sign in sign up
<<
Home , Haqqani network

Terrorist Financing Assessment 2018

TABLE OF Other jurisdictions and groups CONTENTS of concern ...... 18

Introduction ...... 3 Somalia ...... 18 Al Shabaab ...... 18 Middle East ...... 4 The Philippines ...... 19 Syria ...... 4 Abu Sayyaf Group ...... 20 Iraq ...... 5 Turkey ...... 5 Financial activities of extremist travellers 22 Lebanon ...... 6 Stages and roles in the extremist traveller process ...... 22 Jordan ...... 6 Yemen ...... 7 Emerging issues and information gaps .... 23 Qatar ...... 7 Small scale, low-value attacks ...... 23 ...... 7 Alternative payment methods ...... 24 Daesh ...... 8 Increasing importance of geographic indicators ...... 24 Al Qaeda ...... 9 Hizballah ...... 11 Further reading ...... 25

South Asia ...... 13 Annex 1: Indicators of financial activities of extremist travellers ...... 26 ...... 13 ...... 14 Annex 2: Methodology for country and group selection ...... 29 ...... 14

Lashkar-e-Taiba ...... 15

Haqqani Network ...... 17

2 Terrorist Financing Assessment 2018

INTRODUCTION In a few instances, jurisdictions have met both of the criteria for inclusion and, as such, are As events of the past several years have deemed to be of particularly higher risk. See shown, the activities of individual terrorists and Annex 2 for information on FINTRAC’s terrorist groups have put virtually every country methodology for this report. at risk. These risks extend to terrorist financing; This report provides a baseline assessment for however, the nature of this exposure differs Canadian reporting entities on the terrorist depending on the country, its counter-terrorist- financing risks presented by various countries, financing regime, and the extent to which its as well as the financing characteristics of some financial system is connected to those higher of the terrorist organizations in those countries. risk jurisdictions. It is important to note, however, that the To help reporting entities focus and improve absence of a country or group from this the quality of their reporting of suspected assessment does not mean an absence of risk. terrorist financing activity, this assessment Rather, this report is intended to introduce examines terrorist financing risks related to reporting entities to the issue of terrorist jurisdictions that meet one of two criteria: financing. Emerging risks or issues related to terrorist financing not covered in this document • exposure to terrorism and terrorist activity; of which reporting entities should be informed or will be covered in future operational briefs and • role in the global financial system and their operational alerts. degree of financial connection to Canada, measured by the volume of reporting to Inclusion of a country in this report indicates FINTRAC and their overall trade and that that country has been assessed as higher economic relations with Canada. risk for terrorist activity financing, and this assessment should be taken into account by Although Canada does not have significant reporting entities in their risk-based analysis. financial connections to certain jurisdictions, the general state of their counter-terrorism- For broader context on how terrorism affects financing regimes and the proliferation of Canada, in addition to the sources listed in the terrorist actors mean that even limited financial Further Reading section, reporting entities may exposure may lead to significant risks for wish to consult Public Safety Canada’s Public Canadian financial entities. Report on the Terrorist Threat to Canada (https://www.publicsafety.gc.ca/cnt/rsrcs/pblctn At the same time, while some jurisdictions face s/pblc-rprt-trrrst-thrt-cnd-2017/index-en.aspx). lower risks of terrorist violence, features of their financial systems or their financial and economic role in a particular region creates a higher risk for terrorist financing activity.

3 Terrorist Financing Assessment 2018

MIDDLE EAST financing. A number of terrorist groups, some affiliated with Al Qaeda, are operating in parts The Middle East, centring on Syria, Iraq and of Syria, and Daesh remains a threat for Turkey, presents the greatest terrorist financing terrorist attacks in Iraq and throughout the risk to Canada. Persistent conflict, not just in region. In opposition to Daesh, moreover, a Syria and Iraq but also in Yemen and Egypt’s number of organizations–some designated as Sinai peninsula, continues to be a source of terrorist groups by the and serious instability in the region. Over the past others–have seen large growth in Iraq and several years, the rise of Daesh in Syria and Syria, and have received support from both Iraq has been a key driver of some of the main Iran and Hizballah. These regional dynamics terrorist financing risks to Canada: extremist continue to pose serious risks for terrorist travellers, also known as foreign terrorist financing throughout the region, particularly in fighters, travelling to the Middle East to the short to medium term. participate in the conflict; individuals providing financial support for terrorist activities abroad; Syria and individuals in Canada being inspired to The outbreak of the Syrian civil war in 2011 commit terrorist attacks on Canadian soil. had a significant negative impact on that While Daesh has lost significant territory over country’s financial sector and its financial the past two years, this otherwise welcome relationship with Canada. Canadian and development presents its own risks, including international sanctions against Syria, including the potential return to Canada of extremist its listing as a state supporter of terrorism has travellers, and continued instability and contributed to the country’s financial isolation. insurgent and terrorist violence in Syria and Prior to 2011, this relationship was already Iraq. weak compared to other countries in the region, given the relatively late development of The rise of Daesh, and Canadian and the banking sector in Syria and the tendency international sanctions against Syria, for Syrians to use third countries, such as succeeded in financially isolating Syria and Lebanon and France, for their banking activity. parts of Iraq from much of the world. A perhaps To date, transaction volumes between Canada unintended consequence of this, however, was and Syria, particularly in the banking sector, that the risk of financial exposure to Daesh remain minimal. partly shifted to third countries such as Turkey, which became gateways for Daesh to continue Suspicious transaction reporting on Syrian- to access the regional and international related financial activity since 2014 has financial system. A similar shift towards focused primarily on the potential funding of Lebanon has also been observed, where large extremist traveller activity, possible support of numbers of Daesh and Al Qaeda members, Daesh-affiliated individuals, and the suspected along with extremist travellers and their families diversion of funds sent to or received by and supporters engage in facilitation activities. charitable organizations working in the region. An additional risk related to Syrian financial Daesh’s ongoing loss of territory has not led to transactions involving politically exposed or a decrease in the region’s risk for terrorist

