Tackling Terrorism Financing and Money Laundering

The interlinking of criminal aspects of terrorism financing was the primary topic at SAS’ fourth annual Terrorism Financing and Money Laundering Forum, held March 6 at the SAS campus in Cary, NC. Bankers and law enforcement officials from around the globe listened to speakers discuss the interconnectivity of terrorist groups and how to spot the webs of money laundering and other frauds they weave.

Banks and financial institutions have a strong incentive for thwarting fraudulent activity of any variety, as the US government has increased fines for failing to file SARs (suspicious activity reports). As SAS CEO Jim Goodnight noted at the start of the conference, the government issued $400 million in fines and penalties in 2007. A Deloitte-KPMG report estimated that the cost of compliance has increased by 76 percent between 2004 and 2006.

The conference drew speakers from the private and public sectors who discussed what they are seeing and how they are combating fraud and money laundering. Conference speakers touched on an array of topics:

• Steve Emerson, the Executive Director of the Investigative Project on Terrorism (IPT) and author of books such as the recent Jihad Incorporated: A Guide to Militant Islam in the US, discussed how Islamic terrorist groups create benign-sounding charitable, religious or social nonprofit groups that act as fronts for laundering money used to fund terrorist operations. He related the origins of the Muslim Brotherhood and the many organizations it spawned. While the organizations increasingly choose names that don’t suggest an Islamic connection, they often have board members linked to organizations whose funds have been frozen. Emerson noted that bankers have played key roles in tipping off law enforcement to suspicious activity – even before the many post-9/11 laws went into effect. “Your role,”  Emerson told the audience, “is critical. Disrupting the money flow is critical. You have the opportunity to catch someone.’’
  
  
• Jim Candelmo, an Assistant US Attorney, moderated a panel with representatives of the US Treasury Department, the IRS, the US Department of Agriculture and the North Carolina State Bureau of Investigation to discuss highlights of Suspicious Activity Review team results. Candelmo’s panelists assured bankers that the SARs they so diligently file really are used by detailing some of the investigations and arrests the SARs have helped spawn. He also explained how different agencies look at the SARs.
  
  
• Imam Hoque, Chief Technology Officer for Detica, detailed how government agencies, banks and insurance companies use his company’s solution to expose networks of criminal activity. He discussed the limits of independently-operating rules-based programs and data mining and made a compelling case for maintaining data on seemingly legitimate claims or minor criminal activity to help build a database that can discover hidden networks of fraudulent activity and crime. Hoque described the work Detica did with a bank over a 16-week period to run all of its personal banking, small business and credit card debt data through Detica NetReveal®. The bank correctly flagged “bust-out” accounts at 10 times the previous rate. NetReveal, which uses SAS software, helped the United Kingdom’s Insurance Fraud Bureau find crimes that resulted in 100 arrests in the first year the government agency used the solution.
  
  
• Dennis Lormel, Senior Vice President, Anti-Money Laundering for Corporate Risk International, discussed the importance of interagency and industry cooperation in identifying money laundering, saying that terrorists are adaptable and learn quickly from mistakes. It is critical for agencies and financial institutions (via SARs) to be proactive and quick to identify and disrupt terrorist operations. Lormel detailed the various ways terrorists raise money – from identity fraud to credit card theft.
  
  
• Emery Kobor of the Office of Terrorist Financing and Financial Crimes, US Department of the Treasury and Rich Weber, Chief of the Department of Justice Asset Forfeiture and Money Laundering Section, talked about new trends in money laundering and the threats they pose. Electronic funds transfers that mimic cash are increasingly popular. Criminals will use online payment services and prepaid cards to launder money or commit fraud. The number of SARs filed on prepaid or stored value cards increased ten times over from the period between 1997 and 1999 and the period between 2003 and 2007. In a US Secret Service case individuals used a Las Vegas hotel card reader, a computer and phone line to initiate $700,000 in fraudulent returns. The group transmitted electronic processing codes for four businesses in four states directly to the payment processor and loaded refunds onto 80 Visa prepaid cards. The group was able to stay within the load/unload reporting limits yet withdrew up to $200,000 a day via ATMs and money order purchases. Kobor also talked about the risks posed by online payment or “digital currency” companies that require no identification and create no money trail. Last year, one online payment company, E-Gold, was indicted for money laundering and illegal money transmitting.
  
  “The Terrorism Financing and Money Laundering Forum is important to SAS’ initiatives in financial crimes and compliance,’’ said David Stewart, Director of SAS Anti-Money Laundering. “Very few conferences focus on terrorist financing, and even fewer provide the caliber of speakers present at this year's event. Technology providers play an important role in the private/public partnership to monitor the flow of funds to terrorist entities. SAS' sponsorship of the conference demonstrates our commitment to our customers, prospects, and regulatory agencies."