France calls for stronger counter-terrorist financing laws

By Christine Duhaime | January 29th, 2015

Consensus on Supranational Risk Assessment 

As part of the 4th Anti-Money Laundering Directive approval process in the European Union (the “4th AMLD“), the Council of the European Union’s President yesterday issued declarations and proposals for the regulation of anonymous financial transactions that are transacted on new fintech products.

The communication from the President included Declarations from Member States and a Joint Declaration from the European Union Commission and the Council.

The Joint Statement said that as a result of the attacks in Paris this month, decisive action against terrorist financing must be taken and that in addition to the 4th AMLD, the EU needs to speed up implementation at the Member State level of the 4th AMLD; improve cooperation of FIUs; and undertake a supranational risk assessment for digital currencies.

Four Member States made Declarations with the Council. Austria expressed concerns regarding beneficial ownership rules because they do not apply to trusts, ergo tax havens and some private equity firms and the UK noted that there should not be duplication in respect of beneficial ownership and noted that Politically Exposed Person regimes needed to be consistent.

France Calls for Regulation to Strengthen Counter-Terrorist Financing

France issued a Declaration that as a result of the terrorist attacks in Paris, decisive action needs to be taken in respect of terrorist financing.

France is seeking to have the EU adopt a strict position on anonymous electronic money and the financial transactions carried out with electronic money. A strict stance means to prohibit anonymous digital financial transactions by requiring that they be transparent and not-anonymous.

France recommended amending legislation to stop terrorist financing by controlling anonymous payment instruments by strongly regulating electronic money and requiring that there be reporting requirements for those transactions within the AML regime. It also recommended improving existing terrorist financing asset freezing laws.

The 7-year old ‘Baby Girl’ terrorist ~ Nigeria and the growing phenomena of women terrorists

By Christine Duhaime | January 10th, 2015

Youngest known case of girl terrorist

Today, a young girl believed to be as young as seven years old, killed herself and several others in a suicide bomb terrorist attack in the northeastern part of Nigeria in the ongoing confrontation from Boko Haram. The attack represents the youngest known female suicide bomber.

Other similar terrorist incidents in January 

At the end of January, there  were three similar terrorist events where young girls figured prominently:

(a) One in Maiduguri, Nigeria on January 9, 2015, involving a little girl who blew herself up at a crowded market, killing 20 people and injuring 57 more; and

(b) Two on January 10, 2015, 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 on January 9, 2015, 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 the next day to create terrorist attacks confirms the beginning of a trend of increasingly using women for terrorist acts and selecting younger and younger candidates.

Fathers involved in selection

As to the motivation for seven, or 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.

Continue reading →

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

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.

Continue reading →

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.

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.

Continue reading →

UK to prohibit insurance payments to terrorists for ransom and jail insurance executives for up to 14 years for terrorist financing on conviction

By Christine Duhaime | December 6th, 2014

Ransom payments

The UK government’s proposed Counter-Terrorism and Security Bill 127 (the “Counter-Terrorism & Security Act“), now at Second Reading in the UK Parliament, will prohibit insurance companies from making ransom payments to terrorists and terrorist organizations.

The provision would amend §17, the counter-terrorism financing part of the UK Terrorism Act 2000, to make it an offence for an insurer to make a payment of money or any other property in response to a demand for terrorism if they know or suspect its in response to a ransom demand.

Moreover, the provision renders directors, managers, secretaries and officers of an insurance company guilty of the offence of terrorist financing if the insurance company is convicted of making a ransom payment for terrorism in cases where the executives or directors acted with neglect, or consented or connived in respect of the payment to the terrorist or terrorist organization.

Continue reading →

Credit union fined over anti-money laundering controls of its money services business clients

By Christine Duhaime | December 1st, 2014

The question every credit union has been asking for the past five years – namely, do we have anti-money laundering law obligations over the financial transactions of business clients that are money services businesses (“MSB“) – was just answered by FinCEN with a $300,000 fine.

Last week, FinCEN assessed the fine against the North Dade Community Development Federal Credit Union for violations of the Bank Secrecy Act and USA Patriot Act which exposed the US financial system to significant risks of money laundering and terrorist financing from high-risk countries in the Middle East and Central America.

The Credit Union onboarded as a client, a MSB that itself was a financial services provider to 56 other MSBs in high risk jurisdictions. The 56 MSBs were not members or shareholders of the Credit Union. In 2013, the Credit Union, which only had five employees, processed almost $2 billion in financial transactions for the MSBs and in the process failed to comply with its anti-money laundering and counter terrorist-financing obligations over the MSBs in respect of client verification, filing reports, reporting suspicious transactions, undertaking risk assessments in respect of the MSB business line, and to have controls in place to mitigate the risks associated with the MSB business line.

Continue reading →

The Chinese Way – the impact of China’s anti-corruption campaign on trade-based money laundering and Macau casinos

By Christine Duhaime | November 29th, 2014

Money Laundering Bulletin in the UK has a good article out today on the anti-corruption drive in China and its impact on the casinos in Macau, which explores the anti-money laundering lapses and lack of legislation in the gambling industry in Macau, and the corresponding increase of trade-based money laundering in China.

Trade-based money laundering

According to the article, as a result of the diminishing gambling revenues in Macau, Chinese foreign nationals are increasingly turning to trade-based money laundering in China to remove funds from the country.

The article notes that last month, the government of China discovered that companies in China have “faked, forged and illegally re-used” documents for imports and exports on a wide scale and there is an investigation ongoing with a view to prosecuting the companies and their executives involved.

Because of the prospect of lucrative bribes, the article notes that one of the most sought-after positions in China is as a border guard at the Hong Kong-Shenzhen border. Border guards at that location will, for a fee, adjust the price of iPhones in a container upwards or downwards depending upon the request, notes the article, to either half price or double the price.

The article quotes an analyst describing the revival of the ancient practice of “mayo banjia” (meaning ants moving a house) where many people move funds across the border instead of one person as the new, old way of money laundering across the Hong Kong and Macau borders. The analyst says that rather than giving one person a bag of gold to smuggle, 1,000 people each smuggle a bag of gold bracelets.

Less money moving to Macau from China

According to an organized crime specialist in China quoted in the article, money supply is tightening in China and officials are having difficulty exporting funds from China to gamble in Macau. In order to internationalize the Yuan, President Xi is apparently controlling the laundering of funds out of China.

We are quoted in the article as saying that supervision and oversight of casinos in Macau in terms of anti-money laundering (“AML”) law compliance is not as stringent as in mature gambling markets and that Macau’s standards for AML fall short compared to global standards with respect to junket operators who manage the VIP Rooms, which account for 75% of the gambling revenues in Macau.

Another Australian Bank De-Risks and Exits Remittance Business Over Terrorist Financing Regulatory Risks; Financial Inclusion and Shadow Banking Seen As Repercussion

By Christine Duhaime | November 20th, 2014

Fourth banks closes remittances businesses

Another bank in Australia, the Westpac Bank, has announced it will close its remittance business division next week over the difficulty of complying with counter-terrorism laws. By de-risking and closing its remittance division, the Bank is terminating the bank accounts of all of its business customers who operate money services businesses.

Westpac is the fourth major bank in that country to withdraw from remittances over reputational concerns and business risks. Those risks are mounting exponentially in the face of the realization that the civil and regulatory liability facing banks has the potential to bankrupt them (as a result, in part, of the Arab Bank case) for current and historical cases in which they participated in the funding terrorism by processing transactions that benefitted terrorist groups or persons, knowingly or not, or as a correspondent bank or otherwise.

Annually, 80 million remittances are sent from Australia worth approximately $30 billion and most of it goes to families in Asia and the Pacific region.  In the remittance business, banks in Australia, Canada and elsewhere provide services to money services businesses (MSB) who deal with the clients directly. Then, larger banks, usually a correspondent bank, process transactions on behalf of the localized banks. In the money services business regime, banks must not only know their clients, but the clients of the MSB as well.

ISIS making banks more cautious

Banks are becoming more concerned with banking MSBs, even those that are regulated and subject to anti-money laundering laws, and correspondent banks are typically refusing to bank the accounts that they know come from MSBs because of the fear of terrorist financing involving the Islamic State.

The remittance association in Australia noted that if another bank de-risks an entire sector of remittances, the movement of funds will move to shadow remittances, potentially causing more of a terrorist financing threat to national security and worsening the financial inclusion problem.

You can read the original article on the Westpac Bank here.

Is the ATM Global Network Unwittingly Used for Terrorist Financing?

By Christine Duhaime | November 19th, 2014

We’re pleased to announce that Christine Duhaime is giving a presentation on the issue of “How the ATM Network Globally is Unwittingly Used for Terrorist Financing & Ways to Prevent it” at the 2015 Interac Conference in Ottawa.

After a spouse of a member of the Islamic State Tweeted to the world from ar-Raqqah, Syria, about accessing the ATM network to finance their activities, financial institutions have become more concerned about how and where the debit and credit cards they issue are being used, and by whom.