10 tips for businesses to avoid financing terror

If you run or work for a medium or small business that can’t afford to have an entire compliance department, or even a compliance officer, here are a few tips that will help your business reduce its risk of inadvertently funding a terrorist organization, running afoul of federal authorities, or both:

1. Conduct due diligence before taking on new accounts, and do not rely exclusively on Internet searches for due diligence.
2. For international accounts it is doubly important to carry out thorough due diligence (including overseas business partners, banks, security providers, and charities) before signing agreements with them. You will probably have to contract out for investigation services, but it’s worth the expense.
3. If your business promotes or authorizes employee payroll deductions to make charitable contributions, review the list of participating charities. Do not offer payroll deductions for donations to charities suspected of financing terrorism or charities known to have worked with designated terrorists. This would include Islamic Relief USA and the Zakat Foundation (see here and here).
4. If your business requires or offers diversity or equal opportunity training, do not make payments to any organization or person to conduct the training who has been implicated in terrorist financing schemes such as members of the Council on American-Islamic Relations or the Islamic Society of North America, both of which were unindicted co-conspirators in the Holy Land Foundation Hamas-financing case.
5. Think twice before offering sharia-compliant investment accounts to employees or allowing a conventional retirement brokers to offer sharia funds to your employees. These financial products are less transparent with respect to fund management by sharia advisory boards whose members often share close ties with the international Muslim Brotherhood and are not subject to disclosure requirements on where they channel their profits.
6. Do not buy corporate fruit baskets or other gift baskets from Edible Arrangements. Their CEO operates a foundation out of his office at Edible Arrangements allegedly linked to Pakistani front charities that fund Islamist militants.
7. Do not have business lunches, meetings, or conferences catered by halal food providers such as IFANCA and Crescent Foods, which have been endorsed by or have catered events for entities that are suspected to have financed terrorism.
8. If you are asked by an importer whether your business can ship to or “enter an Arab Port?” do not answer the question. That is code language used to ascertain your business’s willingness to participate in the Arab League’s boycott against Israel. Answering the question helps those who oppose the existence of Israel and will lead to fines by the U.S. Office of Antiboycott Compliance.
9. Don’t let your data or your employees be held for ransom. Ask your IT department or technology provider about their security protocols against ransomware. Make adequate plans to protect your employees from abduction during overseas travel. Paying ransoms will serve to enrich criminal or terrorist groups which will be costlier and less secure for your industry in the long run.
10. Bookmark and read blogs such as Money Jihad, Kenneth Rijock’s Financial Crime Blog, and Shariah Finance Watch for the latest threat trends in terror finance risk management. These websites are free unlike some of the other specialized news sites which are informative but fee-based.

U.S. Bank backs out of Dahabshiil deal

Minnesota banks stopped providing remittance services to Somalia in late 2011 over concerns about the risks of terror finance and money laundering. U.S. Bank, a subsidiary of U.S. Bancorp, considered a partnership with Dahabshiil to reinstate money transfer services to Somalia, but cancelled those plans earlier this year.

Minnesotans for a Fair Economy reported in April that:

U.S. Bank officials informed representatives of Minneapolis-based Dahabshiil, a Money Service Business (MSB) that serves the Somali community, that it would not conduct remittances to Somalia…

Community leaders have met with U.S. Bank officials many times since the last Minnesota bank ceased conducting the transactions. Such a meeting took place just two weeks ago.

“On behalf of our community, I am very disappointed by this decision to back out of our agreement,” said Mohamed Nor of Dahabshiil.

U.S. Bancorp explained its decision by saying, “”Unfortunately, because of some items identified in the independent review of Dahabshiil and the inherent risks of doing business in Somalia, we are not able to open an account as we had hoped.”

U.S. Bancorp should be applauded for its sensible decision. There are simply too many questions about the financial relationship between Dahabshiil and the terrorist group al-Shabaab to proceed with business partnerships between Dahabshiil and Western financial institutions.

