On 30 December 2020, the Singapore terrorism financing (TF) national risk assessment (NRA) was published. This report is a joint effort by the Risks and Typologies Inter-Agency Group (RTIG), led by the Ministry of Home Affairs (MHA) and the Monetary Authority of Singapore (MAS) further enhanced by the involvement of the private sector and academia through various projects. It reflects their collective experience and observations over the past few years and provides valuable guidance for financial institutions (and other exposed persons) to calibrate their measures to counter TF.
Key Terrorism Financing Threats
The TF NRA identifies the following terrorist groups as the highest threats:
- Islamic State of Iraq and Syria (ISIS): The ongoing conflict in Syria and Iraq, ISIS’ growing interest in Southeast Asia and the presence of ISIS militants in the region, namely under its East Asia division, Wilayat Sharq Asiyya, raise the possibility of Singapore being used by ISIS as a conduit to move funds in the region. Known means of transfers for the organisation involve cash couriers, money remittances, bank transfers, virtual currencies and online transactions.
- Al-Qaeda (AQ): There are signs that Al-Qaeda and Jemaah Islamiyah are regrouping and may resume planning large-scale attacks, which require funds to be raised or moved.
- Jemaah Islamiyah (JI): Prior to its disruption in 2001/2002, the Singapore JI network was largely self-financed. The funds were used to finance the Singapore JI’s local activities, as well as channelled to the JI leadership in Malaysia. The Singapore JI members eschewed the commercial banking system, primarily because these institutions were interest-generating and hence regarded as haram(forbidden).
The most salient TF threat to Singapore however pose radicalised individuals. Singapore also continues to detect a small number of radicalised Singaporeans who had intended to travel abroad and fight alongside ISIS and radicalisation among foreigners working and living in Singapore. All activities of individuals convicted for TF relate to the raising and/or moving of funds out of Singapore, using fairly unsophisticated channels (e.g. through remittance agents) and methods, to support terrorist activities abroad. The main modalities include self-funding from individuals’ salaries or savings, but may also come from charities (misused), or illegitimate sources such as criminal proceeds. The sums involved were small and did not involve complex or peculiar transaction patterns that would trigger suspicion.
Terrorism Financing Vulnerabilities and Risks
The TF NRA identifies the following key areas for terrorists to exploit to raise, move and use funds.
(Source: 2020 Singapore Terrorism Financing National Risk Assessment; Diagram 1: TF Risk Rating)
Money Remittances (High Risk)
Terrorist financiers are known to use money remittance (cross-border money transfers) channels widely to move funds, both into, out of, and within the region. International typologies also suggest the use of unlicensed remittance channels (including hawalas) to facilitate TF fund flows. These unlicensed remittance businesses pose special TF risk. In Singapore, TF threats in this sector have also materialised.
Some of the counties in the region that local remittance agents frequently transact with are known to be more exposed to terrorism / TF risk. While some remittance businesses are using advanced data analytics tools to monitor transactions and detect TF-related red flags, other remittance agents, namely smaller ones, rely on less sophisticated controls. Thus far, known local TF cases have shown that TF transactions often involve small amounts and are funded from legitimate sources such as salaries and profits from businesses.
Banks (Medium-high Risk)
Terrorist financiers are known to use the banking sector to raise and move funds into and out of the region. These typologies are well reported in the region and around the world (e.g. due to the ubiquity of banks and ease of transacting through them). Singapore’s status as an international financial centre with its interconnected banking system exposes it to large international money flows. In addition, its close geographical proximity to countries with active terrorist activities or terrorist groups makes Singapore vulnerable to being used as a conduit for TF purposes. So far, TF activities are however not known to be conducted through banks in Singapore, although a small amount of funds / assets relating to persons of interest would have been initially deposited with the banks.
Local cases have shown that radicalised individuals and sympathisers are known to transact in small amounts and fund terrorism-related activities from legitimate sources such as salaries or savings. It is thus not easy to differentiate these transactions from the individuals’ normal financial activity.
Non-profit Organisation (Medium-low Risk)
International and regional typologies have shown that terrorist financiers are known to use non-profit organisations (NPOs) as the means to raise, move and use funds. For example, international aid flowing into liberated areas of Iraq and Syria could present opportunities for ISIS to generate funds. Besides the possible diversion of legitimate funds for TF due to weak internal controls, the sector is also seeing an emergence of online fundraising movements that call on sympathisers to donate to families of jihadists, terrorist detainees and martyrs.
