Posts Tagged ‘AML’

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5 terror finance predictions for 2016

January 11, 2016
  • TrendMicro says2016 will be the year of online extortion.” Rather than simply holding data for ransom, hackers will threaten to divulge personal information about users if a ransom isn’t paid. Cyber-criminals will use the psychology of fear to a greater extent than ever before through ransomware.
  • Enhanced financial monitoring in EU. This is as much of a reflection on 2015 as it is a prediction for 2016, but second-generation Muslim immigrants will continue returning from the Syrian front to Europe. Domestic intelligence services will be too under-resourced to monitor all of the jihadist returnees. A British psychic website goes as far as to predict a terrorist attempt to assassinate Chancellor Angela Merkel. While there is no way of predicting such a thing, it does seem that since Germany has been such a favored destination for Middle Eastern transients, Germany could very well be targeted by ISIS operatives for a major operation. German authorities would do well to beef up customs and border searches for the possibility of bulk smuggled cash and to increase monitoring by undercover agents of black market firearms purchases by suspected Islamists.
  • Forecasters are predicting a modest rebound but a continued low price for oil in 2016. This will put pressure on the budgets of the Arab Gulf monarchies. It should also mean that they’ll have less money to export Wahhabism and fund Islamist rebellions.
  • Expect Washington to promulgate more counter-terror finance regulations that paint with a broad brush. Compliance officer Doug Cornelius predicts that “FinCEN will come out with new regulations imposing anti-money laundering requirements on investment advisors and fund managers.”
  • Taliban spending spurt. There are mixed predictions for the Taliban in 2016. Some analysts predict that the Taliban will topple the Afghan government again, while others predict that the leadership scuffle in the wake of Mullah Omar’s reported death, the rival appeal of ISIS in Afghanistan, the strength of Afghan security forces, could weaken the Taliban or force it to a negotiated settlement. Sensing that it’s do or die for the Taliban, Money Jihad predicts they’ll employ more aggressive and audacious tactics, and they’ll be willing to expend hundreds of millions of dollars for their militant operations in 2016.
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J.P. Morgan to Saudi banksters: buh-bye!

March 4, 2014

Fed up with a lack of transparency and flimsy know-your-customer policies, J.P. Morgan has severed ties with the Saudi-based Al Rajhi bank.  The sharia bank, whose founder was named in the Golden Chain list of Al Qaeda benefactors, has provided financial services for East Africa embassy bomber Mamduh Mahmud Salim, Al Qaeda leader Ayman al-Zawahiri, and dangerous Wahhabi organizations like Indonesian Kompak and the Al-Haramain foundation.

Thanks to Sal for sending this over from Bloomberg:

JPMorgan Said Cut Tie to Saudi Bank Amid Focus on Control

JPMorgan Chase & Co. (JPM) dropped Al-Rajhi Bank, the world’s largest Shariah-compliant lender, as a correspondent banking client amid a push to improve risk controls, said two people with direct knowledge of the move.

The relationship with Saudi Arabia’s biggest publicly traded bank ended Dec. 31 because JPMorgan couldn’t get enough information on where payments in dollar-clearing services for Al-Rajhi had originated, said one of the people, who requested anonymity because the decision wasn’t public.

JPMorgan said it cut off the service to about 500 foreign lenders last year as regulators press the world’s biggest banks to verify that transactions are used for legitimate business. The crackdown seeks to halt funds tied to money laundering, terrorism and countries covered by economic sanctions. Correspondent accounts allow lenders to take deposits or make payments on behalf of foreign institutions.

“JPMorgan has to be extra careful to make sure they’re adhering to standards and not even approaching anything questionable,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business.

The two banks haven’t been cited by U.S. regulators for involvement in illegal money transfers. Tasha Pelio, a JPMorgan spokeswoman, declined to comment on clients of the company, which is based in New York and ranks as the nation’s largest lender by assets. A spokesman for Al-Rajhi (RJHI) didn’t respond to inquiries, and there was no response to messages sent to the firm’s Riyadh headquarters.

Biggest Holders

Al-Rajhi, founded in 1957 by billionaire Sulaiman Al Rajhi, had 9,000 employees and about 500 branches in Saudi Arabia, Jordan, Malaysia and Kuwait, according to a January 2012 media kit. Members of the Al Rajhi family, one of Saudi Arabia’s richest, are the biggest shareholders of the company, which had $74.6 billion of assets on Dec. 31, according to data compiled by Bloomberg. Shariah-compliant financial firms provide products adhering to Islam’s ban on interest.

