How money is laundered and how terrorists are sponsored

Money Laudering

There are many ways of laundering money, sponsoring terrorism as well as manufacturing, acquisition and distribution of weapons of mass destruction in violation of national and international laws. This article aims to inform you, the consumer, of some of the ways these illegal activities are carried out.

Money laundering involves taking illicit proceeds and disguising their illicit source in anticipation of ultimately using the criminal proceeds to perform legal and illegal activities. Simply put, money laundering is the process of making dirty money look clean. The list of possible examples of money laundering is nonexhaustive and changes over time.

The following are examples of such techniques or methods:
  • Smurfing: making a multitude of payments in different periods of time and through different banks. This will have the effect that a single money transaction is divided into several smaller transactions in order to circumvent the bank monitoring system, which aims to identify all those operations that exceed a certain threshold value.
  • Gambling: In most cases criminal organizations clean up their money using gambling houses and casinos. They buy gambling chips in large quantities in order to play, but use only a small part of them or don’t use them at all. The purpose of these operations is to convert the chips into money and simultaneously be issued by the gambling house a document that certifies the win.
  • Backing of financial loans i.e. giving a loan to oneself: In this method a member of a criminal organization deposits dirty money into a bank account in a “financial haven”, also known as a jurisdiction known to have few restrictions on legitimate business-activities and requiring little or no income tax.
  • Fictitious transactions in properties: this method involves the sale of property at a price higher than its market value.
  • Shell company: also known as a company which serves as a vehicle for business transactions without itself having any significant assets or operations.



Terrorist Financing Techniques

Terrorism financing refers to activities that provides financing or financial support to individual terrorists or terrorist groups. The sums needed to mount terrorist attacks are not always large, and the associated transactions are not necessarily complex. There are two primary sources of financing for terrorist activities. The first involves financial support from countries, organizations or individuals which may come from legitimate sources while the other involves a wide variety of revenuegenerating activities, some illicit, including smuggling and fraud. A new phenomenon in terrorist financing has been the emergence of Foreign Terrorist Fighters (“FTFs”), these are as a result of the increasing efforts by terrorist groups working to radicalize individual’s often young people and inciting them to leave their homes to become foreign terrorist fighters. These FTFs are largely self-funded and have revolutionized terrorist financing.

The following are other examples of terrorist financing methods and techniques:
  • Private donations: direct financial support can come from individuals to terrorist networks. There is also a movement for newer terrorist organisations to look for different small scale sources by using fundraising through social media. Also, wealthy private donors can be an important source of income for some terrorist groups.
  • Abuse and misuse of non-profit organisations: Terrorist entities target may target some non–profit organisations (NPOs) such as charities and religious institutions to access materials and funds from these NPOs and to exploit their networks.
  • Proceeds of criminal activity: terrorist organisations will engage in a variety of illegal activities to generate funds. For example, terrorist organisations engaged in identity theft to raise funds via credit card fraud.
  • Legitimate commercial enterprise: some investigations and prosecutions have found a connection between a commercial enterprise, including used car dealerships and restaurant franchises, and terrorist organisations, where revenue from the commercial enterprise was being moved to support a terrorist organisation.
References
FATF (2015), Emerging Terrorist Financing Risks, FATF, Paris www.fatf-gafi.org/publications/methodsandtrends/documents/ emerging-terrorist-financing-risks.html http://www.moneylaundering.it/2015/05/14/methods- and-techniques-of-money-laundering/
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