This Week in AML
A recent essay on Lawfare caught John and Elliot’s attention. The authors reviewed the costs and funding sources of the January 6th insurrection and paths to interdict financing of domestic terrorist activities. John and Elliot discuss the implications of the funding schemes used by domestic terrorists, the challenges presented to financial service providers in detecting their activities, and the importance of international cooperation on this issue.
Disrupting the Financing of Domestic Terrorism
Elliot Berman: Hi, John, how are you this week?
John Byrne: Oh, I'm good. Elliot. How you been?
Elliot Berman: I've been good. The weather here in Wisconsin has been beautiful, very late summer, early fall weather in the 70s with sunny days and light breezes. So, we could use some rain, but I'm happy not to be in the 90s as a lot of people are around the country. So it's been good.
John Byrne: Yeah, it's good. And, I don't have his name in front of me, but Marquette just got a recruit that chose Marquette over a bunch of other schools. So he will be joining the team, in the 2023 seasons, so that's exciting. It's always good to know that people are continuing to look closely at Marquette's basketball program. So I'm always excited about that.
Elliot Berman: That's true. That is good. Well, there'll be another interesting season and we're starting to work our way into the Shaka Smart era where he's managing the recruiting. So that'll be a lot of fun to watch.
John Byrne: I think we ask people who listen, hopefully regularly to This Week in AML, if they would like updates on Marquette basketball once a month, we'd be happy to provide it in the front end of this short podcast.
Elliot Berman: That's right. So now onto something, in addition to basketball, so there's a website called LawFare which I think you're familiar with and post interesting articles by interesting authors in a lot of national security and other related topics. And recently there was an article, and the title is Cutting Off Financing for the next capital insurrection. But when did you happen to see that article?
John Byrne: Right. And just to let folks know Lawfare's been around since 2010. And it's produced in cooperation with the Brookings Institute, but it's on national and international security issues. So, this particular article that came across my view, I think on LinkedIn is where I saw it. But yeah, I did see it. And two things I'd mentioned before we talked about the substance. There are two authors, one is former Strategic intelligence analyst with the Canadian security intelligence service. And she's written actually a book on illicit money. And the other is a researcher who's worked with and been an officer with the Egmont Group of FIU.
So, both of these folks have international credentials and as we looked at the piece, it was their take on preventing the financing of the next Insurrection even though it's a broader discussion, they talk about some of the things that we've learned from January 6th, 2021, and a couple things that I didn't know, one is that the cost of everything was about $500,000, which is more than 9/11. So, their point is that from legal fees to staging events, to continued recruitment, all of this, it's not a low-cost attack. And the costs are distributed across many participants and donors, so I thought that was interesting. So, the study or the research document looks at open source material reporting, some primary documents, but A, the dollar amount I thought was particularly compelling, but also I guess the B part of this is some of the methods in which, and how things get financed, you know, crowdfunding, unfortunately misuse of charities, some utilization of payment processing and all, all of that.
So, there's definitely a lot to unpack and they give you a number of recommendations and then, I'll stop it from this. The other part of it I thought was really fascinating is in the overview on the page under the title are links to a number of other research documents that support both their theories and their recommendations.
Elliot Berman: Yes. So, all of the things you mentioned caught my eye and I fully agree with you. There is a lot to unpack oftentimes I will take a look at an article that either you point out to me, or I end up pointing out to you and maybe read it a second time. This was a three read minimum given
the complexity and the depth of what was going on in here and I want to jump to the recommendations because it wasn't what I was expecting when I saw the headline and started my first read through. And that is that even though the focus is domestic terrorism, there's recognition that many of the groups that are involved in the US for example, have affiliates in a lot of cases with similar names in other countries. So one of the key recommendations that the authors put forth is the importance of international cooperation among the various jurisdictions where these affiliated organizations are operating because they're operating in a more connected manner then we might think if we only focused on the Proud Boys or the Oath Keepers or the Three Percenters in the US, there are affiliates in Canada, for example, and in other jurisdictions that are operating more connected than less, I guess I would say.
