The Financial Action Task Force (FATF) has released new guidance to help practitioners assess the risk connected with terrorist financing.
The new guidelines stem from the awareness that “countries often face particular challenges in assessing Terrorism Financing (TF) risks due to the low value of funds or other assets used in many instances, and the wide variety of sectors misused for TF purposes”. Moreover, additional challenges arise from the cross-border nature of TF, especially for lower capacity jurisdictions whose TF expertise or personnel is often limited, and where information gaps on unregulated or unsupervised activities are more common.
This report, which builds on the previous “FATF Guidance on National Money Laundering and Terrorist Financing Risk Assessments” (2013), aims to provide good approaches, relevant information sources and practical examples for practitioners to consider when assessing TF risk at the jurisdiction level.
The new guidance is based on inputs from over 35 jurisdictions from across the FATF Global Network on their extensive experience and lessons learnt in assessing TF risk. However, the report warns against a one-size-fits-all approach when assessing TF risk, stating that “jurisdictions will need to extract from this Guidance those parts that are most relevant to their unique context and threat profile”.
For example, although often interlinked, terrorism financing (TF) risk and terrorism risk aren’t always the same. More specifically, “if a jurisdiction has active terrorist organisations operating domestically or regionally, this will likely increase the probability of TF. Nevertheless, in light of the cross-border nature of TF, a jurisdiction that faces a low terrorism risk may still face significant TF risks”.
The main areas covered by the report include:
– Key considerations when determining the relevant scope and governance of a TF risk assessment
– Practical examples to overcome information sharing challenges related to TF
– Examples of information sources when identifying TF threats and vulnerabilities
– Considerations for different country contexts (e.g. financial and trade centres, lower capacity jurisdictions, jurisdictions bordering a conflict zone etc.)
– Relevant information sources for practitioners when identifying TF risks within high-risk sectors such as banking, Money or Value Transfer (MVTS) and Non-Profit Organisations (NPOs)
As good as it can be, a risk assessment has the limitation of simply presenting a snapshot in time. This is why the new report also “highlights the importance of establishing regular mechanisms to monitor TF risk on an ongoing basis, taking into account current terrorism and TF threats and developments”.
Last but not least, the guidance concludes with some “areas for further focus going forward based on experience from across the FATF Global Network, including enhanced information sharing on TF risks among jurisdictions with similar threat profiles, the continued development of multiagency information sharing initiatives, and use of information technology tools to manage ‘big data’. ”