4 Terrorist Financing Assessment 2018

designated individuals has also been reported, Turkey although this is currently a more marginal risk Overall transaction volumes between Turkey than terrorist financing. Due to the isolation of and Canada remain very high compared to the Syrian banking sector, third countries have those of other countries in the region. This is featured heavily in suspicious transaction driven largely by Turkey’s role as a regional reporting, primarily Turkey, the United Arab economic and trading hub, and its significant Emirates and Lebanon, with Lebanese banks bilateral trade with Canada in multiple sectors. in particular remaining important for Syria’s connection to the global financial system. Due to its proximity to Iraq and Syria, its relative stability and its access to the Iraq international financial system, Turkey is at Conflict in large portions of Iraq has not led to elevated risk for terrorist financing activity. the same degree of financial isolation outside While Daesh no longer controls territory along of Daesh-controlled areas as it has in Syria, the Turkish border in either Iraq or Syria, cross- although reporting received by FINTRAC border flows of people, goods and money are related to Iraq overall remains lower than for still at risk of exploitation by Daesh supporters other jurisdictions in the region. While the and facilitators. As such, Turkish cities and reporting to FINTRAC of Canada-related towns near the borders remain at higher risk, transactions from Daesh-controlled areas has particularly when transactions involving these essentially ceased, reports from areas locations appear in conjunction with other remaining under the control of the central indicators of terrorist financing or behaviour government and from Kurdish territory have associated with extremist travellers. continued, although at a lower rate. As central hubs in the travel routes to and from While Daesh no longer controls significant Syria and Iraq, financial outlets near main entry territory in Iraq, the country remains at higher and exit points to Turkey, such as Istanbul, risk for terrorist financing activity, particularly Antalya, Ankara and Izmir, are also at risk for recently liberated areas, since insurgent and unwittingly providing services to those terrorist activity is still frequent. The presence travelling to or from a conflict zone, or those of multiple armed groups in the country, some engaged in the plotting of attacks against of which have been designated as terrorist targets in third countries. entities by other countries, also contributes to Another important factor contributing to a the elevated risk. The general weakness of higher risk for terrorist activity financing is the counter-terrorist-financing regulations in the large number of unregistered businesses in country, and the large presence of money Turkey, and the substantial share of the services businesses and exchanges make it country’s economic activity for which they difficult to determine the true source of funds. account. Since these companies operate with Reporting entities should take this fact into far less regulatory scrutiny than their registered consideration when assessing the risk of counterparts, they present an elevated risk for particular transactions. exploitation by terrorist groups and facilitators. Reporting entities should pay particular

5 Terrorist Financing Assessment 2018

attention to businesses that appear to be • weakness in, or the absence of, customer engaged in remittance activity but that operate due diligence requirements outside of the under names suggesting activity in another banking sector; sector, especially when these businesses tend • the absence of requirements covering to only send or only receive international wire politically exposed persons (under which transfers. Transactions from such businesses Hizballah political officials would fall); to multiple unrelated businesses or individuals • gaps in customer due diligence for those who appear to lack an established connection sending international wire transfers; to Turkey–such as through legitimate trade– • the lack of clarity with regard to the should also be considered higher risk. establishment of beneficial ownership; and • the absence of proactive reporting of Finally, and again due to its proximity to active suspected terrorist financing. conflict zones and its role in the humanitarian response in Syria, Turkey has also been used Lebanon features prominently in the reporting as a base by charitable organizations oriented FINTRAC receives compared to other towards factions active in Syria’s conflict. jurisdictions in the region. Combined with Hizballah’s influential role in Lebanon, this Lebanon makes Lebanon a higher risk country for Lebanon is one of the primary banking terrorist financing. Reporting entities should jurisdictions in the Middle East, providing consider the following areas of vulnerability in financial services to clients throughout the conjunction with other indicators in their risk- region. Canada also has a large Lebanese based analysis: diaspora, many members of which maintain • transactions involving politically exposed financial connections with the country. persons; Although Lebanon has criminalized terrorist • uncharacteristic low-value international wire financing, there are multiple aspects of the transfers, particularly to areas strongly Lebanese political situation that contribute to associated with Hizballah (see below); an elevated risk. Canada has designated both • transactions through the banking sector in the political and military wings of Hizballah as a which the sending or receiving persons or terrorist entity under the Criminal Code, entities appear to be offering exchange or however Hizballah remains a politically remittance services; and important actor in Lebanon. Hizballah currently • transactions in which Lebanon acts as an holds a number of seats in the Lebanese intermediary for a third country, particularly parliament and is responsible for ministerial when that country is at high risk for terrorist portfolios. financing. Against this political backdrop, a number of issues in the Lebanese counter-terrorist- Jordan financing regime raise risk concerns for Jordan has a moderate profile in reporting reporting entities. These include the following: received by FINTRAC compared to other countries in the region. While Jordan has a

6 Terrorist Financing Assessment 2018

strong counter-terrorist program and has been Qatar active in international efforts to counter Daesh, Qatar has a moderate profile in reporting Jordanian remittance and exchange companies received by FINTRAC compared with other have a high degree of exposure to higher risk countries in the region. Over the past two jurisdictions in the area, in particular Iraq. A years, the country has faced numerous large number of Jordanians have travelled to allegations from other countries over either Iraq or Syria to fight on behalf of a associations with terrorist financing, specifically terrorist organization. The country is also home from private donors inside the country. A to well-known Al Qaeda associated extremist number of both Qatari nationals and charities ideologues. have also been designated by the United International wire transfers received from or States and the with respect to sent to Jordan through exchange houses may the financing of terrorism. be at elevated risk of being associated with When assessing the risk of particular terrorist financing. In particular, transactions in transactions, reporting entities should consider which the name of the sender or beneficiary is the exposure through the remittance and not clear, or the stated purpose of the exchange sectors of Qatar–while at lower risk transaction appears abnormal in light of other of terrorist financing activity than other information, may warrant increased scrutiny. countries in the region–to higher risk Yemen jurisdictions, Pakistan and Afghanistan, in particular. Reporting entities should also be Yemen has a small profile in the reporting aware of the potential for transactions to pass received by FINTRAC, with few international through the Qatari financial system to or from wire transfers compared to other countries in higher risk jurisdictions, such as Syria and Iraq. the region. While low transaction volumes indicate less financial exposure, the ongoing United Arab Emirates conflict in Yemen, the presence of numerous The United Arab Emirates (U.A.E.) is assessed active terrorist groups, and the country’s limited to be at elevated risk of terrorist financing for a state capacity make Yemen a higher risk number of reasons: country for terrorist financing. • The U.A.E. is the primary financial and Reporting entities should consider, in trading hub in the Middle East. conjunction with other indicators, low-value • It has open and relatively unrestricted free transactions, particularly those associated with trade zones. locations in which Al Qaeda in the Arabian • It has considerable exposure to higher risk Peninsula maintains a presence, as higher risk. jurisdictions outside of the region, including Travel to and from Yemen, when observed in Somalia, Afghanistan and Pakistan. conjunction with indicators of extremist traveller financial activity (see Annex 1), should also be Al Qaeda, the Taliban and Daesh Khorasan considered to be higher risk. Province all raise significant revenue in the U.A.E., funnelling this money through Dubai via

