PART IV
TERRORISM FINANCING RED FLAGS
Potentially Suspicious Activity that may Indicate Terrorist Financing
The following examples of potentially suspicious activity that may indicate terrorist financing are primarily based on “Guidance for Financial Institutions in Detecting Terrorist Financing” provided by the Financial Action Task Force (FATF). The FATF is an intergovernmental body whose purpose is the development and promotion of policies, both at national and international levels, to combat money laundering and terrorist financing.
Activity Inconsistent with the Customer's Business
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(a) Funds are generated by a business owned by persons of the same origin or by a business that involves persons of the same origin from high-risk countries (e.g., countries designated by national authorities and FATF as non-cooperative countries and territories);
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(b) The stated occupation of the customer is not commensurate with the type or level of activity;
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(c) Persons involved in currency transactions share an address or phone number, particularly when the address is also a business location or does not seem to correspond to the stated occupation (e.g. a student, an unemployed, or self-employed);
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(d) Regarding nonprofit or charitable organizations, financial transactions occur for which there appears to be no logical economic purpose or in which there appears to be no link between the stated activity of the organization and the other parties in the transaction;
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(e) A safe deposit box opened on behalf of a commercial entity when the business activity of the customer is unknown or such activity does not appear to justify the use of a safe deposit box.
Funds Transfers
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(i) A large number of incoming or outgoing funds transfers take place through a business account, and there appears to be no logical business or other economic purpose for the transfers, particularly when this activity involves high-risk locations,
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(ii) Funds transfers are ordered in small amounts in an apparent effort to avoid triggering identification or reporting requirements,
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(iii) Funds transfers do not include information on the originator, or the person on whose behalf the transaction is conducted, when the inclusion of such information would be expected,
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(iv) Multiple personal and business accounts or the accounts of nonprofit organizations or charities are used to collect and funnel funds to a small number of foreign beneficiaries,
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(v) Foreign exchange transactions are performed on behalf of a customer by a third party, following by funds transfers to locations having no apparent business connection with the customer or to high-risk countries.
Other Transactions that Appear Unusual or Suspicious
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(1) Transactions involving foreign currency exchanges are followed within a short time by funds transfers to high-risk locations;
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(2) Multiple accounts are used to collect and funnel funds to a small number of foreign beneficiaries, both persons and businesses, particularly in high- risk locations;
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(3) A customer obtains a credit instrument or engages in commercial financial transactions involving the movement of funds to or from high-risk locations when there appear to be no logical business reasons for dealing with those locations;
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(4) Banks from high-risk locations open accounts;
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(5) Funds are sent or received via international transfers from or to high-risk location;
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(6) Insurance policy loans or policy surrender values that are subject to a substantial surrender charge.
Red Flags – Non Government Organization (NGO) Terrorist Financing
The red flags most often associated with NGO terrorist financing are—
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(a) Foreign bank accounts, where the NGO's stated aims and activities have no connection with that area;
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(b) The NGO has a high volume of wire transfers;
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(c) Transfers are made to regions where there is a high risk of terrorist activity;
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(d) The NGO has multiple accounts without a satisfactory explanation for their use;
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(e) The NGO receives third party cheques for deposit into its account;
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(ƒ) Multiple cheques are received from the same individual;
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(g) Donations are diverted from their intended purpose or application;
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(h) Cash deposits are followed by immediate ATM withdrawals;
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(i) Donation cheques are cashed rather than deposited in the NGO account;
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(j) Transfers are received from intermediary organizations;
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(k) There are multiple transfers to the same recipient;
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(l) The NGO has a hoard of cash available that is not deposited into its account;
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(m) There is evidence of laying of funds;
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(n) The account history is inconsistent with typical NGO activity.
Many NGO officers who are involved in terrorist financing have had prior experience with other NGO's that were also fronts. All NGO staff, as well as officers and directors, should be vetted when the organization is periodically checked.