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The Funding of Terrorism (Part I) – Hookahs and Honey: Funding Terrorism through ‘Benign’ Activities

by Ian Ralby

4 August 2019

Shisha pipes across the Middle East are being filled with charcoal smuggled from Somalia. This seemingly benign but criminal activity nets the terrorist group Al-Shabaab millions, if not tens of millions, of dollars each year. (Image credit: Flickr)

 

Terrorism catches people’s attention, charcoal does not. It is a certitude much like the fact that a bomb blowing up a building will make international news and a fishing boat laden with jerry cans of diesel will not. Over the last decade, terrorist groups have increasingly sought to fund their operations using activities that many consider ‘benign’ and thus undeserving of serious scrutiny. While the trafficking of arms, drugs or humans draws significant law enforcement attention around the world, goods including fuel, charcoal, honey, sugar, fish and antiquities do not occupy prominent positions on most of these agencies’ priority lists – if they feature at all.  Noting how high-profile crimes tend to attract the close watch of national and international authorities, terrorist organisations around the world have found relative ease in recent years by funding themselves through profitable ‘benign’ operations. It is imperative for law enforcement agencies and counterterrorism authorities to increase their coordination on these matters and scrutinise such often overlooked activities as critical sources of terrorist financing.

Perhaps the best-known instance, at least in counterterrorism circles, of seemingly benign economic activity that actually finances terrorist organisations is the trading of Somali charcoal to the Middle East. Acacia charcoal, excellent for use in shisha pipes, has been exported from Somalia for decades. As Al-Shabaab, a terrorist group established in 2006, took over parts of Somalia, it sought to benefit from the lucrative trade in various ways, including through informal taxes and port revenues.  In response, the Transitional Federal Government banned the export of charcoal from Somalia and later the international community imposed an embargo on it. The result has been an extensive smuggling operation in an effort to maintain the income stream. Publicly disclosed estimates from the British Royal Navy suggest that this operation currently yields $7 million per year for Al-Shabaab. Prior to substantial interdiction efforts, that figure was once estimated to be in the tens, or even hundreds, of millions.  Unlike issues like piracy or wildlife trafficking, charcoal has not captured public attention in the same way, and thus has not garnered the same political interest, though recent exposés have sought to change that. While the counterterrorism community is heavily focused on charcoal, many politicians still view it as a low priority, since compared to other goods it still seems relatively benign.  And even if charcoal does gain further visibility, the situation with Al-Shabaab is only one example of a larger phenomenon.

The same apathy towards smuggling of a benign commodity has been a major factor in illicit oil and fuel activities becoming a substantial source of terrorist financing.  The majority of people around the world rely on fuel in their daily lives. Consequently, it is perhaps the most ubiquitous commodity and one which people are most interested in obtaining at a discount.  Too often, widespread and seemingly harmless shopping for discounts equates to a willingness on the part of law enforcement and the political establishment to overlook the sources of cheaper-than-market-price fuel. They disregard what seem to be low-scale illicit operations as not meriting the attention of law enforcement. This salutary neglect of black market fuel trading has become a major point of manipulation for terrorist groups looking for under-the-radar income streams.

Furthermore, the success of the Islamic State in Iraq and Syria (ISIS) has inspired groups around the world to adopt a Jihadi-Salafist philosophy and seek to ‘restore’ the early Islamic caliphate.  ISIS-inspired groups, however, are inspired not only by ISIS ideology but also by ISIS methods and it is well-known that ISIS’ principle source of income has been proceeds from illicit oil and fuel activities. It is therefore not surprising that affiliated groups in other regions of the world have turned to fuel smuggling as their primary source of income. In the Philippines for example, Abu Sayyaf used fuel smuggling both to fund itself and to reinforce smuggling routes that supported its movement of weapons and ammunition in the lead-up to and throughout the year-long siege of Marawi.  In Trinidad and Tobago, a similar co-location of ISIS ideology and rampant fuel smuggling has given rise to significant international concern. As with charcoal, a prevalent perception of the commodity itself as being benign has created a blind spot that allows terrorist groups to earn substantial profits with little interference or even interest.

