Islamic State’s likely use of TBML will challenge AML officers

Islamic State (IS) has lost its position in Mosul, Iraq. This means the group will be seeking to shift its financial assets as well as its people out of its former stronghold.

Trade-based money laundering (TBML) will likely be used by IS, and this presents a major challenge to anti-money laundering (AML) officers according to the director of AML advisory at global risk and compliance consultancy, Matrix-IFS.

Complex web

Joshua Fruth maintains that IS fighters will retreat through human smuggling networks to other countries while its illicit proceeds from trade in black market oil and antiquities. kidnapping ransom and human trafficking will be spirited out of the area too.

Fruth, who maintains an active commission as a US Army intelligence officer, says IS will employ a broad range of money laundering typologies and create a complex geographic web of channels and operatives to flow its financial assets into new locations.

TBML typologies

He anticipates IS will employ at least two TBML typologies. The group will likely take a similar approach to the one adopted by Al Qaeda that involves the use non-profit organisations and shell or shelf companies.

IS will also be considering schemes similar to those adopted by Hezbollah, which uses a system employing seemingly legitimate front companies (Trade-based Financial Crime, 24 February 2017).

Compliance challenges

AML compliance specialists face new challenges according to Fruth, particularly now terrorism financing, which used to be predominantly financed by third parties, is now routinely self-financed through terrorists’ own criminal enterprises.

Senior IS leaders are highly educated and will launder illicit assets through outside individuals with legal, compliance, and accounting backgrounds.

Sanctions evasion

These individuals will likely understand the regulatory environment and know how to subvert conventional AML techniques and may take advantage of the lack of integration between know-your-customer and transaction monitoring within banking compliance programmes.

They will likely be well-versed in sanctions-screening evasion tactics, Fruth concludes.

Fruth’s commentary, Islamic State’s financial withdrawal poses big anti-laundering challenge, can be found here.

Categories: Trade Based Financial crimes News

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