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  • A War of Proportion: Regulating the Financial Sector in the Name of Counterterrorism | Charity & Security Network
    abuse 5 Broadening financial inclusion should be seen as a key and desirable element of establishing an effective CTF policy and thus steps taken by banks and authorities that exclude users from the financial system and make use of the underground economy appear more attractive are counterproductive 6 Particularly in the case of fragile states such as Somalia the creation of greater financial inclusion is likely to benefit security rather than detract from it and global authorities need to monitor closely whether their measures support or undermine this goal A concerted globally coordinated effort is needed to ensure proportionality is established and maintained Much research has been published consistently highlighting the negative consequences of the global CTF regime and the overwhelming benefits of financial inclusion In what Ian Bremmer President of the Eurasia Group terms a G Zero World a lack of political leadership is to blame for the vicious spiral created by ever increasing CTF pressure Countries such as the U S and UK need to prioritise taming a system that appears on the whole increasingly wasteful and redundant There is an imminent opportunity for leadership to be demonstrated when the UK Government convenes an upcoming roundtable to consider the plight of UK based Money Service Businesses MSBs which are losing their bank accounts because banks fear the regulatory and reputational risks and associated sanctions and penalties of serving clients that transfer money to regions afflicted by terrorism Without political leadership banks fearful of the consequences of CTF regulation will balance risk and return and will exclude an ever greater number of people and organisations from the financial system Rather than trying to catch one kind of fish by draining the ocean 7 committed political leadership is needed Policymakers need to rethink why they have a CTF strategy what are the explicit goals of this strategy and how these goals are being benchmarked and measured If these goals are not being achieved they should have the courage to modify replace or scrap them rather than allow the continued and unchecked proliferation of regulation that inflicts unnecessary cost and burden on corporations and nations and restricts well intentioned access to financial services for people in need leading to greater use of the informal and black economies No one suggests that CTF is not important but a balanced reassessment of the effectiveness of an often counterproductive regime is urgently needed Proportionality is key Tom Keatinge is a banker with nearly 20 years experience He recently completed a sabbatical year studying for a Masters in the War Studies Department of King s College London where he wrote his dissertation on the question of the role played by the global counter terrorist financing effort in international security He is co author of the recently published article Draining the Ocean to Catch one Type of Fish Evaluating the Effectiveness of the Global Counter Terrorism Financing Regime in Perspectives on Terrorism Vol 7 Issue 4 1 US Department of the Treasury 2002 Contributions by the

    Original URL path: http://www.charityandsecurity.org/blog/War_Of_Proportion_Financial_Sector_Counterterrorism (2016-02-16)
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  • Furor Over Misleading UK News Story on Aid to Syria | Charity & Security Network
    money to help millions of refugees from the civil war in Syria are inadvertently supporting terrorism The story quoted Shawcross as saying A lot of money is raised that goes to Syria some if it undoubtedly goes to extremist groups It is very hard for all organizations to determine that In a statement the following day Shawcross said The Daily Telegraph s suggestion that millions are being diverted from well known charities to fund terror groups is speculative and certainly does not represent what we know Such allegations risk undermining the efforts made by charities to alleviate the suffering of vulnerable people in areas like Syria I hope people will continue giving to charities working the UK and around the world with their usual generosity I can reassure donors that known cases of terrorist abuse of charity funds are very low and that we will vigorously pursue any such allegations emphasis added The story has no factual information to support the allegation Instead it cites the risk of diversion of aid referring to things that might happen or are also possible Shawcross also published a letter to the editor in the Telegraph on Sept 10 saying The Charity Commission has no evidence that huge amounts of charitable donations are going to terror groups Diversion of funds is always a danger for charities working in disaster zones The commission recognizes the particular dangers they face in areas in which terrorist groups operate He noted that the DEC had assisted the Commission with drafting guidance on minimizing the dangers which was published in September The DEC s Chief Executive Saleh Saeed issued a statement that said DEC members and their partners take all reasonable steps to avoid any theft or losses and in particular to ensure that aid resources are not used

