What is the key difference between money laundering and terrorist financing?  

Unlike money laundering funds may come from legal sources, such as legitimate businesses, government funding, and religious or cultural organisations, or from illegal sources, such as drug trafficking, kidnapping, and government corruption.

Like money laundering terrorist organisations will utilise a variety of entities, such as banks, charities, and businesses, in order to move funds across local and international borders.

Red flags of terrorist financing

The following is a list of common funding of terrorism indicators:

• Acquiring or changing smaller denominations into large denomination currencies that are internationally accepted (e.g. USD, euro), especially if this is known to coincide with travelling arrangements to areas where terrorist groups are active.
• Transfer of funds to or from areas where terrorist groups are active, or to areas where terrorist groups are known to enjoy support, without any legitimate or reasonable explanation for the transfer.
• Payments related to the purchasing of substances and materials that are not related to, or in quantities that are unusual for, the individual’s known activities and can be used in the construction of explosive devices (e.g. acquisition of aluminium pipes, fertiliser, scrap iron etc).
• Payments related to travelling arrangements to or from areas where terrorist groups are active, or close to areas where terrorist groups are known to enjoy support.
• Bank account activity conducted remotely (e.g. through on-line banking, ATMs, debit/credit cards etc.) from areas where terrorist groups are active, or to areas where terrorist groups are known to enjoy support.
• Using e-wallets and/or stored value/pre-paid cards in areas where terrorist groups are active, or close to areas where terrorist groups are known to enjoy support.
• Taking out personal loans which are drawn down but the debtor defaults and the creditor is not able to start collection procedures due to the debtor leaving the country.
• Liquidating personal assets (e.g. selling one’s residential home, liquidating any retirement plans, withdrawing all funds in bank accounts, etc).
• Donations to voluntary organisations having connections with geographical areas where terrorists are active or in close proximity, or to voluntary organisations that are known or suspected to have been infiltrated by terrorists.

If you have any questions about your responsibilities when it comes to CFT and the policies and procedures you should have in place, contact our expert team.