Money Laundering Prevention: Deterring, Detecting, and Resolving Financial Fraud

Chapter 7

Terror Financing

Terrorists Use Money Laundering Techniques

The September 11 terror attacks on the World Trade Center and Pentagon forced a major change in anti-money laundering (AML) enforcement. The first was legislative, in the creation of the Patriot Act; the second was perspective, in the change in direction with the resolution of financial crimes being addressed from a combined and international perspective. While the regulations to this point addressed crime, criminal proceeds, and U.S.-registered financial institutions, that changed with the Patriot Act and it took a new direction. The Act required the creation, and independent auditing, of a specific AML function. The Act further restricted U.S. financial institutions from conducting business with foreign shell banks, known terrorists, and required knowing-your-customer provisions and authorized extensive information sharing with law enforcement.

The ability to launder money has allowed terrorist groups spanning the globe the ability to fund their operations with clean money and not be detected by authorities. Concealing the identity, source, or destination of illegally gained money is important to terrorists, not only for money-laundered funding of standard operations. It also prevents authorities from learning about car bombs, attacks on civilians, airplane hijacking, and the like.

As money laundering at the global level became the focus, international associations have been formed to promote the settlement ...