    Original URL path: http://www.charityandsecurity.org/news/Furor_Over_UK_News_Aid_Syria (2016-02-16)
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  • Barclays’ Delays Shutting Accounts, But Uncertainty Remains for Somalis Depending on Remittances | Charity & Security Network
    to the bank s initial announcement to suspend accounts pleas to British Prime Minister David Cameron and other top British officials to intervene were made by nearly 200 Somali non governmental organizations NGOs on July 1 a copy of the letter can be viewed here If the bank closes the accounts not only will the Somali Diaspora be affected but many aid agencies operating humanitarian programs in Somalia including Oxfam and CARE will be hampered While this suspension will not affect our local transfers it is worth noting that the UN and many of the large relief and development organizations use hawala money transfers to pay their staff procure assistance and implement very successful emergency aid and poverty relief programs such as cash for work the United Nations Dawn Blalock Goodwin told IRIN Many also believe that closing the legal channels of transferring money will drive people to use less accountable alternatives that will make tracing the flow of funds harder The closing of these accounts will only encourage people to send funds through illegal unsafe and untraceable channels thereby potentially making the problem of support to proscribed parties much more serious say over 100 academics and aid experts who wrote a letter a copy can be found here to the British government in late June 2013 They also called on the bank to delay the move provide evidence that the money transfer firms are not in compliance with existing regulations and to convene a series of multi stakeholder discussions to improve due diligence standards to facilitate these types of financial transfers The humanitarian situation in Somalia continues to be grave The Director the UN s Office for Coordination of Humanitarian Affairs John Ging visited the country in mid July and reported that one million people are in urgent need

    Original URL path: http://www.charityandsecurity.org/news/Barclays_delays_Move_Somalia_Remittances_Uncertain (2016-02-16)
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  • New Treasury Regulations Use Expanded Definition of Prohibited Charitable Contributions | Charity & Security Network
    new 31 CRF 594 409 states 594 409 Charitable contributions Unless specifically authorized by the Office of Foreign Assets Control pursuant to this part no charitable contribution or donation of funds goods services or technology including contributions or donations to relieve human suffering such as food clothing or medicine may be made by to or for the benefit of or received from any person whose property and interests in property are blocked pursuant to 594 201 a For the purposes of this part a contribution or donation is made by to or for the benefit of or received from any person whose property and interests in property are blocked pursuant to 594 201 a if made by to or in the name of or received from or in the name of such a person if made by to or in the name of or received from or in the name of an entity or individual acting for or on behalf of or owned or controlled by such a person or if made in an attempt to violate to evade or to avoid the bar on the provision of contributions or donations by to or for the benefit of such a person or the receipt of contributions or donations from any such person The new 31 CFR 595 408 states 595 408 Charitable contributions a Unless specifically authorized by the Office of Foreign Assets Control pursuant to this part no charitable contribution or donation of funds goods services or technology including contributions or donations to relieve human suffering such as food clothing or medicine may be made by to or for the benefit of or received from any specially designated terrorist For the purposes of this part a contribution or donation is made by to or for the benefit of or received from a specially designated terrorist if made by to or in the name of or received from or in the name of a specially designated terrorist if made by to or in the name of or received from or in the name of an entity or individual acting for or on behalf of or owned or controlled by a specially designated terrorist or if made in an attempt to violate to evade or to avoid the bar on the provision of contributions or donations by to or for the benefit of a specially designated terrorist or the receipt of contributions or donations from a specially designated terrorist b Individuals and organizations who donate or contribute funds goods services or technology without knowledge or reason to know that the donation or contribution is destined to or for the benefit of a specially designated terrorist shall not be subject to penalties for such donation or contribution Note that section b in 595 408 is not included in 594 409 leaving organizations which may inadvertently and unknowing provide goods or funds under different sanctions programs subject to very different legal consequences No explanation is offered for this disparate treatment Part 594 317