Money Jihad’s recommended reading

• Despite budgetary hard times, the Palestinian Authority is able to cough up $46 million to terrorist ex-convicts—from your tax payments… more>>

• Is a financial-cyber war against America already underway?  More>>

• Sharia law dictates that gambling is haram (unclean), and Sheldon Adelson is Jewish and pro-Israel. Perhaps those are two of the reasons why Adelson’s Las Vegas Sands has been the target of a major cyber attack… more>>

• New legislation in Turkey threatens to prevent meaningful due diligence by bank compliance officers by suppressing negative information on the Internet… more>>

Covert finance news: suggested reading

• Considering that Saudi Arabia and the U.A.E. fund al-Nusra Front, which other chapters of Al Qaeda are they financing?… more>>

• The U.S. and British pause in arming the rebels hasn’t deterred Turkey’s gunrunning program to Syria. They’ve just dropped off almost 50 tons of weapons across the border… more>>

• How an Al Qaeda acolyte used a stun gun on the streets of London to mug and fund his personal jihad to Syria… more>>

• The risks of banking and doing business deals in Turkey has grown too great… more>>

 

Pakistan scrambles to get off FATF’s gray list

The world’s leading financial standards body, FATF, alerted the international community earlier this summer that Pakistan and 11 other countries have failed to make sufficient progress in preventing money laundering and terrorist financing.

The newspaper Pakistan Today notes that if Pakistan fails in “coming up with proper and combating the financing of terrorism and anti-money laundering legislations the country may face severe financial sanctions that may affect its financial deals with the World bank, the Asian Development Bank and other top financial institutions” (h/t Zia Ur Rehman).  Pakistan should make reforms prior to FATF’s next meeting in October to avoid such sanctions.

Not so coincidentally, Pakistan’s central bank has rolled out a new requirement for Pakistani financial institutions to adopt nationwide software by Sept. 30 that will facilitate the filing of suspicious activity reports by bank employees.  When a certain customer or transaction is regarded as suspicious, the financial institutions would use this software to report their observations back to the central bank.

Anybody familiar with new software deployments, even under the best circumstances in well-developed high-tech nations, will recognize that this is an overly ambitious timetable to for implementation.  Widespread training and adoption of the software is unlikely to be complete by FATF’s deadline, but the stated goal may be enough to persuade FATF that Pakistan is moving in the right direction.

Pakistan has been cited before by the Financial Action Task Force for its financial regulatory deficiencies.  Despite the history of shortcomings, Western nations have continued to saturate Pakistan with foreign aid.  Without adequate money laundering an CFT controls in place, there is a high risk of any such military and development aid being abused by malicious actors without fear of detection or prosecution.

Lights out for terror-funding Islamic charity

Canadian nonprofit ceases operations after bank closes account

Once again pointing to the power of tax authorities to expose and defang dangerous front charities, a Muslim nonprofit in Canada has stopped accepting donations after its bank closed its account.  The bank’s decision followed an audit and finding by tax officials that IRFAN was no longer eligible for tax-exempt status, largely because of its role in funding Hamas.

The bank account closure and operational suspension is also a victory for Canada’s taxpayers, who will no longer see their money being channeled through a network of smaller Islamic charities and mosques for distribution by IRFAN.

From the National Post; thanks to Gisele for sending this in:

Relief organization that allegedly supported Hamas suspends operations after CIBC closes bank accounts

Stewart Bell | 13/07/15

A humanitarian relief organization that lost its charity status two years ago over its alleged support for Hamas said Monday it was suspending operations after the Canadian Imperial Bank of Commerce won court approval to close its accounts.

The CIBC gave notice in May that it intended to stop providing banking services to the International Relief Fund for the Afflicted and Needy — Canada. The Ontario Superior Court of Justice upheld that decision, which went into effect on Monday.

Without a bank, the Toronto-based relief group, which spent $9-million on charitable activities in 2009, said it could no longer transfer money abroad for programs that include the support of orphans in the Palestinian Territories, Lebanon and Sudan.