7 Terrorist Financing Assessment 2018

Iran and Pakistan, often via hawalas or cash it controlled, in particular its ability to tax local couriers, as well as via the manipulation of populations, extract resources such as oil and import and export trade transactions. gas, and appropriate financial and material resources from businesses and state As a result, reporting entities should take the institutions in occupied areas. following risk factors into account when assessing the terrorist financing risk of While these revenue sources have been transactions involving the U.A.E.: seriously diminished over the past year by Coalition efforts against Daesh, the group • the significant presence of general trading continues to pose a significant terrorist companies for which client information is financing risk. Although it is impossible to difficult to obtain, particularly those determine the details, Daesh is known to have operating in economic free zones; moved unspecified amounts of funds out of • the country’s frequent role as an both Syria and Iraq into third countries for intermediary for international financial safekeeping. Daesh can then use this pool of transfers; and funds for terrorist attacks within Syria and Iraq, • the large role played by hawalas, money and elsewhere. It is also known that the exchanges and remittance companies. organization has provided finances to its In particular, general trading companies that foreign affiliates, and is likely to continue to engage in what appear to be non-business- seek means to move funds from Syria and Iraq related transactions with multiple unrelated to jurisdictions where its affiliates are located. parties pose a heightened risk, since their Due to its loss of the revenue associated with intermediary role can obfuscate the true sender the territory it controlled, Daesh is likely going or beneficiary of funds. to have to diversify its revenue streams in order Daesh to continue its operations. At the same time, its overall expenses can be expected to decrease, Daesh was the primary terrorist financing threat since it will no longer have the costs associated group throughout 2017. In particular, it was a with governing and managing civilians. This magnet for individuals travelling overseas to may lead to Daesh being weaker overall in engage in terrorist or extremist activity and financial terms, but continuing to have a subsequently was a potential source of capacity to fund maximum-impact terrorist individuals seeking to return to their home attacks in Iraq, Syria and abroad. countries or relocate after having engaged in armed conflict or other types of terrorist activity. Outside of Iraq and Syria, individuals continue to sympathize with Daesh and its message. Daesh financing developments are in a state of While these individuals may not have formal constant change as the organization continues ties to the organization or its members, they to lose territory and slowly transition back into could nevertheless pose a significant threat to being a conventional terrorist/insurgent group. public safety should they choose to engage in Over the past several years, the bulk of lone-actor-type attacks. Monitoring the Daesh’s revenue has come from the territories financing of such activities is difficult, since

8 Terrorist Financing Assessment 2018

these individuals are often self-funded and may Al Qaeda not act in any way that is significantly different While international attention on Daesh has from routine, small-scale financial activity. somewhat lessened the focus on Al Qaeda As Daesh has lost territory, a number of over the past several years, it remains a fighters with origin countries outside Syria and formidable organization throughout the Middle Iraq, including Canada, have, or could seek to East. Indeed, it has affiliates and sympathizers return or move to other regions. Some of these in numerous countries in the region, including individuals may also engage in lone-actor or Yemen and Saudi Arabia (Al Qaeda in the small-cell-type attacks in their home countries Arabian Peninsula, or AQAP) and Syria (Al or elsewhere. An additional risk, however, is Qaeda in Syria also known as Tahrir al-Sham). that these individuals may go on to facilitate There are multiple Al Qaeda affiliates in South financial aid to the organization from their Asia and North, East and West Africa as well home states, thanks to their connections to (see below). Daesh members in the Middle East. Al Qaeda’s activities, unlike those of Daesh, Outlook have not been centralized in a primary geographic territory. Instead, Al Qaeda’s core Daesh will continue to remain a significant provides the overall direction for the terrorist financing risk to Canada over the movement, coordinating with its affiliates coming year as the organization continues to through various clandestine means, and return to its origins as a terrorist group providing or receiving financial support engaged in insurgent activity. Given that many depending upon its circumstances and the Daesh-inspired attacks outside of Syria and affiliates’. Al Qaeda’s financing appears similar Iraq were designed to maximize the number of to that of Daesh in its opportunistic nature, casualties, reporting entities are encouraged to wherein the organization capitalizes on single remain vigilant in their monitoring for any acts that can bring in substantial sums of transactional activity that could indicate the money. For example, AQAP members stole planning stages of such attacks. millions of dollars from a provincial bank in Daesh will also continue to pose a serious risk Zinjar, Yemen, in 2011, and looted within Syria and Iraq. There, and in approximately $60 million from the main bank neighbouring counties such as Turkey and in the port city of Mukalla, Yemen, in April Jordan, it will continue to exploit the existing 2015. financial infrastructure. While such one-off funding opportunities can bring in significant resources, they do not Geographic indicators provide a stable source of revenue. For AQAP, Iraq more regularized revenue sources have been • Mosul taxing oil and gas transiting through the areas • Hawija in which it exercises control or influence, • Diyala kidnapping for ransom, and setting up and • Baquba receiving donations for fake charities. AQAP

9 Terrorist Financing Assessment 2018

has also received support from other Al Qaeda (see Annex 1) in which transactions to or from branches, which have provided fighters. The these jurisdictions may arise, or transactions in organization has also taxed goods and fuel the form of donations to charities in these when it has had control over territory, such as areas for which negative media coverage Mukalla in 2015. Although since AQAP has lost exists. control of the city, it remains unclear whether such revenue streams are still available and in Geographic indicators what volumes. Yemen Tahrir al-Sham has made use of some of the AQAP has a significant presence in certain same funding strategies in Syria as AQAP. For areas of Yemen. When seen in conjunction example, Tahrir al-Sham relies on kidnapping with other indicators of suspicious transaction for ransom, taxation of the local population, in activity, these areas may provide further particular for water usage, and the looting and context for indicators, which may suggest that sale of goods, such as antiquities. It also such transactions warrant the submission of a receives support from other Al Qaeda affiliates suspicious transaction report. In addition, due and donors. Like Daesh, however, as the to the ongoing conflict within the country, the group’s capability and territorial control have weakness of state structures, and the presence been degraded, its revenue sources have also of multiple violent groups, Yemen as a whole is diminished. considered higher risk for potential terrorist financing activity. The following cities within Outlook Yemen have been known to be areas with a Ongoing conflict and unrest in the Middle East high presence of terrorist organizations. will continue to provide Al Qaeda and its affiliates with opportunities to expand and • Rada potentially capitalize on the decline of Daesh • Ja’ar by securing greater support and access to • Zinjibar financial resources. While these resources may • Mahfad be smaller and less stable compared to what • Azzan was available when both groups controlled • Al-Mukalla territory, the low cost of attacks protects Al • Sana’a Qaeda from financial disruption to a certain • Aden extent. Syria

Although neither of these groups relies on Tahrir al-Sham, like Daesh, has lost significant Canada as a significant source of funding, portions of the territory it once controlled in reporting entities should continue to be aware Syria. In spite of these losses, however, there of the risks associated with transactions are still certain jurisdictions within the country involving certain jurisdictions with which Al where Tahrir al-Sham maintains a presence. Qaeda is associated in both Yemen and Syria, The following subnational jurisdictions may as discussed below. In particular, this includes provide further context when assessing monitoring for extremist traveller typologies

10 Terrorist Financing Assessment 2018

transactions for suspicions of terrorist financing giving it the capacity to act as a state within a activity. state. Outside of these formal structures, however, Hizballah operates within a logistical • Aleppo and support structure that is both global in • Idlib scope and highly diversified in nature. The • Daraa organization makes use of this support network • A’zaz to augment its financial capacity for operations • Al Bab’ both within and outside the Middle East. • Al Safirah • Manbij For decades, Hizballah has received significant • As Suwayda funding from Iran, resulting in many countries • Jisr ash Shugur designating it as a state sponsor of terrorism. This funding likely accounts for a large Lebanon proportion of Hizballah’s overall budget, • Sidon although specific figures are not known. • Ain Al Hilweh Second to state support for Hizballah are While the preceding analysis focuses primarily numerous material supporters–successful on Tahrir al-Sham, it should be emphasized individuals in business and other professions– that the alliances and affiliations among who provide both financial and other resources terrorist organizations fighting in Syria remain to the organization. These individuals operate extremely fluid. This can make assessing a in many countries both within and outside of specific group difficult, particularly when the Middle East, including Canada. In many reviewing suspicious transactions. In light of cases, these individuals are not directly tied to this, FINTRAC recommends that reporting the formal structures of Hizballah, and operate entities emphasize geographic areas of successful businesses that engage in concern, with a focus on those cities and towns legitimate commercial activity. Some of the in Syria in which conflict is ongoing, regardless resources these businesses generate, of the specific alliances of the groups involved. however, are ultimately diverted to support The locations listed above are not exhaustive, Hizballah’s official activities. but rather indicative of the most contested areas at the time of writing. That notwithstanding, Syria in its entirety remains at higher risk for terrorist financing. Hizballah Hizballah is one of the most complex listed terrorist organizations from a financing perspective and currently one of the most powerful political parties in Lebanon. The organization is well entrenched in the Lebanese political and economic landscape,

