The International Monetary Fund (IMF) has published an extensive book to assist anti-money laundering and combating terrorism financing (AML/CFT) policymakers and practitioners in identifying key challenges and good practices for strengthening the effectiveness of counter terrorism financing frameworks.
The roles of financial institutions (FIs) are discussed in detail in the book, Countering the Financing of Terrorism: Good Practices to Enhance Effectiveness. Topics include frustration amongst FIs at the lack of information or guidance from law enforcement; tensions between reporting requirements versus secrecy and privacy laws, and the relatively high terrorist financing risk profile of banks compared with most other FIs and non-financial reporting entities.
The free-to-download book runs to 211 pages and presents contributions by experts from the IMF, UN, Egmont Group of Financial Intelligence Units, Interpol, and Europol.
The book contains six chapters. The first three cover improving the understanding of terrorist financing risks; the role of the private sector in detecting and disrupting terrorist financing activities, and the production and use of financial intelligence to counter terrorism and terrorist financing.
Investigating, prosecuting, and sanctioning terrorism financiers; terrorism-related targeted financial sanctions, and international cooperation in combating the financing of terrorism are covered in subsequent chapters.
Focus on FIs
The authors say financial institutions and other reporting entities are frustrated at the lack of information or guidance from law enforcement regarding the identification of suspicious activity, and adopt a defensive approach to checking with the primary aim of avoiding regulatory sanctions.
Financial institutions report difficulties in implementing AML/CFT measures due to secrecy and privacy laws, including tipping off and similar provisions, which constrains the exchange of information according to the book.
It says some jurisdictions are implementing measures to share information across public- and private-sector actors, including competent authorities such as customs and tax authorities, social services, birth and death registries, and company registries.
High risk FIs
Regulated financial institutions can become complicit in terrorist financing activities stemming from a shared ideology with the terrorists, pressure from the state (in instances of state-sponsored terrorism), infiltration by criminals, or profit motivations according to the book.
It also looks at how intelligence can be lost in areas where financial institutions have limited or ceased services to certain geographies or types of customers.
The book concludes that the different categories of financial institutions and non-financial reporting entities may have sharply differing terrorist financing risk profiles. In general, banks and money remitters have the largest risk of being misused.
Countering the Financing of Terrorism: Good Practices to Enhance Effectiveness can be downloaded from here.
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