Terrorist Finance

Kabul, Afghanistan

April 2006

History ofFinancial Transparency

• “Follow-the-Money”

• U.S. Bank Secrecy Act - 1970

• Creation of “financial intelligence”

• G-7 Creation of FATF – 1988

• FATF 40 Recommendations

• Egmont Group of Financial Intelligence Units - 1995

What is Financial Intelligence?

• Many different examples:

• Records of large cash deposits

• Cross-border currency reports

• Large cash purchases

• Casino reports

• Suspicious Transaction Reports

Purpose of Financial Intelligence

• Gives investigators a “paper-trail”

• Key tool in the War on Narcotics

• Useful in other “predicate offenses” for money laundering

• Money laundering is the “inverse partner” of terrorist finance

Osama bin Laden:Osama bin Laden:

“Attempts to find and freeze assets will not make any difference to al-Qaida or other jihad groups. Al-Qaida is comprised of modern, educated young people who are as aware of the cracks in the western financial system as they are of the lines in their own hands. These are the very flaws in western financial system which is becominga noose for it.”

“Attempts to find and freeze assets will not make any difference to al-Qaida or other jihad groups. Al-Qaida is comprised of modern, educated young people who are as aware of the cracks in the western financial system as they are of the lines in their own hands. These are the very flaws in western financial system which is becominga noose for it.”

47%

8%10%

1%

34%

Cash Travelers Checks

Misc Cks from Individuals

Wire Transfers

42%

2%11%

13%

15%

12%

2% 3%

Cash Lodging

Misc Aviation

Airlines Cks to Individuals

Automotive Balance in a/c

September 11Totals for 19 Hijackers

Deposits $303,481.63 Disbursements $303,671.62

Other Terrorist Attacks

• 1998 U.S. Embassy bombings in Kenya and Tanzania - $50,000

• 2000 attack on USS Cole in Aden - $10,000

• 2002 bombings in Bali – $50,000• 2003 attacks in Istanbul - $40,000• 2004 attacks in Madrid – about $10,000

Source: United Nations

War on Terrorist Finance:Response to Date

• Designations• UN 1267 Committee’s “Consolidated List”• Results:

$112 million “blocked” by December 2001$150 million – cumulative – by January 2006$60 million actually “seized”

Effective?

Response - continued

• Charities

• Cash

• Rules/Regulations/Reporting Requirements

Saddam’s $$$

We have ignored Informal Value Transfer Systems

• Hawala• Misuse of international gold trade• Diamond/gem trade• Commodity/narcotics exchange• Trade-based value transfer

• Common denominator:Common denominator:

TRADETRADE

Hawala

Hawala Markings on Currency Seized in Iraq

The golden age of crime

Why international drug traffickers are

invading the global gold trade

World Report, November 1999

U.S. Islamic Cash Outlets Investigated‘Hawalas’ Suspected in Terror Funding

The Washington Post, November 2001

In Gold We TrustWired, January 2002

Al Qaeda’s Road Paved With Gold

Secret Shipments Traced Through a Lax System in United Arab Emirates

The Washington Post, February 2002

The Afghan-Gold ConnectionThe Afghan-Gold Connection

Laundering of Diamonds/Gems

• Diamond/Gem “Pipeline”

point of origin to sale

• Mining,

trading, cutting,

polishing,

retailing

Laundering along “Pipeline”

• Striking similarities to money laundering• Illicit diamonds “placed, layered, and

integrated”• Facilitated by smuggling, corruption,

porous borders• Neither the Kimberly Process nor

proposed anti-money laundering rules for diamond dealers will be effective in combating the laundering of diamonds

Colombian Black Market Exchange

Afghan Narcotics/Commodity Exchange

Questions?

John Cassara