Black money news: recommended reading

• Jiminy cricket! Our friend El Grillo says a “Stockholm suicide bomber falsely claimed student loans to fund his terrorist activity.”  The latest case of debt financing the jihad… more>>

• The good news is that Indian financial institutions are getting better about filing suspicious transaction reports. The bad news is that it makes it look like India has experienced a 300 percent increase in terrorist financing activity since last year.  Maybe they have… more>>

• Which way is the wind blowing?  Towards Iran.  Just ask Europe about its renewable energy sanctions waiver for Iranian wind power.  Thanks to Willauer Prosky for sending this in… more>>

• International financial watchdog FATF is supposed to counter the financing of terrorism. But lately it seems more focused on getting countries to pass meaningless laws and high-fiving itself… more from Dr. Rachel Ehrenfeld>>

• Money Jihad has covered the illicit wildlife trade, particularly in cheetahs by rich Arab buyers. But even we didn’t know how extensive the cheetah market has become in Dubai.  No reporting yet on how the smugglers use the revenues… more>>

Bangladesh overwhelmed by the financial jihad

Bangladesh continues to teach the world more and more about the collusion between Islamic sharia financial institutions and terrorist organizations.

First there was the revelation that IBBL uses zakat to fund terrorists.  Then there was the U.S. Senate’s damaging report about HSBC last summer which highlighted the British bank’s relationships with IBBL and another sinister sharia bank in Bangladesh, the Social Islami Bank Limited.

The revelations probably had something to do with FATF issuing a warning to Bangladesh to clean up its act and tighten the screws on terror financing.  The government of Bangladesh is indeed trying to, but the jihadi swamp there is so foul, and sharia banking is so dominant over conventional banking, that one wonders if the swamp can ever be drained.

This informative November article from the Eurasia Review provides some excellent background on the last 20 years of terrorist financing in Bangladesh and how the country wound up in its current stew with FATF:

Bangladesh: Banking For Terror – Analysis

By: SATP
November 12, 2012

By Sanchita Bhattacharya

In what seems a logical culmination of events, Bangladesh has been given time until February 2013 to address deficiencies in its fight against money-laundering and terror-financing to avert black-listing by the Financial Action Task Force (FATF)…

…[T]he U.S. Senate Permanent Subcommittee on Investigation, in its July 17, 2012, report titled U.S. Vulnerabilities to Money Laundering, Drugs and Terrorist Financing: HSBC Case History, disclosed that two Bangladesh-based banks, Islami Bank Bangladesh Limited (IBBL) and Social Islami Bank Limited (SIBL) were involved in terror financing. Regarding the functioning of HSBC, it was mentioned that the bank acted as a financier to clients seeking to route funds from countries like Mexico, Iran, Saudi Arabia, Syria, North Korea, Cuba, Sudan, Myanmar, Japan and Russia. The report also stated that the HSBC supplied dollars to IBBL and SIBL, ignoring evidence of their links to terror financing. HSBC did not submit these two banks to enhanced monitoring for suspicious transactions, despite recommendation by HSBC’s own Financial Intelligence Group (FIG).

According to the document, SIBL’s ownership stakes were held by two Saudi Arabia based non-governmental organizations (NGOs): the International Islamic Relief Organization (IIRO) – implicated in terrorist financing by the U.S. administration and included on the list of those prohibited to do business in the country; and Lajnat-al-Birr-al-Islam (Benevolence International Foundation, BIF), one of al Qaeda’s financers.

It was noted, further, that Saudi Arabia’s Al Rajhi Bank, also engaged in suspicious transaction, had a 37 per cent ownership in IBBL. HSBC also had maintained an association with Al Rajhi, a member of al Qaeda’s “Golden Chain” – a list including at least 20 top Saudi and Gulf States’ financial sponsors of al Qaeda, including bankers, businessmen, and former ministers.

The U.S. report on terror financing was not a recent finding. Since 9/11, the U.S. has taken strong steps to halt the flow of funds to terrorist organizations under Executive Order 13224 and related elements of the USA Patriotic Act.

