In 2015, more countries become terrorist hotspots; Canada moves up ranks to become 35th in terrorism threat index; US moves up to 17th place

By Christine Duhaime | July 5th, 2015

US and Canada move up on the terrorism threat index

2014 and thus far in 2015, have been marked by a dramatic increase in terrorist incidents and in the number of countries that have been pulled into terrorist activity and for which financial institutions have been used for terrorist financing. Western countries are becoming less safe, as they increasingly become targets of terrorist attacks, or attempted attacks. They are also being used more than ever before as a breeding ground to radicalize terrorists in the West over social media (see the “Twitter Terrorist” for more) to defect and to undertake domestic lone wolf attacks.

Canada, for example, now ranks 35th globally on the country terrorism threat index released on July 5, 2015, ahead of (more of a risk than) Mexico, the Palestinian Territories, Thailand, and Sierra Leone. China ranks 36th and Turkey ranks 34th. Spain, which ranks 33rd, just issued a “maximum alert” for terrorism saying that the country was at the same level of terrorism risk as the Madrid attacks in 2004.

The US now ranks 17th under the country terrorism threat index. According to the US Committee on Homeland Security, since early 2014, there have been 47 planned or executed terrorists plots against Western targets, including 11 inside the US that were inspired by ISIS. Moreover, there have been more ISIS-linked plots against Western targets in the first half of 2015 (28 thus far), compared to all of 2014, in which there were 19. The number of “home grown” terrorist plots have tripled in the US in the past five years.

The country threat index is an artificial intelligence created risk assessment based on numerous inputs including messages from terrorist groups and injuries and threats that have occurred. It is created by the Intel Center Database and is updated in 30-day increments.

High risk generally for terrorist attacks

According to our research, countries in which there is a high risk of a terrorist attack, and terrorist financing, include:

  • Syria
  • Iraq
  • Nigeria
  • Somalia
  • Tunisia
  • Yemen
  • Libya
  • Afghanistan
  • Pakistan
  • Ukraine
  • Egypt

Terrorist safe havens for financing and illegal movements

Terrorist safe havens are pockets within countries where terrorist affiliates offer safe haven services (financing, terrorist banking, passage of terrorists, fake identity, movement of other people and goods illegally). They are  at risk for terrorist financing and commercial and immigration fraud, as well as money laundering. According to the US Committee on Homeland Security, the key safe havens for terrorist organizations, and of concern for fraud and terrorist financing, are as follows:

  • Afghanistan
  • Algeria
  • Egypt
  • India
  • Indonesia
  • Iraq
  • Jordan
  • Kenya
  • Libya
  • Lebanon
  • Nigeria
  • Palestinian Territories
  • Pakistan
  • Philippines
  • Russia (North Caucasus)
  • Somalia
  • Sudan
  • Syria
  • Tunisia
  • Yemen

High risk for terrorist attacks on tourists in select locations

According to the Foreign & Commonwealth Office, the following are high risk in certain locales for terrorist attacks that may affect tourists:

  • UK
  • France
  • Thailand
  • Spain
  • Israel
  • Australia
  • Lebanon
  • Indonesia

High risk for terrorist attacks at hotels

According to the Intel Center Database, the following are the countries with the highest incidents of hotel terrorist attacks in 2015:

  • Somalia
  • Libya
  • Afghanistan
  • Yemen
  • Tunisia
  • Kenya
  • Columbia
  • Egypt
  • Iraq

High risk of terrorist refugee claimants

According to material released out of Syria and Iraq, the following are at high risk for being so-called “fake” refugees, i.e., persons who are members of, affiliated or aligned with, or are former foreign fighters with, the Islamic State who have been commissioned by the Islamic State to infiltrate the West by claiming refugee status:

  • Individuals arriving in migrant boats from Libya to the EU who avoid refugee camps or formal refugee registration
  • Individuals arriving by foot in Iraq, Lebanon or Turkey from ISIS-controlled areas who avoid refugee camps or formal refugee registration

With respect to foreign fighters who joined ISIS and are attempted to return to the West, according to locals in Syria, they have apparently been trained by ISIS to recite a similar story, namely that the atrocities committed by ISIS were not only abhorrent to them but that they refused to commit them, and that once they arrived in Syria, they had an immediate change of heart, tried to defect from ISIS and at great personal risk, eventually managed to escape. Things they will not be able to substantiate to Western intelligence agents (where their stories will be contradicted or internally inconsistent) will centre around, inter alia, their identity documents; access they have to funds; access to mobile devices; alleged change of religious radicalism; renunciation of ISIS way of life; and change of physical appearance (especially hair and facial grooming) and clothing back to blend in with Western styles.