“IRFAN-Canada is choosing not to accept donations at this time because they are unable to transmit funds to the intended destinations,” the group’s lawyer, Naseer Syed, told the National Post. “Therefore, without donations, they will be forced to suspend their humanitarian relief programs”…

Formed in 1998, IRFAN-Canada was mostly active in the Muslim world but it ran afoul of federal regulators, who revoked its charity status in 2011. The Canada Revenue Agency said an audit had determined the group was an “integral part” of an international fundraising effort that supported Hamas, a Palestinian terrorist group…

Chase assesses risk, closes suspected accounts

Banks have a responsibility under federal law to deny account services to customers who are at risk for funding terrorism, money laundering, or evading economic sanctions.  Banks can’t allow customers to send money to countries that lack safeguards against such activities either.

Accordingly, JPMorgan Chase has closed an unspecified number of accounts that are at risk for abuse or criminal behavior by customers who are, according to the Michigan chapter of the Council on American-Islamic Relations, Muslims or Arabs.

The Arab-American Civil Rights League also alleges 50 “improper” account closures by banks such as Flagstar, Charter One, and Comerica.

Opponents of such bank closures would be better served by proposing changes to federal law rather than threatening lawsuits against banks that are simply carrying out their duties under the existing rules.

From the Detroit News:

Muslim, Arab-American groups say banks closing accounts without explanation

• Mark Hicks, June 13, 2013

Two groups are seeking answers to what they say is a growing practice of Muslim and Arab-American groups having their bank accounts closed without cause or explanation.

The Council on American-Islamic Relations–Michigan is asking the Office of the Comptroller of the Currency, part of the U.S. Department of the Treasury, to investigate the complaints and the Arab-American Civil Rights League in Dearborn is pursuing a lawsuit against major banks.

“We see a type of pattern taking place in the Muslim/Arab community,” Dawud Walid, executive director of CAIR–MI, said Wednesday. “Bank accounts are being closed with no real justification … so it appears on the surface that there could be some sort of bias involved.”

One of the latest reported incidents, according to CAIR–MI, involved Alif Arabic, a business described as teaching Arabic to American citizens online. Officials there were notified May 30 by JPMorgan Chase their bank account would be terminated within 10 days. JPMorgan Chase officials did not detail why, according to the letter.

When an Alif Arabic employee asked the bank for clarification, they were told an analytical tool “alerted them that Alif’s account could pose a possible risk,” the letter read.

Walid said such a move could suggest discrimination based on religion and ethnicity. “We need answers and the bank is not giving answers,” he said.

Emily Smith, a JPMorgan Chase spokeswoman, said privacy reasons prevent the company from discussing details of its customer relationships. However, “on occasion, Chase determines it can no longer maintain a customer’s account but those decisions are not based on the customer’s religion, ethnicity or any other similar basis.”

Bryan Hubbard, a spokesman for the Office of the Comptroller of the Currency, said: “We have just become aware of the letter and have not had a chance to review. We will look into these allegations.”

Meanwhile, the Arab-American Civil Rights League plans to file a lawsuit after nearly 50 incidents of individual and business accounts being closed.

The group earlier this year asked the U.S. Department of Justice to investigate and launched a hotline for complaints after some area residents were notified by Huntington National Bank and other institutions their accounts were terminated without explanation.

That affected professionals and others who believed they acted lawfully, said Nabih Ayad, the league’s board chairman.

“It’s just a shame this continues to happen. It’s not fair to the community,” he said. “These sort of circumstances, they’re basically telling Arab Americans: ‘You’re not at the same level or beneath the average American”…

H/t to Creeping Sharia for sending this over.

Habib Bank throws caution to the wind

Habib Bank and its former compliance officer Syed Itrat Hussain have been fined over a half million pounds by the British for downplaying the risks of dealing with customers in jurisdictions prone to money laundering and terror finance.

Banks, and especially their compliance divisions and officers, have a responsibility to adhere to anti-money laundering regulations and know-your-customer standards.  When opening an account or conducting business with citizens from corrupt, unstable, or rogue regimes, those customers represent a greater risk to the bank and to the international financial system.

But Syed Itrat Hussain saw things a little bit differently.  He and the Swiss-based (but Islamic-oriented) Habib Bank regarded customers from the notoriously corrupt and jihadi financial swamp of Pakistan as no different from bank clients in New Zealand or Norway.

