Presentation by Dr Nicholas Ryder Terrorism financing and

Presentation by Dr Nicholas Ryder Terrorism financing and the fraud dossier Professor in Financial Crime Friday 22 nd March 2019 Wales Fraud Forum Annual Conference 2019

Introduction • What is terrorism financing? • Sources of terrorist Funding • Terrorism financing and fraud • Joint Intelligence Money Laundering Task Force • Conclusion

What is terrorism financing? Terrorist financing has been referred to as ‘reverse money laundering’, which is a practice whereby ‘clean’ or ‘legitimate’ money is acquired and then funnelled to support terrorism

Sources of Financing • State Sponsors of terrorism: • Sudan, Iran, Syria and North Korea • Iran rejected new counter terrorist financing law (November 2018) • Private terrorist moneys may be classified into two categories : • legitimate, • and unlawful funds.

Sources of Financing cont… • • • • Corporate donations, Non-profit organisations, Drug trafficking, Extortion, Organised retail theft, Kidnappings for ransom, Oil refining, Misapplied charitable donations, Islamic non-remittance systems, Sale of conflict diamonds, Cryptocurrencies, Bank robberies, The sale of ivory and Fraud

Terrorism Financing and Fraud • The association between terrorism financing and fraud was first associated with the IRA, • Who accrued its funding via tax fraud (International Monetary Fund, 2000), • al-Qaeda often receives funding via credit card fraud (Financial Action Task Force, 2008)

Terrorism Financing and Fraud • Charities susceptible to abuse by terrorists who are seeking to accrue finances via the exploitation of charitable payments (Gurule, 2008), • Following 9/11, it was estimated that approximately 30 per cent of al-Qaeda finances were obtained from misapplied charitable donations (Ryder, 2015),

Terrorism Financing and Fraud • Terrorists will seek to use associated charities because it provides an element of authenticity for the transfer of funding, • This technique that has been frequently used by Boko Haram across Africa (Financial Action Task Force, 2016).

Terrorism Financing and Fraud • Jonathan Paul Jimenez: • sentenced to 10 years in prison for making a false statement to a federal agency in a matter involving international terrorism, • Jimenez was training to become an foreign freedom fighter and began making preparations to participate in violent extremism overseas • Jimenez obtained a refund from the Internal Revenue Service (IRS) in the amount of $5, 587 (FBI, 2013)

Terrorism Financing and Fraud • Michael Todd Wolfe: • pleaded guilty to attempting to provide material support to a Foreign Terrorist Organisation, ISIL. • Wolfe and his family expected a tax refund of around $5, 000 which they planned to use to fund their travel expenses. • Jailed for 82 months (Department of Justice, 2015)

Terrorism Financing and Fraud • The Home Office identified the link between terrorism financing and charities in 2017 when is reported that charitable donations worth hundreds of thousands of pounds were unwittingly sent to Islamic extremists (The Independent, July 2017). • Interestingly, the Home Office refused to publish the full report, thus limiting understanding of this funding stream (The Guardian, July 2017).

Terrorism Financing and Fraud • Yahya Rashid, • Spent his student loan and other grants on travelling to join ISIL, • R v Yahya Rashid [2016] EWCA Crim 568

Terrorism Financing and Fraud • Salman Abedi • Allegedly used taxpayer student loans to fund the Manchester Arena attack (The Telegraph, May 2017)

Terrorism Financing and Fraud • Ahmed Hassan, • Parsons Green Tube bombing, • Convicted and ordered to serve a minimum of 34 years imprisonment, • Funded by Amazon voucher

Commentary • There are three common themes in these terrorist attacks: 1. the use of low capability weapons, 2. cheap terrorism and 3. emergence of a fraud dossier. • Therefore, are the UK counter-terrorism financing laws able to stop such acts of terrorism?

DATF SARs • Terrorism Act 2000 (s. 19) • DATF SARs seek to provide financial intelligence (FININT) • Regime littered with problems: • Interpretation of suspicion, • Quality of SARs, • Compliance costs, • Quality of information provided and • Defensive reporting.

DATF SARs • Problems recognised by Home Office, Law Commission and Financial Action Task Force, • Hopelessness of DATF SARs is illustrated by their inability to provide FININT that could be used to prevent acts of terrorism, • “retrospective SARs are less helpful in terrorism financing cases” (Law Commission, 2018, 57),

DATF SARs • Terrorism financing is associated with very small amounts of funding which are impossible to detect via a DATF SAR: • Finsbury Park Mosque (2017), • Westminster Bridge (2017), • the Parsons Green tube bombing (2017), • London Bridge and Borough Market attacks (2017) and • Manchester (2017).

Commentary • There are to important conclusions on the effectiveness of DATF SARs: 1. Several terrorist attacks have involved terrorists using a rental vehicle to target pedestrians and 2. Anyone has the financial capability to self-fund the renting of a vehicle, thus providing more evidence that low cost acts of terrorism exploit the loopholes in the DATF SAR system.

Commentary • Is Joint Money Laundering Intelligence Taskforce the way forward? • Public/private partnership with the financial sector, • Created in February 2015, • Seeks to improve the sharing of information between reporting entities and LEAs, • The increased appreciation is partly achieved because JMLIT has access to 89% UK personal current accounts.

Commentary • JIMLT results: • 63 arrests of individuals suspected of money laundering, • over 1, 000 investigations into bank customers suspected of money laundering, • the recognition of over 2, 000 accounts that were unknown to LEAs, • enhanced monitoring by banks of over 400 accounts, • the closure of a further 450 bank accounts suspected of being used for the purposes of money laundering, • the restraint of £ 7 m of suspected criminal funds and • the ordering of approximately 40 Proceeds of Crime Act 2002 orders.

Commentary • JIMLT results: • London Bridge terrorist attack, • NTFIU and the NCA liaised with JMLIT, • Within 12 hours of the attack they were able to identify the payments for van hire and establish spending patterns, allowing further investigative strategies to be identified and • investigators concluded that the attack involved only three attackers with no broader network.

Commentary • JIMLT: • Limited scope? • Does it include to providers of credit? • Does it include accountants, lawyers and estate agents?

Conclusions • Fraud has now become the crime of choice for terrorists, • Terrorists have acquired funding via benefit and credit card fraud, identity theft and the sale of counterfeit goods, • The threat posed by terrorism and its financing is unprecedented, • and there are clear gaps within the existing counterterrorism financing legislative frameworks that require a radical rethink.