What is it and What Can Be Done About it?
Anytime the T word comes up in the media, our minds go to a far removed shady organisation that has no ties to our economy or society. Terrorism is defined as the unlawful use of violence and intimidation in the pursuit of political aims. In order to complete these acts of terror however, the organisations require funding, a need that has created many illegal pathways. Which is where the AML/CTF legislation comes in.
Terrorist financing is, funnily enough, the financing of terrorist acts and organisations. Now this funding isn’t necessarily just for weapons and explosives, but also living and administrative costs. And as such, this cash flow then requires the funneling of the dirty money throughout the organisation, to where it is needed.
Money Laundering and Terrorism Financing have a lot in common, as they include the means with which people bury money trails. This is why AML and CTF often go hand in hand and have a lot of overlap. “People who finance terrorism use similar methods to money launderers to channel funds to violent causes and to disguise who is providing and receiving the money", is how the New Zealand Ministry of Justice defines such acts. However there is one key difference between the two - The origin of funds.
How to Identify Risky Behaviour
Whilst money launderers always generate wealth through criminal activity, terrorist organisations have been known to also use legitimate means to raise funds. Donations and legitimate businesses are commonly used to create a source of income. This makes the tracing and prosecution of such activities more difficult.
And so what can be done about this? Keeping an eye on risk indicators plays a huge role in this fight against terrorist financing. The following red flags can be indicators of such behaviours:
- A customer transferring funds to beneficiaries located in high risk jurisdictions
- A customer transferring funds to known terrorist entities or entities suspected as having links to terrorism
- Multiple customers using the same address or phone number
- Customers with connection to known terrorist groups
- Setting up a New Zealand account with false identification
- Customers in or returning from conflict zones
- A sudden increase in account activity inconsistent with the customer profile
- Repetitive low-value domestic transfer to one account
There are difficulties facing CTF, such as the fact that often the transactions are small and innocuous in nature in order to avoid detection. Large transactions would draw the attention of the government bodies monitoring such actions, meaning that the smaller the transaction, the lower the risk.
An ever growing method of smuggling cash are trade based money laundering schemes. These methods are deployed to get money across borders without detection, and include over-invoicing and under-invoicing shipments coming in and out of the country. Exploiting the trade industry in such a way makes detection ever more difficult, as different jurisdictions and pathways cross over.
How to Prevent Being Exploited
The monitoring and tracing of various transactions across multiple industries is the key in combating terrorist financing. As legislation adapts to the changing landscape, the AML and CTF processes can seem daunting and convoluted. Let First AML take the stress away, and ensure you and your company are protected from being exploited. Every industry is vulnerable to this risk, and so AML and CTF are the main defense mechanisms against the masking of money trails. We can help keep your business safe whilst not sacrificing efficiency or customer relationships in the process. Contact us today.
About First AML
First AML is an AML technology provider, and the maker of Source, an all-in-one AML platform. Source powers thousands of compliance experts around the globe to reduce the time and cost burden of complex and international entity KYC. Its enterprise-wide, long term approach to the KYC / CDD data lifecycle addresses time and cost challenges while minimising compliance, reputational and security risks.