What is Terrorist Financing?
The act of soliciting, gathering, or supplying money with the aim that it be used to support terrorist groups or activities is known as terrorism funding. Money can come from both legal and illegal origins. More specifically, a person violates the International Convention for the Suppression of the Financing of Terrorism when they “provide or collect funds by any means, directly or indirectly, unlawfully and willfully, with the intention that such funds should be used or in the knowledge that such funds are to be used, in whole or in part, in order to carry out” an offence covered by the Convention.
Therefore, the main objective of those or organisations engaged in funding terrorism is not required to hide the sources of the funds but rather to hide both the financing and the nature of the supported action.
How is Money Laundering used for Terrorist Financing?
Terrorists adopt methods similar to those used by money launderers to avoid detection by law enforcement as well as to conceal the identities of their supporters and the eventual beneficiaries of the monies. If the profits of crime are used to finance terrorist operations, then money laundering may also be directly related to terrorism funding. However, compared to money laundering generally, financial transactions related to terrorism financing tend to be lower in scale. When terrorists raise money from trustworthy sources, it is more challenging to find and follow these cash.
Terrorists employ a variety of methods to transfer money, including the legitimate banking system, unofficial value-transfer channels like Hawalas and Hundis, and the oldest technique of asset-transfer—the physical movement of money, gold, and other valuables through smuggling routes.
Over the past few years, terrorism’s appearance has altered. With the advent of terrorist cells and the absence of the crucial complicated networks and command structures found with organised terrorist groups, the nature of assaults has changed for the better.
Financial Intelligence Units may be extremely helpful in identifying or detecting the purchasing of items that could be used in a terrorist attack. The most recent assaults are carried out by lone actors or small cells. Prior to an assault, relevant transactions can be found using financial indicators.
How do Financial Institutions counter Terrorist Financing?
Because there are so many ways for criminals to interact, financial institutions are extremely susceptible to the threat of being exploited as a conduit for money laundering (ML) and terrorist financing (TF). Financial institutions operate as points of entry for assets that are the proceeds of criminal activity or acts of terrorism into the financial system, where they can then be used to the advantage of the criminals who committed the crime. For instance, ML criminals have the ability to extract proceeds of crime that seem lawful and hide the sources of illegally acquired funds. While TF offenders utilise the proceeds of their crimes to fund their terrorist actions.
All Financial Service Providers under the supervision of Bank Indonesia are needed to execute the AML and CFT programmes efficiently due to the complexity of product, business model, technology, and information development. The AML and CFT programme is crucial for protecting service providers, customers, and the public from potential threats in addition to eradicating money laundering and terrorist financing.
How are Anti Money Laundering and Counter Terrorist Financing linked?
The act of hiding the illegal source of the proceeds of crime is known as money laundering. The act of raising money or supplying it to terrorist organisations is known as terrorism funding. While money used to finance terrorism might come from both legal and illegal sources, it is always illegal in the case of money laundering. Therefore, the main objective of those or organisations engaged in financing terrorism is not required to hide the origins of the funds but rather to hide both the funding activity and the nature of the supported action.
Both the financing of terrorism and the washing of money employ similar techniques. Both times, the actor uses the financial industry in an improper manner. The methods used to finance terrorist acts and launder money are frequently interchangeable and strikingly similar. The prevention, detection, and punishment of illegal funds entering the financial system as well as the funding of terrorist individuals, groups, and/or activities are therefore two risk issues that must be addressed by an anti-money laundering/counter-financing of terrorism framework in order to be effective. Additionally, AML and CFT techniques overlap; they both try to combat criminal or terrorist organisations through their financial operations and utilise the financial trail to locate individual members of their networks. This entails the implementation of systems for reading all financial transactions and identifying shady money transfers.
Some criminals fund terrorists or carry out terroristic crimes via the banking system. In particular in nations with nonexistent or inadequate national anti-money laundering/countering the financing of terrorism (AML/CFT) tools, terrorist financiers and other criminals use the formal financial system, new payment methods like bitcoin and ripple, traditional methods of value transfer like hawala*, trade-based money-laundering, and cash couriers.
Tools for AML/CFT can:
- expose the networks of corruption, the infrastructure of criminal groups, and the plans for terrorist attacks
- Give authorities a road plan for people who support illegal and criminal activity resulting in the seizure and confiscation of assets that were obtained illegally
- Support comprehensive deterrent strategies against a variety of illegal activities, including terrorism funding.
The only way to stop those who finance terrorists from succeeding is through an all-encompassing anti-money laundering framework that makes use of such instruments.
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