The exposure of the unholy nexus between banking establishments and terrorist activities in Bangladesh can be traced back to the watershed country-wide serial bomb blasts on August 17, 2005. 459 explosions had been orchestrated in 63 of the country’s 64 Districts (excluding Munshiganj), killing three persons and injuring 100 others, on that date. After the serial blasts, which were orchestrated by the Jamaat ul-Mujahideen Bangladesh (JMB), the role of IBBL in promoting religious terror was brought under scrutiny, when Bangladesh Home Ministry constituted a committee to investigate terror financing. Subsequent to the arrest of the JMB ‘chief’ Shaikh Abdur Rahman and his second in command Siddiqui Islam alias Bangla Bhai, and the subsequent seizure of some banking documents, the investigation team documented suspicious transactions with IBBL branches in Sylhet, Gazipur and Savar, where violations of the Anti-Money Laundering Act were noticed. The Act which came into existence in 2002 was last amended on June 20, 2011. Rahman and Bangla Bhai were also found to have accounts with IBBL. The two were eventually hanged on March 30, 2007 – Rahman in Comilla Jail and Bangla Bhai in Mymensingh Prison.

Pakistan falters on terrorism funding

Much like the recent ultimatum given to Turkey for its insufficient laws against the financing of terrorism, FATF may blacklist Pakistan if it doesn’t update its laws against money laundering and the financing of militants.

In an editorial from the Express Tribune (h/t El Grillo), even the journalists of Pakistan realize that the government should stop pointing fingers, and comply with FATF’s guidance to do more to address the actual problem of terrorism, which has led to 40,000 deaths in Pakistan:

Blocking terrorist funding

The United Nations can slap Iran and North Korea-like sanctions on Pakistan next year if the Financial Action Task Force (FATF) standards on curbing money laundering and terror financing are not met. In an attempt to ward off this threat, Pakistan is now lobbying to seek international support and feels that the reason it is being targeted is because the FATF is heavily dominated by Western countries and India. Instead of being worried about the FATF’s member countries’ “political motives”, Pakistan should focus on meeting the requirements set by the international anti-money laundering watchdog, as curbing terrorism is something that should be our top priority in any case. Pakistan has suffered the most from home-grown terror; we have lost more than 40,000 lives in terror attacks. The fact that non-state actors have managed to launch cross-border terror attacks and planned attacks in other countries has put Pakistan in further trouble.

The government has reportedly improved the current legislation on counterterrorism financing, which will soon be presented before parliament for approval. The anti-terror legislation must be brought forward as soon as possible. It is an open secret how some terrorist organisations use to have links to elements within the establishment. Since the government was unable to stop these elements from pursuing a deeply flawed policy, the least it can do is put a firm stop to terrorist-funding by bringing in a strong anti-terror legislation. Money laundering is one of the primary sources of finance through which terrorist groups are able to fund their activities. If this source of financing can be cut off, we would be able to somewhat control our terror problems.

Pakistanis live in constant fear of terror attacks on both military and civilian targets. Ridding our soil of terrorists is a win-win for both Pakistan and the international community. It is about time we took this important step and brought forward the anti-terror legislation.

In a sane world, Pakistan would have already been recognized globally for its state sponsorship of terrorism years ago.  But to the degree that international pressure will bring about some marginal legal and financial reform, FATF’s standards are probably a helpful incentive.

Turkey failing to stop terror finance

The Financial Action Task Force has threatened to suspend Turkey if it doesn’t fix its laws on terror financing within the next four months.  The financial and money laundering watchdog organization says that Turkey doesn’t yet have a legal means for freezing terrorist assets.  How can Turkey be a good NATO ally if it can’t even identify and freeze the assets of terrorists in their banking system?

Turkey probably should have been suspended long ago for its sponsorship of IHH, the radical charity that manned the Gaza flotilla and has since been designated by Germany as a donor of Hamas, but FATF is more focused on financial regulatory frameworks.