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ISIS becomes a central bank and releases its new terrorist currency

By Christine Duhaime | June 22nd, 2015

True to its word, the Islamic State (ISIS) has released its own currency, the gold dinar, pictured above.

The creation of an ISIS central bank issuing currency and taking control of, and managing monetary policy, is an obvious further step towards fulfillment of “statehood” for members of ISIS and sympathizers.

Unfortunately, the legacy of an Islamic State currency and functioning central bank, even when ISIS is defeated, will live on for decades to come and will fuel the flames of terrorism long after that. The fact that they got this far, in and of itself, will become part of future terrorist propaganda to recruit more sympathizers and funding for terrorist activities.

According to Tweets we picked up from ISIS sympathizers and such, ISIS reportedly said they were acquiring a mint in late 2014 for $100 million from the EU to produce the coins, and at that time Tweeted that “money was no object”, as well as the suggestion to sympathizers that buying the new ISIS gold dinar was a way “to support” ISIS.

The sale of a mint to a terrorist organization, or parts thereof, is terrorist financing and presumably the vendor will be easy enough to determine for the purposes of prosecution.

The new ISIS currency is created entirely from terrorist funds and is a new form of terrorist financing not seen before. The purchase, collection and use of such currency, being derived from terrorist financing, is in and of itself terrorist financing for a person who purchases, collects and uses it.

An earlier post on the plans of ISIS to create a new currency is here.

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The FIFA scandal and why banks may be facing regulatory issues over KYC failures

By Christine Duhaime | May 31st, 2015

FIFA Indictment against PEPs

The 47-count Indictment against 14 persons employed or engaged by FIFA by the US District Court for the Eastern District of New York (“EDNY“), and their arrest may do more than shake up international soccer – it also has the potential to result in significant fines against many global banks who processed transactions for the indicted persons for failures of anti-money laundering law. US authorities announced charges against nine FIFA officials and five sports executives associated with FIFA, who were part of a scheme in which they received $150 million in bribes for commercial rights to soccer.

FIFA is the international body governing organized soccer and is registered under Swiss law and headquartered in Zurich.    The Indictment alleges that the defendants solicited, offered, accepted, paid and received bribes and kickbacks acting in their capacities as affiliates with FIFA and engaged in fraud and money laundering in respect of the proceeds of crime. In addition, they are alleged to have corrupted the sport of international soccer.

According to the Indictment, in order to hide the proceeds of corruption from being detected, the defendants are alleged to have established trusts, set up shell companies, and used banks for illicit payments in tax havens. In 2012, when US law enforcement began interviewing FIFA officials in connection with the investigation, the Indictment alleges that several defendants obstructed justice by, inter alia, destroying evidence. The Indictment alleges that the bribery scheme deprived youth leagues of funds to support soccer and run soccer programs.

KYC & PEP Failures

The banks that processed the transactions that involved money laundering may be facing regulatory issues under anti-money laundering law because the defendants were politically exposed persons (“PEPs“) in multiple countries (which was ignored by banks in multiple jurisdictions) because they were senior officers of FIFA or business associates of senior officers, and because the transactions were suspicious. Transactions were suspicious because the indicted persons did not earn anywhere near the amounts they allegedly received as proceeds of crime through bank transactions, to justify the transactions, hence money they received was suspicious ab initio. Clearly, the KYC procedures failed at these banks.

With respect to PEPs, had PEP laws been complied with at the banking level, many of the later transactions would have been refused by banks. Conducting due diligence of respect of one PEP typically involves a due diligence investigation of many more people associated with the PEP who are, by definition, also PEPS and in foreign jurisdictions can take months if bank statements are required to be translated. PEP law is just a more involved aspect of KYC. Most banks de-risk PEPs rather than undertake the requisite due diligence because of the expense of banking a PEP.

