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Experts warn companies against terrorism financing threats

As more companies become caught in the web of terrorism financing unwittingly via questionable business partnerships as well as unethical and illicit transactions with organisations whose activities are terrorism-inclined, JOSEPHINE OGUNDEJI examines experts warning to corporations on the need for due diligence and comprehensive background checks

Terrorism, banditry, militancy, inter-ethnic wars, and religious extremism are increasingly assuming a more worrisome dimension globally as more countries experience the challenges of insecurity posed by terrorists and terror groups, as well as groups promoting extreme activities.

The Institute for Economics and Peace, in its Global Terrorism Index 2023 report, stated that terrorist attacks became more deadly in 2022, with an average of 1.7 people killed per attack in 2022 compared to 1.3 deaths per attack in 2021, making it the first increase in lethality rate in five years.

GTI, which compiles comprehensive data on critical global trends and patterns in terrorism over the last decade, also stated that besides the number of deaths, there were also numerous terror-related incidents, including abductions, hostages, injuries, destruction of properties, and displacement of communities.

The report further revealed that Islamic State and its affiliates, al-Shabaab, Balochistan Liberation Army and Jamaat Nusrat Al-Islam wal Muslimeen, were among the world’s deadliest terrorist groups in 2022. Islamic State affiliate groups include Islamic State – Khorasan Province, Islamic State – Sinai Province and Islamic State West Africa  Province, which operates in the Sahel region, including Nigeria.

Terrorist organisations and allied groups often require funds to finance their activities, including the purchase of arms and ammunition and fueling their network of affiliates. Illicit mining of natural resources, such as gold, diamonds, and crude oil, is, therefore, one of the accessible sources of funds they exploit, as the sale of these commodities can serve as a funnel to launder the proceeds of illicit activities.

In addition, most terrorist groups and related organisations may exploit corporate entities by funnelling money through shell companies or engaging in illegal financial transactions, thereby helping to sustain their activities.

For example, in Sierra Leone, illicit diamond mining was one of the several factors that contributed to the prolonged civil war which lasted from 1991 to 2002  in the West African country. Diamond extraction was more prominent in financing rebel groups, particularly the Revolutionary United Front.

The rebel groups funded their activities by trading in ‘blood diamonds’ or ‘conflict diamonds’. These diamonds, often extracted illegally, were sold on the international market to purchase weapons and sustain their insurgency. Gold mining also occurred illicitly, though not as prominent as the diamond trade.

Coming home, terrorism, banditry and militancy enablement have also been recorded in Nigeria. Statistics and studies have shown that crude oil mining in the Niger Delta region accounted for the rise in militancy in the oil-rich South-South states. Continuous agitation for resource control has exacerbated the establishment of many illegal refineries and the theft of crude oil and refined products.

Zamfara State, in North-West Nigeria, is another reference where illicit mining of gold deposits has been identified as a source of funding for insurgents. This has also exacerbated the spread of insecurity in northern Nigeria.

London School of Economics Fellow Uche Igwe, in a write-up, stated that illicit natural resource extraction in Nigeria fuels violence and insecurity, citing crude oil exploration in the Niger Delta region and gold in Zamfara as references. He said further that criminal networks, including the locals, influential persons and foreign opportunists, often provide cover for those involved in the illicit mining of mineral deposits.

In recent times, there have been rising cases of corporations caught in the web of global terrorism enablement arising from questionable relationships, unethical or illicit dealings or transactions with organisations whose activities are terrorism-inclined.

Terrorist groups sometimes exploit corporate entities by funnelling money through indirect shareholding because they require funding. Corporations that are not diligent on due background checks may unwittingly become involved in money laundering for terrorists.

A most recent case that comes to mind is the reports in some sections of the international media in which some technology companies, including Africa’s telecoms giant, MTN Group, were alleged to be facing prosecution and trial in the United States courts for alleged business relationships with a terrorist organisation – the Islamic Revolutionary Guard Corps. MTN Group maintains commercial ties with MTN Irancell, in which IRGC has a minority 49 per cent investment shareholding, a relationship that has been criticised as being unhealthy.

