Financing of terrorism through the banking system
| Date | 07 May 2019 |
| DOI | https://doi.org/10.1108/JMLC-07-2017-0026 |
| Pages | 188-194 |
| Published date | 07 May 2019 |
| Author | Fabian Maximilian Johannes Teichmann |
Financing of terrorism through
the banking system
Fabian Maximilian Johannes Teichmann
Teichmann International AG, St. Gallen, Switzerland
Abstract
Purpose –The purpose of thispaper is to illustrate that it remains feasible for terroriststo use the banking
system to transferfunds to finance their activities.
Design/methodology/approach –Based upon a qualitative contentanalysis of 15 informal interviews
with financiers of terrorism and 15 formal interviewswith compliance experts and law enforcement officers,
concretemethods of financing terrorism through the bankingsystem can be described.
Findings –Even though banks have implemented strict control mechanisms, they often do not give the
same attention to terrorismfinancing as they do to money laundering. Recently, refugeesand “tourists”may
have been involved in terrorismfinancing. When it comes to transferring larger amountsof money, terrorists
do not necessarily act in their own name,but rather hire “straw men”. Some terrorists have proceeded toset
up real companiesin Turkey. Terrorists can explain why funds need to be transferredfrom Europe to Turkey
through “charitablecontributions”. Transfers of largeamounts of money can also be facilitated by lawsuits.
Research limitations/implications –The findings are based on semi-standardized interviews limited
to the perspectivesof the 30 interviewees.
Practical implications –The identification of gaps in current terrorism-financing prevention
mechanismsprovides both compliance officers and legislatorswith valuable insights.
Originality/value –Whilst the existingliterature focuses on understanding the channels terroristscan use
to finance theiractivities and on developing prevention mechanisms,this paper emphasizes that terrorists can
still use the banking system to accomplish their goals. This paper illustrates ways terrorists can transfer
funds throughbanks.
Keywords Banking, Compliance, Financing of terrorism, Anti-terrorism Financing
Paper type Research paper
Introduction
Terrorists can access a large variety of potential funding sources. They can use both legal
and illegal sources of funds, which makes it very difficult to trace their sources. In contrast
to money laundering, terrorism financingdoes not rely solely upon illegally sourced assets.
Smart terrorists do not use illegal sources to fund theiractivities, which means that they can
be prosecuted only once the money has been transferred. It is difficult to prove the illegal
purpose of their activities when the money comes from legitimate sources. Consequently,
one of the most promising routes of fighting terrorism financing is to monitor transfers of
funds.
Banks invest billions of dollars into the implementation of compliance mechanisms.
They closely monitor transactions and strictly implement “know your customer”rules.
Hence, it has been argued that terrorists must rely on non-bankasset transfers. The purpose
of this paper is to show that while many alternatives are available to terrorists, it is not
necessary for themto avoid the banking system.
This will be illustrated by describing concrete methods of financing terrorism using the
banking system that cannot be detected. Obviously, the methods shown in this paper are
examples only; multiple other optionsand variations are possible. However, the description
JMLC
22,2
188
Journalof Money Laundering
Control
Vol.22 No. 2, 2019
pp. 188-194
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-07-2017-0026
The current issue and full text archive of this journal is available on Emerald Insight at:
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