Beyond charcoal and fuel, other goods such as fish, livestock, honey, sugar, minerals and antiquities, depending on their availability, profitability, and relative visibility by law enforcement, have all become sources of income for terrorist groups. Osama Bin Laden used honey trading both to make profits and for money laundering.  Few goods could seem less sinister than honey, and that provided the perfect cover and income stream for one of history’s most ominous terrorists.  Whether the trade is initially illegal, as with fuel smuggling, or technically legal, as with honey or charcoal trading, the very fact that it is being used to fund terrorist organisations makes it illegal.

The point is that terrorist groups are relying on economic activities perceived as benign in order to make, maintain and move their wealth. And wealth is extremely important for terrorism, as evidenced by the direct correlation between the number of attacks perpetrated by a group and its relative financial stature.  In a 2016 interview, Maj. Gen. Amos Gilad, former Director of the Israeli Defense Ministry’s Political-Military Bureau, stated, ‘The financial component of terror organizations is critical, and its indispensability for terror attacks is like fuel for the car’. As true as this statement is, the irony is that the financial component of terror organisations may literally be fuel for the car.

To change this dynamic, law enforcement agencies and counterterrorism units need to become more proactive in identifying their own blind spots and false perceptions.  This means consciously reexamining those matters they have overlooked in the past.  That, however, is not easy to do.  Terrorist groups will continue to seek, find and exploit economic opportunities that occupy lower positions on the priority lists of the authoritaries. Inevitably, as law enforcement approaches change, so, too, will terrorist activities. But, it is imperative that the crimes and trading activities that have been relegated to benign status be reconsidered not just in their own right but for their malignant implications.  The profits accruing from such overlooked criminal goods as shisha charcoal, farm diesel or artisanal honey, may actually be funding deadly bombings, hijackings, or militant offensives.

Dr. Ian Ralby is a leading expert in international law, maritime security and countering transnational organized crime.  He and his team at I.R. Consilium, LLC have world leading expertise in oil and fuel crimes, and the nexus between maritime crimes and both criminal and terrorist activities.  Among other degrees, he holds a J.D. from William & Mary and a Ph.D. from the University of Cambridge where he was a Gates Scholar. 

Strife Series on The Funding of Terrorism – Introduction

by Alexandra Roberts

1 August 2019

The funding of terrorism, an overlooked but important field of inquiry (Image credit: UK Defence Journal)

 

Editorial

We have all seen the outcome of violent acts of terrorism . The attacks of 11 September 2001 were among the largest coordinated assaults that had ever been carried out. In the near two decades that have since passed, there has been a sustained multi-national effort to curb terrorism and to try to prevent further attacks. Troops have been deployed in kinetic operations around the world and intelligence agencies and analysts have increased in numbers to gather and interpret data and intelligence. An essential, but frequently overlooked, component of stopping terrorism is preventing terrorist groups from raising the funds necessary to enact their plans. The practicalities of such operations are little known and rarely focussed on in the public discourse on terrorism. However, like any other organisation or group, terrorists need to be able to finance their activities in order to carry out their objectives.

This leads to questions of where the money come from, how it is moved and how it can be stopped. We, the public, tend to know its source is something nefarious. Almost certainly illegal. That al-Qaeda probably did not check their credit rating or apply for a larger overdraft facility in order to fund the 9/11 attacks. But, beyond that, we have very little knowledge about their funding. We know that there are laws designed to prevent the financing of terrorist activities, but we do not tend know what they are, how they operate or who applies them. Even where these laws exist, not all countries and governments agree on how or whose should be implemented. Moreover, because of the asymmetric nature of terrorism, a tool that can be used stifle one group, may have no practical application to another, whilst at the same time the methods and modes used by terrorists to finance themselves are evolving. In turn, legal instruments that can be used to stop them must also evolve too.