Bloomberg reported that the U.S. District Court for the Eastern District of New York had established that MTN and the tech companies knew the business relationships they were involved with IRGC would help finance, arm and support the Iranian terror group’s campaign in neighbouring Iraq.

It was further disclosed recently that the U.S. District Court had given the nod for the trial of MTN Group in connection with international terrorism financing under the Anti-Terrorism Act. The prosecution of MTN Group and tech companies was a sequel to a federal lawsuit filed by more than 50 Americans, who accused them of doing business with a terror organisation.

MTN Group, Bloomberg added, was also facing counts of aiding and abetting liability under the Justice Against Sponsors of Terrorism Act, civil conspiracy liability, and aiding and abetting terrorist acts in Afghanistan.

Thousands of Americans were reportedly injured or killed between 2011 and 2016 during serial attacks on Iraq by IRGC, which was officially designated as a Foreign Terrorist Organisation in 2019. MTN Group has, however, absolved itself of any wrongdoings while maintaining that its commercial ties with Irancell would continue despite a global outcry.

Earlier in 2019, a U.S. District Court in the District of Columbia ruled that MTN Group violated the U.S Anti-Terrorism Act by paying protection money to Al-Qaeda and the Taliban. Quoting court papers, Bloomberg noted that another layer to the lawsuit against MTN Group was that the court cited “decades of media coverage that alerted MTN to Hezbollah’s use of cellphones as detonators and to provide key means of communication and track enemy operatives.”

Around 2015, MTN Nigeria’s subsidiary,  MTN Communications, was sanctioned over the use of unregistered and improperly registered SIM cards belonging to its network. Hence, the government imposed an N1.04tn fine on the telecoms giant based on a computation formula of N200,000 per SIM card.

Another famous example of terrorism financing by a corporate entity is the Lafarge S.A case, where the US Justice Department, in 2022, imposed on the cement manufacturer and its Syrian subsidiary  ‘$778m  in fines and forfeiture’ for providing corporate material support for terrorism.

Lafarge S.A. and its Syrian subsidiary admitted to a revenue-sharing agreement with ISIS, according to the court.

Writing via its website,  the US Justice Department said, “A global building materials manufacturer and its subsidiary pleaded guilty today to a one-count criminal information charging them with conspiring to provide material support and resources in Northern Syria from 2013 to 2014 to the Islamic State of Iraq and al-Sham (ISIS) and the al-Nusrah Front (ANF), both U.S.-designated foreign terrorist organisations. Immediately following the defendants’ guilty pleas this morning, U.S. District Judge William F. Kuntz II sentenced the defendants to terms of probation and to pay financial penalties, including criminal fines and forfeiture, totalling $777.78m.

“According to court documents, Lafarge S.A., headquartered in Paris, France, and Lafarge Cement Syria S.A., headquartered in Damascus, Syria, schemed to pay ISIS and ANF in exchange for permission to operate a cement plant in Syria from 2013 to 2014, which enabled LCS to obtain approximately $70.3 million in revenue.”

Fundamentally, several assumptions exist about why corporations might get involved in terrorism financing.

When business leaders are not diligent in monitoring their financial activities, they might unwittingly become entangled in money laundering for terrorists, a Lagos-based IT analyst and journalist, Mr Yinka Adewusi, said.

“Some corporations may be part of global supply chains that provide resources, such as weapons, technology, or even everyday supplies, that can be diverted for terrorist purposes. Weaknesses in supply chain security can allow terrorists to access these resources,”  he added.

Adewusi said,  “Corruption within corporate organisations can create opportunities for terrorists to access critical infrastructure or resources. Bribes, kickbacks or other unethical practices can compromise the integrity of a company and indirectly aid terrorist activities.

