Last September, AMCO organised a web conference on the Financing of Terrorism, the particular risks incurred in Monaco, and the role of Compliance Officers in the fight against Money Laundering and the Financing of Terrorism (AML/CFT). The conference was moderated by Nathalie Schinzig, Financial Crime Compliance specialist, AMCO’s TCSP/MFO Committee Leader and Head of Compliance at Landmark Management S.A.M., the event was held on their premises.
AMCO’s guest, Darrell M. Blocker is currently Vice Chairman for MOSAIC Security, a strategic risk and crisis management, intelligence and security advisory firm. He is an ABC News Contributor and subject matter expert on North Korea, Iran and Terrorism. After rising to the rank equivalent to a threestar general, Darrell retired from the Central Intelligence Agency (CIA) in 2018 and joined MOSAIC’s C-suite in 2019. During the Biden-Harris transition, he was one of President Biden’s top nominees to be Director CIA.
Darrell served 32 years as an intelligence officer for six consecutive Presidential Administrations (Reagan to Trump), including four in the US Air Force and 28 at the CIA serving as Deputy Director of the Counterterrorism Center and receiving the George H.W. Bush award for Excellence in Terrorism. His counterterrorism career began in 1993 (in the aftermath of al-Qaida’s first failed attempt to bring down the Twin Towers in January 1993) and was highlighted by subsequent deployments to Somalia (post-Mogadishu Blackhawk Down incident in October 1993), Burundi (post-Hutu-Tutsi massacres), and Pakistan (post-9/11).
Nathalie Schinzig opened the conference by recalling the circumstances surrounding the attacks of 11 September 2001. This unprecedented event gave way to a new world in which terrorism became a global phenomenon, even if it had existed before. This terrible date marked the need for a global fight against this evil.
Discussions focused on the globalisation of terrorism and the priority of the fight against its financing. "Financing is both the lifeblood of a terrorist organisation and one of its greatest vulnerabilities".
Compliance professionals have had to incorporate numerous controls into their activities, with the dual aim of combating money laundering and terrorist financing, because the techniques used by terrorists are similar to those used by money launderers: (i) to escape the attention of the authorities, (ii) to use obscure connections and financial flows, and (iii) to protect the identity of the sponsors and beneficiaries of the funds.
The links between money laundering and terrorist financing are very close, but they are considered to be separate crimes. Nathalie Schinzig presented the key distinctions between the two:
- While money laundering legitimises illegal money, terrorist financing has a compelling need for money, illegal or not.
- The money laundering process is circular, whereas terrorist financing is linear.
- Money laundering places grey money in a chain of transformation that enables criminals to use this money legally. Terrorists aim to raise funds, but anonymously, without anyone knowing what they will be used for.
- Money laundering is carried out by "smurfing" (it is easier to launder a lot of small amounts), while terrorist financing is carried out by pooling small sums.
Given the urgent nature of the fight against terrorist financing, it is essential that Compliance Officers understand these differences and identify signs of terrorist financing in suspicious activities.
Darrell M. Blocker pointed out that today's crimes have become increasingly complex because they can be interconnected and global, and take place both physically and virtually. Terrorists and those who fund them have adapted to the counter-measures implemented by countries and have become more creative, expanding and varying their methods of raising and moving funds. This is why the fight against the financing of terrorism is as crucial as the fight against the terrorists themselves.
According to Darrell M. Blocker, the terrorist financing methods most used in past major attacks are :
• Legitimate business comes first
> Most of the funds come from companies with legitimate businesses or from donations from wealthy individuals.
• Charity
> Charitable foundations are attractive to terrorists and vulnerable to misuse to fund terrorism because they benefit from public trust, they have access to funds and their activities are often cash intensive. This type of foundation is more likely to be misused as they are generally subject to lighter regulatory requirements than other financial institutions or businesses. Some charities have a global presence, providing a framework for domestic and international financial operations and transactions.
• Hawala
> It is an alternative system for transferring funds based on trust, with an international transfer of value outside the banking system. Since the terrorist attacks of 11 September 2001, there has been growing interest in informal money transfer systems. This is particularly true of Hawala, which is suspected of having played a role in the illegal financing of terrorist activities, alongside its traditional function of transferring funds between individuals or families of often different nationalities. Governments and international organisations are therefore working to better understand this system, to assess its impact on the economy and to respond to it in regulatory terms.
• Cryptocurrencies
> 23.8 billion dollars obtained illegally in cryptocurrencies passed through the blockchain in 2022 to be converted, according to Chainalysis. An increase of 68% on the previous year.
• The terrorists intelligence
> Criminal networks, including terrorist organisations, defy laws and have near endless access to their illegal monies. They also employ analysts and hackers as they seek to exploit loopholes within their countries borders and within their business partnerships with likeminded criminals around the world.
They are essentially business without the governance or oversight we have to adhere to; so, “never underestimate their resolve or intelligence because these ecosystems evolve to stay ahead of our legal AND financial AND political systems.”
Darrell mentioned that in the intelligence services there are no historical documents referring to terrorist activity linked to Monaco. However, it should also be borne in mind that just because terrorism does not appear to be prevalent in a country does not mean that that country is not being used for funding purposes. As terrorist networks cannot function without funding, it is essential that Compliance Officers act as watchdogs of the financial sector by identifying terrorist fund flows and reporting any suspicious activity.
The Principality of Monaco is no more at risk from terrorism than other countries, but given its geographical location close to France, the many nationalities involved, and the volume of financial transactions managed through financial establishments based in the Principality, it requires constant attention.
