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FinCEN issues terrorist financing red flags following Hamas attacks

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Following the recent attacks on Israel, the US Financial Crimes Enforcement Agency (FinCEN) has issued an alert detailing key terrorist financing red flags to look out for. The alert is relevant for financial institutions (FIs) in multiple industries, including gambling, precious metals, and investment.

“The US Department of the Treasury…is issuing this alert to assist financial institutions in identifying funding streams supporting the terrorist organization Hamas,” the regulator explained. “FinCEN is urging financial institutions to be vigilant in identifying suspicious activity relating to financing Hamas and reporting such activity to FinCEN.”

Recent actions against Hamas

The alert is connected to a series of measures the US government has taken against Hamas, including recent designations by the US Treasury. On October 18, 2023, the Office of Foreign Assets Control (OFAC) designated eight individuals, one virtual currency wallet, and its owner for involvement in supporting Hamas

Six of the individuals were involved in the Palestinian organization’s secret investment portfolio, which was also the subject of sanctions in 2022. Two were upper-level Hamas operatives.

Investigations have revealed evidence that Hamas has raised funds through virtual currency services. The designated wallet, which belongs to a firm called Buy Cash Money and Money Transfer Company, was seized by Israeli authorities in June 2021. Along with the wallet, Buy Cash was designated for involvement in funding multiple terrorist groups.

“The US Treasury has a long history of effectively disrupting terror finance, and we will not hesitate to use our tools against Hamas,” said Janet L. Yellen, Secretary of the Treasury. “That includes…imposing sanctions and coordinating with allies and partners to track, freeze, and seize any Hamas-related assets in their jurisdictions.”

Alert: Seven terrorist financing red flags

The alert urges FIs to consider red flags in the context of broader risk factors, such as customer history, typical business practices, and the number of red flags exhibited. The publication lists seven key red flags firms should be especially attuned to, including:

  1. Transactions associated with OFAC-sanctioned entities.
  2. Transactions including information pointing to terrorist activity.
  3. Transactions with an FI in a risky jurisdiction, particularly if the firm fails to follow anti-money laundering and countering of terrorist financing (AML/CFT) best practices.
  4. Transactions connected to companies associated with known terrorist organizations, especially those involving Iran.
  5. Nonprofit organizations (NPOs) that seek donations but don’t appear to provide charity, that support Hamas, or that seek donations on social media or virtual currency platforms.
  6. An NPO customer who receives large donations in a short period from unknown donors then makes large donations to other NPOs.
  7. Transactions with virtual currency addresses associated with terrorist organizations.

How firms can take action

FinCEN’s most recent alert is relevant for any firm that could be impacted by activity associated with Hamas or other terrorist organizations. In particular, FinCEN wrote the alert for:

  • Casinos.
  • Depository institutions.
  • Firms in the insurance industry.
  • Money services businesses (MSBs).
  • Mortgage companies and brokers.
  • Firms in the precious metals/jewelry industry.
  • Securities and futures firms.

Firms are encouraged to review OFAC’s recent designations relating to Hamas and ensure their risk assessment incorporates any emerging risks stemming from these recent sanctions. Creating a process for evaluating customers’ overall risk for terrorist financing and implementing enhanced due diligence (EDD) measures for high-risk customers in line with FinCEN’s recent advisory may also be wise. Consider whether that process incorporates sound payment screening, sanctions screening, and transaction monitoring.

FinCEN asks firms to report suspicious activity that could relate to Hamas by including the key term “FIN-2023TFHAMAS” in field 2 of the suspicious activity report (SAR). For additional questions, please contact the FinCEN Regulatory Support Section at [email protected]

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Originally published 27 October 2023, updated 12 April 2024

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