Defining Terrorism
The US Federal Bureau of Investigation (FBI) defines terrorism as using violence and intimidation to pursue political, social, or ideological goals.
People often associate terrorism with violent acts, but not all terrorism involves direct violence. Nonviolent terrorism, such as distributed denial of service (DDOS) attacks or disrupting public utilities like water or electricity plants, can also have devastating effects.
Common methods to fund terrorism include using crowdsourcing platforms, charities, and NGOs
Although money laundering (ML) and terrorist financing (TF) are both heinous crimes, they differ primarily in the ultimate beneficiaries and the sources of funds. Terrorists frequently fund their activities through crowdsourcing or front businesses like charities or NGOs. They require a steady flow of funds, which involves raising, storing, moving, and using money. Without these financial resources, terrorist groups and criminal organizations cannot sustain themselves. Funding sources and requirements vary by the group’s size, mission, and infrastructure, making it crucial to identify their funding streams. Often, terrorist financing involves small amounts of money that do not fit typical customer profiles, such as funding for travel and equipment for foreign fighters.
Finance is essential for terrorists but also a significant vulnerability. We can trace funds and disrupt their flow, exploiting terrorists’ financial dependency. Identifying and following the money is vital to detecting and disrupting terrorist groups.
Analyzing Terrorist Financing
When analyzing suspected terrorism financing, consider three main factors:
- The origin of the funds.
- How funds move from the organization to operations.
- How funds transfer from operations to individuals.
Financial intelligence units and regulators scrutinize charitable and non-governmental organizations (NGOs) due to their potential for misuse. Criminals can exploit these organizations’ perceived credibility to funnel funds to terrorist groups. It’s relatively easy to set up a shell company or charity with an online presence to appear legitimate, attracting funds from supporters, which can then be redirected to terrorist activities.
Identifying Red Flags and Prevention
Context is crucial in evaluating charitable organizations. Indicators of misuse include transfers to high-risk jurisdictions without a clear economic purpose, geographic activity not aligning with the customer’s expected use, and suspicious IP addresses accessing accounts.
Some red flags include:
- Using charity transactions to hide terrorist support.
- Smaller amounts of money are involved compared to money laundering.
- Funnel account patterns where multiple transfers consolidate to a high-risk recipient.
- Unusual patterns of activity, such as routine cash deposits decreasing, or transfers labeled as “humanitarian support” being sent to obscure entities,.
Terrorist financing poses a serious threat, and financial institutions should implement appropriate controls relevant to their jurisdiction and take necessary and swift actions to prevent such activities.