According to the Indictment, the defendants relied heavily on the US financial system and correspondent banks. The US government said it is looking at the banks that are involved. According to the Indictment, just one US bank refused to process one transaction that was alleged to be proceeds of crime. The other banks processed close to $150 million in alleged proceeds of bribery.

The PEP issues in respect of the FIFA Indictment are similar to those facing banks in Hong Kong, the US and Canada who bank PEPs from China without complying with PEP laws, as described here.

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Canada’s Chief Justice talks about defectors who leave Canada

By Christine Duhaime | May 30th, 2015

The Chief Justice of Canada, Beverley McLachlin, delivered a keynote speech yesterday in Toronto and therein, discussed briefly the phenomena of jihadism affecting Canada and tolerance. In discussing tolerance, she said that it has its limits and that there may be some things that should not be tolerated by society because they harm people or institutions, and noted that the line between what is acceptable in society and unacceptable ultimately falls to lawyers to determine (qua legislators or judges).

Continue reading

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How come the Coalition keeps missing large ISIS convoys on satellites and oil trucks of terrorist oil a mystery

By Christine Duhaime | May 26th, 2015

Palmyra was an ISIS target

How the Islamic State managed to take control of Palmyra, Syria seems to be raising questions about the effectiveness of the intelligence-gathering ability of the Coalition. ISIS has stated on numerous occasions and in multiple languages, and on various media, that they are going to destroy the heritage sites of Syria and Iraq one by one. In Syria, the Crown Jewel of significant heritage sites is Ancient Palmyra, thus a foreseeable target for quite a few months at least.

How did we miss a convoy of flagged ISIS trucks in the desert with 1,800 troops?

ISIS apparently approached Palmyra, as it usually does, via convoy of hundreds of vehicles carrying 1,800 troops along one highway. ISIS has specially equipped vehicles emblazoned with its logos and flags and drive in formation, and such a convoy would be hard to miss smack in the middle of the Syrian desert. The desert is, well, sand colored. ISIS’ trucks in Syria are, as we know, usually white. Such a long, moving convoy of military vehicles sticks out like a sore thumb from the sky, the highway and from satellites and should have been easy to take out whether by jet, missile or drone.

How difficult is it to bomb an ISIS convoy?”

Here is a news report taken a few days after ISIS seized control of Palmyra and in it, a local Syrian asks the question everyone is asking: “How is it that American satellites missed them [ISIS]; the desert is like the palm of a hand and the militants and their trucks, pick-ups and tanks are moving. What is this Coalition doing then?”

Press TV: “Exclusive footage of ISIL held Palmyra”

And here is an Intragram post by KurdTV in which they ask rhetorically: “Wondering why it is so difficult for US to bomb these ISIS convoys of trucks and stop them conquering cities?”

If some or all of Ancient Palmyra is razed, the average person will wonder why nothing was done to prevent it from happening and inevitably may place the blame at the feet of the Coalition – not because they are to blame (they’re obviously not), but because they had the intelligence and military capacity to prevent ISIS reaching Palmyra and failed to exercise that power to save lives and preserve a landmark of significance to humanity. They could have taken out a convoy of 1,800 ISIS troops and irreconcilably, elected not to. In this radio interview, an ISIS commander says that they will destroy all the statues in Ancient Palmyra but that they will not destroy the Ancient city.

Taking out oil tanker trucks to stop terrorist financing

This is not the first time that questions have been raised about how come ISIS vehicles are not being wiped out with air strikes. It has happened before in the context of counter-terrorist financing. In November 2014, before testimony at the US House Financial Services Committee, David Cohen, now Deputy Director of the CIA who is not only very clever but usually not rendered speechless, couldn’t (or elected  not to) answer questions posed to him by Rep. Steve Pearce on why the Coalition wasn’t stopping terrorist financing by blowing up oil tanker trucks and the delivery mechanisms used by ISIS to transport terrorist oil to market.

Rep. Steve Pearce said:  ”You have access to that. Every movement, every highway, every oil field. You know which oilfields are under their control. I wonder why you’re not stopping the oil today because you can do it. It is well within your grasp. You have the technology and the information…You can blow up the trucks…or the delivery mechanism. This is a very simple operation…they could do it this afternoon…just stop the oil. We can shut it off today.”