11 Terrorist Financing Assessment 2018

Hizballah also maintains an international suspicious transactions more difficult for network of charities, non-profit organizations reporting entities to detect. and other organizations sympathetic to its cause. These organizations exist in countries Geographic indicators throughout the world, again including Canada. Lebanon The financial connections between Hizballah and these organizations, however, are not Hizballah is strongly rooted in certain always straightforward. In some cases, a geographic locations in the Middle East, with a portion of the funds these organizations raise weaker presence in many others. When seen may find its way back to Hizballah in the Middle in conjunction with other indicators of East; however, in other cases these suspicious transaction activity, implication of organizations themselves may be the the following cities and regions may provide a beneficiaries of Hizballah funding. further context for those indicators. This may suggest that such transactions warrant the Finally, Hizballah may benefit indirectly from submission of a Suspicious Transaction donations or other funding from sympathetic Report. members of the global Lebanese Shia population. Often, these individuals have no • Hret Hreik direct or even indirect affiliation with the • Dahiyah (southern suburbs of Beirut) organization, but may simply sympathize with it • Baalbek for political reasons. This support can even • Hermel extend to individuals engaging in criminal • Tyre (Sour) activity, as has been seen on a limited number • Bint Jbeil of occasions in the past in locations as diverse • Nabatieh as West Africa, the United States and South America.

Outlook Hizballah will remain a primary concern for terrorist financing activity, since its global reach, diversified funding structure, and role in the Lebanese political system will ensure its longevity. Its increasing influence in Syria and Iraq as a result of its participation in the fight against Daesh has also bolstered its fortunes. The risk of the potential diversion of funds to support Hizballah remains higher in Canada in particular, given the longstanding and significant financial flows between Canada and Lebanon, the volume of which can often make

12 Terrorist Financing Assessment 2018

of institutional capacity and resources have allowed terrorist organizations to continue to SOUTH ASIA generate and access funds through the international financial system. These factors The South Asia region, centring on Afghanistan will continue to pose serious risks of terrorist and Pakistan, is of high importance in the risk financing throughout the region. of terrorist financing to Canada. Moreover, Canada is financially exposed to Since the transition of security enforcement these jurisdictions via its large Afghan and from the NATO-led International Security Pakistani diaspora, as evidenced by the Assistance Force to the Afghan National substantial value of funds remitted to and from Defense and Security Forces beginning in their home countries. The degradation of 2013, Afghanistan’s security environment has security in Afghanistan and Pakistan and the become increasingly unstable. Over the past strengthening of terrorist organizations in the year, there has been an increase in terror region present a terrorist financing concern for attacks by the Taliban and its affiliate the Canada. Any fund flows from Canada to Haqqani Network, while groups such as Daesh regions controlled or influenced by terrorist Khorasan Province and Lashkar-e-Taiba organizations are potentially at risk of being continue to attempt to establish themselves taxed or diverted and used to support these through high-profile mass-casualty attacks. terrorist organizations. Pakistan has long experienced high levels of Afghanistan terrorism, with mass-casualty attacks against civilians, government officials and religious Canada’s exposure to Afghanistan-related minorities continuing throughout the country. financial activity has been low and limited to While the number of terrorism-related civilian mostly remittance activities since 2014 as a deaths has decreased since 2016, the result of the withdrawal of Canadian troops in proliferation of numerous active terrorist March of the same year. A significant portion of organizations perpetrating attacks both within observed transactions are low-value wire and outside the country persists. The country is transfers being sent to and from higher risk a base of operations for groups such as the jurisdictions within Afghanistan and to third Haqqani Network, the Taliban and Lashkar-e- countries at risk for terrorist financing activity. Taiba. Transactions are primarily conducted through money service businesses followed by the Persistent insecurity and the proliferation of banking sector. While FINTRAC assesses numerous active terrorist organizations these transactions to be remittance activities, throughout most of Afghanistan and key areas funds are being remitted to cities or provinces of Pakistan pose serious challenges to counter- within Taliban or Daesh Khorasan Province terrorist financing regimes. Despite the efforts control. The presence of numerous active of both countries to stem terrorist financing terrorist groups in the country contributes to a activities, weak anti-money laundering and higher risk of possible fund diversion for counter-terrorist financing controls and the lack terrorist financing purposes.

13 Terrorist Financing Assessment 2018

Other indicators of suspicious transactions Taliban financial solicitation, facilitation and related to Afghanistan focus on potential logistics occur well beyond Afghanistan and diversion of funds sent or received by Pakistan. charitable organizations; transactions The Taliban’s longevity stems in part from its associated with politically exposed foreign ability to exploit Afghanistan’s weakly regulated persons and corruption; high-risk auto economy, as well as its persistent insecurity, to purchases and/or imports and exports; and successfully diversify its income sources. While third-party romance and/or relative-in-need the group engages in traditional fundraising in fraud. Afghanistan and Pakistan, as well as in the Pakistan Gulf States, opium and hashish trafficking remains one of its largest revenue sources. Pakistan has a large profile in the reports The Taliban increasingly leverages criminal FINTRAC receives, compared to other networks to raise funds and levy taxes on countries in the region. With a very high rate of heroin and hashish production, sale and domestic terrorist attacks, and the presence of smuggling, as well as providing protection and a number of terrorist groups throughout the escort/security services to non-affiliated drug country, Pakistan remains at particularly traffickers. Similar protection and security elevated risk for terrorist financing activity. services are used to extort funds from Particular risk factors reporting entities should international aid and development agencies consider in relation to Pakistan include operating in Afghanistan. The presence of transactions involving cities or towns close to international military and nongovernmental the Afghan border; transactions involving organizations in Afghanistan also allows the businesses whose activities resemble those of Taliban to profit from kidnapping-for-ransom a money services business but who appear to schemes. be operating in an unrelated sector; and The group also profits in large part from the transactions involving other high-risk countries, unofficial economy (grey/black markets) – Afghanistan and the United Arab Emirates, in imports, exports and smuggling of goods that particular. occurs outside of the realm of state purview and therefore financial control. The Taliban Taliban also exploits natural resources, seizes assets, The Taliban continues to be a resilient and and levies taxes on opium farmers, citizens active insurgent group, outlasting missions by and commercial businesses in its areas of the NATO-led International Security Assistance control. Force and the Afghan National Defense and The Taliban relies on informal methods to Security Forces. Unlike Al Qaeda, the Taliban move funds into, out of and around operates and conducts attacks primarily in one Afghanistan, including couriers, commodities geographic region and, since 2016, has made and informal money transfer systems. Due to significant territorial gains in Afghanistan in an Afghanistan’s small banking sector, inadequate effort to develop parallel governance in the customer due diligence and record keeping country. Unlike its military operations, however,