This Strife series explores the relationship between money and terrorism. The series looks at who funds it, how they do it, what tools we have to prevent it and even how the laws to stop it can be misused. Its purpose is to highlight quite how complex and diverse the issues surrounding terrorism’s funding are. That it is not just a matter of finding the sources of their finance and shutting it down, but rather understanding the multifaceted political web it is entangled in.

Publication Schedule 

In the first article (04/08), Dr Ian Ralby raises concerns about how low profile and seemingly benign criminal activities are used to fund global terrorism. He makes the case that law enforcement agencies need to recognise that terrorist groups will exploit these overlooked, lesser crimes as a way of raising funds and laundering money and must respond.

In the second article (06/08), Dr Vanessa Neumann explores the relationship between Venezuela’s Maduro regime and Hezbollah through long-standing links with post-revolutionary Iran. She tracks the history of the relationship between these groups and argues that ending the Maduro regime will deliver a severe setback for Hezbollah.

In the third article (08/08), Dr Michael Greenwald examines how Section 311 of the Patriot Act that pertains to correspondent banking relationships between the United States and other countries has been used to stop terrorism. He argues that in a new era of great power competition, it needs to be updated to be able to respond to the current global political and economic climate.

In the final article (10/08), Dr Jack Watling looks at how mass trails and vague charges are undermining efforts in the Middle East to stop the Shia system of tithes and its opaque financing practices potentially funding terrorism. He highlights that these questionable prosecutions are not only used as tools of state oppression, but that they are counterproductive in reaching a more transparent financial system.

Alexandra is studying for an MA in Terrorism, Security and Society at King’s College London. She is particularly interested in the role of women in Jihadist terrorism and US foreign security policy. Prior to starting her postgraduate studies, she worked as a political and security researcher, with a particular focus on the MENA region. She also done work focussing on the prevention of IUU fishing. Alexandra has a BSc in Oil and Gas management, with particular focus on the petrochemical industry in Iraq and its potential social, economic and political impacts on the country, using knowledge and experience gained working in the private security sector with a company specialising in the Middle East and Afghanistan.

ULFA: A Persistent Threat

By Athul Menath

Two ULFA cadres guarding a camp in Tinsukia district, in the northeast Indian state of Assam. (Source: AFP)

 

Since 1979, the United Liberation Front of Assam (ULFA) has been at the forefront of insurgent violence in the Indian state of Assam. The group sprang up during the ‘anti-outsider’ agitation which demanded the expulsion of ethnic Bengalis whose large scale influx had impacted the local demography of Assam. Soon the movement started showing a secessionist character, resulting in the birth of ULFA, under the leadership of Paresh Baruah. The group has been demanding session from the Union of India, claiming that Assam has been ‘colonised by New Delhi’. Although created in 1979, the group became active in 1982, when it killed a well-known Bengali lawyer, Kalipada Sen.

An undivided ULFA was estimated to have a cadre strength of about 5,000. Following a split in 2012, two factions emerged. The first is the Pro-talk faction of ULFA (ULFA-PTF), which  conducts peace talks with the Government of India. The second is the Independent faction of (ULFA-I), which is based in Myanmar and has a capacity of about three hundred cadres.

The article is an attempt to chronicle the renewed activity of ULFA-I and  to identify the underlying reason for its longevity in the plethora of insurgent outfits in the often under-reported and misunderstood Northeast India.

 

Recent activities

On January 13, 2018 an ULFA-I cadre was arrested from Chabua in the Dibrugarh District. He was reportedly tasked by ULFA-I to collect information on aviation-carrying turbine fuel (ATF) tankers entering Chabua Air Force station. The alleged purpose was to place an Improvised Explosive Device (IED) on ATF tankers entering the air base.