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Digital Finance Conference to Include Hot Money Laundering & Terrorist Financing Issues with FINTRAC & RCMP

By Christine Duhaime | May 24th, 2015

The Digital Finance Institute’s 1st Conference on FinTech and Banking Innovation is holding two sessions on anti-money laundering, terrorist financing and regulatory compliance that will cover the latest issues facing government agencies, regulators and financial institutions relevant to financial technology and innovation.

The session is approved by ACAMS for CLE credit for professional financial crime experts to attend, and is approved by the Law Society of British Columbia for CPD credit for lawyers to attend.

The first session is chaired by the Editor of ACAMS’ Money Laundering publication, Kieran Beer and will cover “Hot Issues in Anti-Money Laundering in Vancouver; a Potpourri Discussion on AML Compliance in Vancouver that impacts all financial institutions including FinTech such as Real Estate, Hot Money from China, Politically Exposed Persons, Terrorism and Risks from Transnational Criminal Organizations and Bitcoin” and includes speakers from the RCMP and FINTRAC, as well as ACAMS Certified Anti-Money Laundering Specialists.

The second session is devoted to digital currency and Bitcoin issues, including financial inclusion and regulatory matters and is chaired by the Financial Crime and AML lawyer for the digital currency company Ripple Labs, who recently negotiated their settlement with FINCEN, and will include prominent speakers in digital currencies, digital banking and digital innovation, including Sarah Martin from the Digital Currency Council and Ebru Pakcan from Citi Bank, both from New York City.

Registration is www.digitalfinance2015.com.

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Defector from UK to Islamic State releases e-book that sheds some light on trade-based terrorist financing

By Christine Duhaime | May 23rd, 2015

Ebook on ISIS

An ISIS defector from the UK has published an e-book called “A Brief Guide to the Islamic State” (2015 Edition) that is posted on a popular social media site used by ISIS to publish propaganda, called Internet Archive.

The Guide is consistent with ISIS terrorist propaganda messages: it gives information on life under the Islamic State to encourage recruitment to Syria; it reveals trade-based terrorist financing; and it ends with threats against the West.

More than anything else, the Guide begs a lot of questions that we should be asking about terrorism and commercial material support from other countries to ISIS controlled areas.

ISIS Trade-based terrorist financing still happening

One of the most disturbing parts of the Guide is that, to the extent the e-book is to be believed, it makes it obvious that nothing appears to be being done in the way of stopping material support in areas controlled by ISIS and in particular trade-based terrorist financing.

The Guide says that in ISIS controlled-areas, new cars from Kia and Hyundia and motorbikes from China are imported and sold. It also says that defectors can buy the same electronics they can get in the West including cellular phones, computers, tablets and laptops. One of the questions this begs is what manufacturers are selling technology to ISIS or for the benefit of ISIS? I get the point that perhaps sales are coming via conduit countries such as Lebanon, Turkey or Iraq but that’s immaterial. We all know by now, in trade-based terrorist financing, that conduit countries are a concern and we all know which are used for ISIS.

The Guide also says all mobile apps from the West are available for download but that some of the free ones are better (Kik, Skype, Ask.fm). Another question arises — surely Apple and Google, who are after all, American public corporations, have blocked IPs from Syria and Iraq in ISIS controlled areas and terrorists in the Islamic State cannot actually download or buy apps from them?

With respect to Skype, Ask.fm and Kik, terrorists say that the companies running those apps provide services to them in ISIS controlled areas. That’s a problem because those services are used to radicalize others to commit terrorist attacks against us in the West and to recruit defectors to Syria who are committing acts of terrorism there. We have the technology to block IPs – are corporations not actually doing that in ISIS -controlled areas?

If there is any doubt that ISIS is engaged in trade-based terrorist financing with foreign companies, the Guide says that eventually ISIS will re-build the destroyed manufacturing base so that it is “less dependent on foreign goods.”

This begs the question as to why we are not preventing corporations from outside ISIS areas from engaging in trade-based terrorist financing and why we are not preventing financial institutions from supporting terrorist financing, and prosecuting those that provide financial or other material support to ISIS? We are a well-connected and wired world and this evidence is not that difficult to obtain as part of a terrorist financing investigation. Counter terrorist financing is not rocket science.