The U.S. Office of the Comptroller of the Currency ordered JPMorgan to improve anti-money-laundering efforts last year, finding that its controls tied to the Bank Secrecy Act were inadequate. The firm failed to find out enough about banking customers and identify suspicious activity, according to the January 2013 consent order. The Bank Secrecy Act requires firms to report all large cash deposits to help prevent crimes such as drug-trafficking and terrorist financing…

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Hawala used to launder £20 million in England

January 26, 2014

A British trial has revealed that criminal gangs have been laundering drug money by sending it through hawala and conventional banking channels from England to a hawala dealer overseas to send back to the gangsters in the U.K.

Despite the seriousness of the underlying crime, four of the men involved in the scheme have received light sentences ranging from three years in prison to supervised release with no prison time.  The sentencing is reminiscent of that of New York hawala dealer Faisal Shahzad, who funded the failed Times Square bomber and got off with probation.

Meanwhile, law enforcement and financial regulators continue to make marginal or piecemeal recommendations for how to protect financial markets and the public from the inherent risk of hawala transactions.  One simple idea would be to impose tougher penalties and longer sentences for hawala crimes.

From the Liverpool Echo on Jan. 17 (h/t Arun):

Gang who laundered more than £20m using ancient Islamic system jailed

Two Liverpool men part of four man gang

Two Liverpool men who helped launder more than £20m of drugs money through banks were spared prison.

The money is believed to have been laundered using legitimate bank accounts and an ancient  Islamic money lending system.

Kamran Butt and Instar Ahmed, from Greater Manchester and Liverpool men Steven McKenna and Sean Moore were put under surveillance by police in two undercover operations.

But officers found they were linked when Butt and Ahmed were seen depositing money into  the same bank accounts.

The money was transferred to the defendants, who were recruited by operatives in the Middle East, using the ‘Hawala’ system – an informal Islamic way of lending money based on honour agreements and third-party lenders.

A fifth man, named in court as ‘Akhtar’, was also heavily involved – but was deported to  Pakistan in 2012 and has not been traced since.

Watched by undercover police, Akhtar and Ahmed were seen depositing huge sums of money  at banks in Chorlton, Longsight and Manchester city centre.

The two men would travel to branches of Lloyds, HSBC and Halifax together but then pretend  not to know each other once inside.

Ahmed also worked in partnership with others in the gang.

Manchester Crown Court heard how on Monday, August 22, 2011, police intercepted Ahmed and McKenna and seized three rucksacks stuffed with more than £200,000 in cash.

On another occasion, Moore was seen with Butt in his Mercedes car.

Butt was stopped and a bag was seized, which was found to contain about £120,000 in cash.

His Stretford home was then searched and a further £10,000 was seized.Cash receipts in vehicles traced to the four men showed they were paying in anywhere from £500 to £10,000 a time.All the money is believed to have come from criminal gangs, mainly through drug sales.

The criminal cash was given to a Hawala money lender abroad who then transferred the  money to a Hawala lender in the UK and gave them a password.

This password was then passed onto one of the defendants allowing them to collect the cash.

They then paid the money into bank accounts in Manchester which the criminals had access to.

The court heard the four defendants were the bottom of the chain – below controllers and then  co-ordinators, working as collectors to receive the money, deliver it and pay it into various bank accounts in the UK.

After being caught, all four defendants pleaded guilty – Moore to two charges of money  laundering and Butt, McKenna and Ahmed to one charge of money laundering each.

Butt, of Great Stone Road, Stretford, was believed to be behind £12m in laundered cash, and  was sentenced to three years and six months.

Ahmed, of Kelstern Square, Rusholme, who is believed to have laundered £10m also received  a sentence of three years, six months.

Moore, of Kingfisher Grove, Liverpool, and McKenna, of Maley Street, Liverpool, both received  14 month sentences suspended for 12 months and 12 month supervision orders.

Moore was ordered to carry out 108 hours unpaid work and McKenna 150 hours…

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Financial data mining yields no gold nuggets

September 19, 2013

Financial privacy is becoming a fading memory of the past due to aggressive regulations by Western governments that require bankers to serve as snitches against their own customers for transactions that may or may not be criminal in nature. These regulations are costly for the banks to comply with (costs which are ultimately passed on to customers), and they carry a price for citizens’ privacy as well.

