AIBA Quarterly Meeting

1. AIBA Quarterly Meeting The Challenges of Terrorist Financing in 2014 and Beyond September 9, 2014 Dennis M. Lormel President & CEO DML Associates, LLC

2. Introduction Current Threat Environment in the U.S. Current Noteworthy Litigation The Power of Financial Intelligence Conclusion Terrorist Threats 2014

3. Introduction

4. Global Flash Points • Transnational criminal organizations and terrorist groups thrive and prosper in regions fraught with conflict and corruption • Countries / regions where chaos prevails and criminal organizations and terrorist groups thrive: • Yemen • Syria • Iraq • Afghanistan • Palestinian territories • Pakistan • Lebanon • Africa

5. Dangerous Trifecta Corruption Transnational Crime Terrorism

6. Hybrid Criminal / Terror Entities • Transnational criminal organizations and terrorist groups share many operational and organizational similarities and characteristics • Often learn from one another • Imitate each other’s successes and failures • Frequently partner with one another • Evolution of hybrid criminal / terror entities • Nexus between transnational criminal organizations and terrorism increasingly complex and sophisticated • Public and private sectors must develop new methodologies and strategies to deal with the problem of convergence • Understanding the crime / terror nexus is first step toward solving the problem

7. Business Model for a Terrorist Organization • Mission statement • Desired infrastructure • Political and or social wing(s) • Military wing • Funding requirements • Must have ability to raise, move, store and spend money to sustain organization and operations • Desired capacity • Funding sources • Licit / illicit • Must be sufficient to support infrastructure and capacity • Funding mechanisms • Formal / informal financial mechanisms

8. Current Terrorism Threat Environment in the U.S.

9. Most Significant Threats to the U.S. • Syria • Islamic State (ISIS / ISIL) • Foreign fighters (Western passport holders) • Violent home grown extremists • Al-Qaeda in the Arabian Peninsula • Islamic State • This does not diminish the threats from al-Qaeda affiliates, Hizballah and other terrorist groups

10. Syria • Syria has become the pre-eminent location for Al-Qaeda aligned groups and the Islamic State to recruit, to train and to equip what is now a growing number of extremists, some of whom seek to conduct external attacks • From a terrorist perspective, the most disturbing element is that Al-Qaeda has declared Syria its most critical front • Foreign fighters attracted to the Syrian battleground represent a long term threat to U.S. national security interests • Syria has become an incubator for extremism

11. Islamic State • Formed by Abu Musab al-Zarqawi as al-Qaeda in Iraq • Expanded into Syria during Syrian civil war • Has taken control of large portions of Iraq and Syria • Announced formation of an independent Islamic State • The Islamic State is the fruit of chaos • Its deep rooted sense of purpose and its political, financial and military ability have transformed the Islamic State into a regional and global threat • Leader is Abu Bakr al-Baghdadi • Extremely vicious like al-Zarqawi • Conflict provided opportunity for Islamic State to amass incredible wealth • Responsible for rampant executions and kidnaping • Disavowed by al-Qaeda

12. Success of Islamic State • How did Islamic State become so dangerous? • Precision and sophistication • Can function as military or insurgency group • Members • Veterans • Westerners • Unstable misfits • More radicalized • Financial management • Incredible wealth • Territory (caliphate) • Syria / Iraq • Sunni population (Sectarian divide) • Propaganda • Media savvy

13. Abu Bakr al-Baghdadi Leader of al-Qaeda in Iraq, which evolved into the Islamic State Became leader in 2010 Moved to Syria in 2013 and announced he was taking over al-Qaeda in Syria Disavowed by al-Qaeda Extremely brutal Cult like figure Overseas all operations in Syria and Iraq On June 29, 2014, announced formation of an Islamic State (caliphate)

14. The Boston Marathon bombing in April 2013 reminds us that the terrorist threat (by violent homegrown extremists) against the U.S. remains persistent In the past two years, homegrown extremists have attempted to detonate improvised explosives devices or bombs at such high profile targets as the Federal Reserve bank in New York, commercial establishments in downtown Chicago, the Pentagon, and the U.S. Capitol Fortunately these attempts and many others were thwarted Yet the threat from such individuals remains Source: FBI Director Comey March 27, 2014 Violent Homegrown Extremists

15. Yemen AQAP Threat • On 8/25/2010, CIA reportedly considered for the first time since 9/11 that an al-Qaeda offshoot group was a greater threat to the U.S. than al-Qaeda • Al-Qaeda in the Arabian Peninsula (AQAP) • Al-Qaeda affiliate in Yemen • Responsible for attempted UPS parcel bombings and Christmas day bombing attempt on flight to Detroit • Ibrahim Hassan al-Asiri bomb maker and group leader • Responsible for threat that caused 19 U.S. consulates in Middle East to close during August 2013 • Communication between AQAP leader Nasir al-Wuhayshi and al-Qaeda leader Ayman al-Zawahiri • Publish “Inspire” magazine • Successful recruitment tool used by Anwar al-Awlaki and his recruitment successors