With respect to manufactured goods, foreign trade cannot occur without substantial letters of credit involving financial institutions. How it is possible for ISIS, or any companies within their territory, to be able to obtain letters of credit from financial institutions is incomprehensible. There is no such thing as a company or organization in ISIS-controlled areas that is “independent” and not controlled by ISIS in some material manner, unless they operate underground. Bearing in mind that ISIS controls all of the financial institutions in its area of influence means that it also controls financial transactions involving foreign trade. This is not something we do not know.

In the latest edition of Dabiq, ISIS confirms that they have “billions in the bank,” and are obviously sufficiently funded to carry on any activity they wish, including foreign trade.

The dark and risky side of ISIS continuing to be able to use the banking system internationally for trade is also obvious and if it isn’t, ISIS has spelled it out for us in Dabiq. They say that it will be easy to use their billions of dollars in the bank (i.e., easy to use our financial system because we let them) to obtain WMD from Pakistan and have them smuggled in the US via Nigeria, Libya, South and Central America then into Mexico and then Texas, using transnational criminal organizations. The result, they say in Dabiq, will be “epic.”

Trying to convince defectors that life is normal

ISIS uses social media to recruit, encourage attacks in the West, socialize Westerners and for terrorist financing. You can read more about that in our White Paper on the Twitter Terrorist. The Guide confirms that the social media campaign of ISIS is meant to “persuade.” So obviously is the Guide. It tells prospective defectors that in ISIS controlled areas, when they walk the street, they will be “loved” and supported, and that the people of Syria will seek their counsel and advice because they are symbols of liberation, suggesting that even the most unaccomplished defector will be a superstar in Syria. The average Syrian is only going to kiss the feet of a foreign defector who is destroying their country if there is a gun or a sharp sword pointed at them.

ISIS terrorist propaganda on social media is usually contradictory on the issue of lifestyle. The Guide is similarly inconsistent. The Guide says that ISIS has successfully recruited defectors by honestly focussing on the hardship of life in Syria. But that’s not accurate. ISIS consistently paints a picture of how amazing life is and promises defectors a life of relative comfort with slaves available to carry the load. Even the Guide contradicts its own so-called hardship stance by devoting pages to describe how defectors can buy cafe lattés, cappuccinos, fruit and vegetables, American chocolate bars, new cars and motorcycles in land controlled by ISIS. According to the Guide, there is ample Internet access and the latest technology “gadgets” for sale. According to the Guide, life under ISIS is normal and you won’t want for much in the way of material things.

Threats to West

The Guide ends, as all ISIS terrorist propaganda ends, with the promise that ISIS will descend upon the streets of Washington, London and Paris to spill the blood of, inter alia, Americans, demolish Western landmarks, erase our history, and “most painfully” according to the Guide, convert our children who will then curse us. ISIS will succeed, according to the Guide, because Americans allegedly do not have the stomach to fight ISIS long-term.

The only part of that which is true is that in the West, we have sanitized ISIS’ Reign of Terror and already we do not appear to have the stomach to meet them face on in terms of the atrocities they commit. It appears that we are going to wait until they are defeated before being more vocal.

Atrocities committed by ISIS

The atrocities committed by ISIS include:

  • The rendering of over 9 million Syrians homeless and either internally or externally displaced. That’s more than the whole of the population or Switzerland or Austria. Imagine ⅓ of the population of Canada or all of Sweden on the move on foot who have been instantaneous made financially excluded and homeless searching for water, food, shelter and safety. The Syrian refugee crisis is unsustainable and involves more than just Syria. Four million children who are not getting an education is a recipe for disaster in terms of future terrorism mitigation. 
  • The reinstitution of the practice from earlier times of the sale of young girls and women into slavery to men who have joined or are sympathetic to ISIS, and to foreign men willing to pay the price. Locals in Syria and Iraq say upwards of 40,000 to 50,000 young girls have been sold and bartered from ISIS, some to Turkey and Saudi Arabia.
  • The killing of tens of thousands of people for a wide-range of alleged crimes or simply for being, in the view of ISIS, the wrong religion, the wrong gender or for asserting certain rights.
  • The destruction of significant parts of the critical infrastucture of Syria that experts estimate will take 30 years to rebuild.
  • The erosion of the rule of law and human rights in what is left of Syria and Iraq under the control of ISIS, including the elimination of rights for the whole of the female population who have been financially and governmentally excluded from society.
  • The indoctrination of hundreds of thousands of young children in Syria and Iraq on the ISIS way of life, including ingraining in them a disrespect for the rule of law and human rights.
  • Less important than any of the above, but still important, the destruction of antiquities in Syria that are irreplaceable that form part of our shared history of humanity.