All that might be forgiven if the invasive policies actually result in stopping terrorists, their financial transactions, or their operations.  But according to new research being conducted in the European Union, the results of such programs are “meager and sometimes debatable.” The government holds the data while you’re left holding the bag.

A tip of the hat to Andrew S. Bowen for sending this over:

Terrorism financing barely traceable using data analysis

28 August 2013

Doctoral research by Mara Wesseling has shown that the data analyses being performed as part of the European fight against terrorism financing are of little use for preventing terrorism. Wesseling will receive her doctorate from the University of Amsterdam (UvA) on 3 September.

Immediately following the terrorist attacks on 11 September 2001, the European Union created the EU Action Plan for Combating Terrorism, which included action against terrorism financing as a ‘core component’. Politicians, policymakers and legal experts stress the importance of combating terrorism financing, as they see money as a crucial element in the propagation of terrorism. Specific programmes have been set up to address the problem.

‘My research shows that it cannot yet be demonstrated whether these programmes have had much success with regard to tracking down suspected terrorists or preventing terrorist attacks. In light of the meagre and sometimes debatable results of both programmes, the question arises whether the social and political changes instituted as part of the data-analysis-driven fight against terrorism are (still) desirable or justified,’ Wesseling says.

Terrorist Finance Tracking Program

In her research, Wesseling analysed the Terrorist Finance Tracking Program (TFTP – better known as the SWIFT programme in the wake of the ‘SWIFT affair’) and the Third European AML/CFT directive. These two programmes constitute the most significant initiatives in the European fight against the financing of terrorism.

It has been shown that risk analyses carried out by banks as part of the Third European AML/CFT directive have revealed virtually no patterns that point to terrorism financing. Wesseling goes on to say that the preventive power of the TFTP to detect terrorist networks at an early stage is also limited…

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Pakistan scrambles to get off FATF’s gray list

September 16, 2013

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.

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Former spooks question financial surveillance

July 2, 2013

Sanctions, asset freezes, and financial surveillance have produced the opposite result from what policy makers intended by driving Al Qaeda deeper underground and creating a more diffuse system of financial transactions by the terrorist group.  This is the analysis from LIGNET, a group of ex-CIA and intelligence officials.

There is a lot of truth to what these analysts are saying.  The regulatory regime has cost banks and our overall economy billions of dollars in compliance costs while producing thousands of meaningless currency transaction reports and foiling few plots.  This analysis is also consistent with what Jean Charles Brisard has written about counterterror finance bureaucracy, which he considers “basically useless.”  And recent revelations about the federal government’s domestic monitoring policies only cast financial data mining programs such as SWIFT in further doubt.

An excerpt from LIGNET’s analysis follows.  Reading their full piece requires registration.

With New Ways to Fund Attacks, Al-Qaeda Now a Bigger Threat

Posted on June 18, 2013

The overreliance by the United States on sanctions and surveillance in the war on terror has allowed al-Qaeda to adapt its methods of financing to avoid detection, and resulted in a decentralized al-Qaeda structure — and a much greater threat.

Al-Qaeda has transitioned from a hierarchical cell structure to a franchise organization that is now responsible for four times as many terrorist attacks a year as it was before 9/11. Al-Qaeda training camps are now being established on the Arabian Peninsula, in Africa, countries of the former Soviet Union, and Southeast Asia.

Background

The current counterterrorism strategy is to rely on economic sanctions and financial surveillance to identify and then stop terrorist financing. Examples of this are the U.S. PATRIOT Act, UN Resolution 1617, and the EU’s Third Money Laundering Directive.

The success of counterterrorism efforts in freezing the assets of terrorists has diminished over time. The UN found that while $112 million was seized in the three months after 9/11, only $24 million was seized in the two years that followed.

The continued targeting of al-Qaeda’s financial assets has had the unintended consequence of transforming al-Qaeda into a loose coalition of localized, autonomous, and self-sufficient terrorist “franchise” cells. These cells, held together by a world view rather than by a hierarchical structure, have been enormously effective. The number of terrorist attacks quadrupled in five years from 208 in 2003 to 864 in 2008.

