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Payments firms must look out for red flags indicating that they are being used to transfer funds to terrorist group ISIS and its global affiliates, US Financial Crimes Enforcement Network (FinCEN) has said.
In an advisory note issued on Tuesday (April 1), the agency listed 11 warning signs to help financial institutions recognise suspicious activity linked to ISIS.
The threat from ISIS has evolved over time, but its malicious intentions against the US, its interests and allies remained consistent, said FinCEN director Andrea Gacki.
“As the terrorist organisation looks for ways to take advantage of instability in Syria and elsewhere to grow and resurge, we look to financial institutions to remain vigilant in identifying ISIS funding streams and protecting the U.S. financial system from terrorist financing.”
The advisory says that a clampdown on fund transfers to ISIS through payments systems is crucial to disabling the group, which derived most of its funding through natural resources like oil when it controlled territory.
However, according to FinCEN, the group is now forced to rely on a combination of taxation, extortion, crowdfunding and donations.
As a result, ISIS organisational funds have dwindled to $10m-$20m, mostly held in cash and other liquid assets.
The agency said ISIS frequently solicits donations through its official websites and publications, and on social media platforms, with ISIS-K (Islamic State Khorasan, an Afghan branch of Isis) publishing posters in its magazine with QR codes for supporters to send it donations in virtual currency.
Individuals have also raised funds for ISIS, coordinating donation drives through encrypted mobile applications, FinCEN said.
Warning signs
The red flags highlighted by FinCEN include:
- Credit cards or bank accounts being used to book travel to or accommodation and transportation in an area of known ISIS activity for several unrelated people at the same time for no known legitimate purpose.
- Fundraisers attached to social media profiles that show support for ISIS or display ISIS-related iconography.
- A customer collecting small amounts through peer-to-peer (P2P) transfers, social media or virtual currency payments over a short period and then sending them in a lump sum to someone where ISIS is prevalent.
- A customer placing virtual currency in a virtual currency wallet using an IP address in one location that is then withdrawn from virtual currency kiosks or converted to fiat currency by users with IP addresses in different locations where the individual is not known to reside or have travelled but where ISIS is prevalent.
Financial institutions must file a suspicious activity report if they know, suspect or have reason to suspect a transaction conducted or attempted by, at or through the financial institution involves funds derived from illegal activity.
The USA PATRIOT Act also requires covered financial institutions to implement due diligence programmes for private banking accounts held for non-US persons.
FinCEN’s advisory note means payments firms will have to review their processes to ensure they are equipped to comply and spot any red flags, as the responsibility for preventing money laundering largely falls on them.
Enforcement action and reputational damage are possible outcomes for firms that fail to take the advisory seriously.
The note is a reminder for the payments industry that anti-money laundering (AML) is closely linked to counter-terrorism financing (CTF), with both touching not only on financial irregularities but threats to the fabric of society.