One of the reasons we should not sanitize ISIS conduct is because Western children are already watching their Reign of Terror on social media (see the White Paper on this point). When parents and the media fail to discuss the ISIS phenomena openly, children are left to process ISIS’ horrific movies they download online out of context. We run the obvious risk that they will be assimilated and terrorist conduct will no longer shock their conscience.

We should be having a dialogue about clips of ISIS’ Reign of Terror in the media and by governments and discuss them in the context of our values, namely the rule of law, democracy and constitutional rights.

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The other ugly side of human smuggling ~ the terrifying fake refugees with terrorism on their mind in the EU and Canada

By Christine Duhaime | May 18th, 2015

ISIS allegedly smuggling its people as refugees to EU

According to a report today in RT, the Libyan government has obtained intelligence that the Islamic State is using human smuggling operators from Libya to move its people to the European Union to commit terrorist acts, who are disguised as refugees to access the EU and bypass security and passport controls. Allegedly, ISIS affiliates in Libya are also demanded 50% of the revenues taken from the human smugglers for protection and access. This report also confirms that ISIS is actively in the human smuggling business and has generated about $300 million in revenues for arranging smuggling operations.

The Canadian experience – Refugees with terrorism on their mind

ISIS’ strategy is not new. Terrorists have used human smuggling operations to circumvent passport and international security controls consistently in the past.

For example, according to news reports from refugee claimants at the time,  members of the Liberation Tigers of Tamil Eelam paid between $20,000 – $40,000 each to be smuggled into Canada aboard the MV Sun Sea in August 2010, and claimed refugee status and poverty, when they arrived in Vancouver. In order to gain access to Canada, some of the alleged refugees on board the MV Sun Sea, destroyed their passports. The LTTE is a listed terrorist group in Canada.

Another of its members, Suresh Sriskandarajah, claimed refugee status successfully in Canada but unbeknownst to intelligence officials at the time, was sympathetic to the LTTE and was actively providing terrorism material support for the LTTE from the US and Canada. He was eventually extradited from Canada to the US for terrorist financing and coaching other terrorists on how to circumvent border controls to infiltrate a foreign country to smuggle in weapons for the commission of acts of terrorism.

Infiltration of a Canadian bank by LTTE

The capacity of terrorists, or sympathizers of terrorist causes, to infiltrate countries and organizations should not be underestimated. Financial institutions are particularly at risk.

A third illustration involving Canada being used by alleged refugees with terrorism on their minds involves a large and prominent international Canadian bank. It was infiltrated by a member of the LTTE in Toronto who obtained employment with the bank for the express purpose of obtaining the personal information of judges and politicians in Ontario. He subsequently used that personal information to contact prominent individuals on behalf of the LTTE to threaten them, and went so far as to contact a judge presiding over a case involving the LTTE. He was not prosecuted for a terrorist-related offence, unfortunately.

Sending defectors back to commit acts of terrorism

ISIS, also a listed terrorist group like the LTTE, has allegedly said in the past that they are sending defectors from the West back home and coaching them to claim, inter alia, that they became disenchanted with ISIS’ brutality, and barely escaped alive trying to leave ISIS-controlled areas, in order to be believed by law enforcement and permitted back to their former countries. The story from the Libyan government is consistent with ISIS’ stated plan of sending defectors back to the West, who are trained in terrorism, including infiltration methods.

The consistent terrorist-related conduct should be noted, namely: (a) the payment by the terrorist organization for a terrorist recruit to be relocated (whether by smuggling or otherwise) to the target country; (b) the arrangement by the terrorist organization for the transportation of the recruit; (c) the training and coaching by the terrorist organization of the recruit on (i) lying to gain entry into a foreign country as a refugee; (ii) the destruction of identification documents; and (iii) committing acts of terrorism, whether it be obtaining employment at a key institution to steal personal information for extortion purposes, providing material support or financing, or plotting destruction of critical infrastructure.

