Following The Trail Of Terrorist Funding

Finance in Counter Terrorism
The Financial Action Task Force (FATF) was founded in 1989 as an organization to stop money laundering. In the wake of 9/11, when financial investigations were instrumental in the apprehension of several of the participants, it became clear that these financial investigations were an essential tool for counter-terrorist units. So, the FATF developed its techniques to apply to locating terrorists, as well.

According to the FBI (cited by the Combating Terrorism Center), in a sample of 500 terrorist investigations, information from suspicious transaction reports were implemented in 42% of the cases. Financial records were utilized in the investigation of the 2002 Bali Bombings, the 2004 Van Gogh murder in Netherlands, the London and Madrid bombings, the Mumbai attacks of 2008, and the Jakarta hotel attacks of 2009. They helped uncover a plot to attack JFK airport in 2007, as well as an Islamic Jihad Union plot to attack Germany.

Financial data was also used to arrest three individuals in Norway who were suspected of plotting a terrorist attack in the country, and to uncover a link between eight Al Qaeda members arrested in Spain and accomplices in Spain, Morocco and Netherlands who were subsequently arrested (United States Mission to the European Union).

Measures and Regulations for Counter-terrorism Financing
FATF has had to hone its methods as criminal organizations have become more adept at enlisting the aid of legal and financial professionals to disguise their illicit transactions. It’s a constant war between the two, with the race on to see who can implement more sophisticated financial technologies and methods.

The FATF currently has 40 recommendations for legal practices and operating procedures to protect against money laundering. Post-911 it added nine recommendations specifically for combating terrorism financing. Countries around the world are monitored in terms of their compliance with these standards, and any deemed insufficient are categorized as at risk of being a hotbed of terrorist activity, and subsequently blacklisted.

Ghana, for example, was on the blacklist for a year, but has recently been removed and the Bank of Ghana (BoG) was applauded for its efforts to improve counter-terrorism financing measures in the country. In Pakistan, hundreds of bank accounts totaling Rs 751 million (US$13,472,038) were frozen due to suspicious financial transactions.

As a founding member of the FATF, Australia has a strong legal framework to counteract money laundering and terrorism financing. Foremost in this is the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF), which places four obligations on businesses:

  • Customer identity verification.
  • Reporting suspicious transactions to authorities.
  • Keeping records of transactions and customer identities.
  • Establishing an AML/CTF program for the business.

Using financial records for data mining is, of course, strictly forbidden, and financial institutions are obligated to protect customer privacy. They can only investigate financial records only as part of counter-terrorism investigation, just as police investigators require a warrant before they can take an investigation further.

Executing a terrorist attack is one thing, maintaining the funding and infrastructure required for a terrorist network is another, and is sure to leave money trails that financial experts have the training and experience to follow.

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Written by Matthew Flax on behalf of Now Learning, which promotes tertiary education opportunities in Australia, including finance courses, degrees and short courses.

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