THE JERSEY FIU TERRORIST FINANCING [TF] CASE-STUDY SCENARIO FOR THE TCSP SECTOR

The Jersey FIU has published a terrorist financing [TF] case study for the TCSP sector.

The scenario is shown below [with some Comsure amendments]. However, a link to the original is at the end of the case study.

 CASE-STUDY SCENARIO

Client X is the settlor of a Jersey Trust, administered by a Jersey Trust and Company Service Provider (TCSP).

The Trust was established for the benefit of Client X’s extended family. Client Y was appointed as the sole non-familial beneficiary.

Client Y is a resident in a jurisdiction shown on the

• Jersey Financial Services Commission (JFSC) D2 high-risk jurisdiction
• https://www.jerseyfsc.org/industry/financial-crime/amlcftcpf-handbooks/appendix-d2-countries-and-territories-identified-as-presenting-higher-risks/
• Government of Jersey (GoJ) Red List countries for Terrorist Financing (TF).

• https://www.gov.je/Industry/Finance/FinancialCrime/Pages/MoneyLaunderingTerroristFinancing.aspx

Client Y is a close family friend of the settlor and is entrusted to make distributions from his funds on behalf of the Trust.

These distributions are to family members (who are not named beneficiaries of the Trust) and who are also residents in JFSC D2/Red list TF jurisdictions.

Client Y is reimbursed by the Trust directly through UK-based bank accounts held in his name.

ENHANCED CHECKS REVEALED.

• That Client Y’s associated businesses and his immediate family operate a network of currency exchange businesses based in the UK and JFSC D2/Red list jurisdictions.

• Members of Client Y’s extended family and their associated businesses are subject to US, UK and EU terrorism sanctions (Islamic State associated).

EDD QUESTIONS

• What linkages these formal businesses have with the informal value transfer activity in certain jurisdictions need to be clarified.

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• Checks cannot ascertain linkages, but the value and activity volume seem to have some discrepancies.
• Therefore, there is suspicion that funds from the Trust may have been diverted and used for TF purposes.

TRIGGERS OF SUSPICIOUS ACTIVITY – SAR DATA:

1. The appointment of a non-familial beneficiary based in a JFSC D2 listed EDD Q country.
2. Engagement with a country on the GoJ Red List of high-risk jurisdictions associated with Terrorist Financing.
3. Operation of a network of currency exchange businesses in D2/Red list jurisdictions.
4. The use of both a formal banking system and the potential to be linked to the informal value system (potentially money services businesses/Hawala type arrangements) to facilitate the funds to individuals not named as beneficiaries of the Trust.
5. Indirect sanction links, Client Y maintains close familial and business links with individuals and businesses who are subject of sanction measures.
6. An audit trail regarding the final destination of the distributions made to Client Y under the guise of a “beneficiary” could not be established.

FIU Actions:

1. The FIU reviews all SAR submissions and grades and prioritises them as appropriate.
2. TF-related cases will always be graded as the highest priority with the greatest urgency of assessment and analysis, known as Code 1.
3. Code 1 is prioritised and allocated to an FIU officer with a specific higher-level.

TF training.

1. While all FIU members have training in TF matters, the FIU has several officers who are highly trained in TF matters and maintain additional global connections and higher vetting levels to support a deeper understanding of potential TF typologies.
2. A wide range of sources will be reviewed and checked to ensure the submission's facts are correct. We want to expand our understanding.
3. The FIU engages with domestic competent authorities and internationally with global FIUs and specialist counter-terrorism units to share intelligence and seek further information.
4. The FIU maintains additional awareness of a range of jurisdictions and activities aligned to product, jurisdiction, sector and client risks, in particular as it may relate to TF matters

Outcomes:

1. Client Y was highlighted as a significant potential risk.
2. A review of the Trust's risk appetite and compliance approach identified that it was unsuitable as a client.
3. Client Y was removed as a beneficiary from the Trust.
4. International intelligence organisations could understand more comprehensive network links associated with potential TF matters.
5. International partners further reviewed the businesses and associations in several jurisdictions.
6. The indirect risk to Jersey was negated.

FIU Comment:

1. In TF cases, identifying the value chain and funding distribution is necessary to fully understand the activity, as the complex links between formal and informal value systems are often undertaken to obscure illicit activity.
2. How value may be used or abused is not always clear. International partnerships and collaborative work is critical to better understand typology and threat development as well as support local investigations and disruption operations.
3. The sense and transparency of activity were worrying as it appeared overly complex and sought to obscure activity.
4. The D2 and Red lists are dynamic, necessary and valuable aids that can support risk understanding and reporting thresholds

SOURCE – PAGE 22+23 = https://jersey.police.uk/media/678455/FIU-SAR-Q3-Reporting-2023.pdf