/origins that lead to the financing of terrorism:
- Nongovernmental Organizations
- Fraud, theft, or Illicit drug proceeds
- Self-funding from legitimate activities
- Ransom payments
Each of the origins of terrorism financing has its unique indicators and red flags that can be used to pinpoint and prevent the financing of terrorist groups. Every global identity verification service should include a check through specific terrorist watchlists including past financial activity.
Step 2: Transferring Funds
You may have heard the term structuring while considering money laundering. When we begin to discuss the financing of terrorist groups overseas (money flows from the Australian economy to a country such as Syria), transfers of funds may be indistinguishable and follow only legitimate channels such as a money transfer service or bank wire to an overseas bank.
Usually, the size and regularity of fund transfers determine the level of care terrorist groups finance their activities and which channels they use to do so:
- Smaller, irregular transactions: smaller transactions to fund terrorism usually use transfer channels without regard to concealing the transaction but for utility and/or reliability (a monitored channel such as a bank or money transfer business vs. a backchannel). In short, it just isn’t practical to conceal smaller transactions.
- Larger, more consistent transactions: larger transactions (meant to support larger terrorist organizations or organizations with support networks, those that conduct larger terroristic activities) and those transactions that are regularly over some time have more attention paid to them to conceal their origins and/or by providing false identity documents.
Key channels often used in the financing of terrorism include:
- Banking sector (international wires, fund transfers, or cheques)
- Legitimate businesses and ‘front’ businesses (set up to pose as a legitimate enterprise)
- Cross-border movement of cash
- Electronic payment systems
Step 3: Using Funds For Illegal/Terroristic Purposes
Once funds have been integrated into the financial system of their destination countries, terrorists or terrorist groups can then begin to use them for illicit purposes or carrying out their terrorist activities. Groups may commit terroristic threats or activities and then claim responsibility for those actions.
Terrorist activities that these groups use funds for include:
- Civil disorder/demonstrations
- Political terrorism
- Non-political terrorism
- Anonymous terrorism
- Terroristic threats
- Murders and suicide bombings
National Identity Card Verification
National identity card verification is one of the most powerful ways to identify those who have had past relationships with terrorist organizations. The identity card information is matched against any terrorist watchlists selected. This information is then compiled and a risk profile is generated for your organization to make an educated decision during onboarding.
The World’s Deadliest Terrorist Groups Evade Global Identity Verification Services
The world’s largest terrorist groups still seem to evade global identity verification services through the use of members with false or spoofed identity documents. Three major terrorist groups conduct terrorist activities internationally: Islamic State based out of Syria, Boko Haram with its headquarters in Borno (Nigeria), and the Revolutionary Armed Forces of Colombia (FARC) in Colombia’s remote jungles and political system. Each of these groups carries out its agenda and its activities wreak havoc on a large geographical area (states, countries, or regions).
Islamic State of Syria (ISIS)
The Islamic State of Syria (ISIS), also known as Daesh (Arabic: داعش), has been a household name and a target for anti-terrorist groups since its growth and popularization in mainstream media. Isis was founded in 2014 by Abu Musab al-Zarqawi and gained international attention when the group drove Iraqi security forces out of Mosul.
Is your organization backed by a reputable global identity verification service? Contact Us today to learn more.
Origins of Group’s Terrorist Financing
ISIS uses several legitimate and illegitimate means to fund its terrorist operations, including receiving funds from both local and international persons. According to a recent National Terrorist Financing Risk Assessment by the Department of the Treasury, “While funds from U.S.-based individuals sent to support ISIS appear to be most commonly generated from legitimate activity or personal savings, ISIS supporters in the United States have also engaged in separate criminal activity, such as fraud, to raise money.” There have been other instances where financial aid fraud has been committed by US citizens attempting to support the terrorist organization.
Public Donations Used To Support ISIS Travel & Terrorist Activities
Many public donations are used to funnel both legitimate and illegitimately sourced funds to ISIS and its associated organizations. Many public and private donations flow from country to country including most notably between Saudi Arabia Kuwait, & Qatar. Identity verification and risk profiling are necessary to understand the past financial activities, business associations, and ownership of any corporation or individual who attempts to gain access to banks or financial services corporation services during onboarding to avoid associations and risk involving terrorist groups such as ISIS/ISIL.
