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This chapter is from the book

Access to Funding Gets Creative

Avoiding banking systems is the modus operandi of most homegrown terrorists. For example, Faisal Shahzad worked with four other men in Pakistan as well as the U.S. to move money to and from Pakistan to fund his failed Times Square terrorist plot in May 2010.

According to a report on terrorist financing by the U.S. General Accounting Office, the use of informal banking systems is one of the ways in which organizations earn, move, and store assets. Like other criminals, terrorists focus on crimes of opportunity in vulnerable locations and seek to operate in relative obscurity by taking advantage of close networks of people.45 The Financial Action Task Force (FATF) requires all member countries to ensure that individuals and entities providing money transmission services must be licensed and registered and subjected to the international standards set out by the FATF.46 But as seen in the case of Shahzad, countries, including the U.S., have a difficult time regulating money transfers.

Terrorist organizations have to stay two steps ahead of law enforcement even when it comes to the transferring of money. Federal law may cover bulk cash transfers over borders, "just like Tony Montana did in Scarface,"47 says John Tobon, Unit Chief of Financial Programs of the Cornerstone Unit of Immigration and Customs Enforcement. These perpetrators are prosecuted in a federal court if they are caught. Laws do not take into account just how technologically advanced money transfers are becoming and that they are evolving rapidly. The use of stored value cards, PayPal, and wire transfers in conjunction with hawalas allows potential terrorists to move money quickly and remain undetected. When there is more than $10,000 on a stored value card in someone's wallet, customs enforcement doesn't know about it.

In an interview with me in July 2010, Tobon explained how his unit tracks 20 different initiatives by looking at the utilization of shell corporations. These corporations are fronts, acting as legitimate businesses so that terrorist cells can transfer laundered money more readily and easily. Tobon spends his time investigating wire transfers, Ponzi schemes, and ATM fraud—the real issue he says is the generation gap between law enforcement and the criminals.

"We are dealing with a group of people where the virtual world is the only world they know," says Tobon. "Law enforcement is full of 37-year-old guys, all of whom didn't grow up with the Internet and are at times slow adapters. This is where we see the generational gap widen. In a recent financial fraud case, a loose confederation of very bright and young men all under 25 got together every six to eight months to defraud customers via stealing their identities and credit card numbers online. The shocking part was that they were making $20 to $25 million a year just on their ability to manipulate web sites. We are going to see that more and more, especially within terrorist cells and networks. In order to arrest them, we have to know them, and the only way we are going to do that is to technologically evolve."

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