John Byrne: Yeah, and you know one of the authors works at the Soufan Center but the Soufan Center has a number of the issue briefs. And I think one of these are listed in the embedded document, I think we actually have talked about this before, and this is an issue brief on lessons learned from listing violent far right extremist groups in Canada. I know we mentioned it when they were listed, but one of the things that they talk about regarding Canada, builds on what you just said, they say in those recommendations, Canada should work with the partner countries to coordinate with the designation and listing of entities; they should share information. So again, because unfortunately, these terrorists are you know, some are working in multinational situations. The other thing I thought was interesting is that they said there should be metrics so we can figure out the impact of sanctions and designations, what does it really do, and that's been an ongoing conversation that our community has had regarding Russia. You know, the response to Ukraine and a lot of publications have looked at that, some saying sanctions are definitely, they definitely work immediately. Some say it takes time. But the one I wanted to just reference is again, this is a July, 2022 issue brief on Canada and I'll just read it, because it's interesting for our financial institution clients, it says “when financial entities in Canada continue to provide financial services to listed terrorist entities. Now of course we wouldn't imagine anybody would be doing that potentially, but when they continue to do it or websites that provide services, Canadian law enforcement should liaise with the companies in question”. Okay, great. “Talk to them. Find. But then consider terrorist financing criminal charges and if or when those services are disrupted issue a public statement to encourage greater adoption and compliance with the law.” So, the, the premise challenge is the fact that I don't believe for the most part institutions intentionally do any of that. I think we've been doing this long enough to know that that's not the case. That's a pretty strong recommendation coming from this group.
Elliot Berman: I agree. I think and I fully agree with you that with a couple of limited exceptions, you know, over the many years, you and I have been doing this, there's no question that the financial services community have been active participants in attempting to build structures and make them work to cut down on terrorist financing and money laundering as well. However, there are some organizations who not because they're supportive of them but because of resources or sophistication or other resource challenges may not be necessarily up to the challenge and the other challenge we know we have is that to the extent that standard payment systems whether they be credit cards or debit cards or other payment streams and payment processors, the volumes of transactions are so high that picking, often designing your systems and picking ways to be certain that you're identifying the ones you want to interdict is challenging. I mean if this were easy, you and I wouldn't have a podcast about it.
John Byrne: Right. So, I think the key conclusion is what you've again already said and I referenced in an issue brief and that is international response that criminalize this extremist violence and they
call out specifically the Proud Boys, Oath-Keepers, the Three Percenters and they believe that they should be as they are in Canada, designated as terrorist groups. And I know there'll be debate about that, which we'll continue to talk about in future conversations, but that'll help them better coordinate and they want talk about coordinating in Canada, New Zealand and other countries that are working hard to combat violent farright extremism. But the bottom line is cooperation, transparency and how you're making the designations metrics so you can figure out how these things work. And then again, working together, collaborating is the key. So really interesting LawFare website. The website is www.lawfareblog.com
Elliot Berman: We'll link to the article in our thing on our website, so you'll be able to see what we saw and follow this thread if you're interested. And that, of course LawFare, as a website, has other interesting material that we would certainly recommend people keep tracking.
John Byrne: Right. And the authors I didn't mention them up front by name, Jessica Davis and Elena Martynova. I hope I get the last name right. Those are the two co-authors of the piece, and it was just posted this week.
Elliot Berman: Yes. So, John, what you got in the hopper?
John Byrne: We have an interview this week with a BSA official from Silicon Valley Bank on the women in AML series that we've been working on for a couple of years so we're going to be working on that. As we mentioned, I think last week we have a couple of other ones that haven't been posted yet. One actually got posted today as we're recording. And that's a new book on the countering the financing of terrorism by the American bar association. So, we were able to talk to the author and editor of that. And then Guy Ficco, the deputy director of, IRSCI -Internal Revenue Service, Criminal Investigation- we had a conversation with him and that'll get posted coming up in a week or so we are working on some webinars. We're still figuring out the panelists, but maybe you can tell them about the one we're having for September.
Elliot Berman: So, September we're looking at how ESG issues influence but really need to influence risk analysis and risk management for financial services companies not just directly on the ESG, but also because they can be connected to financial crime. There's a little bit of a European focus there, but I think that our listeners and webinar participants across the globe will find it interesting since this is an issue that is getting more and more scrutiny by both financial services regulators, but also public company regulators. And usually what happens in the public company sphere quickly moves into the private company sphere. So, I think that will be interesting for everybody. And that is Thursday, September 29th, a new time. It'll be noon Eastern Time so that we can accommodate a broader global audience. And we hope you'll tune in for that, you can sign up and get the access link on our website.
John Byrne: That sounds great. Elliot, have a good rest of your week. We'll talk again next week.
Elliot Berman: Okay. Thanks John. Bye bye.