    Original URL path: http://www.charityandsecurity.org/news/New%20Treasury%20Regulations%20Use%20Expanded%20Definition%20of%20Prohibited%20Charitable%20Contributions (2016-02-16)
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  • UN Counterterrorism Committee Says Anti-Terrorist Finance Rules Should Not Harm Nonprofits | Charity & Security Network
    anti terror finance matters E J Flynn from the UN Counter Terrorism Executive Directorate CTED voiced strong concerns about the impact of measures restricting the rights and freedoms of civil society in particular charitable organizations He said Serious concerns relating to the regulation of non profit organizations and NGOs have been raised in at least three respects The first is that counter financing laws can have a serious impact on the ability of humanitarian organizations to carry out their work in some areas facing crises such as famine and conflict Well established humanitarian principles state that this work must be carried out in conformity with the principles of neutrality independence and impartiality but these principles could be compromised by certain counter financing requirements There are concerns in some States that counter financing measures could place legitimate humanitarian actors in danger of criminal prosecution under material support laws Moreover concerns have been raised over the extent of regulation placed on NGOs and whether or not it is appropriate or proportionate Flynn concluded his remarks by saying he will continue to work with UN members the FATF and civil society on two complementary goals first taking effective action to prevent and to punish the financing of acts of terrorism and second placing our responses to the threat of terrorism within a framework of respect for human rights so as to ensure that our collective action against terrorism strengthens rather than weakens our simultaneous commitment to human rights and the rule of law Another speaker a representative from Pakistan was also critical of FATF polices directed at the nonprofit sector saying R ecommendation 8 of FATF regarding the abuse of non profit entities for the financing of terrorism might have some unintended consequences for charities around the world In some cultures it is

    Original URL path: http://www.charityandsecurity.org/news/UN_CTC_Says_Anti-Terrorist_Finance_Rules_Should_Not_Harm_Nonprofits (2016-02-16)
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  • Charity Blames Anti-Terror Regulations for Bank’s Refusal of Services | Charity & Security Network
    closed down At that time Atallah said Islamic Relief did not think it was being targeted But when it was advised in September by UBS customers that their donations to the charity had been blocked by the bank Islamic Relief realized it had been black listed Islamic Relief was offered no explanation by UBS for the blocks Despite writing to the managing director of the Swiss bank only a bland response advising the action was in line with UBS policy was received The regulators have introduced these rules to fight terror but they are not having the desired effect Atallah said at a meeting of charity regulators that included representatives from the UK Charity Commission and the Internal Revenue Services IRS from the U S at the British House of Lords on Nov 7 Atallah explained how banks like UBS are curtailing services to charities that work in areas considered to be risky out of fear of governments sanctions under broad anti terror finance rules and international monetary regulating bodies like the Financial Action task Force FATF These regimes Hatallah says have a strong influence on banking policy that lead to some banks going over the top in their reaction It is not clear how much this problem disproportionately impacts Muslim charities The impact we see on the ground in Islamic Relief is that like UBS they were fined they upped their risk assessment criteria and we got caught in that Attallah said When they raise the standards I can t speculate exactly why we appear as a higher risk than other organizations but it means we have become a higher risk And from their the banks point of view we can get rid of this risk by stopping work with these people Charities like us were put in a