The month before, on the 8th December 2017, six militants of ULFA-I entered the Kunapathar Tea Estate in Bordumsa, Tinsukia District and opened fire at the estate manager, notably after the authorities refused to pay extortion money that the militants had previously demanded from the planters a couple of weeks prior. A few days later, on the 11th, the ULFA-I militants shot dead a Village Defense Party (VDP) President – identified as Anteswar Mahanta – and his son Karun at Dirak-Hunjan, Tinsukia District. The killing resulted in wide spread protests and demonstrations in the District, with civilians claiming that state Government had failed to provide security.

Additionally, reports in January 2018 indicate that ULFA-I and the Khaplang faction of National Socialist Council of Nagaland (NSCN-K) were planning attacks in India. For instance, it has been reported that ULFA-I leaders have found a location near the Namdapha National Park in Changlang of Arunachal Pradesh to set up a transit camp for about seventy cadres. Furthermore, the same report also claims that once the camp is ready, parts of Assam close to the south-east of Arunachal Pradesh will witness a rise in violence.

The insurgent group is also conducting ‘recruitment drive’ in Udalguri and Darrang, as well as Tinsukia, Shivsagar and Dibrugarh, the districts which have been their strongholds.

There is evidence to suggest that ULFA has revamped its abduction for ransom activities within the region. For example, they abducted the son of a Bharatiya Janata Party (BJP) local leader of Tinsukia District, for INR 20 million. He was released on the 25th December, after ten days in captivity, although his family stated that they did not give any extortion money. However, Assam Police argues that ULFA-I could target more tea gardens and the business community in Upper Assam for extortion, given the area was facing a severe financial crisis.

 

Official statements- From Dismissive to cautious

The resurgence in ULFA-I activity follows briefly after the Assam Chief Minister, Sarbananda Sonowal, stated that the strength of ULFA was “no more” and there is “no law and order problem” in Assam. Although the state only witnessed twenty-six insurgency-related fatalities (five civilians, three Special Forces and eighteen militants) in 2017, compared to eighty-six in 2016 (thirty-three civilians, four SFs and forty-nine militants), the threat of armed outfits are persistent in the state.

Despite the Chief Minister’s statement, Assam Director General of Police (DGP) was more cautious about dismissing the group as a spent force. He stated that ULFA-I “was down but not out”. He also added that the militants were using neighboring states of Nagaland and Arunachal Pradesh to enter Assam from Myanmar. The recent dormancy of ULFA-I, although interpreted by governing authorities as a sign of weakness, suggest that the organisation has been lying low to recover the losses it had incurred, and realign its strategy according to the evolving context in Assam.

The aforementioned contradictory statements may well be an indicator of the way by which inter-departmental coordination function at the state level. On the one hand, the political class may be attempting to convert the brief lull in to political gain as well as to claim the break in violence as a governmental achievement. On the other hand, however, the security establishment calls for a more cautious approach.

 

Secret of Longevity- Alliances

As Winston Churchill once said, there is only one thing worse than fighting with allies, and that is fighting without them.

The armed group has been able to keep itself alive over the years by developing a nexus with other militant groups in the region. Given that ULFA is a part of the United National Liberation Front of Western South East Asia (UNLFWSEA), a conglomerate of militant groups in north east India provides further credence that the group is yet to be defeated. UNLFWSEA was responsible for the June 2015 Paralon ambush in Manipur, where eighteen Army soldiers were killed. Also, the group was more recently involved in a joint insurgency attack in the same region, with another conglomerate group from a neighboring state and Coordination Committee (CorCom) – on the 22nd January 2017, it killed two SFs and two militants. It is also reportedly supported by Inter service Intelligence (ISI) of Pakistan.

The connection takes place with other militant groups active in India such as the aforementioned NSCN-IM and the NSCN-K, as well as with Myanmar based militant groups such as the Kachin Independence Army (KIA), which was instrumental in imparting insurgent tactics to ULFA cadres. Such an endeavour has helped the secessionist militant group to sustain itself for more than three decades, by securing safe havens and bases outside of India. The connection it had with Bangladesh’s Directorate of Field Intelligence (DGFI) also helped not only about safe havens but also to set up income generating projects. ULFA reportedly had number of firms including media consultancies and soft drink manufacturing units. Moreover, it was reported to own three hotels, a private clinic, and two motor driving schools in Dhaka. Paresh Barua was reported to personally own or has controlling interests in several businesses in Bangladesh, including a tannery, a chain of departmental stores, garment factories, travel agencies, shrimp trawlers and transport and investment companies.

