Risks faced by Voluntary Organisations Voluntary Organisations Session
Risks faced by Voluntary Organisations
Voluntary Organisations Session Objectives v To understand the importance of vigilance and the monitoring of voluntary organisations’ activities to prevent and detect such activities relating to money laundering and/or terrorist financing. v Introduction v Red flag indicators v Key differences between money laundering and funding of terrorism v Case studies v Questions
Voluntary Organisations Introduction v Charities and non-profit organisations make a difference to millions of people worldwide. v Since 2015, children and young people’s charities have been the most popular cause for people to donate to, however, religious causes receive the largest share of donations in terms of total money given. (NCVO 2016. How Charities Work. https: //howcharitieswork. com/about-thissite/#sharing) v NPOs are also among the many vehicles that have been identified as being potentially vulnerable to terrorism financing abuse and money laundering.
What is a Voluntary Organisation? Cap. 492 of the Laws of Malta defines a Voluntary Organisation as: “a foundation, a trust, an association of persons or a temporary organisation which is independent and autonomous” and “which is created or established - v for any lawful purpose; v as non-profit making; and v is voluntary”
What is Money Laundering? Cap. 373 of the Laws of Malta defines Money Laundering as v The conversion or transfer of property; v The concealment or disguise of the true nature and source (inter alia) of property; v The acquisition, possession or use of property; v Retention without reasonable excuse of property; “knowing or suspecting that such property is derived directly or indirectly from, or the proceeds of, criminal activity or from an act or acts of participation in criminal activity for the purpose of or purposes of concealing or disguising the origin of the property or of assisting any person or persons involved or concerned in criminal activity” v Attempting money laundering activities; v Acting as an accomplice to money laundering activities.
What is Funding of Terrorism? Cap. 9 of the Laws of Malta defines funding of terrorism as: “by any means, directly or indirectly, collecting, receiving, providing or inviting another person to provide, money or other property or otherwise providing finance intending it to be used, or having reasonable cause to suspect that it may be used, in full or in part, for the purposes of terrorist activities or knowing that it will contribute towards the activities, whether criminal or otherwise, of any person involved in terrorist activities. . ”
TF/ML Red Flags
Terrorism Financing United Nations Office of Counter-Terrorism Implementation Task Force Charities Project (2013) Terrorism Financing Typologies v One of the ways in which terrorists obtain funds is through non-profit organisations. v NPOs used to raise, transfer and divert funds for terrorist purposes. v Identified terrorist organisations posing as legitimate NPOs https: //www. un. org/counterterrorism/ctitf/en/charities-project
Terrorism Financing Financial Action Task Force (FATF) FATF Report (June 2014) “The NPOs most at risk appear to be those engaged in ‘service’ activities, and that operate in a close proximity to an active terrorist threat. This may refer to an NPO operating in an area of conflict where there is an active terrorist threat. However, this may also refer to an NPO that operates domestically, but within a population that is actively targeted by a terrorist movement for support and cover. In both cases the key variable of risk is not geographic, but the proximity to an active threat. ” http: //www. fatf-gafi. org/media/fatf/documents/reports/Risk-of-terrorist abuse-in-non-profit-organisations. pdf
Red Flag Indicators Terrorist Activity Financing Related Indicators Published by FINTRAC (Canada’s Financial Intelligence Unit) v Use of accounts in high risk jurisdictions, conflict zones or adjacent countries. v Subject identified by media or law enforcement as having travelled, attempted/intended to travel to high risk jurisdictions, conflict zones or adjacent countries. v Travel-related purchases (e. g. purchase of airline tickets, travel visa, passport, etc. ) linked to high-risk jurisdictions, conflict zones or adjacent countries. v Mention of travel to, currently in, or having returned from a high risk jurisdiction, conflict zones or adjacent countries.
Red Flag Indicators v Activity indicates the sale of personal property and/or possessions. v Depletion of account(s) by way of cash withdrawal. v Individual/Entity’s online presence extremism or radicalization. supports violent v Subject indicates planned cease date to account activity. v Utters threats of violence that could be of concern to National Security/Public Safety. v Sudden settlement of debt(s) or payments of debts by unrelated 3 rd party or parties.
Red Flag Indicators v Client is known or relevant to law enforcement and/or national security agencies. v Client’s transactions involve individual(s)/entity(ies) identified by media or law enforcement as the subject of a terrorist financing or national security investigation. v Client donates to a cause that is subject to derogatory publicly available information (crowd funding initiative, charity, NPO, NGO, etc. ). v Conducts uncharacteristic purchases (e. g. camping and outdoor equipment, weapons, ammonium nitrate, hydrogen peroxide, acetone, propane, etc. )
Red Flag Indicators v A large number of email transfers between client and unrelated 3 rd party or parties. v Subject provides multiple variations of name, address, phone number or additional identifiers. v Sudden conversion of financial assets to a virtual currency exchange or virtual currency intermediary for increased anonymity.
