ISIS allegedly close to being ready to circulate new currency pegged to US dollar

By Christine Duhaime | January 25th, 2015

Gold dinar

According to locals in Mosul and the Twitter accounts of ISIS members, the Islamic State is moving ahead quickly with its plans to issue its own currency. As noted here, the ISIS dinar will be a set of two gold coins, three silver coins and two bronze coins, minted with Islamic State approved imagery.

 New type of terrorist financing

 A terrorist organization issuing its own currency is an insidious new type of terrorist financing because not only is the whole currency based on and funded by, terrorist activities but each use of the ISIS dinar for goods and services is an act of terrorist financing.

£100 million to mint

Just before Christmas, ISIS members had conversations on Twitter and Ask.fm, two of their prominent recruitment platforms, about the progress of the new ISIS dinar in which, inter alia, they said was costing the organization £100 million to mint.

It is interesting from a counter-terrorist financing supply side that they priced out the cost in reference to UK pounds, suggesting that the suppliers of the components to manufacture the currency are in the UK. It is, of course, an indictable criminal offense in most countries to sell goods or services of any type to the Islamic State, or to provide any material support to them.

 ISIS starts advertising the dinar

In early January, ISIS plastered billboards in several places in Mosul, including the University of Mosul, announcing the advent of the ISIS dinar and extolling its virtues and benefits. Below is an image of the billboards. The goal of the dinar is stated as intended to save Syrians and Iraqis from the “unjust and satanic financial system” in the rest of the world. The ISIS billboard ads say that the ISIS dinar will replace the Syrian pound and Iraqi dinar.

 Dinar priced in USD

According to the billboard ads, ISIS claims that it will begin circulating the dinar soon. The designated value, according to the billboards will be US$139 per one gold dinar. Interesting to note that despite the alleged aversion to Western currencies, financial system and culture, ISIS pegged its homegrown dinar to the US dollar.

The move coincides with the opening of ISIS’ first bank called the Islamic Bank in Mosul. People in Mosul said that all of the bank employees are members of ISIS.

As we know, this is not the first Islamic State, and the creation of an Islamic State dinar is a step back in time to recreate the dinar that existed in the 7th Century under the first Islamic State.

Collecting it will be terrorist financing

 The ISIS dinar is not necessarily a bad thing for counter-terrorist financing in one way – it will make the Islamic State an island financially and have the effect of creating financial isolation. On the other hand, there are ISIS sympathizers in the UK already asking about acquiring it on Ask.fm and no doubt there will be some external sales of the dinar to support ISIS. As well, coin collectors and others who are not ISIS sympathizers will look to collect the dinar for its novelty value, although the purchase and possession of an ISIS dinar would be terrorist financing, ergo illegal.

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ISIS letter calls on attacks in Montreal and cesium 131 attacks in the US

By Christine Duhaime | January 23rd, 2015

The Islamic State media, officially and un-officially, has increased calls to its followers in certain key countries to take violent action against civilians this month, perhaps signaling more desperation on their part to create a state of chaos in Western states more quickly.

The latest, a letter from an ISIS person, published on pro-ISIS media about a week ago, translated here, is  called “Lone Wolves”.

In it, ISIS instructs lone wolves to attack the US, Europe and Russia with radioactive materials and then specifically calls upon lone wolves to kill us in the streets of “Montreal, Norway, Florida, Finland, Lisbon, Luxembourg and Canberra” to terrorize us and to make us feel the wrath of ISIS.

The letter reiterates what we already know about ISIS’ strategy, which is to bankrupt Western countries by forcing us to increase funding to defend against them here and in the Middle East, and drain resources and human capital away from economic development and growth. In the letter, they call it “a bankrupting fight” and admit (as we know) that bankrupting us is ISIS’ “one strategy.”