14 Terrorist Financing Assessment 2018

measures, hawalas are often used as a way to • Badakhshan circumvent government oversight and • Balkh enforcement of the anti-money laundering and • Ghazni counter-terrorism financing framework. Weak • Helmand measures governing the cross-border • Herat movement of currency allow the group to • Jawzjan smuggle bulk cash and use commodities such • as gold to transport funds. • Kandahar • Kapisa Outlook • The presence of the Taliban throughout • Konar Afghanistan has contributed to the higher risk • Nangarhar of fund diversion for terrorist financing • Laghman purposes. The group frequently mounts attacks • Logar to seize control of districts from the Afghan • Paktia National Defense and Security Forces and • Paktika maintains an open presence in government- • Takhar held districts across the region. Given the • Wardak presence of allied forces in the country, as well Pakistan as a large Afghan diaspora in Canada remitting funds back home, the Taliban continues to • Karachi pose a terrorist financing risk to Canada. Lashkar-e-Taiba Geographic indicators Founded in Pakistan in the 1990s, Lashkar-e- Afghanistan Taiba is the militant arm of the organization Markaz-ad-Dawa-wal-Irshad. In 2002, the latter The Taliban has a significant presence in rebranded itself as Jamaat-ud-Dawa (JuD) to multiple districts in provinces across superficially split from Lashkar-e-Taiba. Today, Afghanistan. According to the group’s own Lashkar-e-Taiba uses JuD as a front claims, it controlled or influenced 211 districts organization and the two groups continue to as of March 2017. When seen in conjunction operate together to further their ideology. with other indicators of suspicious transaction activity, implication of the cities in the following Lashkar-e-Taiba is unique in its operations and provinces may pose a higher risk for terrorism has taken advantage of the social capital it financing and may also provide further context gains through its activities. The group’s funds for those indicators. This may suggest that are mainly used for preaching, providing social such transactions warrant the submission of a services and achieving its ideological Suspicious Transaction Report. objectives through recruitment, training, and procurement of equipment and weapons. The group operates numerous Islamic institutions and madrassas, social service organizations,

15 Terrorist Financing Assessment 2018

hospitals and medical clinics across Pakistan Outlook to gain legitimacy and recruit new members. While Lashkar-e-Taiba does not rely on Through JuD, the group provides charitable Canadians as a significant source of funding, services and relief to garner goodwill and the proliferation of the group’s influence and loyalty. stake in the Pakistani economy presents a Lashkar-e-Taiba relies on diverse revenue higher risk for Canadian funds to be diverted streams. A significant portion of the group’s for terrorist financing. The group’s use of JuD financial and material support originates from and other charities to raise funds poses an the state of Pakistan, as well as charitable additional risk for the Pakistani-Canadian donations from the Gulf States, charities and diaspora, who may unsuspectingly donate to expatriate communities and businessmen. The the group. Reporting entities should continue to group also systematically exploits JuD’s social be aware of charity-related transactions that welfare networks and members for fundraising may be associated with Lashkar-e-Taiba and purposes. Donation boxes are used in markets, JuD. JuD offices, businesses and at public gatherings throughout Pakistan. Geographic indicators Pakistan The group secures funding from legitimate businesses it owns or controls, such as fish Lashkar-e-Taiba carries out cross-border farms and agricultural tracts, and profits from operations in both India and Afghanistan. false invoicing, extortion and levying taxes. The Based in eastern Pakistan and Pakistan- group also diverts revenues and tuition fees administered Kashmir, the group maintains and raised from its Islamic institutions, madrassas, operates numerous training camps, recruitment medical clinics and services. Other profitable offices and businesses across Pakistan. When illicit activities include counterfeiting currency seen in conjunction with other indicators of and drug trafficking. suspicious transaction activity, implications of the following subnational jurisdictions may Similar to other terrorist groups operating in pose a higher risk of terrorism financing and Asia, Lashkar-e-Taiba relies heavily on may provide further context for those informal money transfer systems such as indicators. This may suggest that such hawalas and cash couriers. The group transactions warrant the submission of a leverages JuD preachers travelling Suspicious Transaction Report. internationally to raise, collect and move funds throughout the region, essentially acting as • Abbotabad cash couriers for the group. The group is also • Akora Khattak known for exploiting the traditional banking • Chamkani sector by providing account numbers on its • Kohat website for charitable purposes, through which • Bannu expatriates legally move money into Pakistani • Dera Ismail Khan banks. • Dera Ghazi Khan • Jhang

16 Terrorist Financing Assessment 2018

• Muzaffarabad communications, construction, import-export, • Lahore natural resources, weapons and transportation. • Peshawar The group also owns and operates a network • Islamabad of madrassas, and uses both them and its • Rawalpindi business interests to conceal and launder licit • Karachi and illicit profits. • Multan The group also extorts and levies taxes on • Quetta local, regional and international businesses, • Gujranwala and citizens in its area of control. Increasingly, • Sialkot the network has come to rely on kidnapping • Muridke local business owners, or wealthy and Haqqani Network influential citizens, rather than Western targets, since the financial concessions are much The Haqqani Network rose to prominence in easier to gain. Other methods used to raise the 1990s, fighting in the Soviet-Afghan War funds include providing protection for and alongside the Taliban in Afghanistan. Today, taxing narcotics trafficking and drug precursor the group is primarily based in Lower Kurram chemical smuggling. Agency, Pakistan, and conducts cross-border operations in Afghanistan. The group is an The pervasiveness of the Haqqani Network’s integral asset of the Taliban, but maintains influence in the Afghan and Pakistani autonomy over its financial and tactical economies is instrumental to its ability to move operations. and manage its funds. The group uses its madrassas as a conduit for cash couriers The network’s resiliency stems from its ability moving funds in and out of Afghanistan and to to occupy key spaces in both the licit and illicit send monthly salary payments to operatives economies in Afghanistan and Pakistan. The inside the country. Besides cash couriers, the group also leverages its alliances with various Haqqani Network uses hawalas, banks and terrorist factions in Afghanistan and Pakistan, other local financial institutions to hold and various Gulf States, and with some elements in launder funds. the Pakistani security establishment, for support, protection and funds. The network Outlook also benefits from donations through The Haqqani Network’s holdings in both fundraising activities in the Gulf States and Pakistan and Afghanistan pose a terrorist jurisdictions with a Haqqani Network presence. financing risk to Canada, similar to that of The Haqqani Network has spent a Lashkar-e-Taiba. Legitimate financial considerable amount of time and effort transactions may be inadvertently diverted diversifying its revenue streams. It has through Haqqani-related front companies or cultivated a vast network of front companies legitimate businesses. Reporting entities and legal business interests across key should leverage open source intelligence and business sectors, including real estate, negative media coverage to identify

