Posts Tagged ‘regulation’


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.

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…


Smuggling cash with foreign prepaid cards

April 15, 2013

ACAMS is reporting that while know-your-customer requirements and other safeguards are in place to prevent abuse of prepaid, reloadable cards obtained from American financial institutions, the freedom of foreign banks to issue such cards remains a potential area of terror finance vulnerability.

Here is an excerpt from’s featured article by Colby Adams on Apr. 9:

…Final rules issued by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) in July 2011 imposed anti-money laundering (AML) program duties on American providers and sellers of certain prepaid products, including customer identification, suspicious activity reporting and transactional recordkeeping requirements.

But reloadable cards that can be acquired in person or over the Internet from foreign financial institutions remain an immediate threat to the United States, according to a senior compliance officer at a major U.S. financial institution linked to the prepaid industry.

“The rules are way too focused on what’s leaving the United States—on bulk cash smuggling on a card,” said the person, who spoke on condition of anonymity. “The giant elephant in the room is that the regulators aren’t checking what’s coming here, and that could mean trouble sooner rather than later.”

In such a scenario, a member of a terrorist organization living in a high-risk jurisdiction could purchase a network branded prepaid card from a non-U.S. bank with little trouble. Should the person travel to the United States, he or she could use the card to withdrawal money from any one of thousands of ATMs, or receive additional funds from another foreign-issued prepaid card holder

Why would Muhammad Atta need a SunTrust account if he could have just brought a preloaded payment card with him from Hamburg?  Especially when that card is branded with the familiar logo of Visa or Mastercard, such as this product being offered on the website of Cyprus-based Hellenic Bank:

Screenshot of foreign p-card promising anonymity and a Visa logo

So much for know-your-customer provisions when a bank in the EU is encouraging customer anonymity.  Moreover, Mr. Adams notes that “the Visa logo means that it can be used anywhere Visa is accepted – including ATMs.”


Feds stifle banks from fighting terror finance

June 7, 2011

Writing for the American Banker, counter-terror researcher Scott Helfstein has made an outstanding point about the current U.S. approach to combating the financing of terrorism.  The current compliance model forces banks to collect and transmit absurd amounts of personal data about their customers to the federal government at great expense.  Helfstein argues that the CFT and anti-money laundering programs could be much more effective if we unleash the federal chains of one-size fits all regulatory mandates.

Helfstein doesn’t argue for no regulations.  He argues for regulations that give banks the flexibility  to pursue their own innovative techniques.  Read it all:

Strengthen Banks’ Incentives to Choke Off Terrorists’ Cash Flow

American Banker  |  Wednesday, May 25, 2011

By Scott Helfstein

Osama bin Laden’s death is a victory in the war on terror, but devoted followers remain intent on attacking the United States and its allies. Rather than shifting focus away from the terrorist threat after the successful raid in Abbottabad, there is a unique opportunity to strike at al-Qaida’s financial lifeline.

Terrorist groups require financial resources, and bin Laden has been a central figure in financing jihad for three decades first through his own fortune and then through wealthy contacts throughout the Gulf states. Removing this critical figure threatens these funding relationships, and now is the ideal time to take aggressive action to track and punish the financing of terror.

Since terrorism is a fairly cheap tactic, countering terrorist financing is a difficult endeavor at best, but one that can and does play a critical role in keeping Americans safe.

It is not easy, however, to identify radicalizing individuals in the hope of thwarting attacks in the West, so it is important to have reasonable expectations. Cutting the financial lifeline of terror organizations can have a significant impact, and while current rules create a basic platform to deny terrorists access to the financial infrastructure, there is much work ahead.

The 2008 financial crisis offers a parallel and lesson whereby the health of assets and institutions were interconnected, or strongly correlated, such that failure in any asset class or institution was not contained. Investors came to realize that financial institutions forming the economic backbone of the nation were overleveraged and undercapitalized, fostering a contagion effect that amplified the consequences of decisions made by consumers, corporations, and government regulators.

There is a similar risk of interdependent failure in current counterterrorism finance efforts where terrorist exploitation of the financial system will be linked across institutions making it difficult to exert financial pressure and track funds earmarked for major attacks.

The primary culprit for this systemwide risk is the compliance-based approach that financial institutions have adopted in the wake of mounting antiterrorism regulations. Traditionally, the financial industry has been a security innovator. The post-9/11 environment and subsequent financial crisis generated tremendous reporting and regulatory burdens on the financial industry, and as a result counterterrorism activity is addressed in mechanistic, bureaucratic fashion by ticking boxes. Read the rest of this entry ?


Counterterror finance bureaucracy useless

May 12, 2011

Terrorism expert Jean Charles Brisard calls the modern system of combating terrorist financing “basically useless”.  Mr. Brisard points out that in the wake of the vast Western bureaucracies and international agreements that cropped up to freeze terrorist assets, the terrorists have simply found other ways to move about their money.

This analysis comes at the end of a Wall Street Journal blog post about the supposedly stronger controls against terrorist financing that were created after 9/11.

Bin Laden may have temporarily caused the collapse of his own financial network after the 9/11 attacks, but he also tangled up the West and its banks in more red tape, and continued to raise funds through zakat and transfer them through hawala.

Here are both sides, although Brisdard only gets two paragraphs at the end:

Though Osama Bin Laden evaded military forces for nearly 10 years, the capability for the U.S. to track, freeze and seize the finances of terrorists increased considerably in that time.

Prior to the Sept. 11, 2001, terror attacks, Bin Laden’s financial empire was described as “elusive and impenetrable.” Since then, international cooperation, a recognition in governments around the world of how terrorism gets its operating funds, and a heavy dose of U.S. legislation and structural changes at the agency level have all contributed to major progress on curbing terrorism financing, experts said.

“Post 9/11, we’ve learned an awful lot about how terror organizations finance themselves, how they select their targets, the importance financial institutions have for them as a target or for growing their enterprises,” said Jack Williams, who is a professor at Georgia State University College of Law/Middle East Institute and a senior managing director at Mesirow Financial Consulting.

For example, there was no office in the Treasury Department that handled financial intelligence before the attacks. Today, the U.S. Treasury’s Office of Terrorism and Financial Intelligence, or TFI, is the only full-fledged intelligence office in a finance ministry in the world.

Read the rest of this entry ?