Part of the reason ISIS is so violent and quick to upload videos of their violent behavior is deliberately to shock us into action. They figured out that the more gruesome, the more inhumane, the more shocking their behavior is as a terrorism strategy, the more we will feel compelled into action to stop them. Thinking ahead in terms of their “shock the West” terrorism strategy, it is just a matter of time before the plan switches to hunting down blonde women and children in the West to behead. ISIS is an apocalyptic group so to them, the battle is worth it.

The letter goes on to say that France will always be targeted and that there are over 60 countries with active sympathizers of ISIS. It calls on cesium 131 attacks at train stations, mostly in the US, and on renewed attacks on Canada, the US, Russia, Australia and the EU against worshippers of “the cross”. It threatens attacks at offices (specifically beheadings) and suggests even if we hire security guards, they will get us leaving work if they can’t enter our offices.

Each such message from ISIS to Western potential lone wolves seems to pick up in intensity. My guess is  ISIS anticipated a quicker, larger, more willing herd of followers in Canada and the US and have been disappointed with the recruitment efforts. No doubt attacks are coming, and no doubt they will be horrific, but if there is any positive news it is that such letters as the one described above, attest in some way to the failed attempt to get more people radicalized to act in furtherance of ISIS’ plans.

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Silk Road Bitcoin money laundering trial with its Canadian links, including the alleged solicitation of the murder of 5 people from Vancouver, slated to start this week in New York

By Christine Duhaime | January 12th, 2015

Christine Duhaime, B.A., J.D., Financial Crime and Certified Anti-Money Laundering Specialist

Trial starts

The much anticipated trial of the alleged founder and operator of Silk Road, Ross Ulbricht,  is scheduled to start on Tuesday in Manhattan Federal Court. Silk Road was an online marketplace in which sellers and purchasers could buy legal and illegal goods and services with Bitcoin. The types of goods and services for sale included drugs, guns, fake IDs, and hacking services. Silk Road was shut down in October 2013 by the FBI. Ulbricht was arrested and charged with money laundering conspiracy, computer hacking conspiracy and drug trafficking.

Ulbricht says they arrested the wrong person and he was not the operator of Silk Road. He was arrested on the basis of a criminal complaint and since then has been indicted in New York on lesser allegations but in Maryland with, inter alia, allegedly arranging for a hitman to murder someone.

Transactions totaling $1.2 billion in two years

Allegedly, Silk Road’s transactions using Bitcoin totaled $1.2 billion and generated commissions of $80 million to Ulbricht since 2011. It appears from the criminal complaint that the FBI monitored, tracked and collected transactional data on Silk Road since 2011. The majority of the buyers on Silk Road were from the US, U.K., Australia, Germany and Canada.

According to a study by a US professor whose team scraped the Silk Road site for several months before it was shut down, about 6% of the Silk Road transactions came from Canada (mostly Vancouver), both on the supply and purchase side, meaning that Canadians supplied drugs and other things and bought goods and services on Silk Road.

Turkish bazaar on TOR

Silk Road operated like something akin to a Turkish bazaar, only virtual, and is described as a “sprawling, black market bazaar where drugs and other illegal goods and services were  bought and sold over the Internet …[in essence], an extensive and sophisticated criminal marketplace.”

The marketplace was designed for anonymity according to the prosecution, by allowing transactions only by Bitcoin. The purpose of it being a Bitcoin-only site, according to the complaint, was so that the identities and locations of users transmitting funds could be concealed. Ulbricht allegedly operated the online platform that offered the services and goods, in other words allegedly facilitated illegal commerce on the Internet. The site was only accessible on TOR.

Silk Road sold, or facilitated the sale of hundreds of kilograms of illegal drugs to over 100,000 buyers and laundered the proceeds of crime.

Ulbricht is also alleged to have bought several fake IDs from Canada that were intercepted by US customs and border agents. That package from Canada is what led to his arrest because it helped the FBI locate him.

