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Threat Finance and Financial Intelligence

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U.S. CurrencyIncluded in the 2011 National Strategy for Counterterrorism is the stated objective of depriving terrorists of their “enabling means.”  This objective includes “expand[ing] and enhanc[ing] efforts aimed at blocking the flow of financial resources to and among terrorist groups and to disrupt terrorist facilitation and support activities.”  The U.S. recognizes that terrorist and similar organizations require financing to fund their operations and go to great lengths to ensure the sustainability of critical cash flows.

Threat finance and financial intelligence have emerged from this context.  Though slightly ambiguous in definition due to their dynamic nature, these areas of inquiry are critical to unraveling the financial networks that support illicit and dangerous organizations.

Threat finance encompasses the means and methods used by organizations to finance operations and activities that pose a threat to U.S. national security.  A range of actors – foreign terrorist organizations (FTOs), narco- and human traffickers, transnational organized crime (TOC), and cyber criminals – engage in an assortment of financial activities to ensure the reliability of cash flows and protect them from disruption.  Modi operandi are equally diverse: shell organizations, donations from complicit and unwitting sources, extortion, kidnapping, counterfeiting, and fraud, are all common means.  An emerging threat is that of a sophisticated set of actors who engage in market-based commodities or securities schemes, or cyber crime.

The practice underpinning all of these activities is money laundering, or the process by which illicitly-gained funds are concealed and made to appear legitimately sourced.  Consequently, it is money laundering that governments and international financial institutions (IFIs) endeavor to curtail through anti-money laundering (AML) policy and practices.

Euros - CurrencyIn the national security context, financial intelligence includes the means and methods used by the US government and legitimate actors in the financial industry to discover, disrupt, and deter the financing of threats to US national security and global stability.  Transactions of a particular amount or nature made through conventional channels, such as the banking system, are reported and traceable.  Hence, extensive cooperation between IFIs, governments, and the finance industry has yielded a degree of success in combating money laundering via conventional means.  However, Informal Value Transfer Systems (IVTS), such as hawala, are far more challenging to detect and disrupt as they operate outside of formal financial systems that comply with reporting and tracking requirements.  And, due to its unregulated and abstract nature that facilitates secrecy, cyberspace is exploited with increasing regularity by illegitimate actors to conduct their financial operations.

U.S. efforts to combat global terrorism and financial crime require a multidisciplinary approach to understanding the driving forces and enabling factors behind threat finance.  Similarly, the efficacy and cost-benefit tradeoffs of existing AML practices must also be considered.

Restricting the ability of illicit organizations to access enabling means is an essential component of a broader national security strategy.  The adaptive natures of threat finance and financial intelligence require a range of capabilities in technology, forensics, and network analysis, complemented by smart policymaking.

The American Security Project aims to contribute to this growing body of knowledge in Threat Finance and Financial Intelligence by examining the role of these dynamic fields as part of the U.S. national security strategy.  Through understanding the factors influencing current trends and practices in these areas, policymakers and industry leaders will be empowered to develop the effective private-public partnerships and judicious policies needed to facilitate information-sharing and effectively combat threat finance and secure the global financial system.


Additional resources on Threat Finance and Financial Intelligence:

FININT Dispatch –  The FININT Dispatch is a listserv connecting the Financial Intelligence and Information Sharing Working Group (FIIS WG).  The goal of the FIIS WG is to provide the financial services industry and the U.S. Government (USG) community with a forum to informally discuss relevant topics, including protection of critical financial infrastructure, prevention of fraud, and obstruction of terror finance and money laundering.  FIIS meetings and the relationships formed at those events facilitate information flow and bridge cultural gaps between government and industry. The FIIS began in 2010 as a public-private partnerships pilot project out of the USG; grew into a free-standing, member-supported community; and is now an element of the the American Security Project. Members include hundreds of representatives of both public and private-sector entities, including regulatory, intelligence, defense, and law enforcement agencies; financial institutions; think tanks; consultancies; and colleges and universities; among others.

List content is contributed by the membership and moderated for relevance.  Please contact the moderator to join the listserv or for further information at dcamner@hotmail.com

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