 

Indian security forces with the suspected ULFA member arrested in Chabua (Credit: Avik Chakraborty)

 

Significance of the recent reinvigoration

The latest reinvigoration by ULFA-I comes at a politically sensitive time for Assam, after the first draft of National Register of Citizens (NRC) was published. The NRC aims to identify the ‘illegal migrants’ in the state, an issue which ignited the armed separatist movement in Assam in the first place. The second draft will be published following the Supreme Court’s order later in 2018. Additionally, Assam is scheduled to host a Global Investors’ summit from the 3rd-4th February 2018, in an attempt to seduce investors. The summit is expected to attract both major domestic and international investors. Moreover, the reported plan to attack the air base might indicate an attempt from ULFA to significantly escalate the level of violence. Targets would no longer be limited to SF patrols or perceived ‘outsiders’, but would also include defence and infrastructural installations.

 

Conclusion

In light of the aforementioned events, the possibility of a high impact militant attack resulting in mass fatalities cannot be ruled out. Also, such an attack would send a message to the business community that the law and order in the state remains unstable and insurgent groups cannot be written off completely.

Additionally, it is important not to rule out how ULFA uses the NRC to indulge in ethnic violence against those perceived to be ‘non-Assamese’. Any ethnic violence would act as a huge boost for ULFA and simultaneously increase the amount of cadres in its ranks. This surge could result in the revival of militancy in Assam. Hitherto, the highest number of deaths occurred in 1998 and 2000, with 783 and 758 fatalities respectively.

This festering rebellion also highlights the limits of the Indian Government’s security-centric approach towards internal insurgencies. Indeed, it heavily relies on armed forces to bring about a military solution to the crisis. Whilst this strategy may help in reducing or containing militant violence, it is incapable of addressing the political motivations that initially fuel insurgents. As a result, while militant groups are tactically defeated, the underlying political grievances (real or perceived) pave the way for insurgents to revive themselves periodically.

 

Athul Menath is a security analyst at the South Asia Terrorism Portal (SATP). His focus is the Insurgency in Northeast India. You can follow him on Twitter @loner/56.

Images source: 

Banner / Image 1: Here

Image 2:  Here

Islamist Extremism in the Philippines

By Jamie Matthews

 

ISIS media had released this image of one of their militants waving the group’s flag in Marawi in May 2017

On October 17 2017, Philippine President Duterte declared that the city of Marawi had been ‘liberated from terrorist influence‘. The city, located on the southern Philippine island of Mindanao, had been under siege by militant groups fighting under the flag of the so-called Islamic State (IS). While the Government’s victory is a welcome success, the five-month siege exposed the vulnerability of the Philippines to the continued threat of jihadist extremism.

 

Islamic State’s Pivot to Asia

The battle for Marawi represents the escalation of Islamist militancy in the Philippines and, more broadly, in South East Asia (SEA). The island of Mindanao has a history of Islamic separatism, with both peaceful and violent attempts to gain autonomy. However, the more violent elements of the movement have been given a boost by recent global changes. The most obvious change has been the rise of IS, which has attracted a growing number of Muslims to the creation of an Islamic caliphate. While IS has lost ground in Syria and Iraq, the group has sought to extend its influence elsewhere. This change has involved encouraging terrorism in the West, and the establishment of wilyats (IS provinces) in regions such as SEA and North Africa. With a sizeable Muslim minority often living in harsh poverty, the Philippines provides a particularly attractive target for the formation of a wilyat. The attack on Marawi therefore represented the beginning of IS’s ‘pivot to Asia’, meaning the actions of extremists in Marawi was part of a long-term strategic goal of IS. The threat of further attacks across the Philippines and SEA is high.