    Original URL path: http://www.charityandsecurity.org/news/IR_Blames_Anti-Terror_Regulations_Bank_Refusal_Services (2016-02-16)
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  • Senate Panel: A Decade’s Worth of Major Money Laundering Risks at HSBC | Charity & Security Network
    arm HBUS served as a gateway for terrorists to gain access to U S dollars and the U S financial system In one case HBUS supplied nearly 1 billion in cash to a Saudi bank closely connected to a Bangladeshi bank whose largest single shareholder at the time was International Islamic Relief Organization a Saudi based charity classified as a terrorist organization by the U S A second shareholder Lajnat al Birr Al Islamiah was the precursor to the Benevolence Islamic Foundation another charity listed by the U S as a terrorist group The report reveals that HSBC compliance offers were aware of the red flags but approved or maintained the accounts anyway p 245 HSBC actively circumvented U S safeguards designed to block transactions involving terrorists drug lords and rogue regimes the Senate report said An independent audit paid for by HSBC uncovered 25 000 questionable payments with Iranian entities involving over 19 billion between 2001 and 2007 HSBC executives counseled Iranian financial institutions on how to evade American regulation and foreign HSBC affiliates substituted their own names for clients with Iranian ties to avoid raising suspicion p 140 While some at HBUS claimed not to have known they were processing undisclosed Iranian transactions from HSBC affiliates internal documents show key senior HBUS officials were informed as early as 2001 the report said p 113 The federal regulatory body in charge of enforcing anti money laundering procedures Treasury s Office of the Comptroller of the Currency OCC also came under fire in the Senate report for systemic weaknesses in its oversight responsibilities The OCC identified at least 85 problems with HSBC s anti money laundering efforts from 2005 to 2010 but almost no enforcement action took place during that period For example in 2009 the OCC determined HBUS s top executive in charge of anti money laundering compliance was not qualified for the position The OCC could have cited HSBC for violating federal law but instead issued a letter listing the issue as a matter requiring attention HSBC responded by hiring a new anti money laundering official who reported to the unqualified compliance official Other deficiencies included a backlog of over 17 000 alerts identifying possible suspicious activity that had yet to be reviewed and a failure to conduct money laundering monitoring of 15 billion in bulk cash transactions to HSBC affiliates before opening accounts for them The Senate subcommittee found that the agency s responses to these problems lacking Calling the OCC a lapdog not a watchdog Senator Tom Coburn R OK accused the agency of seeing weaknesses in the bank s money laundering safeguards and being at a loss to act Sandy Chen a financial analyst at Cenkos Securities predicts a monetary punishment for HSBC Because HSBC has cooperated with the U S Senate investigation and because it has begun to implement the recommended changes we think that U S legislators and regulators will be inclined to give HSBC some breathing space Chen said I think we

    Original URL path: http://www.charityandsecurity.org/news/%20Senate_Decades_Worth_Major_Money_Laundering_Risks_HSBC (2016-02-16)
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  • Treasury’s Biggest Problem Might be Itself | Charity & Security Network
    agenda was No one is suggesting that Treasury not investigate serious allegations of terrorist financing After all recent achievements of these efforts have forced many terrorist and criminal enterprises around the world to find new financial avenues But it is not uncommon to hear about these entities growing increasingly more sophisticated in both their ability to commit revenue generating crime and to subsequently launder those proceeds through the international financial system illicit drug sales and online scams This is underscored by a recent analysis by the Homeland Security Policy Institute at George Washington University In a report called The Next Decade of Countering Threat Finance it said the use of hawallas by terrorists to raise money is not considered as high risk as once presumed and that organizations and individuals involved in illicit activity are quite comfortable using the modern financial system It is not hard to understand why Integrated financial systems which allow for easy global movement of money are commonly used by criminals to launder their illicit proceeds Money launderers have what seems like an infinite number of ways to disguise and move money and there appears to be no limit to their ingenuity a Justice Department official testified before Congress in February A January Congressional Research Services report on organized crime estimates that money laundering annually accounts for between 2 and 5 of world GDP On July 9 the Chicago Tribune reported that HSBC one of the world s largest banks is facing multiple investigations for not reviewing billions of dollars in transactions linked to drug trafficking and other criminal activity by the Securities Exchange Commission Department of Justice and the U S Senate Notice any agency missing So what is Treasury doing these days Rather than target these financial threats which terrorists turn to with increasing

    Original URL path: http://www.charityandsecurity.org/blog/Treasurys_Biggest_Problem_Might_be_Itself (2016-02-16)
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