Alleged to have ordered hits on 5 Canadians from Vancouver

The prosecution alleges that Ulbricht solicited six murder-for-hires to protect his business. It has no evidence that any of the murders were carried out. Despite its prejudicial effect, evidence of the solicitations will be admitted in the trial in New York.

Five of those alleged murder-for-hire plans involve Vancouver.

Ulbricht is alleged to have paid a member of the Hells Angels named “RedAndWhite” $150,000 for the murder of a drug dealer from Vancouver known as “Friendly Chemist” who allegedly tried to extort Ulbricht for $500,000.

The FBI says they consulted with Canadian law enforcement who informed them that no murder took place and no body was located. This seems to be subsequently confirmed by the Department of Justice in SDNY who later said they have no evidence that any murders occurred.

According to evidence filed in support of the charges, however, the funds were allegedly transferred by Ulbricht to RedAndWhite who confirmed the murder and supplied photos to Ulbricht of a deceased person when the mission was accomplished.

Subsequently, according to the evidence from the prosecution, Ulbricht allegedly re-hired the same Hells Angels hitman, allegedly for four more murders in Vancouver in exchange for the payment of 3,000 Bitcoin valued at $500,000. The four people were friends of the Friendly Chemist and had allegedly participated in the blackmailing scheme against Ulbricht.

The FBI recovered computer evidence, Bitcoin payments and personal logs allegedly from Ulbricht’s laptop that speak to the solicitation of the five Canadian murder-for-hire plans.

Canadian connections

According to the court documents in the case, the connections to Canada include the following.

  • Over 6% of the transactions on Silk Road were from Canada (mostly Vancouver).
  • The alleged murder-for-hire solicitations involved the engagement of an alleged Hells Angels hitman from Vancouver who confessed to murdering one Vancouver-based man and allegedly supplied pictures of his dead body.
  • Bitcoin exchangers in Vancouver were used to buy and sell Bitcoin for people to transact on Silk Road.
  • The package of fake IDs that Ulbricht is alleged to have ordered that resulted in his arrest came from Canada.
  • Also interesting is that, despite the Canadian connections, no one was arrested in Canada for allegedly supplying fake IDs or selling or buying drugs on Silk Road and no financial institutions or money services businesses were fined for lax compliance for providing financial transactional services to buyers and sellers on Silk Road. The volume of such transactions was likely close to $1 million and the amount allegedly paid to RedAndWhite in two installments was $650,000.

Security Issues

There are some legally unique aspects in this case as well. For one thing, the list of witnesses that the prosecution is calling was secret until last week. That is unusual obviously for due process reasons because a person has a right to know who his accuser is and to mount a defence to refute that person’s evidence. Not knowing who intends to testify against you until days before the trial is contrary to the rules of natural justice. This is not a case of national security where such a decision may be justified. However, in this case, the judge, Katherine Forrest, was threatened online over an earlier ruling she made and as a result, there may be security reasons to protect witnesses.

This is pure conjecture on my part, but in order to introduce evidence of the five Vancouver-based alleged solicitation of murder-for-hires, it seems likely that at least one person involved in the schemes will have to testify for the prosecution. That witness could only be RedAndWhite, the Hells Angel from Vancouver with whom someone, allegedly Ulbright, communicated on TOR.

Seminal Case

People will be following the case closely to see how Silk Road was monitored and tracked by law enforcement on TOR, and how it traced and tracked Bitcoin transactions, and the extent to which Bitcoin transactors are proven to be anonymous.

The Silk Road case will be a seminal case for Bitcoin, TOR, Internet commerce, privacy, cyberhacking and money laundering.

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Thoughts on the twin brothers in Canada who were arrested on terrorism-related charges

By Christine Duhaime | January 11th, 2015

Brother allegedly attempted to defect from Canada to join terrorists

Two twin brother in Canada were arrested on Friday and charged with terrorist-related offenses under the Criminal Code for allegedly attempting to become defectors and join a terrorist organization abroad. The terrorist organization was not identified.