17 Terrorist Financing Assessment 2018

transactions involving high-risk businesses OTHER associated with the Haqqani Network. JURISDICTIONS Geographic indicators AND GROUPS OF The Haqqani Network maintains its base of CONCERN operations in Thal and Saida in the Lower Kurram Agency of Pakistan. When seen in Somalia conjunction with other indicators of suspicious Somalia has a small profile in the reporting transaction activity, implications of the following FINTRAC receives, although Canada’s large subnational jurisdictions may pose a higher risk Somali diaspora contributes to a relatively high of terrorism financing and may provide further exposure to remittances to the country. Due to context for those indicators. This may suggest Somalia’s extremely weak banking sector, the that such transactions warrant the submission majority of financial transactions to and from of a Suspicious Transaction Report. Canada occur through money services Pakistan businesses. As with many other African • Thal countries, Somalia relies heavily on mobile • Saida banking, given the relative scarcity of banks • Peshawar and other financial institutions there. Particular • Kohat vulnerabilities reporting entities should consider for terrorist financing in relation to Somalia Afghanistan include financial activity that appears to • Paktia indicate that an individual is acting as an • Paktika unregistered money services business, as well • Khost as financial indicators associated with extremist travellers who may be travelling to or from the country. Al Shabaab Al Shabaab is based primarily in the southern and western regions of Somalia. At various times, it has controlled significant portions of Somali territory, including parts of the capital, Mogadishu, and the port city of Kismayo. Since 2013, Al Qaeda has recognized Al Shabaab as its official branch in Somalia. Although Al Shabaab no longer has territorial control over major urban centres in Somalia, it still maintains a strong presence throughout the south of the country, and has networks in Mogadishu, the north of the country and

18 Terrorist Financing Assessment 2018

throughout various parts of neighbouring in particular when observed in conjunction with Kenya, particularly along the Somali border. the geographic indicators observed below.

Al Shabaab has relied on various financing Geographic Indicators sources over the past several years, including the taxation of various commodities and Somalia activities, which has been possible due to its While Somalia in its entirety remains at higher territorial control. For example, Al Shabaab has risk for terrorist financing activity, the following taxed the export of both sugar and charcoal to areas have been associated with Al Shabaab various countries in the region, as well as the activity: sales transactions and salaries of individuals living in Al Shabaab-controlled areas. While the • Bosaaso taxation on activity related to the use of ports • Ghalkayo has also been a significant funding source, Al • Dhusamareb Shabaab no longer has access to this revenue • Beledweyne since losing control of Kismayo in 2012. • Hudur Revenue provided by taxation of charcoal has • Baidoa also been somewhat hampered by a United • Bardere Nations ban on the commodity coming from • Marka Somalia. Taxation of the drug khat, which is • Mogadishu commonly used in the region, provides an • Jilib additional funding source. • Kismayo

While it is unknown to what extent Al Shabaab Kenya receives financial support from other Al Qaeda In addition to the aforementioned cities and affiliates, there is limited indication that the towns in Somalia, the following locations in group has received donations from wealthy Kenya have also been associated with Al individuals sympathetic to Al Shabaab’s cause, Shabaab activity: as well as indications that the group receives • Mandera smaller amounts from sometimes unwitting • El Wak members of the diaspora living in various Gulf • Dadaab States. Supporters in Kenya have also raised • Kolbio funds for the organization through money services businesses serving the Somali The Philippines diaspora. The Philippines has a large profile in reporting In previous years, a small number of received by FINTRAC relative to other individuals have left Canada to join Al countries in Southeast Asia, likely as a result of Shabaab, although this trend has slowed the large Filipino diaspora and subsequent dramatically. Nevertheless, financial indicators remittance flows out of Canada. The presence of extremist traveller behaviour with a link to of numerous terrorist and separatist groups, Somalia should still be considered higher risk, including the Daesh-affiliated Abu Sayyaf

19 Terrorist Financing Assessment 2018

Group, and the country’s historical and ongoing During the establishment of ASG, the group use as a drug trafficking jurisdiction, represents received logistical and financial support from a higher risk for terrorist financing activity. various terrorist groups, including Al Qaeda and Jemaah Islamiyah. As revenues from other The primary concern for Filipino terrorist like-minded groups have declined, ASG has financing risk is the diversion of remittances mainly turned to violent and criminal activity to through taxation or extortion in cities and raise needed funds. Specifically, the group provinces where terrorist activities occur. targets Westerners, wealthy foreign nationals, Transactions originate predominantly from local politicians, businessmen and civilians to money service businesses and banks, largely kidnap for ransom. The group levies taxes and for remittances. Transactions may be demands protection payments from businesses intercepted and redirected by terrorist groups, and civilians within its area of control. The which largely rely on the same informal money group also profits from taxing marijuana farms transfer systems to move and manage funds. as well as the sale of marijuana in the Sulu Filipino terrorist groups have leveraged the loss Archipelago. of Daesh core territory in Syria and Iraq, and Remittances from the Filipino diaspora are an the inability of extremist travellers to travel to integral part of the country’s economy and may Syria or Iraq, to transform the Philippines into be diverted by ASG and other terrorist an emerging theatre for terrorist activities. organizations operating in the Philippines. ASG Particular risk factors to consider in relation to relies on the same informal money transfer the Philippines include suspicious transactions systems to move and manage funds as the indicative of extremist traveller activities, and Filipino diaspora, and may intercept and international flows between the Philippines and redirect funds entering the country via money Middle Eastern countries that may act as a service businesses. front for fund flows between the headquarters of Daesh or Al Qaeda and their affiliates in the Outlook Philippines. ASG has capitalized on Daesh’s brand and Abu Sayyaf Group transformed parts of the Philippines into a possible new theatre for extremist travellers The Abu Sayyaf Group (ASG) is a multi-faction unable to travel to Syria or Iraq to fight. network operating in the southern Philippines. However, with the death of Daesh-linked ASG The group gained increased international leader Isnilon Hapilon in 2017, the group has notoriety in 2014 for pledging allegiance to been quietly recovering and reorganizing for Daesh and then for the kidnapping and brutal future attacks. Since its founding, ASG has beheading of three Westerners–two Canadians been a resilient group and there is no indication and a German. Operating in the south islands that the group has been completely erased of the Philippines, the ASG engages in terrorist from the Philippines landscape. As such, activities both for profit and to push for an FINTRAC is of the view that ASG will continue independent Filipino . to engage in criminal activities to raise revenues.

20 Terrorist Financing Assessment 2018

While Canada’s exposure to ASG-linked • Kabacan terrorism financing is low, reporting entities • Isabela City should continue monitoring extremist traveller • Ozamiz City typologies related to the Philippines as well as • Monkayo transactions involving certain jurisdictions • General Santos City linked to ASG, as identified below. • Kidapawan City • Datu Piang Geographic indicators • Cagayan de Oro • Koronadal City The Philippines • Butuan City ASG mainly operates in the southern • Cortabato Philippines. While the group has conducted its • Basilan Island kidnapping-for-ransom operations all over the • Sulu Island country in recent years, its base of operations • Tawi-Tawi Island remains in the Sulu Archipelago and Mindanao. When seen in conjunction with other indicators of suspicious transaction activity, implications of the following subnational jurisdictions may pose a higher risk of terrorism financing and may provide further context for those indicators. This may suggest that such transactions warrant the submission of a Suspicious Transaction Report.

