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Posts tagged money laundering
Illicit Financing in Afghanistan: Methods, mechanisms, and threat-agnostic disruption opportunities

By Jessica Davis

Illicit actors in Afghanistan, including drug traffickers, warlords, terrorist groups, and even former government officials, exploit the country to achieve their own political and economic objectives. Historical and contemporary sources demonstrate that there are patterns in how these actors raise, manage, store, move, and obscure money. This paper provides a historical and contemporary overview of illicit financing activities in Afghanistan. It uses a terrorist financing framework to explain the various mechanisms involved in how illicit actors raise, use, move, store, manage, and obscure their funds. Specific jurisdictions used for illicit finance and global financial vulnerabilities that illicit actors with a nexus to Afghanistan exploit in their financial activities are discussed, outlining the threat-agnostic capabilities that could tackle some of these illicit financial challenges.

To raise funds, illicit actors engage in the production and trafficking of narcotics, taxation and extortion activities, illegal mining and timber production, and any other activities that can generate revenues. Depending on the actor in question, management of the acquired funds might be centralised, within the purview of a financial head, or decentralised, with control vested within several stakeholders. Illicit actors store some of their funds in cash within Afghanistan and use hawalas and banks to both store and transfer wealth out of the country. Since the Taliban takeover, international sanctions have largely ended the ability of banks to transact with most aspects of the global financial sector, with the exception of regional banking relationships that remain intact. Therefore, in addition to hawalas, common methods of moving money out of Afghanistan include bulk cash couriers, the transfer of precious metals and stones, and trade-based money laundering schemes. Wealth is moved out of Afghanistan to several key jurisdictions. Much of it makes its way to the United Arab Emirates (UAE) where funds are invested in businesses and real estate. Funds are also moved to Pakistan, Turkey, and to a lesser extent Iran and other neighbouring or proximate countries.

The stability of illicit financing mechanisms over time and across illicit actors presents opportunities for detection and disruption. However, this also applies to limitations of disruption opportunities. Since illicit actors in Afghanistan raise most of their funds within the country, there are few opportunities to disrupt internal Afghan revenue sources in the post-August 2021 context. As such, other detection and disruption opportunities that can be used to combat illicit financing with a nexus to Afghanistan must be examined. The policy options elaborated in this report include: enhancing the monitoring of aid and donor funding entering the country, facilitating the adoption of foreign asset and beneficial ownership tracing, introducing reforms to the hawala and banking sectors, and addressing deficiencies in international sanctions regimes.

A regionally coordinated policy approach to counter illicit financing from Afghanistan can reduce the ability of illicit actors to access their wealth and fund their activities. However, without access to a cooperative government in Afghanistan, there are limits to what can be achieved. Nonetheless, many of the policy and disruption opportunities available to counter illicit Afghan finance also serve to strengthen the integrity of the global financial system, address existing policy gaps in other jurisdictions, and can generally serve to enhance international cooperation on counter-illicit financing.

SOC ACE Research Paper No 11.

Birmingham, UK: University of Birmingham, 2022. 32p.

Triads, Snakeheads, and Flying Money The Underworld of Chinese Criminal Networks in Latin America and the Caribbean

By Leland Lazarus and Alexander Gocso

This paper provides a comprehensive analysis of the Chinese individuals, gangs, and companies engaging in illicit activities in Latin America and the Caribbean. Our methodology was to research academic literature, news articles, press releases, official statements, and podcasts in Spanish, Portuguese, Mandarin and English, as well as conduct off-the-record interviews with U.S. and LAC intelligence and law enforcement officials to ascertain growing trends in Chinese criminal behavior in the region.

Miami: Florida International University, 2023. 33p.

Money Laundering and Terrorist Financing Risks Arising from Migrant Smuggling

By The Financial Action Task Force (FATF)

Migrant smuggling is a global issue. Every year, millions of migrants seek to escape regional conflict, political instability, persecution and poverty in search of a better future. They can risk their lives at the hands of migrant smugglers who see them as an opportunity to make financial gains and often have little regard for the migrants’ safety. The proceeds generated by migrant smuggling are estimated to exceed USD10 billion per year.

This FATF report analyses the money laundering and terrorist financing risks associated with migrant smuggling. While there has been an increase in migrant smuggling, many countries do not consider it a high-risk crime for money laundering and the associated financial flows are rarely investigated. 

The report identifies the most common methods to transfer and launder the proceeds of migrant smuggling, from hawala, integration of proceeds into legitimate business such as shops, travel agencies and transport companies, and the increasing use of professional money launderers. Using countries’ experiences, the report provides several recommendations and good practices that allow authorities to better trace criminal proceeds and enhance the effectiveness of money laundering investigations.

The report highlights the need for countries to understand the money laundering risks they face from migrant smuggling and to proactively follow the money linked to this criminal activity, including through increased collaboration with national and international authorities and the private sector.

The FATF calls on countries to proactively follow the money linked to migrant smuggling. Strengthening institutional, international and regional cooperation is an important step. There should be particular focus on supporting countries directly affected by migrant smuggling.

Paris: FATF, 2022. 78p.