WCAML Forum. The Challenges of Terrorist Financing in 2014 and Beyond. May 7, Dennis M. Lormel President & CEO DML Associates, LLC

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1 The Challenges of Terrorist Financing in 2014 and Beyond May 7, 2014 Dennis M. Lormel President & CEO DML Associates, LLC

2 Al-Qaeda s Most Dangerous Member: Nasir al-wuhayshi 2

3 Terrorist Threats 2014 Introduction Current Threat Environment in the U.S. Current Terrorist Flashpoints The Power of Financial Intelligence Conclusion 3

4 Introduction

5 Dangerous Trifecta Corruption Transnational Crime Terrorism 5

6 Crime Terror Nexus Includes two independent, but related, components Involvement in criminal activities by terrorists as funding source Linkage between criminal organizations and terrorist groups Evolution of convergence of transnational criminal organizations and terrorism emerged at end of cold war Created conditions that challenged the financial system of terrorism Evaporation of funding sources encourages terrorist groups to develop into Narco-Terrorist organizations Increasingly engage in drug trafficking and other illicit organized crime to acquire money and material 6

7 Hybrid Criminal / Terror Entities Transnational criminal organizations and terrorist groups share many operational and organizational similarities and characteristics Often learn from one another Imitate each other s successes and failures Frequently partner with one another Evolution of hybrid criminal / terror entities Nexus between transnational criminal organizations and terrorism increasingly complex and sophisticated Public and private sectors must develop new methodologies and strategies to deal with the problem of convergence Understanding the crime / terror nexus is first step toward solving the problem 7

8 Terrorist Financing Funding is the lifeblood of terrorist organizations Require financial support to succeed Must have effective financial infrastructures and support mechanisms There will be more successful terrorist attacks in the U.S. The best chance to prevent terrorists from succeeding is to disrupt their ability to raise, move and access money Need for proactive and reactive strategies 8

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10 Most Significant Threats to the U.S. Violent home grown extremists Al-Qaeda in the Arabian Peninsula Syria This does not diminish the threats from Al-Qaeda and other terrorist groups 10

11 Current Terrorist Threat in U.S. On March 27, 2014, FBI Director James Comey testified before the Senate Appropriations Committee. His points on terrorism included: The threat from homegrown violent extremists is of particular concern. These individuals present unique challenges because they do not share a typical profile; their experience and motives are often distinct and personal. They are also increasingly savvy and willing to act alone, which makes them more difficult to identify and stop. The foreign terrorist threat is similarly complex and ever changing. Overseas we are seeing more groups and individuals engaged in terrorism, a wider array of terrorist targets, greater cooperation among terrorist groups, and continued evolution and adaptation in tactics and communication especially Al-Qaeda in the Arabian Peninsula 11

12 Yemen AQAP Threat On 8/25/2010, CIA reportedly considered for the first time since 9/11 that an al-qaeda offshoot group was a greater threat to the U.S. than al-qaeda Al-Qaeda in the Arabian Peninsula (AQAP) Al-Qaeda affiliate in Yemen Responsible for attempted UPS parcel bombings and Christmas day bombing attempt on flight to Detroit Ibrahim Hassan al-asiri bomb maker and group leader Responsible for threat that caused 19 U.S. consulates in Middle East to close during August 2013 Communication between AQAP leader Nasir al-wuhayshi and al- Qaeda leader Ayman al-zawahiri Publish Inspire magazine Successful recruitment tool used by Anwar al-awlaki and his recruitment successors 12

13 Nasir al-wuhayshi Leader of Al-Qaeda in the Arabian Peninsula (AQAP) Became leader in 2002 Brazenly appeared at meeting with over 100 AQAP operatives that was reported in the media on April 15, 2014 Video from meeting quoted al-wuhayshi stating we must eliminate the cross the bearier of the cross is America In retaliation, U.S. and Yemen made two drone attacks against AQAP killing numerous members possibly including al-asiri Has been elevated to Al-Qaedas second in command behind Ayman al-zawahiri Not a career enhancing position Prior three #2 Al-Qaeda leaders killed in drone missile attacks Served as a private secretary to Osama bin Laden 13

14 Violent Homegrown Extremists The Boston Marathon bombing in April 2013 reminds us that the terrorist threat (by violent homegrown extremists) against the U.S. remains persistent In the past two years, homegrown extremists have attempted to detonate improvised explosives devices or bombs at such high profile targets as the Federal Reserve bank in New York, commercial establishments in downtown Chicago, the Pentagon, and the U.S. Capitol Fortunately these attempts and many others were thwarted Yet the threat from such individuals remains Source: FBI Director Comey March 27,

15 Syria Syria has become the pre-eminent location for Al-Qaeda aligned groups to recruit, to train and to equip what is now a growing number of extremists, some of whom seek to conduct external attacks From a terrorist perspective, the most disturbing element is that Al-Qaeda has declared Syria its most critical front Foreign fighters attracted to the Syrian battleground represent a long term threat to U.S. national security interests Syria has become an incubator for extremism 15