• Mindanao • Davao • Jolo • Marawi • Pagadian • Zamboanga • Misamis • Ipil

21 Terrorist Financing Assessment 2018

FINANCIAL an important element of producing that intelligence. As such, reporting entities are ACTIVITIES OF encouraged to use the indicators found in EXTREMIST Annex 1 as a baseline, while refining them in TRAVELLERS light of the global terrorist situation.

The extremist traveller phenomenon has posed Stages and roles in the the primary terrorist financing risk to Canada extremist traveller process over the past several years, drawing FINTRAC assesses that there are several approximately 190 individuals with a nexus to discrete phases to successfully travelling to join Canada to conflict zones all over the world. a conflict or engage in terrorist activity While the phenomenon predates the creation overseas. The four main stages are pre- of Daesh, the most recent conflict in Syria and departure, en route, in theatre and returning, Iraq has drawn thousands of individuals from corresponding to the steps individuals take across the globe to Daesh-controlled territory. when travelling overseas to engage in As of 2017, approximately 60 individuals had hostilities. In some cases, an individual may returned to Canada from global conflicts. not reach their ultimate destination for any Despite Daesh’s loss of territory throughout number of reasons, resulting in the interruption 2017, and the departure or death of many or denial of their travel. Finally, the activities of extremist travellers in Syria and Iraq, the extremist travellers may also be supported by broader phenomenon of individuals travelling individuals who, while not participating actively overseas to participate in foreign conflicts for in conflicts themselves, facilitate the political or ideological reasons will likely persist. participation of others. This final category is the As such, continued attention on the part of facilitator or donor. Canadian financial institutions to specific financial indicators of such activity and the global context in which they occur remains crucial.

The extremist traveller phenomenon is not new, but in the context of the rise of Daesh it has taken on a new importance to the fight against terrorist financing. While in the case of Syria and Iraq it appears that the trend of individuals travelling to engage in violence has decreased, this phenomenon could continue in current and future conflicts. Financial intelligence will continue to play an important role in the detection and prevention of individuals travelling to participate in conflict, and indicators of this type of activity will remain

22 Terrorist Financing Assessment 2018

EMERGING ISSUES AND INFORMATION GAPS Small scale, low-value attacks Over the last several years there has been a tendency towards small-scale, low-cost terrorist attacks against vulnerable or soft targets. A particularly disturbing example of this has been the use of cars or trucks to target random groups of individuals, often at public events or other large gatherings.

While the nature of these attacks speaks to the relative effectiveness of counter-terrorist measures, among other factors, particularly in preventing the acquisition and use of more dangerous weapons, they also present a particular challenge to counter-terrorist financing programs. The extremely low cost of such attacks, combined with the routine nature of the limited financial activity required to undertake them, will continue to present challenges to the proactive detection of An understanding of these stages can be potential terrorist activity using financial useful for determining possible financial intelligence. indicators of extremist traveller activity, since The continued occurrence of such attacks will each stage presents potential opportunities for require an ongoing examination of risk detection through financial intelligence. methodologies and monitoring strategies to facilitate the development of actionable financial indicators. This process will also likely require greater reliance on public-private partnerships, and new means of information sharing to ensure that financial intelligence keeps pace with the changing environment.

23 Terrorist Financing Assessment 2018

Alternative payment methods Increasing importance of Alternative payment methods refer to a wide geographic indicators variety of products used to facilitate the transfer Over the past several years, coinciding with the of value, and have become a key enabler of rise of Daesh and the extremist traveller economic activity across many parts of the phenomenon, the role of geography as an world. While a necessary and valuable part of additional indicator in the assessment of contemporary commerce, however, many of terrorist financing risk has come to the fore. In these products introduce the potential for new contrast to previous approaches, however, vulnerabilities and potential exploitation for the more specific geographical information related purposes of terrorist financing. to transactions is becoming critical. Attention not to just countries determined to be at higher Products that facilitate the anonymity of risk for terrorist financing, but more specifically individuals engaging in transactions, such as to cities and towns within those countries, and prepaid cards unattached to an established the characteristics that make them higher risk, account with a financial institution, will continue will be a crucially important factor to consider in to pose risks similar to that of cash, but with the the reporting of suspicions of terrorist financing. additional feature that they are far easier to move, particularly across international borders. The extremist traveller phenomenon illustrates While there is limited evidence of the wide this growing importance. As discussed adoption of such products for the purposes of throughout this report, particular cities in terrorist financing, monitoring of trends in this countries such as Turkey, which border on area will gain importance over the coming year. territory formerly controlled by Daesh, for a time, provided a powerful indicator of risk. This Mobile payments and other online payment was due to cities being used as a transit point alternatives to traditional banking or exchange for individuals and goods aiding extremist services are also an emerging area of terrorist groups in the region. This dramatically financing risk, in particular when these services increased the usefulness of reporting on these can help obscure the identity of one or both areas compared to reporting referring only to parties to a transaction, slowing down the flow Turkey generally. of actionable financial intelligence. A move toward the monitoring and reporting of more specific geographic information in the future will enable reporting entities to both better manage their risk of exposure to terrorist financing, as well as to report more actionable and useful financial intelligence.

24 Terrorist Financing Assessment 2018

FURTHER READING Global Affairs Canada http://international.gc.ca/world-monde/country- The terrorist financing landscape is dynamic, pays/index.aspx?lang=eng and often changing political developments can Global Affairs Canada maintains travel elevate or decrease the level of risk from a advisories on countries across the world, particular jurisdiction. As such, the following list including regions within countries that are of sources for public information on terrorist particularly unsafe for reasons of security and financing, and terrorism more broadly, is safety, including terrorist activity. recommended for financial institutions in order to assist with the ongoing development of Chatham House monitoring and risk assessment tools. http://www.chathamhouse.org/

Financial Action Task Force Chatham House is a London-based http://www.fatf-gafi.org/countries/ independent policy institute that provides expert commentary and reporting on The task force and its various regional bodies international security issues, including terrorism provide useful information on risks associated and conflict. with terrorist financing. In particular, mutual evaluation documents are a good source of National Consortium for the Study of information on specific vulnerabilities in Terrorism and Responses to Terrorism member states’ counter-terrorist financing http://www.start.umd.edu/ regimes. This group is dedicated to the scientific study of Canadian Security Intelligence Service global terrorism, and provides research and https://www.canada.ca/en/security-intelligence- education on terrorist activity across the globe. service.html It also maintains the Global Terrorism Database, a comprehensive list of terrorist The Canadian Security Intelligence Service events from 1970 to the present. publishes a number of public reports on current security issues, including issues related to Studies in Conflict and Terrorism terrorism. https://www.tandfonline.com/toc/uter20/current

This journal publishes theoretical and empirical studies on issues related to terrorism, conflict and insurgency.

25 Terrorist Financing Assessment 2018

Terrorism and Political Violence ANNEX 1: https://www.tandfonline.com/toc/ftpv20/current INDICATORS OF This multidisciplinary journal publishing studies FINANCIAL on the causes of terrorist and state violence, links between terrorism and organized crime, ACTIVITIES OF and public policy responses. EXTREMIST SITE Intelligence Group TRAVELLERS https://ent.siteintelgroup.com/ Stages and roles in the extremist This non-governmental counter-terrorism traveller process organization tracks and analyzes online activity FINTRAC assesses that there are several related to extremist and terrorist movements discrete phases to successfully travelling to join and organizations. a conflict or engage in terrorist activity RUSI Centre for Financial Crime and overseas. An understanding of these can be Security Studies useful for determining possible financial https://rusi.org/expertise/research/centre- indicators of extremist traveller activity, since financial-crime-and-security-studies each stage presents potential opportunities for detection through financial intelligence. RUSI’s Centre for Financial Crime and Security Studies conducts research to address the Pre-departure challenges and effects of financial crime and Individuals who decide to travel overseas to threat finance. participate in hostilities in a conflict zone need time and resources to prepare. Prospective Center on Sanctions and Illicit Finance extremist travellers get their personal affairs in https://www.defenddemocracy.org/csif order, plan their travel (including means of The Center on Sanctions and Illicit Finance transportation, timing and routes) and raise provides in-depth analysis on areas of illicit money to buy travel-related items, including finance and national security aspects of tickets. financial activity.

26 Terrorist Financing Assessment 2018

Indicators In theatre • Person indicates planned cease date for Upon reaching the conflict zone, individuals are account activity in theatre. Since a number of contemporary • Person or account activity indicates sale of conflict zones lack financial services, due to the personal possessions conflict and, frequently, international sanctions, • Purchase of airline ticket to country in the the financial aspects of this stage are often vicinity of a conflict zone (e.g., Syria or Iraq) more opaque than those at other stages. • Use of funds for other travel-related items However, extremist travellers in theatre may • Donations to non-profit organizations linked still have some access to either personal to terrorist financing activity resources or those of friends, family or • Use of funds from social assistance, student supporters outside of the conflict zone. loans or other credit products (“debt Indicators financing”) • Exploitation of available credit products, • Person receives money transfers from including maxing out credit cards, not family or friends in or in the vicinity of a making payments and transferring balance conflict zone to personal debit account • Publically available information and media coverage indicates that the individual has En route travelled to a conflict zone This spans the period from departure from • Client accounts go dormant home until individuals reach their destination. Returning Generally, individuals take multiple means of transportation (e.g., airline, bus, train) and stop While extremist travellers may remain in the in a number of locations. Depending on where conflict zone after the conflict subsides, some the conflict is, individuals may follow a attempt to return home or try to go to a third circuitous or seemingly irrational route to country. This stage is critical in terms of public obfuscate their ultimate destination. safety, since returning extremist travellers may bring their combat experience and connections Indicators to terrorist groups home. There is also a risk • Client notifies reporting entity of travel to a that returnees could go on to act as facilitators third country via a country contiguous to a or supporters of terrorist activity, or even as conflict zone, but subsequent financial participants in future attacks. activity indicates the journey was not Indicators completed • Financial activity, such as debit or credit • Person reinitiates activity on a dormant card usage, along a known travel corridor to account a conflict zone • Person begins receiving new sources of • Receipt of wires inside or along the border income (e.g. employment, social assistance) of a conflict zone • Person sends or receives atypical domestic or international transfers

27 Terrorist Financing Assessment 2018

Interrupted travel Donors and facilitators Some individuals may be prevented from In addition to those who travel or intend to reaching a conflict by the authorities or may travel to support a foreign terrorist organization, change their course of action for other reasons. there are those who have no intention to travel In some cases, as has been the case in themselves but support the goals of those who Canada, these individuals may go on to plot or do. These individuals may act as either donors, facilitate domestic attacks or attempt to providing small amounts to individuals facilitate the travel of others. While the intending to travel, or facilitators, who take a frequency of such attacks is low, their impact larger role in planning foreign travel and may on public safety can be significant. assist not only financially but also with logistics. Indicators These individuals may have formal ties to a foreign terrorist organization and may operate • Individual made travel-related purchases, under the guise of a legitimate business such as of airline tickets or a visa, which operation or non-profit organization through were subsequently refunded which they carry out their activities. • Individuals indicated they would be travelling out of the country but transaction history Donors and facilitators operate from virtually suggests the travel did not occur any jurisdiction but may do so from a country • Publically available information indicates near the conflict zone, particularly one that has that the individual was prevented from access to the international financial and travelling for security reasons transportation systems, and affords some degree of anonymity. Turkey, which hosted a number of Daesh facilitation networks throughout the course of the conflict in Iraq and Syria, is a case in point.

Such third-country facilitation activity has taken place in other conflicts. For example, Al- Shabaab used Kenya to facilitate its insurgency, while the Taliban used northern Pakistan and some economically central Gulf States in its activities. This suggests that third- country facilitation activity is highly likely to feature in future conflicts.

28 Terrorist Financing Assessment 2018

ANNEX 2: and presence in Canada, their hostility towards Canada, and their capability and sophistication METHODOLOGY in terms of undertaking operations or attacks FOR COUNTRY AND outside of their main theatre of operations. GROUP SELECTION It is important to note that while all of the above-listed factors were taken into FINTRAC’s terrorist financing assessment consideration when selecting countries and provides a baseline assessment for Canadian terrorist groups, the exclusion of certain reporting entities on the terrorist financing risks jurisdictions and terrorist organizations does presented by various jurisdictions and terrorist not mean there is an absence of risk for organizations within those jurisdictions. The terrorist financing. Rather, this report is trends highlighted in this assessment reflect intended to introduce reporting entities to the 2017 financial intelligence data. issue of terrorist financing. The inclusion of specific countries and terrorist groups was based on a number of factors. Countries determined to be at a higher risk of terrorist financing were selected based on their FINANCIAL TRANSACTIONS AND exposure to terrorists and/or terrorist activities, REPORTS ANALYSIS CENTRE OF CANADA their role in the global financial system, and their counter-terrorist financing regulatory and 234 Laurier Avenue West enforcement regime, as well as Canada’s Ottawa, Ontario K1P 1H7 Canada financial exposure to them, as determined by Telephone: 1-866-346-8722 FINTRAC reporting; remittance flows, as Facsimile: 613-943-7931 reported by the World Bank; and data on trade www.fintrac-canafe.gc.ca volumes, as reported by Statistics Canada. FINTRAC also assessed the financial ISBN: 978-0-660-27844-5 characteristics of terrorist organizations within Cat. No. FD4-18/2018E-PDF jurisdictions at elevated risk of terrorist financing. A number of factors were considered when highlighting high-priority terrorist groups that represent an immediate risk of either violence or terrorist financing undertaken in or directed against Canada. Selected terrorist groups were assessed for lethality and activity, as determined by the number of attacks they had carried out over the previous 18 months, as well as the context of the country or countries in which they operate and access the financial system to raise funds. Terrorist groups were also assessed for the extent of activity

29 Terrorist Financing Assessment 2018