 

Impact of the Marawi Siege

Despite the militants’ eventual defeat in Marawi, the conflict has heightened the risk from extremist groups inspired by IS. Over five months, a small number of militants resisted government forces and controlled large parts of the city. At one point, it is thought that as few as 70 militants were keeping some 7000 troops at bay. The effectiveness of such a small number of dedicated fighters emboldened IS over the strategic potential of occupation in Mindanao. Some security analysts even believe that IS won the battle strategically because they showed their ability to resist powerful military forces. Success during the battle for Marawi has provided Islamists with a martyrdom to inspire others.

The siege also assisted the radicalisation of young Muslims in the region and attracted extremists from around the world to the cause in Mindanao. The attack was well-documented in the media and IS publications. Images of militants raising black IS flags across Marawi were broadcast across the world and are thought to have had a similar impact as the images of IS’s 2014 victory in Mosul. The heavy-handed and ineffective approach of the Philippine military further aided the recruitment of young Muslims into IS ranks. IS recruiters utilised the Philippine military’s reliance on airstrikes to claim that it was the Government that destroyed the city and its residents’ homes. These publications by IS were made in conjunction with information on the historic plight of Muslims in Mindanao, highlighting previous governments’ attempts to oust Muslims from the region. These messages have encouraged radicalised Muslims to sympathise with the cause in Mindanao. The Island has even been described as “the new land of jihad”.

In the aftermath of the siege, the risk of Islamist extremism remains high. Civilians in Mindanao are growing increasingly wary that the militants will regroup and overrun surrounding rural areas and towns. The likelihood of lone-wolf terrorist attacks has led some Christian groups in Mindanao to arm themselves. The arming of Christians against Islamists is particularly worrying because previous rounds of sectarian violence in the Philippines began in a similar manner. President Duterte is aware of the severity of the danger,  shown by the recent extension of martial law in Mindanao until the end of 2018. This extreme course of action taken by Duterte, and ratified by the Congress in Manila, demonstrates the difficulty of providing security and rule of law in a region which is extremely vulnerable to civil unrest.

 

Future Policy

The threat of Islamist extremism is clearly ongoing and serious in the Philippines. There are numerous ways in which the Philippine Government can mitigate these risks. Firstly, investment is required to rebuild the city of Marawi. Failing to do so would heighten poverty and resentment towards the government. Such conditions would prove fertile for the radicalisation of young Muslims by IS propaganda. Secondly, sufficient intelligence and policing resources are required to track down and capture extremists. This is particularly important given recent accusations that Duterte has not dedicated enough time, energy and money into countering Islamist extremism. Instead, he has been accused of diverting precious military and policing resources to his infamous war on drugs. Finally, the Philippines should take a more collective approach to countering extremism alongside their South East Asian neighbours. Tighter security checks on movement between borders and improved intelligence sharing would prove particularly helpful. The threat from IS in SEA is becoming increasingly apparent which should encourage cooperation between states. The Philippines, Indonesia and Malaysia have already demonstrated over the past year their willingness to tackle the threat collectively with joint military and security operations. Further collective action is required if they wish to stem the surging tide of Islamist extremism across the region.

 

Jamie is a postgraduate reading Intelligence and International Security at King’s College London. He has a degree in Politics and International Studies as Warwick University. He is interested in a wide range of international and domestic security issues including the rise of Islamist extremism, the use of drones for targeted killing and intelligence related issues.

 

Image Source: 

http://i.dailymail.co.uk/i/pix/2017/05/25/09/40C5C47900000578-0-image-a-25_1495700147350.jpg

Strife Interview – Tom Keatinge (RUSI) on Financial Intelligence

 

The issue of terrorism financing has become a major international concern in the past few years. For instance, in the aftermath of the 9/11 attacks, the US President George W. Bush decided to target finances, and therefore issued Executive Order 13224. Similarly, the November 2015 Paris Attacks have resulted in further efforts to targeting terrorism financing, such as the UNSCR Resolution 2253.

