Fighting the funding of fighters – Part II

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CA Mayur Joshi
CA Mayur Joshi
CA Mayur Joshi is a Forensic Accounting evangelist in India. He is the co-founder of Indiaforensic and is author of 7 books on forensic accounting, fraud investigations and money laundering.

This is the second part of the article in the series of Fighting the funding of fighters.

Enhancing detection and fighting capabilities of financial institutions

It is primarily important to closely look into the financial activity of the clients and file Suspicious Activity Reports (SARs) on time.In the instance of an individual, Abd al-Rahman bin ‘Umayr al-Nu’aymi of Qatar who once served as an advisor to the Qatari Government was sanctioned in US and by UK in 2014 for being a financier of terrorist groups.

US Treasury Department has identified that Nu’aymihas transferred more than $2Mil per month to al-Qaeda group in Iraq over a period of time. Since he was a Politically Exposed Person (PEP) and was highlyprone for money laundering, his activity through financial institutions across the world warrants a close monitoring of activity. But he was never classified as PEP by the banks and hardly a SAR was filed against him.

In spite of being alienated from the international banking systems, ISIS has been able to access the funds through banking channels including private banks and correspondent banking. Some monitoring and reporting controls may include:

  1. Prospects of ISIS availing banking services in Western Countries is meagre and reliance on bordering countries is more. For example, the black market sale of oil is more in Turkey and this is where the banks here may be more susceptible to facilitating the financial activity for ISIS. Thus identifying the geographic risks and transactions through the close proximity of the conflict region such as Lebanon, Jordan must be thoroughly observed.
  2. AML Compliance teams should develop activity patterns and report suspicious transactions by considering some of the red flags such as wire transfers to conflict region with no apparent reason, deposits in western countries followed by ATM withdrawals in the conflict region, drafts and financial instruments purchased in other countries for drawing or negotiation in conflict areas.
  3. Correspondent banks should pay special attention towards the financial activity occurring through Vostro accounts in conflict region. When applying thresholds on transactions, target based monitoring shall be applied and transactions landing in the area must undergo close analysis.
  4. After ISIS attacked Mosul, it was estimated that a massive population of 500,000 have been displaced. In addition, coercing the minority Shiite and Yazidi sections for forced marriages and kidnaps, Christians to convert to Islam has led them flee to safe places like Mount Sinjar and seeking refuge in Turkey and Jordan at United Nations High Commissioner for Refugees (UNHCR) camps. There is a vast necessity of charity for these refugees and various NGOs are stepping up to meet this. Ironically ISIS is exploiting this path as well to syphon the funds to their coffer. Enhanced due diligence shall be performed on these entities to understand the background of these NGOs and identify any front agencies.

Concerns on sanctions

ISIS is a sanctioned group by OFAC, UN, EU and the rest of the world. Hence if the intended party to a transaction is ISIS, it’s members or affiliates or if there is a knowledge that the purpose is to benefit ISIS, a financial institution is bound to block the transaction and report the same to the law enforcement agencies. However some crucial encounters could be:

  1. With the ISIS demolishing a part of the Iraq- Syria border and openly announcing to wipe out the Sykes- Picot agreement (a, there is a significant free movement of people between the countries without any immigration documents. The group’s jihadists are from various countries and personal testimonials state that they have been crossing these borders liberally without even a passport. Thus identifying the parties involved in the transactions and matching their nationalities to discount against the watch list results is a defying task.
  2. ISIS is sophisticated enough for creating fake identities for individuals. Western fighters after training leave the camps with a new identity to their home countries to plot terror attacks or to generate funds. These new identities are difficult to find on screening systems.
  3. The businesses involved in the regions were forced to accept new names of registration and undertake new forms of business. The relevant paper work is duly done by the administrators. These entities are used as conduits for procurement of arms and other essentials by the group. The new names and businesses so formed can hardly be found on any of the sanctioned lists.

For any terrorist organization, finance is inevitable and formal banking channels become integral for the movement of funds. A robust AML policy accompanied with sophisticated data analysis tools benefit a financial institution in timely investigation and reporting the suspicious activity.The challenges encountered with sanctions can be surpassed by understanding the typologies and conducting robust due diligence checks. These all round measures can weaken the magnitude of funds reaching the extremist groups further reducing the vicious attacks on mankind and also meet the regulatory expectations of complying the AML/ CFT standards.


Note: The opinions expressed by in the article are in the author’s personal capacity.

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