Page 562 - IOM Law Society Rules Book

individuals or criminals who want to receive cash. This may complete a
separate criminal ARS transaction, including “grey economy” transactions.

ASSESSMENT OF RISK AREAS

Terrorist Financing

The level of vulnerability for ARS to misuse for terrorist financing differs from that
associated with money laundering. In the terrorist financing area, the level of
vulnerability may also differ according to whether ARS operations are used in
providing funds for a specific terrorist action or if such operations are used in
transmitting funds that have been collected from legitimate (or illegal) sources to
support future terrorist activities. Terrorist financing is difficult to detect and can
involve clean sources of funds. It is important that ARS providers screen transactions
and customers against relevant terrorist financing related lists.

The expenses of an individual terrorist or terrorist cell may well be small. Often cells
are largely selfsupporting and may derive funding from crime. The best defence
against these transactions is the application of normal AML policies, that is, customer
identification, know-your-customer procedures and suspicious transaction reporting.
With fund raising activities, know your customer procedures are equally important.
Any sector may be used for these activities, but as AML procedures are implemented
worldwide, covert ARS will become increasingly attractive to terrorist organisations.

Money Laundering

The risks in money laundering are clearer. Any ARS can be misused to launder the
proceeds of crime. The use of false identities and structuring are common techniques
to which ARS is vulnerable. The highest risks, however, are to the ARS that can
efficiently handle large volumes of cash. While specific risks will vary from one
jurisdiction to another, several common elements can be identified. Some of the
factors to be considered in assessing risks are:

• The effectiveness or existence of the regulatory regime;
• The volume and destinations of criminal money flows (criminal remittance
corridors);
• The number and types of ARS operators;
• The extent of law enforcement interdiction and effectiveness of the suspicious
transaction reporting regime;
• The extent to which banks provide accounts for ARS operations; and
• The size, origins and locations of migrant communities.

The risk analysis for each country will be different and should inform the regulatory
and banking sectors.