ATbar ICT's Publications

CT Financing & Due Diligence

Providing Counter-Terrorism Due Diligence for Financial Institutions

 

Today more than ever, individuals, banks and financial institutions in general are increasingly exposed to legal sanctions and private lawsuits claiming improper business practices and faulty conduct with regard to their handling of clients associated with terror funding and money laundering.

This susceptibility is partially caused by the following failures:

1. The failure to adhere to regulations in place to counter terrorism fundraising and international crime.

2. A lack of familiarity with suspicious elements who must be identified and reported.

3. The scarcity of expert systems proficient enough to handle the abundant information body and the extensive lists of individuals, organizations or front entities suspected of supporting terror.

It is worth mentioning that this field is extremely complicated to navigate due to the large number of designation lists, transliterations, languages and cultures involved.

The terror finance system - its complexity and criticality for the terror industry chain.

In the last few decades, and particularly since 9/11, the phenomenon of global terror has become a threat to the peace and security of many countries around the world. Al-Qaeda's and its mutants` use of "terror networks", "sleeper cells", and "lone wolves" has been seen as a model for other jihad organizations like ISIS. The vision, shared by them all, is the establishment of an Islamic Caliphate and Islamic control of the world. A vision which has been designed to serve as a strategic plan and which has been translated into action through terror attacks against the "far enemy" (the United States and its allies) and the "near enemy" (Muslim regimes).

This global network could not exist without a financing system. Money is essential to maintain and develop terrorist infrastructures, run front institutions and carry out terror attacks worldwide as well as for conducting localized 'medium' intensity warfare, as seen in the cases of Al-Shabaab in Somalia and the Islamic State in both Iraq and Syria.

In general, the funding system consists of three main elements:

1. Sources of money

2. Funding channels

3. Recipients/ beneficiaries

The sources of terrorism financial support can be put into three main categories:

1. State and Government sponsors

2. Charities , Foundations, Front entities and Private donors

3. Plain and Covert Criminal activities.

Funding channels are numerous and varied, including:

1. The International open banking system

2. Islamic banks

3. Alternative methods of transferring funds (Hawala-the traditional Islamic system, money changers, financial institutions and couriers)

4. The internet as a platform for transferring money including the use of virtual currencies

Recipients/ beneficiaries:

1. Jihadi organizations, terror networks, individual terrorists and operatives

2. Human infrastructures supporting terror (institutions, Da'wa systems, families of “martyrs”, injured terrorists, and families of prisoners)

International Mechanism to Cope with Terror Funding - Multifaceted and Complex

In the face of the threat of terrorism, for the past few decades, the international community has worked to provide legal tools, conventions and adequate regulations to oppose the phenomenon of terror financing on all levels i.e. international, country, and the financial institutional level. The goal is to thwart or minimize the capabilities of terror organizations by damaging their financial infrastructures, blocking their funding channels, and deterring and punishing all entities involved in the funding chain. For this purpose, proactive actions were taken against terrorism funding sources through the outlawing the funding bodies and the blocking of financial assets intended or associated with terrorism.

As stated above, after the 9/11 attacks, encouraged and pressured by the United States, the international community faced a turning point in the struggle against terrorism financing. A series of resolutions passed by the UN Security Council (1267, 1373, 1377, 1535) enabled the formation of mechanisms that designated individuals, organizations, and entities to be supporters of terrorism. With the enforcement of the new UN position on terrorism financing, alongside regulations that were publicized by the FATF, a broad base was created for sanctioning the entities that did not comply by the regulations.

One of the major results of this process was the publication of a list of organizations and entities that support terrorism. Business dealings with these tainted entities are liable to expose those parties financially interacting with them to punishment, sanctions, criminal proceedings and civil lawsuits resulting in hefty financial fines or damages.

In-depth familiarity with these terror lists is problematic and complex due to the following reasons:

The large number of lists - In addition to the UN designation lists, individual governments  and regional coalitions such as the United States , Russia and the EU also publish their own designation lists, all requiring careful attention on the part of financial institutions.

Faulty transliterations - Many of the names and titles appearing on the lists are Arabic and some are incorrectly transliterated. Finding and determining the complete name or most of its components, requires familiarity with the native languages ,intensive research and broader expert perspective.

Changes and additions - The lists are frequently updated to include the addition or deletion of names, changes in the transliterations, or updates of details, etc.

Pre-designation status ("gray areas") - Over the years, a need has arisen for coping with terror funding even in "gray areas", in which a relationship is formed between a financial institution and another financial or other entity, which has not been officially designated as "supporters of terrorism", but of which exists incriminating "public knowledge" of the kind illustrated below in the case the Arab Bank.


Why CTS?

The International Institute for Counter-Terrorism (ICT) and its training and consulting branch Counter-Terrorism Solutions (CTS) Ltd. have for the last twenty years been extensively engaged  in the research of terrorism and with the formulation of strategies that cope with it – including in the area of  terrorism financing. Over the years, ICT has acquired extensive knowledge and expertise in gathering, analyzing, and processing information in these fields along with methodically compiling a unique and highly secured database containing information on organizations, entities, and individuals collected from credible data sources in the public domain.

The institute offers services in the following areas:

1. Pre-Designation and Due Diligence Processes - Identifying and mapping individuals, banks, financial institutions and various businesses that do not appear on designation lists, despite the fact that suspicions have been raised about their involvement (direct or indirect) in funding terror.

2. Due Diligence and KYC ("Know Your Customer") - Assisting the banking system by analyzing public information in several languages, with an emphasis on specific languages (Arabic, Pashto), far beyond what is found on designation lists.

3. Checking existing and potential clients against current designation lists - and alongside public knowledge, to ensure effective compliance and preventing/minimizing exposure to criminal sanctions and civil lawsuits.

4. Consulting - with regard to "problematic" clients linked to terror funding.

ICT experts have acquired long mileage consulting governments and private sector clients involved in lawsuits in different countries. Past and ongoing terror financing claims have targeted: Hamas, Arab Bank, HLF, The Palestinian Islamic Jihad and Al-Qaeda (the 9/11 civil lawsuit).

1. Screening checks - The added value of the institute is in its multifaceted professional knowledge and its rich trove of practical and operational knowledge, which provides a higher level of credibility than that of fully automated computerized screening.

2. Identifying targets that are still at the "gray stage" - These targets, which have not yet been designated by the authorities, present a tangible threat warranting attention and proactive action. The institute has the capability to address such situations and provide adequate services.                                                                                                 

3. Tailor made projects - The institute designs projects in coordination with the client's needs, while remaining flexible, adapting to developing or changing situations.

4. Expert witness services - Experts from the institute are involved in guiding and consulting legal teams, also serving as expert witnesses in court.

5. Analysis of terrorist threats, current and expected, to properties and investments in high-risk zones throughout the world.