The arrests followed an investigation of the two in Canada by security officers and presumably arose from their communications over the Internet and visits to terrorist-related websites. It also possibly arose from requests they may have made for a visa to enter a conduit country, such as Turkey or Lebanon, if the ultimate destination was Syria.

The trial will be complicated because, for national security reasons, the government will resist revealing to the public the extent to which, or how, they surveilled the brothers’ communications over the Internet or what the triggering point for suspicion was, particularly if it involved a person who reported them to CSIS or the RCMP.  On the other hand, obviously the brothers will be entitled to that disclosure, as will their lawyers to defend them.  Likely part of the trial will be in camera, or subject to a publication ban.

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The ‘Baby Girl’ terrorists ~ 10-year-old girls kill at least 25 in Nigeria and the growing phenomena of women terrorists

By Christine Duhaime | January 10th, 2015

Updated January 11, 2015

Christine Duhaime, B.A., J.D., Financial Crime and Certified Anti-Money Laundering Specialist

4 terrorist incidents this week involving women

This week there were four international terrorist events where women terrorists figured prominently:

(a) One in Paris involving Hayat Boumeddiene, the spouse of the jihadist who killed a French policewoman and later took several hostages at a Jewish supermarket on January 8, 2015;

(b) One yesterday in Maiduguri, Nigeria involving a little girl who blew herself up at a crowded market, killing 20 people and injuring 57 more; and

(c) Two today, again in Nigeria, involving two little girls who each blew themselves up at crowded markets, killing several people.

The little girls in all three incidents were approximately 10-years-old witnesses said.

Likely youngest suicide bomber ever

The Nigerian incident yesterday is believed to be the first time that a little girl was used as a suicide bomber by terrorist organizations. The use of two more little girls today to create terrorist attacks confirms the beginning of a trend of increasingly using women for deadly terrorist acts and selecting younger and younger candidates.

Fathers involved in selection

As to the motivation for ten-year-olds to become suicide bombers, a report on December 24, 2014, in a Nigerian newspaper that reported on the arrest of a 13-year-old girl who attempted to blow herself up at a busy market, may explain it. In that case, the girl said that her father brought her to some men who strapped her with bombs and they told her they would kill her if she did not carry out the attack.

Using women for terrorism is becoming particularly popular in Nigeria. In late December, two women terrorists blew themselves up in Nigeria, killing dozens of shoppers at a market. That event followed a similar incident in the Summer of 2014 in which four women also carried out suicide bomb attacks in Kano, Nigeria’s largest city.

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UK’s proposed controversial counter-terrorism law deals with home-grown terrorists and their return, including permitting forced relocation of suspects

By Christine Duhaime | January 10th, 2015

Admittedly, infringing rights to uphold democracy

Christine Duhaime, B.A., J.D., Financial Crime and Certified Anti-Money Laundering Specialist

The UK’s tough and controversial new counter-terrorism legislation is slated to be reviewed by the House of Lords on Monday before being given Royal Assent in an expedited fashion.

The Counter-Terrorism and Security Bill (HC 127) is intended to address a number of pressing terrorism and security issues facing the UK, in particular: (a) home-grown Islamic State (“ISIS”) sympathizers in the UK wishing to defect to join ISIS; (b) an increasing number of defector terrorists who joined ISIS returning to the UK; and (c) continued terrorist financing and security concerns for terrorism in the UK.

Terrorist threat in UK is “severe”

The Bill is controversial because it goes further than counter-terrorism legislation in other Western states.

Since September, the UK has determined that the threat of a terrorist attack is “severe” and of the over 500 defectors who left the UK to join ISIS, over 50% have returned. Since 2005, 40 terrorist plots have been disrupted in the UK and in the last four years, 800 people have been arrested for terrorism in the UK.

On January 7, 2015 in Parliament, Home Secretary Teresa May said that the UK government believes that ISIS is “solidifying its hold” on much of the region in Syria and Iraq.