Strife’s William Moray discusses these issues, and others related to financial crime, with Tom Keatinge. Mr Keatinge is the Director of the Centre for Financial Crime and Security Studies at RUSI, and an Alumnus of King’s College London, where he read an MA in Intelligence & International Security. He advocates the importance of Financial Intelligence (FININT) and argues in favour of shifting the international community’s approach from solely focusing on ‘attempting to stop terrorists’ finances’ to ‘using finance to stop terrorists’.

All enquiries as to this article’s content should be sent to Strife Blog.

 

Tom Keatinge is the Director of the Centre for Financial Crime and Security Studies at RUSI

WM – What is financial intelligence? What purpose does it hold?

TK – The financial sector produces a vast amount of data. This information is owned by the private sector, and is generally not shared with the public sector, i.e. the security authorities. There are mechanisms, such as suspicious transaction reporting, that require the private sector to share this information with governmental authorities. However, a considerable amount of financial information is never used by the authorities, because it was never shared with them in the first place, and so effectively, it is thrown away.

So, the question is, can a more intelligent use of that broad information collected by the financial institutions be used? Can we create mechanisms that can allow the security authorities to access such data, as they can for example with mobile phone companies? If you just think about your own use of your ATM card, or you credit card, and so on, it tells you a huge amount about yourself. It generates a huge amount of information, and arguably intelligence about who you are, what you do, or who are you connected with.

We feel very strongly, here at the Centre for Financial Crime and Security Studies, that we need to do more to use this vast amount of bulk information that financial institutions generate, just as we use the bulk information that internet service providers and mobile companies produce.

 

WM – How could this information be used in counter-terrorism (CT)?

TK – In a CT effort, financial intelligence has proven to be very effective at accelerating the ability of the security authorities to develop networks. There tends to be a reason for people paying money to one another, as they tend to be subsequently connected. That can help you identify not just who is connected to whom, but also how the balance of power lies, who might be the leader, or where have these people travelled together. The point is that the vast quantity of situational information that can be generated from financial transactions opens a similarly significant number of networks and facilitates generating further leads to investigate.

From a CT perspective, we obviously want to have every opportunity to identify actors who are planning attacks. For example, regarding the London Bridge attack: who are the perpetrators connected to? Of course, not everyone they have financial relations with will be terrorists or terrorist-related. However, there might be more people worth watching more closely, and those connections are sometimes easier to identify in this day and age through financial means than through communication means – communications data is often encrypted nowadays, whereas financial connections are not encrypted, because at the beginning and the end are banks, and banks are legally required to share their suspicions and to share data when requested with the authorities.

 

Eight people were killed and 48 injured during the June 2017 London Bridge attack (Credit Image: Dominic Lipinski / PA Wire)

 

WM – So financial intelligence would not just help in a terrorist investigation, it might also help in the prevention of attacks?

TK – I am very cautious to say that financial intelligence is somehow a silver bullet. I would not suggest that. What I would suggest is that it adds an additional, extremely valuable dimension to the picture that the authorities can create, when undertaking CT operations. There may well be information, as well as connections and activities that are not exposed by CCTV cameras or by communications data, but that are revealed by financial intelligence.

 

WM – Isn’t there a risk here to data privacy / data collection?

TK – Historically, the relationship between the authorities and banks was founded inbank secrecy and privacy. For instance, the authorities told the banks ‘We trust you to manage your data, to look after your data. If you see anything suspicious, please let us know’. In other words, the authorities respected bank secrecy. Yet, over the years, this trust has declined; banks have proven – either wittingly or otherwise – to facilitate money laundering, tax evasion, and so on. Therefore, bank secrecy is perhaps not as sacrosanct as it used to be. What we clearly need to be cognisant of is that banks hold a huge amount of personal data on all of us, and that data needs to be used responsibly. People got very concerned about the kind of access that the authorities might have to communications data over recent years; consider amongst other things, the reaction to the Snowden leaks. We need to make sure that we do not fall into the same trap with financial data, that privacy is protected, and subsequently that there are the right protections on access that the authorities can have to our financial data.