Cryptocurrency & Social Media Pages Shut Down by Dept. of Justice
“It should not surprise anyone that the fraudsters our enemies use modern technology, social media platforms, and cryptocurrency to facilitate their evil and violent agendas,” said Attorney General William P. Barr. Many terrorist groups are now using social media, encrypted apps, and backchannels to secure donations in the form of fiat and cryptocurrency to fund their illegal terrorist operations at home and abroad.
One recent operation involving the IRS Criminal Investigations Unit and other federal agencies such as the FBI dismantled three terrorist financing cyber campaigns controlled by al-Qassam Brigades, Hamas’s military wing, al-Qaeda, and the Islamic State of Iraq and the Levant (ISIS)
Under judicially authorized warrants, U.S. authorities seized:
- Millions of dollars
- Over 300 cryptocurrency accounts
- Four websites and four Facebook pages, all related to the criminal enterprise
More information about this seizure and its associated criminal cases can be located at the US Department of Justice’s Press Release.
Boko Haram, also referring to itself as Jama‘atu Ahl as-Sunnah li-Da‘awati wal-Jihad” (JASDJ; Group of the Sunni People for the Calling and Jihad) and “Nigerian Taliban,” is another major terrorist group whose operations are located in Nigeria.
According to the National Counter Terrorism Center, “Boko Haram’s violence—including the kidnapping of 276 schoolgirls in Borno State, Nigeria, in April 2014—brought international condemnation and in February 2015 provoked a large regional CT offensive against the group that displaced it from the majority of its strongholds in Nigeria.”
Origins of Group’s Terrorist Financing
Boko Haram uses a variety of violent and unscrupulous (not to mention highly illegal) means to acquire funds for their terrorist operations in Africa and the surrounding regions. US Under Secretary for Terrorism and Financial Intelligence David Cohen remarked, “terrorist groups, such as Boko Haram and its offshoot, Ansaru, also are increasingly turning to KFR [Kidnapping For Ransom] to finance their operations.”
Methods Used To Support Boko Haram’s Terrorist Activities
According to the Council on Foreign Relations, Boko Haram finances its operations through:
- Legitimate and illegitimate (criminal) means
- Bank robbery
Each of these terrorist organizations, and their leaders, are being hunted by multiple nations, law enforcement teams, not to mention their finances are being sanctioned or even frozen due to their overt terroristic acts. Due to the international nature of the crimes, often these efforts involve multi-government interventions that take time and resources to implement.
Counter-Terrorist Financing Watchlists Can Help Protect Your Bank. Contact Us Today To Learn More.
Combating Counterterrorist Financing: 5 Current Efforts To End Terrorist Financing in Developing Countries
Many governments and regulatory organizations around the world are coming together to combat the illegal financing of terrorist organizations and persons of interest in terrorist crimes and threats. Many global identity verification services work with law enforcement and government organizations to stay up to date with the latest CTF watchlists.
Understanding FATF Blacklists & Grey Lists
To combat terrorist financing, the Financial Action Task Force (FATF) established a set of recommendations which also are expanded upon during Mutual Evaluation Reports (MARs). FATF works with governments and with other regulators to set out standards that are aimed at lowering the money laundering and terrorist financing (TF) risk within a country or jurisdiction. Many countries implement these regulations through laws that require banks and other covered organizations/money service providers to perform due diligence during onboarding.
The current FATF blacklist includes Iran and North Korea on its list as countries that are non-cooperative in the fight against anti-money laundering and the financing of terrorist individuals and groups.
Countries on the FATF Blacklist:
- North Korea
Our global identity verification service can alert you to an individual being located in one of these blacklisted countries.
FATF Greylists – Jurisdictions Under Increased Monitoring
FATF Greylists are lists of countries which “defined as deficient in their AML regimes, but greylisted countries have committed to working with FATF.” (ComplyAdvantage) Many of these countries have laws and regulations that are bound to go into force (or have done so) but may be deficient in meeting all of FATF’s recommendations.
Countries on the FATF’s Grey List include:
- Burkina Faso
- Cayman Islands
- South Sudan
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Government Action Plans
Government Actions Plans often are crafted after the receipt of initial recommendations from Mutual Evaluation Reports or country visits. The Philippines has recently crafted such an action plan. According to the government’s website, “… these action plans include the amendment and passage of AML/CTF laws; enhancement of the AML/CTF supervisory framework; reinforcement of money laundering and terrorism financing investigation and prosecution; and campaigns to increase public awareness.”
