Chapter 7: Engaging the Financial Sector to Prevent the Financing of Terrorism
7. Engaging the ﬁnancial sector to prevent the ﬁnancing of terrorism By requiring ﬁnancial institutions to concentrate enhanced due diligence and suspicious activity monitoring on terrorist ﬁnancing and money laundering schemes . . . [anti-money laundering/terrorist ﬁnancing provisions] enable ﬁnancial institutions to provide a much more eﬀective ﬁrst line of defense against money laundering, terrorist ﬁnancing, and other ﬁnancial crime.1 U.S. Department of the Treasury, 2003 National Money Laundering Strategy USE OF THE TRADITIONAL BANKING SYSTEM TO TRANSFER TERRORIST FUNDS Terrorist ﬁnanciers use various methods to collect and transfer funds to support jihadist activities throughout the world. The major methods used to move terror money include the traditional banking system, alternative remittance systems such as hawala, and bulk cash couriers.2 Contrary to popular belief, terrorists use banks and other ﬁnancial institutions to transfer funds. Deposit-taking institutions are particularly attractive because they provide an extensive range of ﬁnancial services. For example, wire transfers oﬀer terrorists many advantages: ‘Speed, distance, minimal audit trail, and increased anonymity amid the enormous daily volume of electronic fund transfers are all major beneﬁts.’3 Additionally, monetary wire transfers are much safer than attempting to smuggle bulk cash across international borders. Physically transporting large quantities of cash by courier runs the risk of border and customs oﬃcials conﬁscating the funds, or having the money stolen by criminals. Also, banks provide wide geographic availability either through their foreign branch oﬃces or through correspondent accounts with foreign banks.4 Finally, large sums of money can be transferred instantaneously...
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