Money laundering involves the taking of the proceeds of crime and creating the illusion that the person who uses that wealth has obtained it by legal and lawful means. And, indeed, the proceeds of crime do often fund terrorism. Typical crimes for funding terrorism are the organised crime rackets of drug trafficking, people trafficking, extortion and other offences. However, much lower grade (and more difficult to detect) crime such as simple fraud, burglary and robbery are used by terrorists who are “sleeping,” that is already in place in a country waiting for instructions and do not want to come to the attention of the authorities by becoming employed or by claiming benefits.
But much of the money intended for terrorism does not arise out of crime – it is paid into the accounts by people who earn it legally in ordinary jobs and who pay money to a cause in which they believe. For this reason, money does not come into the financial system as dirty money, which is a point at which dirty money is often most visible.
Moreover, clean money intended for terrorism does not move around the financial system like dirty money: it does not need to make rapid movements between accounts, across borders, through a range of currencies, into and out of assets. Simply, it behaves like ordinary money doing ordinary things and so is almost impossible to identify.
Laws relating to the detection and prevention of terrorist funding (insofar as they relate to clean money) relate to the origins of the money but to the intention of the person having control over that money. This is, you can see, putting the focus not on the money but on the state of mind of the person who controls it.
As a result, the usual range of counter-money laundering techniques and tools are of very limited use. For example, each act of terrorism actually requires remarkably small amounts of money – and so neither cash transaction reporting (where reports are triggered by the value of deposits, withdrawals or transfers) nor suspicious transaction reports are likely to be triggered.
More, even if such reports are made, it is unlikely that the agencies to which the report of a withdrawal is made would have time before the terrorist act to respond to the withdrawal of cash for a terrorist purpose.
Transaction analysis (that is reviewing what happens in an account to identify potentially suspicious activity) is retrospective and therefore may give intelligence for the purpose of tracking flows to the ultimate place of withdrawal or back to their source but there is little prospect of such systems providing early warning that an account is likely to be used for channelling funds to an active terrorist.
The amounts of money needed for terrorism are very small. For example, immediately after 11 September 2001, the USA’s FBI declared that the terrorists would have used in the region of USD6 million. We were interviewed by media all over the world, including in the USA, and expressed our opinion that the total cost of the terrorist operation would have been in the region of USD250,000. Several weeks later, the FBI revised its opinion to about USD300,000 and then, later, down again to USD280,000. What was also clear to us, immediately, was that the amounts of money concerned would have averaged less than USD10,000 per person involved in the scheme and that there was every likelihood that few if any of the monetary transactions involving the terrorists would have triggered a cash transaction report which US banks are required to make in respect of cash transactions or international wire transfers exceeding USD10,000 are made.
An appalling aftershock of the attacks of 11 September 2001 was an immediate backlash against those of Muslim or Arab background or appearance. Governments made lists of those that they deemed dangerous and the prejudice was reinforced by the fact that the vast majority of the names on the lists were Arabic or Muslim origin, regardless of the fact that terrorism is an international problem and is not restricted to the lunatic fringes of the Arab and Muslim worlds.
In response to the problems, Silkscreen Consulting looked for a way of helping banks and other financial services businesses to pre-identify those who have a predisposition to financial crime. The result is Risk Values.
The Risk Values project is designed to make that identification without reference to any racial or religious indicator such as name, place of origin, etc., and, uniquely, without reference to the customer’s transaction history. After all, many accounts opened for money laundering or funding terrorism are used for only a short time after opening and so transaction history as a predictive measure is of little use. You can find out more about Risk Values at RiskValues.Com.
You can get the benefit of analysis from Silkscreen Consultants by engaging us (complete the enquiry form and by reading World Money Laundering Report (www.worldmoneylaunderingreport.com)
© 1999 Nigel Morris-Cotterill
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