Posts Tagged ‘compliance’

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Suggested reading: You can’t afford to play dumb

April 2, 2015
  • The financial crime chief at Istanbul P.D. says Erdogan sheltered an Al Qaeda financier… more>>
  • Pizza businessman Kamran Malik pleads guilty to shipping rifles and rifle parts to Pakistan without a license… more>>
  • Before a U.S. company acquires a foreign business, it should follow this helpful pre-acquisition due diligence checklist… more>>
  • If a country is always in the news along with phrases like “dragged through the street” or “human shield” you might want to do some screening before taking on business partners there… more>>
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10 red flags over Dahabshiil

February 28, 2015

Does the international remittance company Dahabshiil finance terrorism? Are its anti-money laundering and counter-terror finance programs adequate? Here are 10 warning signs to keep in mind:

  1. Mohammed Sulaymon Barre, a Somali citizen and former Guantanamo Bay detainee, was alleged by U.S. officials to have worked in Osama bin Laden’s compound in Sudan in 1994 and 1995. He later worked at a Dahabshiil office in Pakistan before his detention. During a 2005 hearing at Guantanamo, a military judge told Barre, “I am convinced that your branch of the Dahabshiil company was used to transfer money for terrorism.” (Source: Washington Post).
  2. In early 2011, Somali music star and future member of Somalia’s parliament, Saado Ali Warsame, released a protest song entitled, “Dhiigshiil ha dhigan” (which translates as “Don’t Deposit with Dahabshiil” or “Don’t send your money through Dahabshiil”). The song called Dahabshiil a “blood-smelter,” “the enemy of Somalia,” and implored Somalis: “do not deposit your money” with Dahabshiil. (Source: Money Jihad)
  3. In late 2011, the Bell Pottinger public relations and lobbying firm cited its success in “manipulating Google rankings” on behalf of its client Dahabshiil to ensure that the Guantanamo Bay detainee story about Mohammed Sulaymon Barre didn’t appear on the first 10 pages of Google search results. (Source: The Independent)
  4. Amina Farah Ali and Hawo Mohamed Hassan were convicted in October 2011 on federal charges of providing material support to the terrorist group al-Shabaab. The indictment had alleged that “Ali and others acting at her direction transmitted funds to al-Shabaab through the hawala money remittance system” using Dahabshiil and other remitters. (Source: U.S. v. Amina Farah Ali)
  5. In December 2011, Minneapolis-based Franklin Bank and St. Paul-based Sunrise Community Banks ceased doing business with Somali hawala dealers and money transfer organizations including Dahabshiil over “concerns that the accounts put them at risk of violating federal rules designed to halt terror financing.” (Source: Minneapolis Star Tribune).
  6. The British banking giant Barclays announced its intentions to sever ties with Dahabshiil in 2013 over regulatory compliance and terror financing concerns. (Source: Associated Press.) Litigation ensued which delayed Barclays’s plans, but a deal to end their business relationship was finally reached in April 2014. (Source: Financial Times)
  7. In April 2014, U.S. Bancorp backed out of a long-planned deal with Dahabshiil after “an independent review of Dahabshiil and the inherent risk of doing business in Somalia.” (Source: American Banker)
  8. Danish regulators found Dahabshiil offices in Copenhagen, Kolding, Aalborg, and Aarhus to be “completely inadequate” in their compliance with anti-money laundering and terrorist financing laws in Denmark, and referred the case to police for further investigation in July 2014. (Source: Danish Financial Supervisory Authority)
  9. Somali news outlets reported in July 2014 that several Dahabshiil offices in Middle and Lower Juba were ordered by al-Shabaab to be closed after failing to make payments to al-Shabaab on time. (Sources: Radio Kulmiye, Shiniile News, and Dayniile)
  10. Merchants Bank of California announced this month that it is ending its Somali remittance services including Dahabshiil accounts amidst “concerns that some money could be making its way to Islamic militants.” (Source: KARE 11)

Dahabshiil denies all allegations of financing terrorism.

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10 tips for businesses to avoid financing terror

November 24, 2014

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.
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Denmark: Dahabshiil at risk for money laundering

September 16, 2014

Offices of the money transfer company Dahabshiil, which operates primarily in Somalia, have been found “completely inadequate” in their compliance with anti-money laundering and terrorist financing laws in Denmark, and the company has been referred to the police for further investigation.