From Bloomberg (h/t news link from TTFB) on  Oct. 19:

Turkey Given Four Months to Fix Terror Finance Law

By Selcan Hacaoglu

Turkey was given a February deadline by the OECD’s Financial Action Task Force to tighten laws blocking the financing of terrorist groups or face suspension from the organization.

Turkey needs to adopt legislation “to remedy deficiencies in its terrorist financing offense” and set up “a legal framework for identifying and freezing terrorist assets,” the Task Force, sponsored by the Organization for Economic Cooperation and Development, said on its website today at the end of a three-day meeting in Paris.

Failure to do so by Feb. 22 will result in Turkey’s suspension, it said. The Task Force said it is “deeply concerned by Turkey’s continued failure to take action.”

The group had warned in June it would “call upon its members to apply countermeasures” against Turkey if rules weren’t tightened by October. A terror financing bill drafted to address them is still held up in Turkey’s parliament. Exclusion by the Task Force could impede transactions with Western banks.

A suspension would hurt Turkey’s reputation and “alert the international financial world, possibly causing some problems in transactions,” Nihat Ali Ozcan, a terrorism analyst at the Economic Policy Research Foundation in Ankara, said by telephone today. “However, since nearly half of the Turkish economy is not registered, tightening rules might also put the government under domestic pressure from some circles, even including its grassroots supporters.”

Busy Schedule

Turkish officials say the measure has been delayed by a busy legislative schedule…

Concerns mount over Bangladesh

FATF, the world’s leading international watchdog for money laundering, terror funding, and financial standard setting, is concerned that Bangladesh hasn’t done enough to criminalize terrorist financing, and isn’t freezing suspect accounts.

FATF is rightly concerned.  Just take Islami Bank Bangladesh Limited as an example.  IBBL is Bangladesh’s premier sharia bank, and it has used its wealth to fund jihad militants, according to intelligence from Bangladesh’s own interior ministry.  Naturally, a sharia bank that funds terrorism isn’t going to freeze the accounts, or even screen the accounts, of terrorist customers. 

(By the way, IBBL is currently attempting to push farmers into loans that they may not need.  Predatory lending by sharia banks should be condemned as vigorously as predatory lending by conventional banks.)

From Gulf Times on Mar. 4:

Dhaka urged to curb terror financing

By Mizan Rahman

Dhaka—The Financial Action Task Force (FATF), a global body to combat money laundering and terror financing, has asked Bangladesh to freeze terrorist assets and confiscate funds relating to money laundering.

A senior official in the finance ministry said yesterday that Bangladesh might see its place coming down in the global scenario from the current ‘grey list’ to the ‘black list’ if the government failed to implement the action plan of FATF on money laundering by June.

The warning from FATF and its action plan was conveyed to Bangladesh from a recent plenary meeting of the task force, held in Paris in mid-February.

Bangladesh Bank (BB) Deputy Governor Abu Hena Mohammed Razee Hassan led a four-member delegation to the meeting.

“The meeting was a groundbreaking one as it lauded Bangladesh for several steps to combat money laundering and for scrapping the fiscal measure allowing black money in share business,” a delegation member said.

“The FATF has asked us to implement a large number of measures to combat terror financing and money laundering at the earliest possible to avert a possible degradation of our global status from ‘grey list’ to ‘black list,” he added.

According to the action plan, Bangladesh has been asked to adequately criminalise money laundering and terrorist financing, establish and implement adequate procedures to identify and freeze terrorist assets, implement adequate procedures for confiscation of funds related to money laundering, ensure a fully operational and effectively functioning financial intelligence unit, improve suspicious transaction reporting requirements, improve international co-operation in money laundering and issue guidance to capital market intermediaries to effectively extend the anti-money laundering obligations.

The FATF is an inter-governmental body, the purpose of which is to develop and promote policies, both on national and international levels, to combat money laundering and terror financing.

