The job of keeping track of the flow of money that is being used to finance terrorist groups is highly 'resource intensive' and difficult to achieve. John Byrne, a former director of the American Bankers' Association and now a leading light in ACAMS, shares his wisdom with us in this second instalment of a two-part article.

According to information issued by the federal government of the United States at the end of 2014, well over 19,000 foreign terrorist fighters or FTFs from more than 90 countries are known to have left their homes to travel to Syria and Iraq to join ISIS, the Islamic State in Iraq and Syria which some also call ISIL. The actual figure is probably even higher. It is possible that, after completing their active service, they will begin returning to the West and try to go back to their old lives. They might, instead, want to return to ensure that ISIS receives the financial support it requires. Financial institutions ought to be asking themselves which course their suspects/customers are taking by developing a detailed understanding of the part that FTFs play in facilitating the complex financial network that sustains the organizations they work for and the ways they operate.

Living in the combat zone

The management of a multinational operation and the associated logistical and financial framework must require, in one form or another, the use of the conventional banking system including ATMs and money transfer services. For example, according to information surrendered to the US in accordance with FATCA (the Foreign Account Tax Compliance Act 2010), Finland has reported that FTFs often obtain funding from donors who send money in moderate quantities (from hundreds of euros to several thousands in one-off transactions) by means of money transfer services with agents operating in areas close to the borders of territory held by ISIS. They can then withdraw this money as needed, using local ATMs, and use it to support themselves while they are living in their combat zones.

Similarly, authorities in Holland have observed that FTFs may be expected to cover their own living expenses whilst fighting in Syria or Iraq and rely on regular top-up funds from their home countries. Again, the most common means of transfer is to use money transfer services located at accessible points near the borders of conflict regions, or withdraw cash using debit cards linked to the fighter’s national bank account from an ATM. Alternatively, the FTFs may rely on intermediaries to transport the cash physically across a porous border into ISIS-occupied territory.

What are the warning signs?

Financial institutions should be monitoring account activity for transactions related to travel costs, especially costs that involve travel into regions that are known gateways to the conflict zones. From there, it is possible to find out whether an individual is travelling as a tourist, or has a different motive. For example, if an individual travels to Turkey and it is possible to detect payment for travel tickets, he should also be incurring living costs while he is in the area. The absence of transactions relating to accommodation or food while he is in Turkey should be a warning sign of suspicious activity worthy of further investigation. It may be that the individual poses no risk and is staying with members of his family, but that possibility has to be eliminated.

It is equally worthwhile monitoring account activity for other purchases. Has the individual who travels to Turkey also purchased outdoor equipment or military supplies, for instance? Is he connected with someone else who is making such purchases, possibly on his behalf? It is also essential to monitor individuals as they return from known conflict areas – some of them will inevitably try to exchange local fiat currencies into euros or pounds. Why do they have those currencies in the first place? What recent transactions have been made using their bank accounts? Positive matches would suggest further investigation of any social media activity, their social networks and likely travel motivations.

Foreign fighters who seek training in the Middle East sometimes serve in war zones and then return to their country of previous residence. Sometimes they simply return to that country directly after training to await further instructions to fight somewhere else. The bank accounts they hold may display a flurry of activity and then lie dormant for months before being reactivated, according to agents from the Federal Bureau of Investigation.

Case studies for FTF activity, drawn from real life

1. The FTF receiving wired donations from international supporters. Someone – presumably in a financial institution – spotted the fact that a man operating in Turkey had received 70 fund transfers from 54 different senders in 17 countries including Holland, Germany and France. The man also had additional domestic consumer networks that were linked within the donor countries, especially France. Further investigation showed that his counterparts included a man who was actively fighting in Syria and another man who had been uploading propaganda on YouTube. Another person in France supported the man in Turkey, using both a bank account and money transfer service to collect funds from the various supporters and then move the money safely on to the fighter and propagandist directly.

2. A donor fund ‘flipping’ between Turkey and conflict regions. In this story, a man in Turkey acts as an intermediary, receiving funds from donors in Syria, Saudi Arabia, Europe and US, and then sends the money on to new locations. This case provides an example of ‘flipping’, which further verifies the important role of Turkey as a connecting gateway between Western Europe and FTFs in Syria and Iraq. The man is responsible for receiving donations and ensuring that the funds are cleared, after which they can be ‘flipped’ and sent on to FTFs in active combat in Syria and Iraq without being detected. Alternatively, the money could return to Europe to finance propaganda and marketing activities.

These are common examples of terrorist financing, but money-laundering reporting officers must realise that there is no ‘one size fits all’ method to rely upon. This is a continually evolving subject and financial institutions ought to invest time and resources into understanding the geo-political environment, travel routes, flows and sources of money in an effort to contain the problem.

The top 10 tips for stopping FTFs being financed

1. Study the geography and political history of conflict regions to identify sensitive areas and porous borders.

2. Know the physical layout of bordering towns, taking note of where banks and ATMs are located.

3. Invest resources in developing terrorist funding case studies using a combination of open sources and reports from law enforcers.

4. Identify 'know your customer' risk profiles of potential FTFs and monitor their activity and that of their immediate networks closely.

5. Teach people all over your organization about case studies and extend the training to any correspondent banking partners you might have.

6. Monitor suspicious activity, working together with correspondent banking partners to spot anomalies and risky transactions.

7. Use monitoring intelligence to refine and improve your case studies in the interests of “continuous knowledge transfer.”

8. Send off comprehensive suspicious activity/transaction reports (SARs and STRs) to the authorities.

9. Share case studies and intelligence you have gathered with other financial institutions.

10. Understand that terrorist financing is constantly changing, is labour-intensive and requires a significant investment in time and resources.

Of course, the most important part ofevery financial institution's response to terrorist finance is establishing a close working relationship with law enforcers and related government agencies.

* John Byrne is the executive vice president of ACAMS, the Association of Certified Anti-Money Laundering Professionals. To find out more, go to www.youtube.com/watch?v=4i77D5w3nsM