From MoneyLaundering.com on May 22:

U.K.’s FSA Singles Out AML Officer for Fine, Penalizes Swiss Bank

By Brian Monroe

The United Kingdom’s banking regulator Tuesday penalized a Zurich-based financial institution and its former anti-money laundering officer a combined 540,000 pounds for broad failures in risk-ranking and enhanced due diligence procedures.

The U.K.’s Financial Services Authority (FSA) said that Habib Bank Zurich AG underestimated the risk of approximately 67 percent of the accounts the agency had reviewed. In doing so, the Swiss bank removed Pakistan and Kenya from its list of high-risk jurisdictions because it believed it had “specialist knowledge” of the countries that mitigated its vulnerabilities to financial crime, the agency said.

As a result, nationals of those countries “were treated as having the same risk profile as those from a country with a lower perceived risk of corruption, such as customers based in Norway or New Zealand,” said the FSA, which fined the bank 525,000 pounds. When regulatory officials properly adjusted the rankings for the jurisdictions, they found that Habib Bank officials had mistakenly rated 170 high-risk clients as posing “normal” risks.

As part of the enforcement action, which focused on violations between December 2007 and November 2010, the FSA also penalized former Money Laundering Reporting Officer (MLRO) Syed Itrat Hussain 17,500 pounds for not ensuring that adequate anti-money laundering (AML) controls were in place at the institution.

“The failings were quite serious, particularly because so many of the bank’s customers are from high-risk countries,” said FSA spokeswoman Clare Murphy-McGreevey. “Part of the problem is that the bank relied on [Transparency International’s Corruption Perceptions Index] in isolation,” without the context of data provided by the Financial Action Task Force and other organizations, she said.

The FSA singled out Hussain because, “in that role, you should really be responsible for ensuring everything is up-to-date and focusing on the ever evolving landscape of financial crime,” said Murphy-McGreevey. “It changes quite a bit and compliance officers have to keep on top of it.”

“AML is a big area of focus for us, particularly the responsibilities of the MLRO,” she said.

In Tuesday’s enforcement action, the regulator also cited inadequate AML audits, training and recordkeeping related to its employees and individual accounts. The bank did not properly assess whether the beneficial owners of its accounts were residents of high-risk jurisdictions, the FSA said.

The latter resulted in the bank risk-ranking corporate clients with operations in Zimbabwe or Sudan, for example, no differently from a British company with exclusively U.K. operations, the regulator said.

The compliance missteps overall reflect a basic misunderstanding of risk-ranking, said Simon Dilloway, a principal with Norfolk, England-based Lopham Consultancy.

“Just because a bank knows an area or has operations in a high-risk country doesn’t stop the area from being high-risk,” he said, adding that FSA examiners have more closely examined how financial institutions gauge risk in the past year.

In a thematic review of depository institutions published in June, the agency said that three out of four U.K. banks failed to properly manage accounts maintained for high-risk clients, including politically exposed persons (PEPs). The review found that some banks had no formal procedures for PEPs at all.

“The problem is that, for a lot of these higher risk customers, they also have a lot of money and banks don’t want to ask the difficult questions and put them off,” said Dilloway. “Even when the bank identified a higher risk customer, they didn’t follow their own policy and get the proper documentation,” he said, adding that the monetary penalty is “quite small for something so serious. The bank must have cooperated hugely.”

The bank had initially faced a penalty of 750,000 pounds, but agreed to settle at an early stage, earning itself a 30 percent discount, the FSA said in a statement.

The agency, which is scheduled to close its doors in April 2013 as part of a regulatory overhaul, has been increasingly willing to fine banks for AML violations.

In 2010, the FSA more than doubled the number of AML penalties it levied in 2009, with the total related fines rising from 7.7 million pounds in 2009 to 9.7 million pounds the next year. In August 2010, the agency fined RBS 5.6 million pounds for AML violations, an enforcement penalty exceeded by March’s 8.75 million pound fine against Coutts & Co. The FSA had no AML-related fines in 2011.

The FSA’s oversight duties will be assumed by the Financial Conduct Authority and Prudential Regulation Authority next year.

Formed in 1967, Habib Bank Zurich AG has 25 branches in the United Kingdom, United Arab Emirates, Kenya, Isle of Man, South Africa and Canada.