Banks told to keep eyes open for suspicious terror funding patterns

Case studies in FIAU report show Maltese credit institutions can be prone to suspect transactions for the funding of terrorism

Terrorism is historically an uncommon factor inside Malta, but terror financing is a distinct phenomenon which the island has not been immune to.

A report by Malta’s Financial Intelligence Analysis Unit (FIAU) has revealed various cases in which Maltese credit institutions were used for the funding of terror organisations, as well as for illegal activities of human smuggling inside the African continent.

According to a risk assessment from the National Co-ordinating Committee on Combating Money Laundering and Funding of Terrorism, which used data held by the FIAU, Malta is vulnerable at any stage of raising, movement or the use of terrorist funding.

“Given Malta’s open economy and status as an international financial centre, it is most vulnerable to being misused in the movement of funds destined for terror activity or terror organisations,” the FIAU said in its report to stakeholders.

The more likely exposure to such terrorist funding arises from high levels of cross-border business – mainly complex transactions – and the use of charities or non-profit organisations to act as cover for the flow of this money.

However, the FIAU said that even the high rate of transactions passing through Maltese credit institutions were a source of concern: in one case, one licensed credit institution – whose name was not published – noticed that a number of employees of a company held bank accounts with it, in which funds were being transferred back and forth between themselves, labelled as loans and loan repayments.

The transfers were significantly high. The bank was not convinced that these loans were legitimate: one employee would loan a sum of money to another employee, who then would loan a sum of money to another employee.

“The bank conducted more checks on the clients and discovered that their common employer had been identified by reputable media sources to have links with a designated terrorist group. The credit institution proceeded to report this suspicious activity, which led the FIAU to launch its own analysis.”

In another case, a crowdfunding company and its chairman opened a Maltese bank account which attracted the interest of the FIAU’s foreign counterparts. It turned out that the chairman ran a charity that received and donated funds to multiple charitable causes and jurisdictions that required humanitarian aid.

“Further analysis established that the person belonged to an extremist Islamic movement, and that the charity, which he presided over, was linked to other non-profit organisations that supported radical Islamic causes. The analysis also identified significant inward payments that were made in favour of the chairman’s account, held with the Maltese credit institution.”

The transactions had originated from the crowdfunding company, for onward remittance to various individuals: for example, first a €90,000 deposit to the chairman’s account, followed then by smaller, fragmented deposits into other EU bank accounts.

“On one particular day, the chairman received a payment of €150,000 from a PayPal account, and proceeded to send out a total of €88,813 in favour of another natural person through six structured transactions.

“Transactions from the Chairman’s bank account also indicated that he remitted close to circa €600 to a person who is suspected by the Malta Police Force to be a terrorist. It is worth pointing out that, while this data and information was available to the Maltese credit institution in question, the subject person did not report this suspicious activity on its own initiative, but rather did so after being probed following the FIAU’s request for information.”

In another case study, a Maltese credit institution submitted 46 STRs to the FIAU after finding similar suspicious activity linked to 58 individuals in their employment, transactions, residential addresses and flight ticket purchases – all of which revealed several links and relationships between the individuals.

These persons were suspected of being involved in human smuggling and illegal immigration, as well as the funding of terrorism, by providing finances for logistics, to individuals linked with terrorist organisations and their sympathisers.

“For example, one of these individuals was later arrested in an EU country following suspicion that the person was aiding illegal immigration and of assisting persons involved in terrorist organisations. On analysing the customers’ transactional activity, various trends and commonalities were identified. All the customers purchased a considerable number of airline tickets, both for themselves and for third parties.”

In fact, a total of 4,418 airline ticket purchases were identified, of which 600 were conducted by the same individual who was later arrested due to his links with a terrorist organisation recruiter and his involvement in a migrant trafficking ring.

Their bank accounts were also funded by frequent cash deposits and third-party cheque deposits, later remitted to third parties in foreign jurisdictions, apart from having amassed a high number of Voice Over IP subscriptions.