Red Flag Indicators What constitutes suspicion? v FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) noted that a single indicator on its own may seem insignificant, but combined with others, could provide reasonable grounds to suspect that the transaction is related to terrorist financing activity.
Terrorism Support Continuum http: //www. fatf-gafi. org/media/fatf/documents/reports/Risk-of-terrorist-abuse-in-non-profitorganisations. pdf
NPO Specific - Red Flag Indicators
Key Differences Money Laundering and Funding of Terrorism
Key Differences v The FATF Financial Investigations Guidance recognises that terrorism financing and money laundering while often appearing together are actually operationally different. v Money laundering tends to be law-enforcement led and gathering evidence on crimes which have already been committed. v Terrorism financing investigations are required by the nature of the threat to be preventive in nature and intelligence-led.
Money Laundering Terrorist Financing v Funds obtained illicitly v Funds may be licit or illicit v Motivation is profit-seeking v Motivation is ideological v Transactions of larger value v Transactions of smaller value v Circular life circle v Linear life circle
Case Studies
Case Study 1 - Terrorist Financing v Investigation by West Midlands Police in collaboration with British Security Services and London Met Police in 2011 v Principal subjects – Irfan Naseer, Irfan Khalid and Ashik Ali v Two of the subjects had travelled to Pakistan in 2009 and 2010, recorded suicide videos and attended training in preparation for terrorist activity. v Physical and technical surveillance of the subjects uncovered a plot to detonate up to eight explosive devices in crowded places around Birmingham. v Physical surveillance revealed that subjects were engaged in street fundraising for the large UK charity Muslim Aid.
Case Study 1 - Terrorist Financing v Subjects had volunteered with Muslim Aid as fundraisers, obtaining donation buckets and high-visibility vests with the charity’s name on them. v Donations gathered in the first day amounting to approx GBP 1, 950 were returned to Muslim Aid however before returning the donation buckets and vests. v Unbeknownst to Muslim Aid, the three men continued to fundraise for several more days posing as Muslim Aid volunteers. v The donations collected over these subsequent days were deposited into the subject’s personal bank accounts.
Case Study 1 - Terrorist Financing v In total, they diverted USD 23, 000 in donations to finance the bomb plot. v In September 2011, police disrupted the bomb plot, arresting Naseer, Khalid, Ali, and several other suspects. The three were convicted on terrorism charges in February 2013, and sentenced to prison terms ranging from 15 years to life. v After the 2011 arrests, police made Muslim Aid aware that the organisation had been abused by the bomb plotters. v Muslim Aid filed a serious incident report with the Charity Commission of England Wales who in turn worked with the charities involved to review and strengthen their safeguards.
Case Study 2 - Terrorist Financing v Case relates to the diversion of funds by persons within the non profit organisation. v A domestic company was established with very broad commercial purposes. v Numerous small deposits were made to the company’s account by the individual who had signing authority on the account. v These deposits originated from donations which were intended for the NPO. Shortly after receipt the funds transferred to foreign-based companies.
Case Study 2 - Terrorist Financing v An investigation by the national FIU revealed that the individual with signing authority on the company’s account was also a directing official of an NPO. v Law enforcement information indicated that the NPO was known to have ties to a terrorist group. v A second directing official of the NPO, who was also a manager of the company, also had ties to the terrorist group. v The investigation concluded that the domestic company was a front company being used as a conduit to transfer funds on behalf of the NPO linked to a foreign terrorist group.
Case Study 3 – Diversion of Funds v An individual’s personal bank account received a large transfer of funds from a foreign national. v After the transfer the funds were gradually being withdrawn in cash. v The individual was not known to be involved in business transactions and the amount of funds transferred was unusual for the account. v An investigation by the national FIU revealed that a directing official of an NPO held power-of attorney privileges over the individual’s account, and that numerous cash deposits had also been made to the account.
Case Study 3 – Diversion of Funds v Neither the NPO directing official nor the individual had incomes corresponding to the transfers and deposits on the account. v Additionally, the NPO had previously come to the FIU’s attention in relation to terrorism financing and money laundering investigations. v Law enforcement information indicated that the NPO, and this particular directing official, were already under investigation for activities connected to terrorism financing and money laundering investigations. v Based on the FIU investigation, it was determined that the NPO directing official was using the individual’s account to mask his own transactions.
Reading Material http: //www. fatfgafi. org/me a/fatf/documents/reports/Ri k-of-terrorist-abuse-in-non profit-organisations. pdf
Reading Material www. fiumalta. org/library/PD /misc/Guidance%20 Note%2 on%20 Funding%20 of%20 Te rorism%20%20 Red%20 Flag %20 and%20 Suspicious%20 Activities 2018. pdf
Questions?
- Slides: 30