Key Features of the Regional Terrorism Financing Environment Regional CTF Capabilities and Challenges - An Overview. 07 REGIONAL RISK ASSESSMENT ON TERRORISM FINANCING 2016 | SOUTH EAST ASIA AND AUSTRALIA In response to a highly charged and dynamic terrorism. The first section of this assessment provides important context for understanding current and emerging terrorism financing risks in the region.
The regional map on pages 14–15 provides an overview of recent attacks, counterterrorism disruptions, foreign terrorist fighters, and related information for each country.
MalaYsia
PHiliPPines
REGIONAL TERRORISM FINANCING ENVIRONMENT
PHILIPPINES
THAILAND
MALAYSIA
SINGAPORE
INDONESIA
AUSTRALIA
This infographic details the current terrorism and terrorist financing environment in Southeast Asia and Australia. To help understand the nature and range of terrorist financing activity across the region, this assessment identified a number of key characteristics that shape or dominate the regional environment.
The reality of geography
Cash-intensive and informal economies
Financial and transit hubs
Broad terrorisM
Continued use of established methods
Terrorism financing flowing into and out of the region
Implementation of international conventions
NPO regulation and oversight (FATF Recommendation 8)
Quality and number of terrorism financing STRs
Understanding national terrorism financing risks
Comprehensive terrorism financing offences
Quality and use of financial intelligence to detect, investigate and
FATF Recommendation 6) Sanctions frameworks and lists of designated
FATF Recommendation 2) Successful terrorism disruption indicates
International cooperation, particularly in South-East Asia
FATF Recommendations 37 & 40) Sound high-level international cooperation
LESS EFFECTIVE Major or fundamental
Alternative remittance and money service businesses
Cross-border movement of money controls and monitoring
FATF Recommendation 32) Gaps in monitoring border channels
Targeted financial sanctions (FATF Recommendation 6)
Domestic cooperation (FATF Recommendation 2)
MORE EFFECTIVE Minor or moderate
It represents a subset of a wide range of channels that the regional assessment team collected data on and examined. This section also examines two important potential changes that could alter the regional terrorism financing landscape in the future.
How to interPret tHe risk ratings
RAISING
TERRORISM FUNDS
Terrorism financing
Overall risk
FIUs should focus on improving guidance to reporting institutions on customer risk profiles and suspicious financial characteristics associated with self-funding behaviour.
Risk rating
Country experience
Vulnerability
Opportunities to respond
COUNTRIES IN THE REGION should develop a clearer overview of the level of misuse of NGOs for the financing of terrorism, through identification. NGOs that receive funding from foreign regions or send money to, or operate in or near, conflict zones are generally more vulnerable to terrorist financing abuse. While regional authorities have detected only a few cases of terrorist financing through NGOs, this channel has been assessed as a 'high' risk due to the significant number of potentially vulnerable and at-risk NGOs operating within the region, coupled with with their capacity to raise large volumes of funds.
The actual level of misuse of non-profit organizations11 for terrorist financing is lower than expected in most of the region. This contrasts with the number of at-risk nonprofits in the region—particularly nonprofits that receive funds sent from foreign regions, or nonprofits that send money abroad or operate in or near conflict zones. The risk of non-profit organizations to finance terrorism is increased by the ability of non-profit organizations to raise large amounts of funds quickly while avoiding detection.
Even if only a limited number of NGOs are used to finance terrorism, the consequences can be disproportionately higher than for other fundraising methods. It is important to remember that a diverse range of NGOs operate in the region, many of which are not exposed to the risks of terrorist financing.
In Thailand, some NPOs have used money to finance propaganda in support of the insurgency in the south. In the Philippines, an NPO used donated funds to build social housing with cheap materials and used unused funds to finance terrorist activities. Mixing terrorist financing funds with large amounts of legitimate NPO funds is a common method and can significantly reduce the visibility and detection of illicit funds.
Countries should conduct comprehensive risk assessments of their NPO sector to identify higher risk organizations.12 These assessments can be combined into a regional assessment that forms the basis for joint initiatives to strengthen measures to target the subset of NPOs identified as high risk identified. Where gaps exist in individual countries' AML/CTF frameworks, these countries should fully implement FATF Recommendation 8, which requires countries to assess the adequacy of laws and regulations to prevent NPOs from being misused for the purpose of financing of terrorism. 12 This would be in line with the FATF standard for NPOs, which requires a targeted approach to NPOs that are at greater risk of exploitation by terrorist financing.
NPO peak bodies to include AML/CTF measures in codes of conduct to inform risk assessments and build community trust in the NPO sector. FIUs should also work with NPO peak bodies to develop guidance to NPOs and communities on safe ways to donate to humanitarian efforts in high-risk countries.
Strengthening NPO oversight – the Malaysian experience
Given the increased sanctions and transaction monitoring systems used in the banking sector, organizations attempting to send illicit funds to high-risk countries are likely to use recipient countries and alternative channels, reducing the ability of authorities to detect illicit transactions. Obtaining proof of a user's identity and intent to use funds for terrorism will continue to be a challenge for authorities, but a digital footprint of online use can help deter terrorist financing activities and provide detection opportunities. Countries rate the risk of fundraising through social media and crowdfunding as medium (Australia, Thailand and the Philippines) to high (Indonesia and Malaysia).