In terms of financing, al-Qaeda’s shuria or high command council, no longer plays a central role in allocating expenditures or soliciting funds. Instead, terrorist financing has moved further into the ‘grey’ economy. Cells raise funds from a combination of charities, independent criminal ventures, and licit businesses. In fact, crime is now regarded as the main source of funds for al-Qaeda. Criminal ventures generally include extortion, hijacking, theft, blackmail, the drug trade, and kidnapping for ransom (KFR). LIGNET has previously covered al-Qaeda’s use of KFR on the Arabian Peninsula.

Even the transferring of funds between franchise cells has evolved to get around U.S. counterterrorism strategy. Originally, al-Qaeda moved funds through the financial sector, using banks such as France’s Credit Lyonnais, Germany’s Commerzbank, and the Standard Bank of South Africa. However, counterterrorism measures have driven al-Qaeda’s transferring of funds under ground, forcing it to rely on hawaladars and couriers. These provide untraceable methods of securely moving funds. Al-Qaeda recently used Pakistani-based hawaladars to move $1 million from the UAE into Pakistan, at which point the money was couriered to Afghanistan. Al-Qaeda’s pushing of its finances into illicit activities and localized funds have made it difficult for counterterrorism strategies that rely on economic sanctions to be effective. The results can be seen in Table 1, which shows the trend of cheaper – yet more frequent – terrorist attacks.

Operational expenses of jihadist attacks over timeExperts previously believed that the financial war had been a success. This presumption was based, in large part, on the success the United States had in closing down al-Qaeda’s traditional source of funding. But al-Qaeda has evolved and adapted. New al-Qaeda cells, recruiting centers and finance operations have appeared in remote areas of the world, with key affiliates on the Arabian Peninsula and in North Africa.

Analysis

The measures that have been taken in the war on terror since 9/11 to intercept al-Qaeda’s funding have seen diminishing returns. And while financial sanctions certainly weakened al-Qaeda’s ability to launch attacks, at least for a few years, they undercut the ability of intelligence agencies to “follow the money.” The importance of money trails is highlighted by the fact that al-Qaeda spends around 10 percent of its income on operational costs: The other 90 percent goes toward maintaining an international network of cells…

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No sanctions for Hezbollah’s Latin traffickers?

June 23, 2013

Ken Rijock insightfully points out what seems to be a bit of a double standard by the federal government—U.S. sanctions against Hezbollah agents in West Africa while Hezbollah agents in Venezuela are simply monitored quietly.  Some of the banks in Latin America don’t even know that they have Hezbollah customers because the operatives have not been named in public.  Shouldn’t the U.S. be a little more concerned about Hezbollah’s exploitation of New World neighbors?

US SANCTIONS HEZBOLLAH AGENTS IN AFRICA, BUT IGNORES THOSE IN LATIN AMERICA THAT POSE A GREATER THREAT

 

This week’s designation, of a number of Hezbollah agents working in West Africa, who are engaged in fundraising and recruiting, is a step in the right direction, but still leaves me asking: why aren’t the cadre of Hezbollah agents in Latin America also named and designated ?

Known as Hezbollah Latin America, as well as Hezbollah Venezuela, these terrorists traffic in narcotics, and other criminal pursuits, sending their illicit profits back to Beirut through cooperative financial institutions in the Republic of Panama. They are based in Venezuela, and operate openly, with the blessing of the regime in power there, whose leadership is believed to share in a portion of the the criminal profits, for assisting in the regular air transport of bulk cash into Panama, and allowing the trafficking to flourish.

Here’s the problem for financial institutions in the Western Hemisphere. The 92 Hezbollah agents in place in Latin America have all received valid Venezuelan passports, with new Spanish-sounding names created for them, thereby concealing their true Lebanese identities. I have seen some of those, and they are bona fide documents. These individuals now have clean identities, which allow them to open accounts, transact business, and assist in the material support of a specially designated global terrorist organisation. There are also approximately fifty other individuals who support their operation, cash cash couriers, front business operators, suppliers, and others activities; They also must be identified.

It is plain that law enforcement agencies of the United States have this information, but, with the exception of the leader of the group, none of these individuals has been designated by OFAC. The question is why not ? Neither Panamanian banks, nor for that matter American financial institutions, know who the Hezbollah agents are, and risk unwittingly providing material support to a designated terrorist group…

Read it all.