The Danish Financial Supervisory Authority (FSA) began an investigation of Dahabshiil’s offices in Copenhagen, Kolding, Aalborg, and Aarhus in July 2013, and concluded by July 2014 that Dahabshiil “has violated the essential elements of the Money Laundering Act.” FSA found that Dahabshiil’s employees in Denmark received zero training on compliance with the Danish Money Laundering Act, and employees have reported zero cases of suspicious customer transactions over the past five years. The FSA also determined that the destinations of Dahabshiil’s money, Kenya and Somalia, are “countries that have totally inadequate rules to combat money laundering and terrorist financing.”

In response to the FSA’s findings, Dahabshiil denied that its company would be “abused by criminals.”

Financial crime consultant Kenneth Rijock offers the following analysis of FSA’s findings:

Apparently, the local [Danish Dahabshiil] offices had no compliance regime whatsoever, and relied upon the parent entity…

If an EU member nation has taken the trouble to conclude that Dahabshiil represents an unacceptable level of risk, a major UK bank [Barclays] sought to exit the relationship, and ties with Al-Shabaab, which the United States attacked today, and reportedly killed it leader, as representing a clear and present danger to American interests, why can’t OFAC finally smell the coffee, and designate it? Has pressure been exerted by Midwest politicians, who have large Somali expats in their district, and how much more evidence is necessary for sanctions to be imposed?

When I write about high-risk individuals, who are guilty of committing financial crimes, so that compliance officers will know to decline to onboard them as bank clients, I have found that OFAC often doesn’t sanction them for a number of years after the bad news is in the public domain. Why wait so long? There has to be a faster way to identify financial criminals, and terrorist financiers.

Indeed. The FSA’s findings were scarcely reported in Denmark this summer, much less in the United States. Compliance departments have a right to know what allegations and criminal referrals have been made against Dahabshiil.  U.S. financial regulators have some catching up  to do.

In addition to these compliance deficiencies, Money Jihad has previously reported that Dahabshiil makes recurring payments to the al-Shabaab terrorist organization in exchange for the “privilege” of operating in Somalia. Member of Parliament Saado Ali Warsame was slain this summer three years after recording a song describing Dahabshiil’s financing of terrorism and announcing her belief that Dahabshiil had put a bounty on her head.

Meanwhile, several U.S. agencies and politicians are pursuing new ways to ease remittances to Somalia through companies like Dahabshiil.

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HSBC closes accounts: 2 Islamic nonprofits and 1 mosque

August 12, 2014

HSBC has closed the accounts of the Islamic charity Ummah Welfare Trust (UWT), the Finsbury Park Mosque in north London, and an Islamic advocacy group called the Cordoba Foundation. The closures are part of the British bank’s effort to improve compliance with U.S. and British regulations and after being heavily criticized and fined in 2012 for being too lax about the customers and correspondent banks it chose to do business with.

UWT’s accounts were closed by Barclays in 2009. A student group has reported that UWT has conducted projects together with the Al-Salah Islamic Association, a Hamas front. The Finsbury Park Mosque was formerly pastored by hate preacher and jihadist Abu Hamza. The Cordoba Foundation advocates for Palestinian causes, invited a guest to speak from the radical group Hizb-ut-Tahrir, and is run by a member of Britain’s Muslim Brotherhood.

Alex Brummer, city editor of the Daily Mail, offers this insightful analysis of HSBC’s move:

The notion that HSBC is closing down the bank accounts of Muslim groups and charities because of some kind of Islamophobia could not be more wide of the mark.

Britain’s biggest and most international bank is engaged in a determined effort to clean up its reputation and preserve its banking licenses in the United States after settling charges of money laundering and sanctions busting brought by the US Justice Department.

A coruscating 2012 report by the powerful Senate sub-Committee on Investigations found that HSBC had exposed the US ‘financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-laundering controls’.

The bank subsequently agreed to pay £1.12billion ($1.9billion) in fines to settle the claims and was given a five year probationary period to clean up its act.

Under the chairmanship of the redoubtable Scotsman Douglas Flint, who has been in charge of HSBC since 2010, it has rigorously sought to eliminate the risks of further money laundering charges that might put in danger its American banking licenses.

