Comparing Terrorist Financing and Resourcing: Indicators for Analyzing Value Transferred to Terrorist Organizations Professor Christian Leuprecht (Queen’s University), Professor Arthur Cockfield (Queen’s University) and Pamela Simpson, MA (Queen’s University)

Roadmap 1. Purpose of the study 2. Previous Research 3. Methodology 4. Observations 5. Comparison 6. Analysis 7. Implications 8. Conclusion

Purpose of the Study Comparing Terrorist Financing indicators in Gordon, UN, FATF reports with the TRM: Richard Gordon (2012), Terrorism Financing Indicators for Financial Institutions in the United States Leuprecht, Cockfield, Simpson, Haseeb (2019), Tracking Transnational Terrorist Resourcing Nodes and Networks” Compared using the open-source legal cases presented in Gordon’s piece with previous legal cases using the Terrorist Resourcing Model (TRM)

Previous Research “Tracking Transnational Terrorist Resourcing Nodes And Networks” (Leuprecht et al, 2019): most cases involved all steps of the TRM, maintaining that the TRM is useful in displaying the value chain of goods transferred from investor to terrorist organization recipient. pattern of resourcing emerged differs only by scale: the more funds that are transferred, the more financial institutions and intermediaries are involved financial hubs, financial institutions, and recipients of resources are not randomly distributed: New York, London, Beirut reoccurring nodes from mostly US legal cases

Method Gordon identified 266 US court cases that involved charges of terrorism, material support to terrorist organizations, or a terrorist-related matter - 30 involved a financial institution These 30 cases were then presented as a case study in the appendix of Gordon’s paper, and broad trends extracted for the paper The cases were then coded according to the TRM to find converging and diverging patterns based on the same data set with two different methods (subsequent data from the cases was needed) Needed to triangulate data with open-source legal cases

Observations Comparisons between Gordon Methodology and TRM: documents presented in Gordon’s case, found that resources raised and transferred were not presented in the paper, as well as initial investors and specific transfer locations Gordon Leuprecht et al (TRM) Number of Cases 30 32 Investors 37 40 Financial Intermediaries 60 59

Comparisons Gordon Method vs. TRM: Gordon: Used FATF 40 recommendations to extrapolate information on traditional ML methods including suspicious activity reports and identifying methods of transferring funds    Concludes: Traditional ML sufficient to identify TF TRM: deviates from traditional TF methods by expanding the necessary steps to provide more information on locational nodes, actors involved, and resources transferred    Finding: Gordon’s cases presented missed vital information pertaining to the international impact of TF and resources transferred aside from funds

Analysis Gordon method vs. TRM Methods of transfer: Gordon specifically focused on type of transaction, suspicious transactions, and proceeds of crime TRM condenses this into one variable ‘financial intermediary mechanism type’ - but yielded same number of results, and was able to attach the transfer to a financial node Gordon’s method did not consider resources transferred, or investors (only on the financial intermediary step of the TRM) Ex. US v. Mohammad Anvari-Hamedani

Implications TF is becoming more accessible, transnational through unconventional means. However, banks are still a large shortcoming in AML/CFT regulations Traditional ML did not identify >10 of Gordon’s initial cases, and failed to identify any resources providing value to terrorist orgs Is TF legislation grafted to ML sufficient to combat terrorist financing, or does it fail to identify key locational nodes that inform broader TF patterns? The TRM is sufficient in identifying traditional ML transfers, as well as resourcing Do traditional AML/CFT regulations and methods fail with regard to ML cases as well? Explicitly creates a divide between TF and ML, showing that grafting TF legislation onto ML legislation is a problem

Conclusions AML/CFT have clear differences between them, brings into question the grafting of TF onto ML Traditional ML does not capture essential investors, locations, or resources for TF Overlooks value added for the terrorist orgs to conduct operations New methods of transfer will continue to complicate the relationship between AML/CFT, venturing into unregulated territory Need to find strong indicators for both ML and TF

Purpose of the Study Comparing Terrorist Financing indicators in Gordon, UN, FATF reports with the TRM: Richard Gordon (2012), Terrorism Financing Indicators for Financial Institutions in the United States UNODC (Vienna, 2018) Guidance manual for Member States on Terrorist Financing Risk Assessments FATF (2016) Consolidated Strategy On Combatting Terrorist Financing FATF (2008) TERRORIST FINANCING World Bank (2015) Introduction To The National Risk Assessment Tool

Purpose of the Study Comparing Terrorist Financing indicators in Gordon, UN, FATF reports with the TRM: Extracted the methodologies, terminologies, and indicators for identifying terrorist financing Reports also included recommendations for reporting procedures for individual countries, regions, and international cooperative action

Previous Research “Tracking Transnational Terrorist Resourcing Nodes And Networks” (Leuprecht et al, 2019): Terrorist Resourcing Model - Five Steps: Acquisition and Exchange, Aggregation of Resources, Movement of Resources, Transmission to a Terrorist Organization, Purpose o the Resources Coded 33 legal cases according to the TRM to identify broader trends and patterns Also analyzed international and domestic organizations combatting AML/CFT: UN, FATF, EU, FinCEN, FINTRAC, and AUSTRAC. Organizations called for collective-action against ML/TF through: FATF 40 recommendations, the UN CTITF, UNCCT, UNODC, and CTED, and domestic financial intelligence units (FIUs).

