Contents
- Terrorist Financing
- Definition of Terrorism and Terrorist Financing
- Global Efforts on Combating Terrorist Financing
- Emerging Terrorist Financing Risks
- Terrorist Financing Risk Assessment
- Ethnically or Racially Motivated Terrorism Financing
- Role of Hawala and Similar Service Providers
- Risk of Terrorist Abuse in Non-Profit Organisations
- Crowdfunding for Terrorism Financing
- Terrorist Financing Typologies Report
- Conclusion
- Red Flags
Terrorist Financing
„Terrorist Financing“ is a critical global issue that encompasses the methods and processes through which terrorist organizations and individuals fund their activities, including recruitment, training, propaganda, and operational costs. Understanding and combating terrorist financing are essential for global security efforts.
Definition of Terrorism and Terrorist Financing
According to the Financial Action Task Force (FATF) and the Council of Europe (COE), terrorism is generally defined as the use of violence and intimidation, especially for political purposes. Terrorist financing refers to the process of providing financial support to individuals or organizations that engage in terrorism. It includes the funding of terrorist acts, terrorists, and terrorist organizations.
Global Efforts on Combating Terrorist Financing
The FATF has been pivotal in setting international standards to combat terrorist financing. It emphasizes the need for countries to implement legal frameworks to criminalize and prevent the financing of terrorism. The FATF Recommendations, particularly Recommendation 5, focus on criminalizing terrorist financing and implementing targeted financial sanctions against terrorism and terrorism financing.
Emerging Terrorist Financing Risks
The FATF has identified new vulnerabilities in terrorist financing, such as the use of social media, new payment methods, and the exploitation of natural resources. These emerging risks pose challenges due to their global reach, anonymity, and the rapid evolution of technology.
Terrorist Financing Risk Assessment
The FATF guidance assists practitioners in assessing terrorist financing risks. It suggests good approaches, relevant information sources, and practical examples based on experiences of various countries. It emphasizes the importance of a comprehensive understanding of both the macro and micro aspects of terrorist financing risks.
Ethnically or Racially Motivated Terrorism Financing
FATF’s focus has expanded to include the financing of ethnically or racially motivated terrorism. This form of terrorism financing often involves self-funded lone actors or small groups and is characterized by the use of legal sources of funds, such as donations and commercial activities.
Role of Hawala and Similar Service Providers
Hawala and other similar service providers play a significant role in money laundering and terrorist financing due to their informal nature and lack of regulatory oversight. The FATF highlights the need for monitoring and regulating these services to prevent their misuse for terrorist financing.
Risk of Terrorist Abuse in Non-Profit Organisations
Non-profit organizations (NPOs) are at risk of being abused for terrorist financing. The FATF has developed guidelines and best practices to protect NPOs from such abuse, focusing on a risk-based approach and the need for proportionate measures.
Crowdfunding for Terrorism Financing
The use of crowdfunding platforms for terrorist financing has been a growing concern. The FATF has identified this as an emerging risk, noting that while most crowdfunding activities are legitimate, there is a potential for abuse by terrorist entities.
Terrorist Financing Typologies Report
The FATF’s Terrorist Financing Typologies Report provides an overview of the methods and practices used by terrorists to finance their activities. It covers various aspects of terrorist financing, including the use of the formal financial sector, alternative remittance systems, cash couriers, and trade-based money laundering.
Conclusion
In conclusion, the FATF plays a central role in the global fight against terrorist financing, providing guidance, setting standards, and conducting research to understand and mitigate the risks associated with terrorist financing. Their efforts are crucial in disrupting the financial networks that support terrorism and ensuring global security.
Red Flags
General Red Flags
- Matches on one of the known sanctions lists (UN/EU/National)
- Predominantly and high number of cash withdrawals
- High account turnover traceable to cash deposits or cash withdrawals
- Transfer of an exceptionally high number of small amounts from a variety of different persons (so-called collection account)
- Use of a collection account for foreign transfers
- Obviously incorrect, doubtful, or non-verifiable address details
- Opening multiple accounts for persons and institutions at the same address
- Frequent change of the account authorized signatory
- Noticeably frequent changes of address, phone numbers, account signatories, etc. (keyword: ‚restless account management‘)
- Use of account authorizations from persons whose whereabouts are unknown
- Account authorization for persons living abroad
- Use of account authorizations from persons who are obviously already deceased
- Incomprehensible application for the highest possible overdraft facility
- Irregular account usage
- Numerous transactions related to alleged humanitarian organizations at home and abroad
- Use of a private checking account for fundraising
- Account turnover is disproportionate to the economic situation of the account holder
- Acquisition of high-value real estate, communication, or information technology, which does not correspond with the known financial situation and contradicts the usual consumer behavior of the account holder
- Acquisition of real estate without detected or planned residence in Germany
- Doubtful money transfers for forwarding to third parties
- Account movements contradict the stated purpose of the account
- In a loan application, there are indications that the customer will live abroad in the near future
- Noticeably long stays of the account holder abroad while continuing to receive state basic security benefits or wage replacement payments
- Frequent and inexplicable travel activities at home and abroad
- Sudden absence of turnover for a significant period
- After a longer period of no turnover, usual turnover behavior resumes accompanied by transactions in crisis countries
- Cash withdrawal in crisis areas using an EC/credit card
- Investment with the goal of achieving no or only low-interest income (‚Islamic Banking‘)
- Avoidance of personal contact
- Conducting business exclusively through authorized representatives
- Use of noticeably new-looking identification documents
- Doubts about the authenticity of the presented documents (total forgeries, falsified original documents, etc.)