The task force is a ‘policy making body’ which works to generate the necessary political will to bring about national legislative and regulatory reforms.

Earlier, the FATF in a report in 2010, said Bangladesh was still non-compliant in at least 10 key areas in attaining the international standard in the sector of money laundering and terror financing.

The government had formed a national co-ordination council, headed by Finance Minister A M A Muhith, to implement the recommendations of FATF.

A ministry of finance official said a joint effort by ministries of finance and home and central bank is needed to implement the action plan.

FATF: Iran, Pakistan, Indonesia fail to criminalize terrorist financing

The world’s leading financial watchdog has added Pakistan and Indonesia to its blacklist of deficient jurisdictions.  Iran was also once again named by FATF for its failure to criminalize the funding of terrorism.  What they all have in common is that none of them has sufficient laws on the books to combat the financing of terrorism or freeze terrorist assets.

Here are some excerpts from FATF’s Feb. 16 statement:

The FATF remains particularly and exceptionally concerned about Iran’s failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system, despite Iran’s previous engagement with the FATF.

The FATF reaffirms its call on members and urges all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with Iran, including Iranian companies and financial institutions. In addition to enhanced scrutiny, the FATF reaffirms its 25 February 2009 call on its members and urges all jurisdictions to apply effective counter-measures to protect their financial sectors from money laundering and financing of terrorism (ML/FT) risks emanating from Iran. FATF continues to urge jurisdictions to protect against correspondent relationships being used to bypass or evade counter-measures and risk mitigation practices and to take into account ML/FT risks when considering requests by Iranian financial institutions to open branches and subsidiaries in their jurisdiction. Due to the continuing terrorist financing threat emanating from Iran, jurisdictions should consider the steps already taken and possible additional safeguards or strengthen existing ones.

The FATF urges Iran to immediately and meaningfully address its AML/CFT deficiencies, in particular by criminalising terrorist financing and effectively implementing suspicious transaction reporting (STR) requirements. If Iran fails to take concrete steps to improve its CFT regime, the FATF will consider calling on its members and urging all jurisdictions to strengthen counter-measures in June 2012…

Indonesia has taken significant steps towards improving its AML/CFT regime, including by enacting AML legislation in 2010 and developing draft comprehensive CFT legislation. Despite Indonesia’s high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies, Indonesia has not made sufficient progress in implementing its action plan, and certain strategic AML/CFT deficiencies remain. Indonesia should work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising terrorist financing (Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); and (3) amending and implementing laws or other instruments to fully implement the 1999 International Convention for the Suppression of Financing of Terrorism (Special Recommendation I). The FATF encourages Indonesia to address its remaining deficiencies and continue the process of implementing its action plan…

Pakistan has taken significant steps towards improving its AML/CFT regime, including by enhancing the capacity of its FIU, approving an AML/CFT strategy, and by ensuring training is provided to relevant stakeholders. Despite Pakistan’s high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies, Pakistan has not made sufficient progress in implementing its action plan, and certain AML/CFT deficiencies remain. Specifically, Pakistan needs to enact legislation to ensure that it meets the FATF standards regarding the terrorist financing offence (SR II) and the ability to identify, freeze, and confiscate terrorist assets (Special Recommendation III). The FATF encourages Pakistan to address the remaining deficiencies and continue to implement its action plan, including by demonstrating effective regulation of money service providers and implementing effective controls for cross-border cash transactions (Special Recommendation VI and Special Recommendation IX).

Weekly word: PEP

Admittedly, it’s been a lot longer than a week since our last effort at defining terms related to the money jihad.

This latest addition to the glossary will be “politically exposed person” (PEP):

PEPs are individuals who are or have been entrusted with prominent public functions in a foreign country, such as heads of state or government; senior politicians and party officials; senior executive, judicial, or military officials; and senior executives of state-owned corporations.*

PEPs normally include family members of government officials, but do not normally include low or mid-level government officials.

