Part 3: The law in context (Sub‐group 2: Impact of the initiatives against terrorist property on banks and financial institutions)

DOIhttps://doi.org/10.1108/13685200310809554
Date01 July 2003
Published date01 July 2003
Pages233-247
Subject MatterAccounting & finance
Part 3
The Law in Context
Sub-group 2: Impact of the initiatives against terrorist property on
banks and ®nancial institutions
How much terrorist ®nancing is done
through banks?
It appears that published information and analysis of
terrorist ®nancing is currently very scarce. Rueven
Paz, the former Academic Director of the Interna-
tional Policy Institute for Counter-Terrorism, said,
in October 2000, that there had only been a few aca-
demic articles published on the issue.
1
A search of the
Internet and of a number of on-line academic and
business bibliographies illustrates that, despite recent
developments, little appears to have changed.
Typologies of terrorist funding
Typologies of terrorist funding have been issued by
the Joint Money Laundering Steering Group
2
and
FATF.
3
Joint Money Laundering Steering Group
The December 2001 Guidance Notes contain a sec-
tion on terrorist ®nancing which is intended to
`help ®nancial institutions to recognise terrorist trans-
actions by identifying some of the most common
sources of terrorist funding and business areas
which are at high risk'. The sources of terrorist
®nancing are listed as:
donations Ð the Islamic practice of donating a
`zakat', one tenth of one's income, to charity is
cited, although, of course such donations will nor-
mally have no connection to terrorist funding. It is
also suggested that many wealthy Middle Eastern
individuals may be making donations which
amount to little more than protection money;
criminality Ð major sources of income listed are
extortion, smuggling, fraud including credit card
fraud, charities fraud, thefts and robbery and
drug tracking.
In the case of smuggling, the pro®ts are often chan-
nelled by courier to another jurisdiction and enter
the banking system by means of short-term shell
companies (including bureaux de change) that dis-
appear after about three months. There have been
cases recently, however, where monies are paid into
the banking system along with the normal turnover
of legitimate businesses, making detection more
dicult.
The Guidance Notes list a number of ways in
which bank accounts have been used in terrorist
®nancing.
Legitimate accounts: there are instances where indi-
viduals have had a number of accounts with dier-
ent banks. Accounts with one bank are to be used
for domestic purposes, receiving salaries and ben-
e®ts, while those at another bank are for `business
purposes'. The latter accounts will receive money
transfers and cheque payments.
Dormant accounts: accounts with small balances can
be held with a number of banks, with the inten-
tion of activating them when funds are required
(eg for the purchase of `terrorist material'). They
will then be emptied fairly quickly by a series of
cash withdrawals. Dormant accounts have also
been used as the basis for obtaining bank loans,
not subsequently repaid.
Telegraphic transfers: certain wire companies are
said to be used in preference to others, although
the notes do not specify which ones. The key fac-
tors appear to be the ease of sending and receiving
money, the extent to which documentation is
required and the location of the outlet.
Money service businesses: bureaux de change,
money changers and other dealers in foreign cur-
rency are often a channel for funds, with funds
often passing through several jurisdictions before
they reach their ®nal destination.
While this information provides some general data
on the source of terrorist ®nancing, there is no infor-
mation on quantum and no detailed examples, apart
from those on money laundering in general.
Page 233
Journal of Money Laundering Control Ð Vol. 6 No. 3
Journalof Money Laundering Control
Vol.6, No. 3, 2003, pp. 233± 247
#HenryStewart Publications
ISSN1368-5201

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT