The Canadian Press
CSIS develops model to understand terror financing
Mon. Apr. 21 2008 8:19 AM ET
http://www.ctv.ca:80/servlet/ArticleNews/story/CTVNews/20080421/csis_terror_080421/20080421/

MONTREAL -- Canada's spy agency has been forced to junk its approach
to terrorist financing as clandestine groups both here and abroad
learn to skirt the law-enforcement initiatives set up after Sept. 11,
2001.

Intelligence assessments obtained by The Canadian Press suggest
Canadian authorities have been operating in the dark when it comes to
tracking funds earmarked for terrorism.

"A generally accepted model for terrorist financing would provide a
clear and common strategic understanding of how terrorist financing
operates and a sound basis for deciding how to respond to it," reads a
2007 study from CSIS' Integrated Threat Assessment Centre.

"Currently, no such model exists."

The country's ability to trace money for terrorism was taken to task
recently by the Financial Action Task Force, an international body
that deals with criminal threats to financial systems.

In a February report, the group found "serious issues" with the
effectiveness of the Financial Transactions and Reports Analysis
Centre of Canada, or Fintrac, the federal body that traces illicit
cash transfers.

"The feedback provided by some organizations that receive Fintrac
disclosures was generally negative," the task force's report said.

"Until 2007, no conviction for ML (money laundering) or TF (terrorist
financing) had directly resulted from a Fintrac disclosure."

Fintrac, which provides research to the RCMP and CSIS but has no
enforcement powers itself, rejected the criticisms as unfounded and
unreflective of the "legal reality" in Canada.

Last month, a 45-year-old Toronto man, Prapaharan Thambithurai, became
the first Canadian to be charged with terrorist financing.

He allegedly used a humanitarian organization, the World Tamil
Movement, as a front for raising money for the Tamil Tigers, an armed
independence group fighting the Sri Lankan government.

RCMP officers sealed the movement's headquarters in Montreal and
Toronto last week, although the group has repeatedly denied claims it
is a front for the Tigers.

Charities are a particular area of concern for Canadian
counter-terrorism investigators, who note that legitimately raised
funds can often end up financing terrorist activities.

"Charities constitute, wittingly or not, a (censored word) source of
financing," reads a 2006 intelligence assessment obtained through
Access to Information laws.

While government officials disguised the scope of the problem, the
Financial Action Task Force report said "charities and other
non-profit organizations have figured in over one-third of Fintrac
disclosures related to suspected terrorist activity financing."

The Canadian agency reported a total of 33 incidents last year linked
to terrorist financing, worth around $200 million.

"Typically in Canada (funds for terrorism) are raised here and sent
overseas," said Chris Mathers, a former undercover officer with the
RCMP's proceeds of crime unit.

The CSIS intelligence assessments, which are marked "for official use
only," indicate that problems tracking such funds may stem from the
use of the money-laundering model to understand terrorist financing.

"Current techniques for the detection of money laundering, which is
basically what is applied to terrorist financing in most cases, are
essentially designed to track drug transactions," said Mathers, who
now serves as a security consultant.

"But the problem is that the amounts of money used to finance
terrorist activities are so small compared to drug trafficking
proceeds that it doesn't really make sense to use the same techniques
to catch both."

The assessments offer a new model for terrorist financing that takes
into account the expanding variety of sources and uses for clandestine
funds.

The model breaks financing into five stages: acquisition, aggregation,
transmission to terrorist organization, transmission to operational
cell, and expenditure.

Intelligence gathered since the 9-11 hijackings shows terrorist groups
have avoided using conventional banking systems, largely because of
the rigid regulatory environment.

"Deprived of safe access to conventional banking, terrorists have
turned to harder-to-detect remittance methods, such as hawalas and
couriers," says the 2006 assessment, referring to a traditional
informal money transfer system.

Other open-source intelligence has noted recent trends towards
Internet payment systems and value cards, which can store thousands of
dollars with relative anonymity.

"The terrorist financing/resourcing "trail" is not like a piece of
string one can follow from its beginning to its end," one 2007
assessment reads. "It is a process that involves many things from many
sources to many recipients through many channels for many uses."