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Terrorism Act (2018 Revision) Cracks Down on Terrorist Financing

The Cayman Islands has taken a significant step in the fight against terrorism with the revision of the Terrorism Act (TA), aimed at preventing and disrupting terrorist financing. The new legislation targets individuals and financial institutions that provide funds to terrorist groups, making it an offence to engage in such activities.

Unlawful Sources of Funding

The TA defines various unlawful sources of funding for terrorist groups, including:

  • Kidnapping
  • Extortion
  • Smuggling
  • Fraud
  • Theft
  • Narcotics trafficking

However, unlike traditional criminal organizations, terrorist groups often receive funds from legitimate sources or a combination of lawful and unlawful means.

Laundering Funds

Terrorist groups use sophisticated methods to launder their funds, including:

  • Cash smuggling
  • Structured deposits and withdrawals from bank accounts
  • Purchases of monetary instruments
  • Credit and debit card transactions
  • Wire transfers

These methods make it difficult for authorities to trace the source of the money.

Vulnerable Charities and Non-Profit Organizations

Charities and non-profit organizations (NPOs) are also vulnerable to being misused for terrorist financing. Terrorist groups use NPOs to raise and launder funds for their activities.

Underground Banking Systems

The TA also highlights the role of underground banking systems, particularly the hawala system, in moving terrorist-related funds. FSPs (Financial Services Providers) are required to develop procedures for identifying transactions linked to such systems.

Reporting Obligations

Any person who believes or suspects that another person has committed an offence under the TA must disclose the information to the Financial Reporting Authority (FRA) or the police as soon as is reasonably practical. Failure to do so is an offence punishable by imprisonment and a fine.

International Sanctions Compliance

The TA requires FSPs to comply with international targeted financial sanctions and designations related to terrorist financing, including:

  • Filing suspicious activity reports
  • Freezing funds
  • Informing the Governor as required under relevant Acts or orders

Proliferation Financing

The TA also deals with proliferation financing, which refers to the act of providing funds or financial services for the manufacture, acquisition, possession, development, export, transit, brokering, transport, transfer, stockpiling, or use of weapons of mass destruction and their means of delivery.

Consequences of Non-Compliance

The TA makes it clear that failure to comply with its provisions can result in severe consequences, including:

  • Imprisonment
  • Fines
  • Forfeiture orders

In conclusion, the revised Terrorism Act aims to prevent and disrupt terrorist financing by criminalizing various activities related to terrorism funding and requiring financial institutions to report suspicious transactions.