NPOs in Singapore are predominantly registered charities under the regulatory purview of the Commissioner of Charities (COC). Singapore’s NPO sector is largely domestically oriented. Only three out of ten charities engage in some form of overseas work and/or make donations and/or provide funding or services to beneficiaries outside Singapore. An even smaller proportion of charities within this group conduct these activities in higher-risk jurisdictions. Thus far, there has been no indication of foreign sources of funding flowing into Singapore via Singapore’s local NPO sector to support domestic terrorism-related activities, nor has there been any indication of funds raised by local NPOs being moved to fund terrorism-related activities abroad.
Given that the diversion of funds from local NPOs for TF has been identified as a threat, the charity sub-sector which has relatively more exposure to overseas activities, is assessed to be more vulnerable to TF. In recent years awareness of TF risk has increased amongst charities. Some charities have provided training for staff and volunteers to raise awareness and understanding of TF risks. However, the level of TF risk understanding still varies amongst the registered charities. Larger charities tend to have a better understanding of risk management.
Digital Payment Token Service Providers (Medium-low Risk)
Digital payment tokens (DPTs, also referred to as virtual assets / currencies) have emerged as a potential means for terrorist financiers, particularly tech-savvy militants, to raise and move funds across borders. DPTs are susceptible to TF abuse because of: (i) the anonymity they offer; (ii) the convenience they provide as a near-instantaneous value transfer medium; (iii) their ability to make high-value transactions quickly; and (iv) the cross-border nature of the transactions. Known international typologies include using DPT service providers to solicit DPTs online and then transfer the DPTs through multiple hops within a short duration to a wallet address associated with extremist sites. However, there is as yet, no evidence of widespread usage of DPTs. Arising from COVID-19, authorities have nonetheless noted indications that terrorists and terrorist groups may be looking to make greater use of virtual currencies to support their nefarious activities, and this is an area which the relevant authorities in Singapore continue to monitor closely.
Given that DPT service providers only recently came within MAS’ regulatory ambit, the levels of TF risk awareness and AML/CFT controls are lower compared to the other financial sectors.
Cross-border Cash Movement (Medium-low Risk)
Terrorist financiers around the world have been known to use cash couriers as a means to physically move funds across borders to finance their activities. These typologies are well reported in the region, perpetuated by cash-intensive economies, porous borders, loose maritime boundaries and proximity to conflict zones. The known routes do not involve Singapore and there is no indication of cross-border cash movement (CBCM) relating to TF in Singapore to-date. Nevertheless, Singapore’s proximity to countries with active terrorist groups makes it vulnerable as a potential location to pick up and transit funds for foreign terrorist fighters travelling to conflict zones.
Singapore has stringent border controls and a robust framework to detect illicit CBCM. Nonetheless, the risk remains that radicalised individuals intending to travel out of the region to join terrorist groups carry cash out of Singapore to fund terrorist activities abroad, especially if these individuals should leave Singapore undetected. International typologies also recognise that given the small amounts of monies typically associated with terrorism, that they would frequently fall below the reporting threshold.
Precious Stones and Metals Dealers (Medium-low Risk)
International and regional typologies indicate relatively few instances of terrorist financiers using precious stones and precious metals (PSPMs) to move or raise funds for terrorism. However, PSPMs have high intrinsic value in a relatively compact form and tend to maintain or increase their value over time. This means that PSPMs could be a good store of value and accepted as an alternative to monies, whether in Singapore or in conflict-ridden and terror-prone states.
Since 2014, cash transactions with precious stones and metals dealers (PSMDs) reporting regime. From April 2019, a full suite of AML/CFT supervisory measures applies in the PSMD sector.
Being a sector with a diverse range of activities and scale of operations, the levels of TF risk understanding and AML/CFT controls are varied. The retail sector for precious stones and second-hand dealing of precious and precious products are assessed to have a lower level of awareness and controls.
You can find the full Terrorism Financing National Risk Assessment report at https://www.mas.gov.sg/-/media/MAS/Regulations-and-Financial-Stability/Regulatory-and-Supervisory-Framework/Anti_Money-Laundering_Countering-the-Financing-of-Terrorism/TF-NRA/Terrorism-Financing-National-Risk-Assessment-2020.pdf.