In an extreme situation, just like the case of Apple with the iPhone and the San Bernardino shooting, you may find that some banks might say ‘You customers can trust me, I am going to be the Apple bank, I will only provide the authorities with the information I am legally required to. And I am not going to allow access to any additional information on a voluntary basis’.

So I think there is an important need for a debate about privacy and financial intelligence to be taking place now, before we end up in a situation where people discover their data is being used for CT purposes without them really realising what is going on.

 

WM – I suppose that you are in touch with various institutions such as banks to discuss financial intelligence. What is their reaction?

TK – When dealing with a financial institution, I think it is important to divide it into two parts.

On the one hand, you have those who are responsible for financial crime and compliance, who often have a law enforcement or a security background, and completely understand the power of data, and indeed perhaps even that of financial intelligence.

On the other hand, you have staff who are doing the business on the trading floor, in the branches and so on; they of course can feel a long way away from the financial crime compliance department and thus are less likely to understand the value of financial intelligence; it’s not part of their job

There is also a public relations issue in all of this: the banks obviously have had very bad press and PR in recent years; and thus, demonstrating that you as a financial institution are either contributing to the disruption of human trafficking, of wildlife trade, or contributing to CT efforts, is obviously a positive message to deliver to your customers.

I do not want to sound completely cynical, the financial institutions clearly do see the importance of doing this from a social and security perspective. But there is also an obvious desire to show that they are, as one of the banks has it as its tagline, ‘here for good’, and that they are not just here for profit.

 

WM – Moving on to the state perspective, who is more likely to be involved? The intelligence community and/or law-enforcement agencies?

TK – There are different forms of information sharing models around the world.

In the UK, the information sharing partnership is called the Joint Money Laundering Intelligence Task Force. It is a partnership between the private sector and the public sector that is effectively run by the National Crime Agency. So here, we are not talking about security authorities, but law enforcement. There is a working group which looks specifically at terrorism financing but again, these initiatives are run by law enforcement, not by the security authorities.

But clearly information sharing goes beyond CT alone.  The process of sharing information aims to identify and disrupt a range of different kinds of financial crimes, not just terrorist financing. Different countries have different priorities: in the UK, these are human trafficking, trade based money laundering, corruption, terrorism financing. In Hong-Kong, they have a Fraud and Money Laundering Intelligence Taskforce, as fraud is one of their big focuses.

In other words, the sharing of information underpins tackling threats that are particular to each individual country, not just terrorism.

 

WM – What are your views on the impact financial intelligence, information sharing might have on intelligence cooperation?

TK – One of the great frustrations a financial institution has is that it holds information in different countries, and yet it is often legally unable to get the benefit of bringing that information together and looking at it holistically. And even in the cases banks can do that, if they succeed in creating a complete picture out of all this information, the law often restricts them to only give a slice of the picture to the relevant country. For instance, if they draw on information from the UAE, from Singapore, from the UK, and from Mexico, they cannot give the whole picture to each country, they have to give just the Mexican slice to the Mexicans, the UAE slice to the Emiratis, and so on.

The financial sector has tremendous difficulties with cross-border information sharing. At the same time, I have to say that the financial sector has more ability to get a transnational global picture with its analysis than countries do. Therefore, I think there is an opportunity for financial institutions to facilitate the creation of global threat pictures, where sometimes governments are more restricted on what they can and cannot share. I am thinking about cases where banks simultaneously operate in Five Eye countries and in African or South-East Asian states, such countries where information sharing with Five Eyes is probably zero. Whereas the banks have a pretty good picture of the financial flows and thus potentially have a pretty good picture of some of the emerging threats that might be developing. The question then is how do they use that information? Can they help governments overcome some of these cross-border information-sharing challenges? Again, that brings us back to the issues of data privacy, data collection; we should not be using the financial sector as a back door to circumvent the protections and procedures imposed on the ability of states to share information.

 

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