Being able to identify and screen PEPs can help prevent the transfer of ill-gotten funds from, for example, corrupt politicians to banks overseas.  But that is easier said than done.

In August, MoneyLaundering.com reported:

Three intergovernmental groups are questioning the effectiveness of anti-money laundering controls meant to curb abuses of corrupt political figures who steal from their countries.

The World Bank and United Nations said in a joint June 21 report that at least 74 of 124 jurisdictions examined have not complied with anti-money laundering (AML) recommendations to quash kleptocracy by political figures. The record indicates that financial institutions and the agencies that regulate them may be “deficient” in enforcing the controls, the report said.

In a separate report published July 29, the Paris-based Financial Action Task Force (FATF) warned banks and other companies that government officials, also known as politically exposed persons (PEPs), can exploit the “natural advantages” of their positions to launder ill-gotten funds through institutions, and then stymie investigations into the crimes.

The three organizations recommended requiring financial institutions to review their PEP accounts annually, sharing suspicious activity reports on the accounts of foreign politically-tied figures with their home country and eliminating the distinction between foreign and domestic PEPs.

The questionable effectiveness of PEP screening sheds further doubt on the world’s approach to preventing money laundering and terrorist financing.

The PEP concept is particularly relevant during the Arab Spring, where rulers like Muamar “Daffy” Qaddafi, Bashar “Butcher” al-Assad, Hosni Mubarak, and other leading thugs are being accused of holding secret bank accounts of wealth stolen from their people.

* World Bank, Combating money laundering and the financing of terrorism:
a comprehensive training guide, Volume 3, Part 1 (Washington D.C.:  World Bank Publications, 2009).

IMF report damns useless FATF standards

The most important international anti-terror financing organization in the world, the Financial Action Task Force (FATF), has been ridiculed by a report from the International Monetary Fund (IMF).

Of course, all these people are members of the global power establishment, so they use a lot of polite words, but it pretty much boils down to a comment from IMF employee Jody Myers that the modern FATF style anti-money laundering (AML) system “isn’t helping” and “why are we doing it.”

Indeed, the international system is cumbersome, anti-business, anti-bank, anti-investor, anti-consumer, and only anti-terrorist on rare, almost coincidental occasions.  Everybody who uses a bank gets treated like a terrorist, and the real terrorists escape notice through the sheer volume of bank data being transferred around the world.  Nobody wants to discuss a possible solution which involves profiling bank customers.

From MoneyLaundering.com on Aug. 2:

AML Standards Should Be Revised to Better Root Out Crime, Says IMF

By Brian Monroe

Intergovernmental evaluations of how nations fight money laundering and terrorist financing often do not accurately reflect whether those efforts are effective, the International Monetary Fund said in a report Wednesday.

The jurisdictional examinations conducted by the Paris-based Financial Action Task Force (FATF) and other groups that follow its 49 standards “do not correlate” with whether a country is involved with narcotics trafficking, the organization said in a 97-page report.

Huge global problem, small UAE improvement

Just like last year, the United Arab Emirates has reported a significant increase in the number of suspicious activity reports (SARs) submitted by companies to the central bank (hat tip to AML-CFT blog).  The National reported on Jan. 31 that it’s not clear whether the increase means companies are being more vigilant or if money laundering has actually increased.

It probably is a signal of actual improvement in AML practices; nevertheless, the improvement is still overshadowed by:  1) the continued financial survival of the Taliban, 2) a slight but apparent financial rebound by Al Qaeda, and by 3) the continued reports of illicit cash passing back and forth between Kabul and Dubai.  Here’s The National’s account:

Financial companies reported 55 per cent more suspicious money transfers to the UAE Central Bank last year compared to 2009, the head of the regulator’s anti-money laundering unit said today.

The Central Bank received 2,711 tip-offs from insurers, banks, investment companies and other financial services firms last year, said Abdulrahim Mohamed al Awadi, an executive director and the head of the anti-money laundering and suspicious cases unit. That compared to 1,750 reports in 2009.

