Terrorist Financing Explained
What is Terrorist Financing?
The offence of terrorist financing involves the provision, collection or receipt of funds with the intent or knowledge that the funds will be used to carry out an act of terrorism or any act intended to cause death or serious bodily injury. It also includes collecting or receiving funds intending that they be used or knowing that they will be used for the benefit of a terrorist group. Please see a full definition of the offence.
The Criminal Justice (Terrorist Offences) Act, 2005 (the “CJA 2005”) gave effect to the 1999 United Nations Convention for the Suppression of the Financing of Terrorism. It created a new offence of financing terrorism and inserted a scheme through which An Garda Síochána can freeze and/or confiscate funds used or allocated for use in connection with an offence of financing terrorism or funds that are the proceeds of such an offence.
Preventing Terrorist Financing
Measures to be taken to prevent terrorist financing are set out in the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 as amended by the Criminal Justice Act 2013 [the “CJA 2010”]. Under Part 4 of the CJA 2010, credit and financial institutions are obliged to take measures to prevent the financing of terrorism such as carrying out customer due diligence, ongoing monitoring, reporting of suspicious transactions, training and having in place effective policies and procedures.
While anti-money laundering (AML) and combating the financing of terrorism (CFT) preventative measures are dealt with together in the CJA 2010, it is important to note that a distinction exists in the nature of the two offences. For money laundering to occur, the funds involved must be the proceeds of criminal conduct. For terrorist financing to occur, the source of funds is irrelevant, i.e. the funds can be from a legitimate or illegitimate source. The key consideration when taking measures to prevent terrorist financing is to examine the intended use or destination of the funds as opposed to its origin.
Targeted Financial Sanctions Related to Terrorist Financing
Financial sanctions are political measures taken to restrict the movement of funds to achieve a specific outcome. Targeted Financial Sanctions are a specific type of financial sanction with a stated objective, one of which is the prevention of terrorist financing.
Targeted Financial Sanctions can originate at the supranational level (EU) or international level (UN). While there is a clear obligation to comply with EU Council Regulations, it is also necessary to have regard to the designation of persons and entities by the United Nations Security Council Sanctions Committees (“UN Sanctions Committee(s)") in the terrorist financing context. The EU gives legal effect to Targeted Financial Sanction designations by the UN Sanctions Committees through EU Council Regulations.
Once a person or entity is designated by the UN Sanctions Committees, it is intended that funds or other assets are frozen without delay and not made available directly or indirectly to that sanctioned individual or entity. Targeted Financial Sanctions relating to terrorism are dealt with in United Nations Security resolutions 1267 (1999) and 1373 (2001) and their successor resolutions. Links to further information about Targeted Financial Sanctions is at the end of this page.
Obligations of Credit and Financial Institutions
Under the CJA 2010, credit and financial institutions are required to take measures to prevent terrorist financing and must adopt measures to prevent terrorist financing commensurate with the risk. The preventative measure for AML and CFT are the same but will be applied at times in different ways.
To ensure compliance with the CJA 2010 and prevent the financing of terrorism, it is necessary for credit and financial institutions to monitor their customers and transactions against both the EU and UN Sanctions Committees lists relating to terrorism. The lists are regularly updated and must be frequently checked to ensure that they are the latest ones available.
Financial Sanctions lists that relate to terrorism should be monitored to assist in preventing terrorist financing from occurring, including, but not limited to, the following:
What to do if a customer is on a terrorist list
If a credit or financial institution has knowledge or a suspicion of terrorist financing, it must immediately send a suspicious transaction report (STR) to An Garda Síochána and the Revenue Commissioners.
In the event that a customer is matched to either the EU terrorist lists or UN terrorist lists, the credit or financial institutions should file an STR immediately with the Financial Intelligence Unit in the Garda Bureau of Fraud Investigation and not carry out any service or transaction in respect of the account until the report has been made. When the report is made, the Gardaí can then take steps and/or give directions to the credit or financial institution in respect of the account as appropriate under the CJA 2005 and/or CJA 2010. Where a person or entity is also listed in an EU Council Regulation relating to terrorism, there is a legal obligation to immediately freeze that person or entity’s account.
Please see further information on financial sanctions
Related information and guidance on targeted financial sanctions and the prevention of terrorist financing can also be found at the following links: