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Preventing Terrorists from Raising, Moving, and Using Funds

Previous sections of this report explored the diversity of ways in which terrorist funds are raised, moved and used. Terrorists use legitimate and criminal methods to finance their organizational and operational activities. The international response addresses each of these methods in a focused manner.

Detecting terrorist involvement in otherwise legitimate financial activity requires financial institutions to implement the FATF standards through strong application of the “know your customer” principle and of customer due diligence (CDD) policies and procedures. These are also fundamental to the reporting of suspicious transactions which may indicate criminal activity supporting terrorism.

To assist financial institutions in combating terrorist financing, jurisdictions must adopt certain measures. These include implementing targeted financial sanctions programmes, protecting vulnerable sectors including the charitable sector and money-service businesses, and encouraging effective reporting of suspicious activity.

Targeted Financial Sanctions

FATF Special Recommendation III (SRIII) calls on countries to develop and implement targeted financial sanctions regimes that identify, freeze the assets of, and prohibit making funds available to designated terrorists and their support networks without delay. These requirements are necessary to deprive terrorists and terrorist networks of the means to conduct future terrorist activity and maintain their infrastructure and operations. The preventive intent of SRIII requires countries to designate the elements of terrorist support networks pursuant to an evidentiary standard of reasonableness.

Protecting Vulnerable Sectors

Formal Financial Sector

Jurisdictions have an obligation to protect their financial sectors from money laundering and terrorism finance. In particular, FATF Special Recommendation VII was developed with the objective of preventing terrorists and other criminals from having unchallenged access to wire transfers for moving their funds and for detecting such misuse when it occurs. Specifically, it aims to ensure that basic information on the originator of wire transfers is immediately available to: (1) appropriate law enforcement and/or prosecutorial authorities to assist them in detecting, investigating, prosecuting terrorists or other criminals and tracing the assets of terrorists or other criminals; (2) financial intelligence units for analyzing suspicious or unusual activity and disseminating it as necessary; and (3) to beneficiary financial institutions to facilitate the identification and reporting of suspicious transactions.

Charitable Sector

FATF Special Recommendation VIII lays out a framework that aims to protect the non-profit organization / charitable sector by ensuring it is not misused by terrorist organizations that: (1) pose as legitimate entities; (2) exploit legitimate entities as conduits for terrorist financing, including for the purpose of escaping asset freezing measures; or (3) conceal or obscure the clandestine diversion of funds intended for legitimate purposes but are diverted for terrorist purposes.

Toward this aim, FATF has developed an effective four-prong approach to identifying, preventing and combating terrorist misuse of charities that focuses on: (1) outreach to the charitable sector; (2) supervision or monitoring of the sector; (3) information gathering and investigation of protect the sector globally.27

Cash Couriers

FATF Special Recommendation IX was developed with the objective of ensuring that terrorists and other criminals cannot evade financial market controls through the physical cross-border transportation of currency and bearer negotiable instruments. Specifically, it aims to ensure that countries have measures to: (1) detect the physical cross-border transportation of currency and bearer negotiable instruments, (2) stop or restrain currency and bearer negotiable instruments that are suspected to be related to terrorist financing or money laundering, (3) stop or restrain currency or bearer negotiable instruments that are falsely declared or disclosed, (4) apply appropriate sanctions for making a false declaration or disclosure and (5) to enable confiscation of currency or bearer negotiable instruments that are related to terrorist financing or money laundering consistent with FATF Recommendation 3 and Special Recommendation III.

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