- Withdrawal of the application for account opening after reference to the need for further research on the person
- Choice of branch (especially geographically) is incomprehensible
Sources:
- Council of Europe (COE) Financing of terrorism https://www.coe.int/en/web/moneyval/implementation/financing-terrorism
- FATF’s global efforts on combating terrorist financing https://www.fatf-gafi.org/en/topics/Terrorist-Financing.html
- FATF „Action on Terrorist Finance“ https://www.fatf-gafi.org/en/publications/Fatfgeneral/Fatf-action-on-terrorist-finance.html
- FATF „Emerging Terrorist Financing Risks“ https://www.fatf-gafi.org/en/publications/Methodsandtrends/Emerging-terrorist-financing-risks.html
- FATF „Best Practices on Combating the Abuse of Non-Profit Organisations“ https://www.fatf-gafi.org/en/publications/Financialinclusionandnpoissues/Bpp-combating-abuse-npo.html
- FATF „Terrorist Financing Typologies Report“ https://www.fatf-gafi.org/en/publications/Methodsandtrends/Fatfterroristfinancingtypologiesreport.html
- FATF „Terrorist Financing Risk Assessment Guidance“ https://www.fatf-gafi.org/en/publications/Methodsandtrends/Terrorist-financing-risk-assessment-guidance.html
- FATF „The role of Hawala and other similar service providers in money laundering and terrorist financing“ https://www.fatf-gafi.org/en/publications/Methodsandtrends/Role-hawalas-in-ml-tf.html
- FATF „Terrorist Financing in West Africa“ https://www.fatf-gafi.org/en/publications/Methodsandtrends/Tf-west-africa.html
- FATF „Crowdfunding for Terrorism Financing“ https://www.fatf-gafi.org/en/publications/Methodsandtrends/crowdfunding-for-terrorism-financing.html
- FATF „Ethnically or Racially Motivated Terrorism Financing“ https://www.fatf-gafi.org/en/publications/Methodsandtrends/Ethnically-racially-motivated-terrorism-financing.html
- FATF „Financing of Recruitment for Terrorist Purposes“ https://www.fatf-gafi.org/en/publications/Methodsandtrends/Financing-recruitment-terrorist-purposes.html
- FATF „Risk of terrorist abuse in non-profit organisations“ https://www.fatf-gafi.org/en/publications/Methodsandtrends/Risk-terrorist-abuse-non-profits.html
- FATF „Best Practices on Combating the Abuse of Non-Profit Organisations“ https://www.fatf-gafi.org/en/publications/Financialinclusionandnpoissues/Bpp-combating-abuse-npo.html
- FATF „Guidance on Criminalising Terrorist Financing“ https://www.fatf-gafi.org/en/publications/Fatfrecommendations/Criminalising-terrorist-financing.html
- FATF „Public Statement on the Financing of ISIL, Al Qaeda and Affiliates“ https://www.fatf-gafi.org/en/publications/Fatfgeneral/Statement-isil-al-qaeda.html
- FATF „Actions to Identify and Disrupt ISIL, Al-Qaeda and Affiliates’ Financing“ https://www.fatf-gafi.org/en/publications/Methodsandtrends/Fatf-action-against-terrorist-financing-june-2019.html
- FATF „Public Statement on the Situation in Afghanistan“ https://www.fatf-gafi.org/en/publications/Fatfgeneral/Afghanistan-2021.html
- FATF „Financing of the Terrorist Organisation Islamic State in Iraq and the Levant“ https://www.fatf-gafi.org/en/publications/Methodsandtrends/Financing-of-terrorist-organisation-isil.html
- FATF „Protecting non-profits from abuse for terrorist financing through the risk-based implementation of revised FATF Recommendation 8“ https://www.fatf-gafi.org/content/fatf-gafi/en/publications/Fatfrecommendations/protecting-non-profits-abuse-implementation-R8.html
- FIU Germany https://www.zoll.de/DE/FIU/Fachliche-Informationen/fachliche-informationen_node.html