Our global identity verification service can help you understand if your compliance program meets the legal standard.
Detecting & Cutting Off Illicit Funds
Cutting off illicit funds first involves understanding the origins of funds and those involved in the perpetration of crimes. Many steps need to be taken by law enforcement and government officials to secure warrants to freeze funds and to launch investigations, but one such step is to engage in a transaction and behavioral analysis. Once a warrant is furnished, banks or financial service firms are required to freeze funds and enter into judicial proceedings against the terrorist group or individual suspected of commuting or contributing to, terrorist acts.
Contact one of our identity specialists to Schedule a Demo of how we can help you identify those with terrorist ties and comply with AML/CTF regulations.
Terrorist Financing Watchlists
Identity verification services and AML/terrorist watchlist screening involves conducting identity verification for individuals before conducting business with them or offering them access to any of your services. The watchlist screening process is mainly conducted by third-party vendors with AML risk management and know your customer (KYC) APIs. These tools are used to search through reliable and independent global databases to verify client identity and ensure they have not engaged in terrorist acts or are linked to terrorist groups.
The primary requirement for watchlist screening is access to a reliable database. These are a few of the valuable databases in this field:
Terrorist Watchlists- past terroristic threats, acts, or any known links to terrorist groups may be uncovered via these lists.
Sanction lists– Sanctioned organizations are suspected to be carrying out crime operations. Common sanction lists include UN consolidated lists, OFAC sanction lists, and EU consolidated lists.
Regulatory databases– these are records containing organizations or individuals with records of crime operations and penalties. They exist on a national and global level and are helpful in watchlist screening. They include the World Bank Ineligible Firms, EU Terrorism list, Denied Person list, among other records.
Adverse Media data– these records include media coverage on crimes such as fraud, cybercrimes, financial violations, arms dealerships, and narcotics. Adverse media screening involves searching media records for negative data on individuals and organizations that reveal an individual’s or organization’s criminal history.
Legal & Policy Intervention
Each country and jurisdiction enacts its laws and follows regulations from organizations such as FATF, but there are a few that are recent and stand out as well as processes that are standard such as identity verification and KYC by covered entities.
Identity Checks For Money Laundering & Terrorist Financing
Identity checks are particularly important for banks and financial institutions to screen for money laundering, fraud, and past illicit financial activities. KYC, or Know Your Customer, is the process of verifying a customer’s identity to ensure they are providing accurate personally identifiable information (PII) as well as to understand their past financial behavior with previous institutions or money service providers.
The Know Your Customer (KYC) process helps to ensure that the financial institution’s services are not misused for identity theft, money laundering, and the funding of criminal organizations. KYC ensures that organizations are both compliant and that customers with a suspicious financial background are not approved for an account at the bank or financial institution.
EO 13224: Blocking Property and Prohibiting Transactions with Persons who Commit, Threaten to Commit, or Support Terrorism.
According to the US Department of State, “provides a means by which to disrupt the financial support network for terrorists and terrorist organizations by authorizing the U.S. government to designate and block the assets of foreign individuals and entities that commit, or pose a significant risk of committing, acts of terrorism.” This order will go a long way to hold those who have ties to terrorist organizations or threaten to support them accountable.
Future Trends in Counterterrorist Financing Legislation
The future trends to look bleaker and bleaker for terrorist groups and individuals who choose to support them. Many new laws and regulations are being considered by governments around the world. Technological advances such as those seen with anti-spoofing, identity tampering detection, and facial recognition/biometrics are making the fraud detection process easier. Terrorists have fewer places to hide and are being brought to justice much faster, and this will only continue to improve over time.
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- We can validate Passports, Drivers Licenses, and National IDs from 220 countries and territories.
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Contact one of our identity specialists to Schedule a Demo of IDMscan today.
Headquartered in San Diego, California, IDMERIT provides an ecosystem of identity verification solutions designed to help its customers prevent fraud, meet regulatory compliance and deliver frictionless user experiences. The company is committed to the ongoing development and delivery of offerings that are more cost-effective and comprehensive than other solution providers. IDMERIT was funded by experts who have been sourcing data on personal and business identities across the globe for over a decade. This access to official and trusted data throughout the world has become increasingly important as companies find themselves completing transactions across borders as a standard course of business. www.idmerit.com