Terrorists and their financiers mainly use social media as a communication channel to solicit and issue calls for funding. Because fundraising activities via social media and crowdfunding platforms often cross common banking or remittance channels, intelligence-driven surveillance is likely to lead to increased detection and disruption of illegal activity. Social media and crowdfunding platforms are widely available, low cost and can reach a global audience.
Social media accounts can be accessed on demand and from any internet connection around the world. Social media platforms also provide an opportunity to track terrorism financing and other suspicious activities through outreach to at-risk communities and public calls for information – these initiatives can be included more broadly.
While very few cases have been detected, the risk associated with this channel has increased due to the inherent vulnerabilities that online fundraising presents to authorities. Online fundraising activity has been reported more in Indonesia and Malaysia than other regional countries. The number of identified cases of online fundraising for terrorism varies across the region, but is generally minimal.
The money raised through this channel is mainly used to finance individual trips to conflict areas or to support terrorist activities – both within the region and beyond. FIUs could consider forming dedicated 'cyber operations teams' to enable them to better collaborate with security and investigative authorities and relevant online providers to monitor and identify suspicious fundraising activities and related accounts. Criminal activities are a major source of funding for some terrorist and extremist groups in the region.
The secure and timely sharing of key national security intelligence and criminal investigations is necessary for countries to detect and prevent the criminal financing of terrorism. The use of criminal proceeds by extremists and terrorist groups varies markedly, but poses a very high risk to the southern Philippines and other pockets of the region.
Country experiences
Vulnerabilities
Apart from Singapore, all countries rate cross-border movement of cash and other valuables for terrorism financing within and across regional borders as high risk. The chains of islands that stretch between Indonesia and the Philippines have long served as stepping stones for the movement of illicit cash. The now-disrupted JI network in Singapore used cash couriers15 to deliver funds intended for terrorism financing to Malaysia and Indonesia.
The cross-border movement of cash is a proven methodology for terrorist financing and the main method for moving money across the region. Extremists and terrorist networks are exploiting the porous land borders and closing maritime borders in many parts of the region to move cash outside monitored cross-border reporting channels. Trusted networks of cash traffickers are also being used, which will remain a key element in regional terrorist financing activities.
Given that only relatively small amounts need to be transferred, these funds do not need to be disclosed if they are below the reporting threshold for cross-border movements. 16. 16 Thresholds for reporting cross-border movement range from just under US$8,000 to US$20,000 in countries in the region.
If border authorities do not have intelligence and movement alerts regarding a traveler, terrorist financing money can move across borders with little risk of detection, even if the amounts disclosed are above the threshold. Knowledge gaps also exist regarding the cross-border movement of stored value cards and bearer transferable instruments (BNI)18 for terrorist financing. While cash mostly moves, the use of stored value cards and BNI to finance terrorism presents a potential vulnerability for regional border enforcement regimes.
National authorities need to work more closely with the banking sector to improve the sector's ability to detect and deter terrorist financing. Most countries rate the risk of financing terrorism through the banking system as a medium risk. In the Philippines, the banking system has been used to transfer kidnap-for-ransom payments, but the link to terrorist financing remains unclear.
The most common services misused for terrorist financing are bank accounts (personal and business) and instructions for international fund transfers. Financing of terrorism through the banking sector is often small-scale and, especially in the case of self-financing, is indistinguishable from the mass of legitimate financial transactions that take place every day.
Banking sYsteM
Compared to other countries in the region, Australian banks are often used to send money to those involved in foreign conflicts. This largely reflects the central role of banks in the Australian economy, in contrast to the larger cash economies in some regional countries. In Malaysia, a terrorist group used a bank account to provide financial support to Malaysian foreign terrorist fighters and ISIS affiliates in the Philippines.
Despite relatively mature AML/CTF frameworks across the region, the banking system is still being exploited to move terrorist funds across the region and abroad. Foreign terrorist fighters also use ATMs at transit points in the region to withdraw cash using debit and value cards while traveling to the Middle East. False identification documents and other methods of concealment – such as accounts held by family members or partners – are also involved in terrorist financing cases.
In the absence of law enforcement intelligence or sophisticated high-risk customer profiles, detection can be highly challenging for frontline bank staff and bank transaction monitoring systems. FIUs should assist financial institutions to better monitor ATM activities in key foreign terrorist fighter transit routes.
Engaging with the private sector
FIUs must continue to build close, reliable and cooperative working partnerships with banks to secure the banks.
Operational funding or direct use 2. Organisational funding or indirect use
The consequences of funding organizations may be less immediate, but they help support terrorist actors and networks to hide, build operational capabilities, and prepare and organize attacks. Organizational funding helps terrorist groups recruit, expand networks and consolidate their presence in communities.
In general, operational financing of terrorism will have more serious consequences, ending in attacks and physical injuries.
Operational
Likely use of terrorism financing
Country risk rating
Organisational
This assessment identified two key potential changes that could alter the regional terrorist financing environment in the future.
PRIORITY ACTIONS
Geopolitical shocks and terrorism financing
Risk ratings
Likelihood matrix
Measuring consequence
Questionnaire
Terrorism financing assessment package
Moving funds to finance terrorisM
Moving funds to finance terrorisM
Targeted financial sanctions relating to terrorism and terrorism financing
Regulate NPOs, undertake domestic reviews of the NPO sector or have the
Wire transfers as they apply to money or value transfer services (remitters)
Quality and scope of reporting of suspicious transactions related to
