Recent trends in counter terrorist financing
By Alain Bozzi, Head of Group Compliance for Societe Generale - 2016
“Preventing terrorist financing is becoming increasingly costly for banks but we do not have a choice because the money at some point flows through banks. We have to work closely with regulators to track terrorist financing and develop ways of fighting it. Combating terrorist financing is not just a question of adding regulations, it is also important to develop the tools that will automatically help banks to find suspicious transactions.”
Terrorists have become increasingly adept at using the Internet and social media to gain and monetise support. Regulators and the industry are working together to prevent terrorist groups from using the global financial system for illicit purposes. What are the latest trends in Counter Terrorist Financing (CTF)? Are there standardised, cost-effective methods of choking off the financial lifeblood of terrorist organisations without drowning the industry in additional regulation, imposing financial harm on innocent parties, or raising data privacy concerns?
- Countering terrorist financing is one of the main priorities of financial regulators today. Banks, along with regulators, have to reassess the tools we have to make sure we can catch all abnormal or suspicious situations that arise within bank accounts that could be linked to the financing of terrorist acts.
- There are many different ways terrorists use to try to finance their acts. It should be remembered that the attacks of 11 September 2001 were financed via the collection of small amounts sent by wire transfer from many countries that added up to a significant amount of money. Also, terrorists can create so called charity organisations that are a front for terrorist finance. Terrorist groups such as Daesh launder their money through the sale of arts and artefacts on the international market. Banks have to be very aware of the many different ways terrorist find to finance their activities. At no stage should a bank ever think that it has completed the work that needs to be done in order to tackle terrorist financing.
- Often within bank branches small amounts or accounts with low amounts in them are not followed closely. As a consequence, there is a danger that funds for terrorist financing go unchallenged. Banks need to develop tools that are able to identify all of the suspicious situations that are not consistent with the expected functioning of individual accounts.
- Tracking transactions in accounts and identifying abnormal or suspicious events is not something that can be done manually as it is too time-consuming and costly. Banks have to dig deep into vast quantities of data to find situations that are abnormal; this can only be done via automated tools. By developing parameters and scenarios, banks can use automated tools to view all transactions and identify those that are not consistent with the expected scenarios tied to particular accounts.
- Developing the tools to identify suspicious transactions is costly and banks should not try to do this in-house. Rather, they should enter into partnership with external parties that have a broad range of experiences and depth of knowledge that can be leveraged to build the parameters and scenarios into the tools. By working together, banks and external companies can develop more broad-reaching scenarios based on their collective experiences.
- Terrorist financing is a moving target; the perpetrators of terrorist acts are always looking for new ways of raising money. It is important that banks constantly review the scenarios they use to identify suspicious transactions in order to ensure that we are always up to date.
- Staff training is a very important element of countering terrorist financing. Entire teams across the front office functions must be trained to identify various scenarios and to know how to handle them. In the past, organisations were reluctant to admit to government authorities that suspicious transactions had occurred – a suspicious transaction is not necessarily a forbidden transaction, however.