Tracking Terrorists….How you are Effected

CMTA Advanced Workshop January 24, 2007

Deborah M. HigginsPresident

Higgins Capital Management

The alleged terrorists on this list have been indicted by sitting Federal Grand Juries in various jurisdictions in the United States for the crimes reflected on their wanted posters.

http://www.fbi.gov/homepage.htm

National Money Laundering Strategy

• In 2003, the U.S. government implemented a national money laundering strategy to attack money laundering and terrorist financing on all fronts: both formal and informal methods of the domestic and international financial systems.

• Information taken from the Dept. of Justice and Dept. of the Treasury’s 2003 National Money Laundering Strategy.

National Money Laundering Goals

• Safeguard the international financing system from money laundering and terrorist financing

• Enhance the U.S. government’s ability to identify, investigate and prosecute major money laundering organizations and systems

• Ensure effective regulations

Examples of Terrorist Funding

• Alternative Remittance Systems (ARS)

• Informal Value Transfer System (IVTS), or “hawala”

• Bulk Cash Smuggling

• Trade-based money laundering and terrorist financing

• Cyber Crime

IVTS or “Hawala”

• IVTS, or “hawala”…..an individual in one country gives funds to a hawala broker, who notifies a counterpart (usually of the same extended family or ethnic group) in another country, to transfer an equivalent amount of money to a recipient in that country; used in South Asia, the Middle East, Europe and North America; it’s fast, cost-effective & no paper trail

Bulk Cash Smuggling

• Bulk cash smuggling is used by money launderers and terrorists

• U.S. is working with the international community to ensure mandated inbound/outbound currency reporting at reasonable levels (U.S. reporting is $10,000)

Trade-based Terrorist Financing

• Terrorists move money by means of commerce in either licit or illicit goods

• We now know the Taliban relied on international narcotics trafficking to raise funds

• “Knock-offs” of designer goods are used by terrorist groups

• A North Carolina Hizballah Cell used buying large volumes of cigarettes in a cigarette smuggling enterprise to fund activities

Cyber Crime

• Terrorist solicit donations, share info, and recruit supporters directly via web sites, chat rooms and targeted electronic mailings

• Exploit charitable organizations…solicit funds but with covert intent

• Identity and credit card theft, intellectual property piracy and fraud

Safeguard the International Financing System

• Section 311 of the USA PATRIOT Act provides special measures for jurisdictions, financial institutions, or international transactions of primary money laundering concern

• This is where your day-to-day banking, broker/dealer, and custodian bank interaction come into play.

• This is where your personal accounts & privacy come into play

FinCEN

• Financial Crimes Enforcement Network (FinCEN)

• This is a network, a link between law enforcement, financial institutions and the regulatory communities.

• Receive personal & business lists to check against client databases

• Update the firm contact annually at the Dept of the Treasury

OFAC

• OFAC-Office of Foreign Assets Control

• Administers and enforces economic and trade sanctions

• Financial firms are sent the latest updates via email and must scan client databases to determine whether the name is in the system

Ability to Identify, Investigate and Prosecute

• FinCEN plays a key role in sharing information; OFAC plays a key role in asset control and sanctions

• Steady stream of emails on above

• Tougher customer due diligence requirements, including those related to identification of beneficial owners of corporate vehicles

CIP-Customer ID Program

• Must have program implemented for new account verification and tracking

• Scans for verification of the following: OFAC, SSN, birth date, address, address high risk, DL , phone number; each account pass, fail or review

• NASD’s Customer Identification Program Notice

CIP: Existing Account Docs

• In working with your financial institutions, the Feds are involved; the rules are set.

• Know your customer…..remember to forward all updates and changes immediately…name not there; can not accommodate

• Moving $ is strictly “by-the-book”

Ensure Effective Regulation

• FinCEN

• OFAC

• Anti-money Laundering Policies and Procedures (AML) for financial institutions

• Annual independent audits of the AML

• National Security Letters

On a personal Note

• Banks get nosy to battle ID theft (12/11/06, Teresa Dixon Murray, Newhouse News Service)

• New security measures being required for online access of bank, credit card & investment accounts online.

• Extra credit measures to access financial accounts by phone

On a personal note, 2

• Cheney defends banking, credit record searches, 1/15/07, Associated Press

• Not violating people’s rights by examining the banking and credit records…

• National security letters permit the executive branch to seek records about people in terrorism and spy investigations without a judge’s approval or grand jury subpoena.

Why do you want to know?

• Hopefully this reduces your frustration both professionally and personally as your financial institutions ask for “things they let slide in the past.”

• Remember, these are federal mandates we must all comply with.

• Update ASAP any changes to your financial relationships. If the name doesn’t match existing records, the requests will be denied.

• Do memory exercises; at one point online, I didn’t know the answer to any of the 5 new security questions!