16 Jihadist Movement Jihadist movement divided into three basic elements Al-Qaeda core organization Regional jihadist franchises Grassroots operatives Two distinct types of operatives Professionals Amateurs Al-Qaeda and regional groups For the most part, highly trained professional terrorists Grassroots operatives Amateurs Continuum ranging from untrained lone wolves to one who received varying levels of training Never joined Al-Qaeda or other formal militant groups 16

17 Current Terrorist Flashpoints

18 Yemen Terror threat AQAP Significant threat to U.S. Extreme corruption 167 / 177 Funding sources Criminal activity Donations 18

19 Syria Terror threat Al-Qaeda in Syria Al-Qaeda in Iraq Foreign fighters (westerners) Extreme corruption (168 / 177) Funding sources Kuwait Other donors Kidnaping and other criminal activity 19

20 Iraq Terror threat Taliban Al-Qaeda in Iraq Extreme corruption (171 / 177) Funding sources Kidnaping and other criminal activity Donations 20

21 Afghanistan Terror threat Taliban Al-Qaeda Criminal organizations Growing alienation between Afghanis and Americans Tied for being most corrupt country Funding sources Drugs (heroin), kidnaping and other criminal activity 21

22 Pakistan Terror threat Al-Qaeda Taliban Other terrorist groups Criminal organizations Serious corruption (127 / 177) Funding sources Drugs, kidnaping, smuggling and other criminal activity Inter-Services Intelligence (ISI) Other donors to include criminals 22

23 Africa Terror threat Al-Qaeda in the Islamic Maghreb Al-Qaeda Al-Shabaab Boko Haram Criminal organizations Pervasive corruption in Africa Funding sources Drugs, kidnaping, extortion, wildlife smuggling and other criminal activity 23

24 Lebanon Terrorist threat Hizballah Criminal organizations Serious corruption (127 / 177) Funding sources Extensive global criminal infrastructure to support vast criminal activity Iran Criminal organizations 24

25 Israel to Include Palestinian Territory Terrorist threat Hamas Renewed relationship between Hamas and Palestinian Authority Emerging Al-Qaeda presence Little corruption in Israel (36 / 177) Extensive corruption in Palestinian territory Funding sources Extortion and smuggling Donations 25

26 The Power of Financial Intelligence

27 Importance of Financial Information As criminals and our financial system continue to become more sophisticated, financial transactional information becomes more relevant as a critically important investigative mechanism Finance, communications and greed are biggest vulnerabilities to bad guys An investigator s ability to collect and use financial information can be devastating to terrorists and criminals Without money, terrorist and criminal organizations cannot adequately function Financial investigations should be integral part of investigative strategies Knowing what financial information is relevant, where to collect it from, and how to use it are facts all investigators can benefit from 27

28 Financial Institutions Responding to Terrorist Incidents Terrorist incidents 9/11 Fort Hood shooting (Nidal Hasan) Time Square bombing attempt (Faisal Shahzad) New York subway bombing plot (Najibullah Zazi) Khalid Ali M. Aldawsari Mumbai Bombing Richard Headley Osama bin Laden s death Boston Marathon bombing Other incidents Following every incident financial institutions immediately came forward to assist law enforcement Provided law enforcement with valuable financial evidence 28

29 Identifying Terrorist Financing There are numerous alerting mechanisms that financial institutions can use to identify terrorist financing Proactive and reactive Challenging Targeted transaction monitoring Media reports Law enforcement Requests Process Transaction monitoring Front line employees Hotline Other mechanisms 29

30 Local to Global Funding Catalysts World events Change Opportunity Corridors Flows Threats 30

31 Triggers for Financial Trends Evolving sources of funds Legitimate to illegitimate (growing reliance on criminal activity) Terrorist and criminal organizations must have continuous access to funds Global money laundering requires the use of facilitation tools Facilitation tools used by terrorist and criminal organizations are dependent on world events and governance Local to regional to global Trends regarding financial mechanisms used by terrorist and criminal organizations are driven by opportunity 31

32 Contrasts of Using Financial System In using the financial system, terrorists are confronted with distinct contrasts Facilitation tool v. detection mechanism Serves as facilitation tool by providing continuous access to funds Financing the lifeblood of terrorist organizations Serves as detection mechanism because funds can be identified through monitoring and / or investigation Financing a major vulnerability 32

33 Conclusion

34 Looking Beyond 2014 Need to develop mechanisms to identify and address the convergence and diversification of terrorist and criminal groups Development of innovative and proactive initiatives Monitoring and investigative methodologies Vigilantly react to terrorist activity to identify potential funding mechanisms Training Need to assess emerging threats, financial requirements and terrorist flashpoints going forward 34

35 Conclusion Growing nexus between criminal organizations and terrorist groups More complex and sophisticated Convergence Diversification Unholy trifecta Corruption Transnational crime Terrorism Must develop new methodologies and strategies to deal with problem of convergence and diversification Proactive and reactive Understanding the crime terror nexus is first step toward solving the problem Exploit vulnerabilities of bad guys Finance Communications Greed 35

36 Dennis M. Lormel President & CEO DML Associates, LLC Winmeade Drive Lansdowne, VA