Disclaimer: The contents of this article are intended to provide a general understanding of the subject matter. However, this article is not intended to provide legal or other professional advice, and should not be relied on as such.
On October 20th, 2023, the Financial Crimes Enforcement Network (FinCEN) issued an alert to assist financial institutions (FIs) with identifying funding for Hamas. This article will give an overview of the important information that FIs need to note for compliance with FinCEN.
For additional information on FinCEN, view our blog detailing FinCEN guidance and advisories as they are released.
What Does the Alert Say?
The alert provides information to aid FIs in maintaining compliance. In the alert, FinCEN releases several red flags it has identified in order to assist with the detection, prevention and reporting of potential suspicious activity related to Hamas’ terrorist financing activity. It additionally gives a brief overview of how Hamas raises funds and urges FIs to be aware of these red flags and to be diligent in the identification and reporting of potential terrorist financing.
How Hamas Raises Funds
The alert details several of the ways in which Hamas raises funds for its operations. These include:
- Support from Iran
- Private donations
- Global portfolio of investments
- Diversion of of aid and support from legitimate charities
- Control of border crossings and avenues of commerce
- Racketeering and business frameworks
- Extortionary practices around local populations
- Fundraising campaigns involving virtual currency
- Fictitious charities with donations in both fiat and virtual currency
Understanding the ways in which funds are raised can better help FIs to detect and prevent future funding.
How Hamas Moves Funds
FinCEN additionally outlines several of the tactics used to transfer funds. These include:
- Smuggling of physical currency
- Regional network of complicit money transmitters
- Exchange houses
- Hizballah-affiliated banks
Red Flag Indicators of Potential Suspicious Activity Related to Hamas’s Terrorist Financing Activity
When listing red flags of potential terrorist financing activity, FinCEN also states:
“no single red flag is determinative of illicit or suspicious activity, financial institutions should consider the totality of available facts and circumstances, such as a customer’s historical financial activity, whether the transactions are in line with prevailing business practices, and whether the customer exhibits multiple red flags, before determining that a behavior or transaction is suspicious.” 1
The red flags identified by FinCEN are:
- A customer or a customer’s counterparty conducts transactions with OFAC-designated entities and individuals, or transactions that contain a nexus to identifiers listed for OFAC-designated entities and individuals, to include email addresses, physical addresses, phone numbers, or passport numbers, or virtual currency addresses.
- Information included in a transaction between customers indicates support for terrorist campaigns.
- A customer conducts transactions with a Money Services Business (MSB) or other financial institution, including one that offers services in virtual currency, that operates in higher-risk jurisdictions tied to Hamas activity, and is reasonably believed or suspected to have lax customer due diligence (CDD) requirements, opaque ownership, or otherwise fails to comply with anti-money laundering/combatting the financing of terrorism (AML/CFT) best practices.
- A customer conducts transactions that originate with, are directed to, or otherwise involve entities that are shell corporations, general “trading companies,” or other companies that have a nexus with Iran or other Iran-supported terrorist groups, such as Hizballah and Palestinian Islamic Jihad.
- A customer that is a charitable organization or nonprofit organization (NPO)10 solicits donations but does not appear to provide any charitable services or openly supports Hamas’s terrorist activity or operations. In some cases, these organizations may post on social media platforms or encrypted messaging apps to solicit donations, including in virtual currency.
- A customer that is a charitable organization or NPO receives large donations from an unknown source over a short period of time and then sends significant wire transfers or checks to other charitable organizations or NPOs.
- A customer conducts transactions with known or suspected virtual currency addresses tied to terrorism or terrorist financing donation campaigns.1
As stated in the quote above, it is important to note that one of these flags on its own is not determinative, and any red flags must be taken into account along with the totality of available facts and circumstances.
For additional information, view the full FinCEN alert, available here.
In order to ensure your organization complies with FinCEN’s latest alert, and all existing requirements, it is vital to implement robust AML compliance solutions to strengthen your business’s compliance program.
Alessa offers a variety of solutions to meet FinCEN requirements, including:
- Identity verification and KYC solutions
- Watchlist and sanctions screening
- Real-time transaction monitoring
- Automated regulatory reporting
To learn more about how Alessa can help you meet FinCEN and AML requirements, talk to a risk professional today.