Home AML/Money Laundering US and GCC Target ISIS Financial Network

US and GCC Target ISIS Financial Network

On 15 July 2020, the U.S. and Gulf Cooperation Council -led Terrorist Financing Targeting Center designated six targets affiliated with the Islamic State of Iraq and Syria, including an entity allegedly posing as a charity (and its director) based in Afghanistan that allegedly provided support to ISIS’ branch in that country, ISIS-Khorasan.

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Scenic view of Dubai Marina in UAE in the evening

On 15 July 2020, the U.S. and Gulf Cooperation Council (“GCC”)-led Terrorist Financing Targeting Center (“TFTC”) designated six targets affiliated with the Islamic State of Iraq and Syria (“ISIS”), including an entity allegedly posing as a charity (and its director) based in Afghanistan that allegedly provided support to ISIS’ branch in that country, ISIS-Khorasan (“ISIS-K”).

The entities that were designated are:

      • Al Haram Exchange
      • Tawasul Company
      • Al-Khalidi Exchange
      • Nejaat Social Welfare Organization

Five of these targets (which includes one individual) were previously designated as Specially Designated Nationals (“SDNs”) by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) in September 2019 pursuant to the anti-terrorism authorities in Executive Order (“EO”) 13224, as amended by EO 13886. All property and property interests of the SDNs in the U.S. or in the possession or control of U.S. persons must be blocked and reported to OFAC, and all transactions involving U.S. Persons or with a U.S. nexus are prohibited. Also, OFAC has the ability to impose sanctions on non-U.S. persons who provide support to such SDNs,which could include include prohibiting or restricting access to the U.S. financial system.

With regards to the recent TFTC designation, the UAE implements all sanctions designated by the TFTC by issuing the Terrorism Lists pursuant to either the UAE AML Law and/or the UAE CTF Law (mentioned below), or UAE Federal Cabinet Decision No. 20 of 2019 on the Regulation of Terrorism Lists and Implementation of Security Council Resolutions Related to the Prevention and Suppression of Terrorism and Cessation of Proliferation of Weapons and its Financing, and the Relevant Decisions (the “UAE Sanctions Law”). The other GCC Member States have legislation in place to replicate the same actions.

Established in May 2017, the Riyadh-based TFTC is a collaboration between the U.S. and the GCC Member States (Saudi Arabia, the United Arab Emirates (“UAE”), the Bahrain, Kuwait, Oman, and Qatar). The TFTC has now issued five rounds of designations against 60 individuals and entities around the world and continues to utilize local intelligence in the fight against the financing of terrorism.

Some key practical takeaways from this recent action would be:

      • to ensure that enhanced due diligence is always conducted when dealing with either money transfer businesses and/or charities, noting that to the extent that charitable donations are solicited in the UAE, these should only be through charities that are appropriately registered in the UAE.

UAE Federal Law No. 2 of 2008 concerning Public Welfare Associations and Organizations (the “UAE Federal Charity Law”) criminalizes the collection of any donations through associations that are not properly licensed by the UAE Ministry of Social Affairs and the General Authority of Islamic Affairs and Endowments (“GAIAE”) at federal level. Furthermore, within the Emirate of Dubai,  Dubai Executive Council Decree No. 9 of 2015 (“Dubai Donation Law”) also prohibits the collection of donations or advertising of fund-raising campaigns through any form of media without prior authorizations from the Islamic Affairs & Charitable Activities Department (“IACAD”). Breaches of these provisions carry criminal liability.

With regards to money exchanges, in January 2013, OFAC issued a useful advisory on “The Use of Exchange Houses and Trading Companies to Evade U.S. Economic Sanctions Against Iran“.  Although the advisory was issued by OFAC within the context of its Iranian Transactions and Sanctions Regulations , the Advisory’s suggested mitigation considerations that can be utilized within the context of the recent TFTC action.  This includes both monitoring payments involving third-country exchange house or trading companies, as well as requesting additional information on the nature of commercial transactions.

      • for financial institutions (“FIs”) and designated non-financial businesses and professions (“DNFBPs”) based in the UAE to consider the risk profiling and level of due diligence undertaken done on those conducting business with Syria, Lebanon, Turkey and Afghanistan, pursuant to obligations under (1) the UAE Federal Decree Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations (the “UAE AML Law”), (2) the UAE Federal Law No. 7 of 2014 on Combating Terrorism Crimes (the “UAE CTF Law”), and (3) UAE Federal Cabinet Decision No. 10 of 2019 on the Implementing Regulations of the UAE AML Law (the “UAE AML Regulations”). Having tools in place, such as a Cash Transaction Monitor System, to monitor the size and frequency of cash withdrawals by potentially high-profile customers, may assist when considering whether a Suspicious Activity Report (“SAR”) to the UAE’s Financial Intelligence Unit (“UAE FIU”) would be warranted.

Similarly, FIs and DNFBPs in the Kingdom of Saudi Arabia should consider their corresponding obligations under Saudi Arabia Cabinet Decision No. 80/1439, approving the Anti‐Money Laundering Law, and its Implementing Regulations, issued in 2017.

      • for those conducting due diligence who discover that money involvement of “Hawala” instruments in the UAE to note that under UAE Central Bank Circular No. 24/2019 issuing the Registered Hawala Providers Regulations, only those who have received a Hawala Provider Certificate issued by the UAE Central Bank may engage in such activities. OFAC has taken enforcement action against Hawala providers in the past that have been identified as providing illicit financing to the Taliban. In 2013, the Financial Action Task Force (“FATF”) issued a report on the issues surround Hawala that identify the various ways Hawala-related activities are utilized in the financing of terrorism.
      • to consider the UAE’s focus on combatting anti-money laundering and terrorism financing, in light of the FATF having recently issued its Mutual Evaluation Report (“MER”) for the UAE in April 2020. The relevant authorities (including the financial regulators) in the UAE will inevitably will be keen to ensure that FIs and DNFBPs implement relevant risk profiling and due diligence exercises to ensure that illicit financing (and by extension illicit trade) is prevented.

For more guidance on sanctions, anti-money laundering and combatting the financing of terrorism, covering both internal and local regimes, our multi-jurisdictional Compliance & Investigations Team are here to assist. For more information, please contact Borys Dackiw, Samir Safar-Aly and Kerry Contini.

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