As a result of the foregoing, there is pressure to implement the Bill quickly.

The four key parts of the Bill are as follows:

1. Forced relocation of people

The Terrorist Prevention and Investigation Measures (“TPIM”) will be amended to allow the forced relocation of a person on the balance of probabilities standard, from his or her home, family, community and job, to another part of the country if that person is suspected to have been or is involved in terrorism-related activities. TPIMs are imposed on a person who is a suspect but for whatever reason is not charged.

Terrorism-related activities include preparing or instigating acts of terrorism, or facilitating or encouraging them, including by giving support or assistance to persons who are preparing or instigating acts of terrorism.

A person who refuses to comply with a forced relocation order to leave their home, employment (and family) and reside elsewhere commits a criminal offense which carries a term of imprisonment of up to ten years and is subject to narrow grounds of review in court.

The TPIMs were introduced in 2012 but by February 2014, there were no suspects under the program despite the increased threat. Initially, there were measures in place to forcibly relocate suspected terrorists but that provision was removed. The Bill re-introduces it in the law.

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Sanctions world first ~ US imposes sanctions against North Koreans for private sector and over cyberhack incident

By Christine Duhaime | January 2nd, 2015

Economic sanctions ordered

Today, the US announced it is imposing economic sanctions against certain individuals  and entities in North Korea over the Sony cyberhack.

The so-called Sony sanctions appears to represent the first time in history that sanctions have been imposed (a) solely in response for, or over a, private sector dispute / issue; and (b) over a cyberhacking incident.

In its statement, the US government said that the sanctions were in response to an attack on freedom of expression, enshrined in the First Amendment to the US Constitution.

The sanctions were ordered pursuant to an executive order which authorizes the Department of the Treasury to impose the sanctions. The US government also reiterated that it will respond formally to the cyberattack against North Korea at a time of its choosing and in a way that it determines is appropriate, and that the sanctions were the first part of that response.

The imposition of state-issued sanctions against entities and persons in North Korea in response to illegal conduct involving private sector raises some legal issues, including when and under what circumstances it is appropriate to consider using economic sanctions in response to illegal conduct targeted against the private sector.

Sony cyberhack

The Sony cyberhack was an incident that occurred near the end of November 2014 in which Sony Pictures Entertainment was the subject of an extensive cyberhack. In the course of the hacking incident, several movies were made available online by the hackers, as well as the personal and confidential employment information of employees that Sony had stored online. The hackers also obtained and leaked legally privileged documents. The US government concluded that the cyberhack originated from the North Korean government, hence the sanctions today.

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Ming Pao Newspaper covers diamond smuggling trade from Hong Kong to Vancouver

By Christine Duhaime | December 28th, 2014

Diamond smuggling into Vancouver

The Ming Pao Saturday Magazine has an interesting story on the arrest of two men from Hong Kong who attempted to smuggle $120 million worth of diamonds into Canada. The diamonds were strapped to their legs and are believed to be proceeds of crime.

The story discusses the issue of money mules that move jewels from Asia to Vancouver on behalf of others. According to the story in Ming Pao (as translated by Google), “Hong Kong has become an international illegal diamond trading hub, and Canada is one of the countries used as a diamond trade terrorist financing transit point.”

Duhaime’s Anti-Money Laundering Law partner, Christine Duhaime, was quoted in the article discussing the issue of money laundering from Asia.

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Duhaime’s AML Law partner in Foreign Policy on counter-terrorism law and ISIS

By Christine Duhaime | December 24th, 2014

Partner Christine Duhaime was interviewed by Foreign Policy Magazine in respect of the effectiveness of counter-terrorism laws globally and the policies from the Financial Action Task Force in the face of the rise to power of the Islamic State, also known as ISIS. The FATF is undertaking a review of terrorist financing to determine how ISIS was financed.

The article can be read here.

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