16. Nasir al-Wuhayshi Leader of Al-Qaeda in the Arabian Peninsula (AQAP) Became leader in 2002 Brazenly appeared at meeting with over 100 AQAP operatives that was reported in the media on April 15, 2014 Video from meeting quoted al-Wuhayshistating “we must eliminate the cross…the bearer of the cross is America” In retaliation, U.S. and Yemen made two drone attacks against AQAP killing numerous members possibly including al-Asiri Has been elevated to Al-Qaedas second in command behind Ayman al-Zawahiri Not a career enhancing position Prior three #2 Al-Qaeda leaders killed in drone missile attacks Served as a private secretary to Osama bin Laden

17. Current Noteworthy Litigation

18. GITMO FIVE 9/11 Highjackers Seed $$ KSM Bin Laden Sheikh Saeed Ali Aziz Ali Attash Richard Reid Ahmed Ressam Al Hawsawi Ali Al Marri Bin Al-Shibh Zacarias Moussaoui Marwan Al-Shehhi Nawaf Al-Hazmi Mohamed Atta Khalid Al-Mihdhar 9/11 Highjackers

19. Linde v. Arab Bank • Victim families brought suit against Arab Bank for knowingly facilitating financial transactions from a group known as Saudi Committee for the benefit of families of Hamas and Palestinian Islamic Jihad suicide bombers • Case brought in 2004 • Went to trial in August 2014 • If Arab Bank found liable, it could significantly impact the way foreign banks • Creates conditions that potentially challenge foreign institutions regarding due diligence • Similar litigation involving another international bank forthcoming

20. The Power of Financial Intelligence

21. Importance of Financial Information • As criminals and our financial system continue to become more sophisticated, financial transactional information becomes more relevant as a critically important investigative mechanism • Finance, communications and greed are biggest vulnerabilities to bad guys • An investigator’s ability to collect and use financial information can be devastating to terrorists and criminals • Without money, terrorist and criminal organizations cannot adequately function • Financial investigations should be integral part of investigative strategies • Knowing what financial information is relevant, where to collect it from, and how to use it are facts all investigators can benefit from

22. Financial Institutions Responding to Terrorist Incidents • Terrorist incidents • 9/11 • Fort Hood shooting (Nidal Hasan) • Time Square bombing attempt (Faisal Shahzad) • New York subway bombing plot (NajibullahZazi) • Khalid Ali M. Aldawsari • Mumbai Bombing • Richard Headley • Osama bin Laden’s death • Boston Marathon bombing • Other incidents • Following every incident financial institutions immediately came forward to assist law enforcement • Provided law enforcement with valuable financial evidence

23. Identifying Terrorist Financing • There are numerous alerting mechanisms that financial institutions can use to identify terrorist financing • Proactive and reactive • Challenging • Targeted transaction monitoring • Media reports • Law enforcement • Requests • Process • Transaction monitoring • Front line employees • Hotline • Other mechanisms

24. Financial Red Flags • IP logins in areas of conflict • Transactions in Syrian border area (Turkey / Jordan / Lebanon) • Transactions in Yemen and Pakistan • Periods of transaction dormancy • Training camps / combat • ATM cash withdrawals in areas of conflict • Wire transfers to areas • Charitable activity in areas of conflict • Particularly in Syria • Uptick in student loans • Purchase airline tickets to travel overseas

25. Triggers for Financial Trends • Evolving sources of funds • Legitimate to illegitimate (growing reliance on criminal activity) • Terrorist and criminal organizations must have continuous access to funds • Global money laundering requires the use of facilitation tools • Facilitation tools used by terrorist and criminal organizations are dependent on world events and governance • Local to regional to global • Trends regarding financial mechanisms used by terrorist and criminal organizations are driven by opportunity

26. Contrasts of Using Financial System • In using the financial system, terrorists are confronted with distinct contrasts • Facilitation tool v. detection mechanism • Serves as facilitation tool by providing continuous access to funds • Financing the lifeblood of terrorist organizations • Serves as detection mechanism because funds can be identified through monitoring and / or investigation • Financing a major vulnerability

27. Conclusion

28. Looking Beyond 2014 • Need to develop mechanisms to identify and address the convergence and diversification of terrorist and criminal groups • Development of innovative and proactive initiatives • Monitoring and investigative methodologies • Vigilantly react to terrorist activity to identify potential funding mechanisms • Training • Need to assess emerging threats, financial requirements and terrorist flashpoints going forward

29. Conclusion • Growing nexus between criminal organizations and terrorist groups • More complex and sophisticated • Convergence • Diversification • Unholy trifecta • Corruption • Transnational crime • Terrorism • Must develop new methodologies and strategies to deal with problem of convergence and diversification • Proactive and reactive • Understanding the crime – terror nexus is first step toward solving the problem • Exploit vulnerabilities of bad guys • Finance • Communications • Greed

30. Dennis M. Lormel President & CEO DML Associates, LLC 19309 Winmeade Drive Lansdowne, VA 20176 571-333-0300 dlormel@dmlassociatesllc.com www.dmlassociatesllc.com