Transnational criminal organizations

Federal law enforcement agencies have said consistently that there are connections between ISIS and transnational criminal organizations, not only in human smuggling but in the trafficking of humans, identity documents and drugs. All of these activities generate proceeds of crime which must be laundered by terrorist groups through the formal banking system and typologies for human smuggling are important for banks to follow. The current refugee-smuggling operations are a mix of smuggling and trafficking - smuggling is a crime against a border and is transportation-based. Trafficking is a crime against a person and is exploitation-based. Human smuggling and trafficking involves multiple players, all of whom use the financial system such as recruiters, sending brokers, staging brokers, receiving brokers, business owners and business managers.

Threats to banks & government agencies of infiltration for personal data

Terrorist organizations are most interested, at this point, in infiltrating databases of financial institutions for client information to conduct focussed attacks on prominent individuals in the West. Although they are trying cyberhacking to gain access, to the extent that fails, they are also motivated to recruit sympathizers who work at financial institutions in the West to undertake this activity for them. They are also interested in hacking social media sites for personal information of targeted persons.

Red flags

Some of the key red flags are:

False asylum seeker red flags:

    • Alleged refugees who could pay a hefty fee to be smuggled yet claim poverty when claiming asylum when they land in a foreign country. It may suggest a terrorist organization funded the smuggling operation or their passage – their circumstances are inconsistent with the ability to pay a smuggling fee.
    • Alleged refugees who have no identification whatsoever and are fuzzy on who they are, where they are from, how they arrived at the country of departure, who their relatives are, how their relatives can be contacted and the like. These are the people who, despite having no material information on their life for government agencies to verify, ask to use a telephone to contact residents in the country of landing.
    • Alleged refugees who have a mobile phone that is still operational when they land.
    • Individuals who defected to ISIS and are attempting to return, or their family members.
    • Alleged refugees who are immediately contacted upon arrival by persons in the country of landing, who are not relatives.

Infiltration of banks or government agency red flags:

    • Employees who access client personal information at government agencies or banks in the following ways (patterns that make no sense and suggest illegal access to personal data of client):
      • Client lives out of town & did not visit the branch or contact the financial institution.
      • Too many searches for client information by the employee (that means they are searching for people and personal information, rather than legitimately serving a client).
      • Too many reviews of client spending activities (that means they are stalking clients and learning where they shop, eat, travel).
      • Rapid searches for people (that means they are afraid of being detected and are culling as much information as possible).
      • Searches that occur after business hours when supervisors are gone for the day.
      • Searches for client personal data that occur on an unmonitored computer of another person who did not log-off.
      • Searches that involve high ranking, prominent persons or persons with power or social status in the West such as government officials, politicians, law enforcement personnel, media personality and judges.

Human smuggling & trafficking businesses red flags:

    • Business accounts that have international wires or significant cash deposits that are unusual for that business type.
    • Financial activity related to customers and or businesses that are indicative of human trafficking  (e.g., multiple, ongoing payments to Internet classified advertising services or credit card charge activity that is in even dollar amounts and occurs between 10 pm and 6 am).
    • Cash deposits into one account from multiple locations across countries that identify transaction patterns potentially indicative of money laundering, terrorist financing or other suspicious activity that may be linked to human smuggling/trafficking.
    • Consumer accounts with deposits and/or withdrawals in geographical regions different than where the account relationship was established (typically low-value relationships but significant number of account relationships – 1:1 cash-in/cash-out ratio).
    • Large payments to foreign companies that are inconsistent with the amount of product received from these companies.
    • Unusual withdrawal, deposit or wire activity inconsistent with normal business practices, or dramatic and unexplained change in account.
    • Leasing of high-end luxury vehicles and extravagant trips paid by electronic funds transfer from business bank accounts.
    • Numerous incoming wire transfers or personal checks deposited into business accounts with no apparent legitimate purpose.
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China to issue guidance for light online payment solutions to preserve emerging FinTech

By Christine Duhaime | April 29th, 2015

The Government of China has announced that it is issuing legal guidance to lightly regulate online payment systems, what it terms as “internet finance.” The guidance will be prepared by the People’s Bank of Canada and will contemplate a regulatory framework for governance.

