FinCEN -Alert Regarding Preventing Financing Terrorist Activities

Last week, FinCEN issued an alert to “assist financial institutions in identifying funding streams for Hamas in response to Hamas’s horrific terrorist attack on the people of Israel, which left more than 1,000 innocent civilians, including citizens of the United States and dozens of other countries, wounded, killed, or taken hostage.”

Hamas, and many entities and individuals associated with Hamas, already are subject to extensive sanctions by the U.S. Building on previous actions against Hamas, OFAC recently designated numerous Hamas members, operatives, and financial facilitators located in Gaza and elsewhere, including Sudan, Turkey, Algeria, and Qatar.

FinCEN noted that Hamas raises funds to support its operations and members in a variety of ways, including: support from Iran; private donations; a global portfolio of investments; diverting aid and support from legitimate charities; the control of border crossings and avenues of commerce; racketeering business frameworks; extortionary practices around local populations; and fundraising campaigns involving virtual currency and fictitious charities raising both fiat and virtual currency. Hamas moves funds through the smuggling of physical currency as well as a regional network of complicit money transmitters, exchange houses, and Hizballah-affiliated banks.

FinCEN emphasized the need for financial institutions, including virtual asset service providers, to be vigilant in identifying suspicious activity relating to financing Hamas and reporting it to FinCEN.

The alert contains the following red flags to help detect, prevent, and report potential suspicious activity related to Hamas’ terrorist financing activity:

·????? A customer or a customer’s counterparty conducts transactions with OFAC-designated entities and individuals, or transactions that contain a nexus to identifiers listed for OFAC-designated entities and individuals, to include email addresses, physical addresses, phone numbers, or passport numbers, or virtual currency addresses.

·????? Information included in a transaction between customers indicates support for terrorist campaigns.

·????? A customer conducts transactions with an MSB or other financial institution, including one that offers services in virtual currency, that operates in higher-risk jurisdictions tied to Hamas activity, and is reasonably believed or suspected to have lax CDD requirements, opaque ownership, or otherwise fails to comply with AML/CFT best practices.

·????? A customer conducts transactions that originate with, are directed to, or otherwise involve entities that are shell corporations, general “trading companies,” or other companies that have a nexus with Iran or other Iran-supported terrorist groups, such as Hizballah and Palestinian Islamic Jihad.

·????? A customer that’s a charitable organization or nonprofit organization solicits donations but does not appear to provide any charitable services or openly supports Hamas’s terrorist activity or operations. In some cases, these organizations may post on social media platforms or encrypted messaging apps to solicit donations, including in virtual currency.

·????? A customer that is a charitable organization or NPO receives large donations from an unknown source over a short period of time and then sends significant wire transfers or checks to other charitable organizations or NPOs.

·????? A customer conducts transactions with known or suspected virtual currency addresses tied to terrorism or terrorist financing donation campaigns.