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Funds Linked to Terrorist Activities: How They’re Being Distributed
A recent investigation has uncovered a complex web of financial transactions and techniques used by individuals to obscure the source of funds linked to terrorist activities. The methods employed are designed to avoid detection by authorities, making it essential for financial institutions to be vigilant in their monitoring efforts.
Techniques Used to Disguise Funds
- Investing in capital markets to disguise the origin of funds
- Purchasing negotiable instruments, often exploiting low reporting requirements
- Mingling legitimate business monies with proceeds from illegal activities
- Making it difficult to trace the source of the funds
Concealing Identity and Tracks
- Using shell companies and corporations
- Offshore banks and businesses, including trust company service providers
- Nominees, trusts, family members, or third parties to obscure the identity of those controlling illicit funds
- Identity fraud and false identification to avoid detection and maintain anonymity
Gatekeepers and New Payment Technologies
- “Gatekeepers” such as lawyers, accountants, and brokers may be involved in facilitating illegal transactions
- Offering specialized services to criminals, making it essential for authorities to monitor their activities closely
- Rise of new payment technologies, including cell phone- based remittance systems
- Virtual assets, such as cryptocurrencies, being exploited due to the lack of transparency in these transactions
Other Methods Used
- Life insurance products and general insurance policies used in some cases to launder money
- Purchasing multiple policies, canceling them simultaneously, and requesting refunds in different currencies or accounts
- Overpaying premiums and requesting refunds for the excess
- Using prepaid cards and tax evasion schemes to conceal illegal activities
- Non- financial businesses, such as travel agencies, car dealerships, and cash-intensive industries used to launder money and finance terrorist activities
Risk-Based Approach
To combat these illegal activities, financial institutions must apply a risk-based approach in identifying and assessing ML/TF risks. This involves understanding the risks faced by Oman and the sector as a whole, as well as the specific risks associated with each institution.
- Comprehensive business ML/TF risk assessment is essential for FIs to understand their risk exposure and identify areas that require prioritization
- Risk assessments should highlight the risks associated with an FI’s business, enabling them to establish effective AML/CFT compliance programs
Conclusion
By being aware of these tactics and techniques, financial institutions can better protect themselves from being used as conduits for terrorist financing and money laundering activities.