It has ruthlessly closed down branches, cancelled relationships with overseas banks and shut down the accounts of customers that might conceivably be regarded as risky because of links to money laundering, sanctions busting or potential terrorist activities.

In the troubled Middle East alone, it has doubled the number of compliance officers—internal enforcers—to 3,500 over the two years since it reached a settlement with the American authorities…

Improving the bank’s standards has been hugely expensive, with the global cost of the internal enforcement operation climbing to £296million ($500 million) a year…

Among the relationships that HSBC has severed, as it has gone about its task, is that with the Vatican Bank, recently renamed the Institute for the Works of Religion, because of its past association with money laundering. Such a move involving a prominent Roman Catholic institution strongly suggests Muslim causes and accounts have not been singled out as HSBC seeks to rebuild its reputation in Washington…

If HSBC could be accused of anything it is of being over-cautious in its dealings with the authorities and its elimination of potentially risky clients.

Thanks to Rushette for sending in the news.

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U.S. Bank backs out of Dahabshiil deal

August 3, 2014

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.

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Recognizing the risks of Somali remittances

March 11, 2014

This piece is also appearing over at Terror Finance Blog today:

Last week, Bell State Bank in North Dakota announced that it would stop doing business with companies that remit money to Somalia.  The move follows decisions by Minnesota banks in 2011 to stop providing Somali remittance services, and an attempt by Barclays last year to cut off its partnership with Dahabshiil, a money transfer company with primary operations in Somalia.  The banks have been challenged in courts on both sides of the Atlantic, and advocacy groups have heavily criticized the banks’ decisions on humanitarian grounds.

Indeed, humanitarian considerations are of the utmost importance.  Unfortunately, money transferred to Somalia, particularly through Dahabshiil, all too often falls into the wrong hands and perpetuates the cycle of violence in Somalia.  Banks should stand fast in their original decisions, and here are five reasons why:

  1. The risks are real.  The frequency of cases involving Somalis in the West transferring funds to al-Shabaab over the last few years presents genuine concerns to financial institutions.  For instance, four men in California were found guilty last year of transferring money to al-Shabaab through Shidaal Express, a Somali hawala business.  Two Somali women in Minnesota were sentenced in 2013 for sending money to al-Shabaab through several remittance channels including local hawala dealers and Dahabshiil.  A Saudi-American was also indicted last year for wiring money to al-Shabaab.  In 2012, a man in London admitting transferring £8,900 to fighters in Somalia.  Danish intelligence revealed in 2012 that the equivalent of thousands of dollars a day is sent to terrorist organizations outside of Denmark—mostly to Somalia, and often unwittingly.  In addition to genuine risks on the ground in Somalia, Western banks have real reasons for concern that if they continue relationships with Dahabshiil, they could subsequently be fined by regulators at a future date if political winds change.  U.S. banks are surely aware, for example, that decisions on whether to fine, settle with, or prosecute banks with lax compliance programs have a great deal to do with the shifting political and prosecutorial priorities of whoever happens to be in charge at the Department of Justice and the financial regulatory agencies.  One official may take a very friendly view toward facilitating Somali remittances this year, but a different person will be calling the shots two years from now.
  2. The risks are not decreasing.  Gone are the days of 2012 when al-Shabaab appeared to be on the ropes in 2012 both financially and militarily.  Al-Shabaab was able to turn around its financial situation after the fall of Kismayo by cutting deals with occupying forces.  Al-Shabaab continues to profit from imposing taxes on commodities such as charcoal and sugar, and their role as ivory trade middlemen between poachers and buyers appears to be growing.  Al-Shabaab is still capable of carrying out devastating strikes such as the Westgate Mall attack and the recent assault against Somalia’s presidential palace that left 11 dead.
  3. Dahabshiil poses a unique risk.  Western readers should be aware of alleged failures in Dahabshiil’s anti-money laundering and counter-terror finance compliance programs to include possible extortion payments made to al-Shabaab to operate in Somalia (which Dahabshiil denies).  One Guantanamo Bay detainee previously worked for Dahabshiil, and the presiding officer at a hearing for that detainee determined that his Dahabshiil branch transferred money for terrorism.  However, coverage of these allegations has been limited partly due from legal threats against journalists and online reputation management by Dahabshiil. Read the rest of this entry ?