November 2023 Foodman Website and JD Supra
terrorist financing financiamiento del terrorismo

On 10/20/23, Terrorist Financing Red Flags were issued by FinCEN to assist financial institutions in identifying funding streams for the terrorist organization Hamas in response to Hamas’s terrorist attack on the people of Israel.  FinCEN is urging financial institutions including virtual asset service providers (VASPs) to be vigilant in identifying suspicious activity relating to financing Hamas and reporting it to FinCEN.

FinCEN requests that financial institutions reference this alert in SAR field 2 (Filing Institution Note to FinCEN) and the narrative by including the key term “FIN-2023TFHAMAS” and select SAR field 33(a) (Terrorist Financing-Known or suspected terrorist/terrorist organization).

The Terrorist Financing alert contains red flags that FinCEN has identified to help detect, prevent, and report potential suspicious activity related to Hamas’ terrorist financing activity.

Although FinCEN states that no single red flag is determinative of illicit or suspicious activity with respect to terrorist financing, financial institutions should consider the totality of available facts and circumstances, such as:

  • a customer’s historical financial activity,
  • whether the transactions are in line with prevailing business practices,
  • whether the customer exhibits multiple red flags, before determining that a behavior or transaction is suspicious.

Terrorist Financing 7 Red Flags

  1. A customer or a customer’s counterparty conducts transactions with OFAC-designated entities and individuals, or transactions that contain a nexus to identifiers listed for OFAC-designated entities and individuals, to include email addresses, physical addresses, phone numbers, or passport numbers, or virtual currency addresses.
  2. Information included in a transaction between customers indicates support for terrorist campaigns.
  3. A customer conducts transactions with a Money Services Business (MSB) or other financial institution, including one that offers services in virtual currency, that operates in higher risk jurisdictions tied to Hamas activity, and is reasonably believed or suspected to have lax customer due diligence (CDD) requirements, opaque ownership, or otherwise fails to comply with anti-money laundering/combatting the financing of terrorism (AML/CFT) best practices.
  4. A customer conducts transactions that originate with, are directed to, or otherwise involve entities that are shell corporations, general “trading companies,” or other companies that have a nexus with Iran or other Iran-supported terrorist groups, such as Hizballah and Palestinian Islamic Jihad.
  5. A customer that is a charitable organization or nonprofit organization solicits donations but does not appear to provide any charitable services or openly supports Hamas’s terrorist activity or operations. In some cases, these organizations may post on social media platforms or encrypted messaging apps to solicit donations, including in virtual currency.
  6. A customer that is a charitable organization or NPO receives large donations from an unknown source over a short period of time and then sends significant wire transfers or checks to other charitable organizations or Non-Profit Organizations.
  7. A customer conducts transactions with known or suspected virtual currency addresses tied to terrorism or terrorist financing donation campaigns.

FinCEN also reminds Financial Institutions and Virtual Asset Service Providers that Hamas and many entities and individuals associated with Hamas are subject to extensive sanctions by the United States

Following Terrorist Attack on Israel, Treasury Sanctions Hamas Operatives and Financial Facilitators, On 10/18/23, OFAC stated that: “financial institutions and other persons that engage in certain transactions or activities with sanctioned entities and individuals may expose themselves to sanctions or be subject to an enforcement action. The prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any designated person, or the receipt of any contribution or provision of funds, goods, or services from any such person”.

FinCEN’s mission is to safeguard the financial system from illicit use, combat money laundering and its related crimes including terrorist financing and promote national security through the strategic use of financial authorities and the collection, analysis, and dissemination of financial intelligence.

Can your Financial Institution or Virtual Asset Service Provider detect and monitor illicit or suspicious activity with respect to terrorist financing?

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