The impetus for developing guidance is driven by the explosive growth in online financial services and payments in China. Not surprisingly, China is the world’s largest peer-to-peer lending market with 1,400 peer-to-peer lending platforms that have raised $18 billion.

Interestingly, a member of the Chinese government called for light regulation to ensure that innovation in FinTech is preserved and not overly regulated, allowing companies to manage risks.

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Mother of the Girlfriend of Mayor of Vancouver held on corruption charges in China

By Christine Duhaime | April 25th, 2015

In the latest twist in the continuous coverage of high-ranking Chinese foreign nationals who immigrated to Vancouver, the mother of the girlfriend of the Mayor of Vancouver has been incarcerated over corruption charges in China.

Here is the story as reported in South China Morning Post.

The Mayor, Gregor Robertson, has a girlfriend who is a current or former (details seem fuzzy on her status), Chinese foreign national named Wanting Qu, who prefers to be called just “Wanting”. She is a singer and is a “tourism ambassador” for Vancouver and her ultimate boss is the Mayor. The Province newspaper is pursuing the story of the appointment of Wanting by the City of Vancouver.

Below is a picture of “Wanting” from her Instagram account.

Wanting’s mother, Qu Zhang Mingjie, was a Chinese government official, specifically the Deputy Director of the Development and Reform Commission of the City of Harbin, China. In September 2014, she was fired from her position and is now incarcerated in China facing a criminal trial. She is alleged to have sold state property at discounted rates to purchasers impliedly in exchange for benefits paid to her. Wanting immigrated to Canada several years ago and told the media that her mother financially supported her studies in Canada. That flow of funds from mother to daughter, from China to Vancouver, and from whence they were derived, may be an issue.

The story is fascinating from a financial crime perspective because Qu Zhang Mingjie is a politically exposed person in anti-money laundering law. As her daughter, so is Wanting. And the Mayor, as Wanting’s boyfriend, is also a politically exposed person under the FATF policy guidance.

As a politically exposed person (“PEP”), banks in Vancouver, Hong Kong and China that provide services to Wanting, and her mother, are and were, obliged to treat them as high-risk clients and vet and confirm the source of their funds above a certain threshold. That is because, pursuant to policy and research by the FATF, G20 and others, politically exposed persons are at a higher risk for the commission of financial crimes. With respect to parents and children, financial crime typologies show that politically exposed parents often transfer proceeds of crime to their children,  hence children are PEPs by definition. Financial crime typologies in respect of Chinese foreign nationals indicate that they often transfer proceeds of crime to places like Vancouver to pay for the education of their children and buy them luxury homes and cars.

With respect to the Mayor, as a FATF designated politically exposed person, his banks in Vancouver and elsewhere are also required to treat him as a PEP. The downside with dating a PEP is that you become one too.

Most global banks are de-risking PEPs outright because of the expense and regulatory risk of servicing their accounts and of the often impossibility of ascertaining source of funds pursuant to proceeds of crime legislation, and the continuing obligations on banks vis a vis PEPs.

The Government of China is now fully aware of the PEP regime and what is required of Western banks when they bank PEPs.

There is no allegation that Qu senior transferred any of the alleged proceeds of corruption, if there are any, to Qu junior. But if Qu Zhang Mingjie is convicted of corruption, the Government of China will likely be tracing funds she transferred to Vancouver. It knows that she transferred funds to Vancouver because, as noted above, her daughter told the media her mother funded her studies in Vancouver. The only question will be, if she is convicted, how much money she sent to her daughter in Vancouver; when; whether the funds exceeded $50,000 annually and were sent with Government approval; whether the funds were proceeds of corruption; and whether the banks treated the accounts as PEP accounts.

The Chinese government is actively seeking recovery of proceeds of crime removed from China and parked in Vancouver. China just released a list of the top 100 Chinese foreign nationals who left China with proceeds of crime derived from corruption and apparently over 25% of them parked the proceeds of crime in Canada, mostly Vancouver. It is not an understatement to say that the jurisdiction most under scrutiny in China for the illegal removal of state assets is Canada – specifically Vancouver.

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