How Terrorists Send Money

[Jay Mailinglists]

This is not quite the case of terrorists using mobile payments.

It seems to make a convoluted relationship between mobile phones, mobile 
SIM cards, stored value cards and tracking financial transfers which are 
quite separate issues.

Eventually, mobile payments should make the source and destination of 
financial transactions even more traceable. Each mobile handset has a 
unique hardware serial number (IMEI) which can be identified (traced) by 
the mobile network. Each SIM card, or phone number, has a unique IMSI 
number which is also identified (traced) by the mobile network. 

The use of multiple stored value cards for multiple financial 
transactions can be traced to the owner and holder of the mobile phone 
and their monthly network billing account.



R.A. Hettinga wrote:
> <http://www.newmediajournal.us/staff/ehrenfeld/05032007.htm>
>
> The New Media Journal
>
> How Terrorists Send Money
>
> Terrorism Dr. Rachel Ehrenfeld & John Wood
>
> May 3, 2007
>
>
> Advanced mobile technology, cooperation between international mobile
> communications providers and international financial institutions and the
> lack of regulations make for a swift, cheap, mostly untraceable money
> transfer -- known as "m-payments" -- anywhere, anytime, by anyone with a
> mobile telephone.
>
> Members of the GSM Association and MasterCard are developing an m-payment
> service to enable 200 million international migrant workers and the poor
> who lack bank accounts to transfer money domestically and internationally.
> According to the World Bank, 175 million migrants transferred at least $230
> billion in international remittances in 2005. A recent U.N.-sponsored South
> African study found that m-banking can be up to one-third cheaper for
> customers than the current banking alternatives.
>
> However, the spread of m-payments in less developed countries, which often
> lack functioning anti-money laundering and anti-terrorist financing
> regulatory frameworks, and where corruption is rife, will likely increase
> money laundering and terrorist financing.
>
> The abuse of the m-payments is easy when the stored value card is used. It
> does not require a bank account, credit card or two forms of
> government-approved identification to activate and use. It just requires
> cash. Most cards set limits on the amount held on the card, but most can be
> reloaded, allowing the transfer of thousands of dollars. Indeed, this
> anonymous and mobile m-payment service is the best vehicle for criminals
> and terrorists for transferring or receiving money.
>
> Three billion people around the world have mobile phones, but only 1
> billion have bank accounts, says the GSM Association. BearingPoint, a major
> management and technology consulting company, estimated the unbanked
> marketplace in the United States alone in 2006 at $510 billion. No wonder
> that banks such as Citigroup, HSBC, JPMorgan Chase, as well as mobile-phone
> companies such as Cingular, Verizon and Sprint, are clamoring for a piece
> of the action. More than a dozen m-payment service providers are already
> operating. The largest is PayPal, with more than 100 million Internet
> accounts worldwide.
>
> Here's how m-payments can work: You buy a stored value card for a certain
> amount of dollars and a prepaid, disposable mobile phone. Next, you
> register with the m-payment service provider using a free anonymous e-mail
> account, your prepaid mobile-phone number and the money on the stored value
> card. Using your mobile phone, you log on to the m-payment service provider
> and give the number of the mobile phone to which you wish to transfer the
> funds from your stored value card. The m-payment service provider sends a
> message to the receiver's phone number asking where to transfer the money.
> The recipient can request the transfer to his stored value card and
> withdraw the funds from any ATM. Both sender and recipient can then throw
> away their mobile phones and use new phones and new stored value cards for
> another transfer, without any fear of detection.
>
> In the United States, on Feb. 27, Citigroup teamed with Obopay, the mobile
> person-to-person payment service provider, enabling not only South American
> and Filipino migrant workers to transfer money to their families, but
> perhaps also offering drug traffickers and/or supporters of al-Qaida, Hamas
> and Hezbollah a safe way to send money to the Middle East or to each other.
>
> The London-based HSBC, with more than 5,000 offices in 79 countries, and
> its subsidiary, First Direct -- a telephone and Internet-based commercial
> bank -- offer an m-payment solution over the Monilink World Wide Web
> network. Such an extensive mobile banking network in countries, many with
> close ties to and large potential terrorist populations, defeats any
> attempt to stop terrorist financing. How many al-Qaida and Hamas
> sympathizers in the United Kingdom are using this service?
>
> In the Middle East, the Amman-based Access2Arabia offers mobile and
> Internet banking services to customers in Algeria, Tunisia, Nigeria,
> Lebanon, Syria, Saudi Arabia, Bahrain, Qatar, Sudan, Iraq, Ghana, Cyprus,
> Gaza and Yemen. In January the National Bank of Dubai signed an agreement
> for m-payments services with the Norwegian/European mobile company LUUP to
> service 300 million people in the Middle East alone. Dubai, a major
> international financial center, is also known as a money-laundering and
> drug- and arms-trafficking haven for organized crime, al-Qaida, Hamas, Iran
> and Hezbollah.
>
> In the Philippines, which Hong Kong-based Political and Economic Risk
> Consultancy (PBRC) terms "the most corrupted Asian country" and where
> al-Qaida is active, at least 3.5 million people are using a service that
> lets them transfer money, pay bills, give contributions to charities
> locally and internationally, purchase prepaid Internet credits, and buy
> gaming credit over the two major mobile networks operated by SMART
> Communications and Globe Telecom.
>
> Special security features of the m-payment system constitute a major
> impediment to law enforcement and intelligence services that seek to detect
> suspicious money transactions. Compounding the challenge is the fact that
> the m-payment process leaves little to no audit trail, and lack of adequate
> regulatory oversight makes the transactions untraceable.
>
> The only applicable federal reporting requirement to providers of stored
> value cards is the Currency Transaction Report rule. A CTR must be filed
> for all cash transactions greater than $10,000 per day. However, the CTR
> can be filed up to 15 days after the transaction has occurred, giving
> terrorists and criminals enough time to disappear.
>
> Furthermore, although almost all U.S. m-payment service providers are
> registered as Money Services Businesses with FinCEN, the regulations do not
> have specific provisions pertaining to them. Moreover, the government is
> already constrained by international privacy and secrecy laws, as in the
> Cayman Islands, Cyprus, Belgium and Panama.
>
> Today, m-payment service providers cannot verify that the address given has
> not been taken from the White Pages. And there is no way to ensure that the
> Social Security number has not been stolen or "borrowed" from another
> person -- alive, dead or in jail. As we learned from the 1993 World Trade
> Center bombing investigations and trials, and the Sept. 11 Commission
> Report, terrorists can easily acquire valid driver's licenses, visas,
> Social Security cards and credit cards.
>
> Since both terrorism and m-payments are global, the m-payment service
> provider, as all those monitoring terror financing, should have immediate
> real-time access to an integrated, closely monitored list of all
> individuals, organizations, businesses and countries suspected of links to
> terrorists.
>
> Yet, in January, the U.S. Treasury's Financial Crimes Enforcement Network
> -- or FinCEN -- told Congress that while "the reporting of cross-border
> wire transfer data by financial institutions is technically feasible," law
> enforcement needs another year to assess whether it would be "valuable to
> the government's efforts to combat money laundering and terrorist
> financing."
>
> We do not have another year to waste. To stop money laundering and
> terrorist financing in real time, the government needs to identify, develop
> and implement the best methods and technologies available to regulate the
> m-payment services. In fact, now is not too soon.
>
> Dr. Rachel Ehrenfeld is author of Funding Evil; How Terrorism is
> Financed-and How to Stop It, Director of American Center for Democracy and
> a member of the Committee on the Present Danger.
>
> John Wood is president of the Playfair Group.