Previous Research “Tracking Transnational Terrorist Resourcing Nodes And Networks”: Conclusions: Nearly half of all the cases used a legitimate financial institution to transfer resources transnationally Financial intermediaries and investors consisted of a mix of financial institutions/individuals Money was not the only value transferred and through a variety of methods – a diverse range of resources funded and transferred as well Prosecution against banks may not be effective due to number of legitimate financial institutions used in the cases Showed the strength of the TRM in determining the multiple channels, methods, and locations resources could be transferred through

Method Coding 30 Terrorist Financing Cases According to the TRM: Gordon’s methodology - 5 steps for identifying TF indicators: 1. Successfully persecuted terrorism cases were selected. 2. “Examined those cases to determine which involved a transaction though a regulated financial institution, and we collected the relevant client identification, profiling, and transaction data” (789). 3. “examine the data to identify any possible indicators of terrorism financing” (789). 4. “determined if any SARs were filed by financial institutions with respect to those transactions. Reviewed the SARs to see why they were filed, including by examining the SAR narrative to determine what, if any, additional information the reporting institution had uncovered” (789). 5. “determined if FinCEN had referred the SAR for further investigation” (789)

Method Coding 30 Terrorist Financing Cases According to the TRM: The Terrorist Resourcing Model (TRM) - 5 steps for identifying terrorist resourcing: “acquisition of free or stolen funds and exchange and end-use goods” (35) – coded as ‘investor’ aggregation, which “consists of pooling resources, either in a few financial institutions (for money) or in a few physical locations (for goods)” (35). – coded as ‘bank location’/’investor’ (location) “transmission to a terrorist organization” (35). – coded as ‘financial intermediary’ “transmission to a terrorist or operational cell” – coded as ‘financial intermediary’/’terrorist agent’ conversion which “consists of exchanging funds or goods for end-use goods” and includes end-use goods to “carry out any of the terrorist organization’s activities” including a terrorist act (35). - coded as ‘cash transferred’/’cash raised’ and ‘non-cash goods transferred’/’non-cash goods raised’

Observations Observations on the comparison between Gordon Methodology and TRM: Gordon: 30 Cases (US Case Jurisdiction), 40 investors, 60 Financial Intermediaries Leuprecht et al: 32 Cases (US-23, Canada-7, UK-1, EU-1), 37 Investors, 59 FIs

Observations Observations on the comparison between Gordon Methodology and TRM: Gordon Locational Hubs: New York (4 Investors, 5 Financial Intermediaries, 3 Terrorist organizations identified), Ohio (4 Investors, 2 Financial Intermediaries, No terrorist group identified), Virginia (4 Investors, 3 Financial Intermediaries, 2 terrorist groups identified), Leuprecht et al Locational Hubs: New York (2 Investors, 8 Financial Intermediaries, 4 Terrorist groups identified), London (2 Investors, 7 Financial Intermediaries, 4 Terrorist Groups identified), Beirut (2 Investors, 11 Financial intermediaries, 2 Terrorist groups identified)

Observations Observations on the comparison between Gordon Methodology and TRM: Gordon Re-occuring Banks: Western Union (2 locations in 3 cases, 2 terrorist groups identified), Fleet Bank (1 location in 2 cases, 3 terrorist groups identified), Bank of America (1 location in 2 locations, 2 terrorist groups identified), Leuprecht et al Re-occurring Banks: Arab Bank PLC (2 locations in 3 cases, 1 terrorist group identified), UBS AG (1 location in 2 cases, 2 terrorist groups identified), HSBC Group PLC (3 locations in 2 cases, 2 terrorist groups)

Observations Observations on the comparison between Gordon Methodology and TRM: Gordon Methods of Transfer: Wire Transfer (14), Cheque (3), Total Methods (29), Leuprecht et al Methods of Transfer: Bank Transfer (17), Hawala (3), Total Methods (30)

Analysis Analysis on comparison between Gordon’s method and TRM Gordon conclusion: ML framework sufficient for TF TRM: ML is not sufficient due to failure of financial institutions to comply, and the divergence between ML and TF Specifically – origins of funds, and resources transferred Locational nodes for Gordon: more general and US-centric (whenever other countries were mentioned, it was not clear how the money transferred through them) Locational nodes from TRM: very diverse, found a surprising number of nodes in Beirut.