Law enforcement agencies are urging financial services firms to pay greater attention to the financing of violent extremism in a surge in politically and ideologically motivated violence, a conference in Sydney heard.
Criminal intelligence experts are also seeing a strong increase in the use of digital payments and cryptocurrency to fund terrorist groups and terrorist acts.
Banks and financial services firms are struggling to find the staff and resources to tackle the rise in funding of terrorism. During the pandemic fraud and scams have risen significantly, which has stretched financial crime compliance teams. Anti-money-laundering (AML) teams are being urged to make better use of technology and partnerships to bolster their counterterrorism financing framework.
A live poll at the recent ACAMS Australasian conference in Sydney found that only 14% of AML teams regard terrorism financing as a critical priority. After delegates said they give TF some focus but do not have a dedicated team to prioritise terrorism related risks. One third of respondents said that “other crime types are a greater risk for us”.
The terrorism threat landscape had changed over the past two years with a shift to more online activity, said Stephen Dametto, counter-terrorism commander at the Australian Federal Police (AFP). This was particularly noticeable in the key areas of radicalisation and financing.
Australia’s terrorism risk rating has remained at “probable” since September 2014. Since then, the focus has shifted from Islamic State and Middle Eastern terrorism to more “soft targets”, lone wolf attacks, improvised weapons and low-key planning. There has also been an increase in the level of radicalisation across the community.
“COVID-19 has been one of the bigger factors in relation to that [radicalisation]. The trouble with the youth is that we see disproportionate amounts of vulnerable youth, youth who come from broken homes, youth that may carry some sort of mental illness issues like that,” Dametto said.
The planning of violent attacks has moved from “a large group wanting to do attacks in Australia to smaller groups and individuals getting radicalised online.”
Partnership approach
In response to these threats, law enforcement agencies are aiming to forge stronger partnerships with the private sector, including reporting entities. Every Australian capital city now has a joint counterterrorism team, which is made up of the AFP, state and territory partners and national security partners.
These groups have also launched a joint threat financing group. The group’s aim is to work more closely with the financial intelligence and private sector partners to assist counterterrorism investigations in Australia. The Fintel Alliance has been a vital player in that public-private partnership.
“Greater partnership with the private sector is a major aim for counterterrorism efforts in Australia,” Dametto said.
Some of the main areas of work have included sharing information about extremist typologies, which is crucial for banks to identify risk indicators.
Indicators may include payments with descriptions that reference the names of extremist groups or associated terminology, including payment narratives. For example, terms such as “1488” and “HH” are known to be white supremacist codes that have appeared in bank transfer narratives.
Another indicator is payments or donations to individuals or groups aligned with extremist ideology. The purchase of weapons or tactical equipment can also indicate a high-risk customer.
Banks and law enforcement agencies have also seen payments linked to crowdfunding for attacks and even legal defence funds.
Digital transformation
The use of cryptocurrency has also been growing in popularity among extremist groups. This has surprised law enforcement and criminal intelligence agencies, which had said cryptocurrency was not being used to finance terrorism just a few years ago.
“We’re starting to see a lot more use of cryptocurrency. This has been part of some of the groups with regards to not only funding what they want to do here but sending money to groups overseas as well,” Dametto said.
Terrorism financing is still far less sophisticated than money laundering but authorities have seen an increase in complexity in recent years.
“We’re seeing much greater use of the digital side,” Dametto said.
Vandhna Narayan, head of compliance at BSP Financial Group in Papua New Guinea, said this increase in complexity was being seen across the region.
“We have noticed that the schemes and methodologies that are being used are increasingly becoming more sophisticated. Whenever we put in any types of controls to try to eliminate certain activities that customers are very quick to come back with further advanced methods to try to get around those controls. So, that is something we have looked at,” Narayan said.
“There is definitely an increase in the use of digital technology.”
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This article first appeared on Thomson Reuters Regulatory Intelligence.
