Terrorism Financing

According to the definition in the International Convention for the Suppression of the Financing of Terrorism drawn up in December 1999, the primary objective of terrorism is ‘to intimidate a population, or to compel a government or an international organisation to do or abstain from doing any act.’ This is in contrast to other types of criminal activity where financial gain is generally the ultimate objective.

The Monetary Authority of Singapore (Anti-terrorism Measures) Regulations 2002 (S515/2002) extends the definition of ‘terrorist’ as any person who:

1. commits, or attempts to commit, any terrorist act; or
2. participates in or facilitates the commission of any terrorist act,
3. and includes any person referred to in the Schedule;

“terrorist act” means the use or threat of action –

where the action –

1. involves serious violence against a person;
2. involves serious damage to property;
3. endangers a person’s life;
4. creates a serious risk to the health or the safety of the public or a section of the public;
5. involves the use of firearms or explosives;
6. involves releasing into the environment or any part thereof, or 
distributing or otherwise exposing the public or any part thereof to –
7. any dangerous, hazardous, radioactive or harmful substance;
8. any toxic chemical; or
9. any microbial or other biological agent, or toxin;
10. is designed to disrupt any public computer system or the provision of services directly related to communications infrastructure, banking and financial services, public utilities, public transportation or public key infrastructure;
11. is designed to disrupt the provision of essential emergency services such as the police, civil defence and medical services; or
12. involves prejudice to public security or national defence; and
13. where the use or threat is intended or reasonably regarded as intending to –
14. influence the Government or any other government; or
15. intimidate the public or a section of the public.

The International Monetary Fund defines Terrorist Financing as

.. it involves the solicitation, collection or provision of funds with the intention that they may be used to support terrorist acts or organization. Funds may stem from both legal and illicit sources..

The primary goal of individuals or entities involved in the financing of terrorism is therefore not necessarily to conceal the sources of the money but to conceal both the financing and the nature of the financed activity.

Reverse money laundering

Reverse money laundering is a process that disguises a legitimate source of funds that are to be used for illegal purposes. It is usually perpetrated for the purpose of financing terrorism but can be also used by criminal organisations that have invested in legal businesses and would like to withdraw legitimate funds from official circulation. Unaccounted cash received via disguising financial transactions is not included in official financial reporting and could be used to evade taxes, hand in bribes and pay “under-the-table” salaries.

The problem of such fraudulent encashment practices has become acute in Russia and other countries of the former Soviet Union. The Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG) reported that the Russian Federation, Ukraine, Turkey, Serbia, Kyrgyzstan, Uzbekistan, Armenia and Kazakhstan have encountered a substantial shrinkage of the tax base and shifting money supply balance in favour of cash. These processes have complicated planning and management of the economy and contributed to the growth of the shadow economy.