The rise “shows the effectiveness” of efforts to educate financial firms about their responsibilities to report suspicious financial activity, Mr al Awadi said. It was not clear, however, whether the rise was due to increased vigilance or an upturn in money-laundering activity.

Moves to track and prosecute money laundering propagated globally following the terrorist attacks on the US of September 11, 2001 as nations including the UAE enacted laws and increased monitoring of transactions suspected of financing terrorism. The UAE passed a Federal law in 2002 covering the detection and reporting of suspicious transactions.

“You all have a responsibility in partnership with the regulators in ensuring that the UAE financial system stays clean and protected from being abused by criminals, money launderers and terrorist financiers,” he told a seminar for insurers and insurance brokers.

The seminar was the first of a series planned this year for the insurance, banking and investment sectors to update executives on developments in international money-laundering reporting rules. As part of the GCC, the UAE is a member of the Financial Action Task Force, a global body that aims to stamp out terrorist financing and money laundering.

Insurance companies in the UAE have long been identifying and reporting suspicious transactions, Mr al Awadi said, but “they have to understand further what are the obligations required under the best practices worldwide.”

Weekly word: blacklist

Random House defines a blacklist as “a list of persons under suspicion, disfavor, censure, etc.”

We often apply the term “blacklist” to any terrorist designations by the U.S. State Department, Treasury Department, the United Nations, and FATF.  But each organization’s blacklisting carries its own specific meaning.

The State Department designates foreign terrorist organizations (FTOs) under Section 219 of the Immigration and Nationality Act.  Designation serves as a stigma and a sign of American disapproval, and members of designated FTOs are “inadmissible and removable” from the United States.

Treasury designates and sanctions countries and individuals under a mix of executive and Congressional authorities, usually within the context of identifying people, companies, or countries that have some role in financing terrorism, not just espousing terrorist views or even engaging in terrorist acts.  Treasury designations require American banks to freeze any accounts held by the designee and prevent Americans from doing business with the terrorists.

Designations by the United Nations, for example, blacklisting by the UN’s Al-Qaida and Taliban Sanctions Committee, result in asset freezes, bans on international travel, and arms embargos in accordance with Security Council Resolution 1267.

FATF identifies countries that are sponsors of or have such weak controls that they are high risks for money laundering.  Officially FATF calls them “non-cooperative countries,” but it’s a blacklist.  Corporations in FATF member countries should avoid doing business with blacklisted countries or be at risk of indirectly helping those countries launder money for terror.

By the way, FATF is based in Paris, and they should probably blacklist France itself for its steadfast business relationships with Iran, itself a blacklisted country.

Weekly term: beneficial owner

There are two types of owners in this world:  those who own it on paper, and those who really own it.  The “beneficial owner” is a fancy way of referring to the real owner.

The Financial Action Task Force, the foremost anti-money laundering international body, offered this definition of beneficial ownership in their publication, The Financial War on Terrorism:  A Guide*:

Beneficial owner refers to the natural person(s) who ultimately owns or controls a customer and/or the person on whose behalf a transaction is being conducted.  It also incorporates those person who exercise ultimate effective control over a legal person or arrangement.

This is especially relevant within the context of jihadist financing because Saudi Arabia, Iran, their “charities,” their millionaires, and their terrorist groups use shell companies, front investors, puppet charities, correspondent banks, secret terror cells, and other cat’s-paw forces to buy assets in the West.  The hidden actor is the beneficial owner.

The Incorporation Transparency and Law Enforcement Assistance Act, a bill sponsored by Sen. Carl Levin, is still lingering around in the Senate.  Levin says that S. 569 would help expose beneficial ownership of, for example, Iranian-backed ventures.  In theory, that would be a good thing, but when you read the actual bill it’s actually just a law to help foreign countries crackdown on tax evasion by their own citizens doing business in America, and the bill’s “beneficial owner”… is Carl Levin…

*FATF, The Financial War on Terrorism:  A Guide (Paris:  OECD Publications Service, 1999).