“Sadly, terrorism enablement impacts negatively on society. Corporations, particularly those in critical infrastructure sectors, can be vulnerable to attacks by terrorist groups. This is already happening in Nigeria, where telecom infrastructure operators and managers of shared facilities have been attacked, kidnapped or abducted for ransom by Boko Haram and ISWAP insurgents. In many cases, employees of infrascos have been denied access to base stations to carry out maintenance and other services.”

Recall that Nigeria recently failed to scale a review of Money Laundering and Terrorism Financing Risk conducted by the global financial intelligence agency,  the Financial Action Task Force, which faulted the country’s anti-money laundering war.

The Financial Action Task Force,  at its plenary held between October 25 and 27 in Paris, France, reviewed Nigeria’s money laundering and terrorism financing risk.

Also, during the FATF meeting in June, when the progress of the affected countries was reviewed, Nigeria, Haiti, Syria, Tanzania and Yemen chose to defer reporting. However, eight months after it was grey-listed, Nigeria had yet to meet the 15 recommendations imposed by the FATF.

FATF, an intergovernmental organisation with a mandate to combat money laundering and terrorism financing, placed Nigeria, South Africa and 20 others on its grey list in February due to deficiencies in the countries’ legislation to counter money laundering, terrorist financing and proliferation financing.

The FATF’s grey list, issued three times per year, includes countries with significant issues with anti-money laundering and countering terrorism financing legislation and regulation.

The global financial intelligence agency has advised Nigeria to ensure that competent authorities have timely access to accurate and up-to-date beneficial ownership information on legal persons and apply sanctions for breaches of BO obligations; demonstrate an increase in the dissemination of financial intelligence by the FIU and its use by Law Enforcement Agents.

Nigeria is also expected to demonstrate a sustained increase in money laundering investigations and prosecutions in line with money laundering risks; proactively detect violations of currency declaration obligations, apply appropriate sanctions and maintain comprehensive data on frozen, seized, confiscated, and disposed assets.

However, the Nigerian Financial Intelligence Unit said it had been working to meet the FATF recommendations on money laundering and terrorism financing.

The NFIU spokesman, Sani Tukur, told The PUNCH that the agency was working hard to address the FATF observations and recommendations related to money laundering and terrorism financing deficiencies in Nigeria.

 “We are working hard to achieve the FATF recommendations, and we are confident we will scale through before the next evaluation,’’ he said.

A Lagos-based telecom and ICT analyst, Abiodun Awosusi, warned that weaknesses in cybersecurity measures could provide avenues for terrorist groups to disrupt operations or steal sensitive information.

According to him, terrorists may exploit technology, including social media platforms and encrypted communication tools, to disseminate propaganda, recruit members, and plan attacks.

“Some corporations operating in the tech sector may inadvertently provide the tools or platforms terrorists use, “  he warned.

Awosusi said, “Multinational corporations operating in regions with a significant terrorist presence must, therefore, ensure their operations are not inadvertently supporting terrorism. This can be incredibly complex in conflict zones. Terrorist groups may attempt to infiltrate corporate organisations or exploit disgruntled employees for insider information or to facilitate attacks.

“Also, corporations must be conscious that their day-to-day business decisions have a lasting impact on their image and reputation – positively or negatively. This is why decision-making requires lots of thought-through and risk assessment because of the need to preserve brand names and reputation.”

Adewusi and Awosusi maintained that It should, therefore, be of utmost importance for corporations to take steps in order to mitigate the risk of being caught in the web of terrorism enablement.

They both opined that corporations must implement robust due diligence, compliance, and risk management measures. This includes scrutinising financial transactions, securing supply chains, enhancing cybersecurity, promoting ethical business practices, and ensuring employees are vigilant about potential threats.

“Collaboration with law enforcement and intelligence agencies is also essential in preventing corporate involvement in terrorism enablement,” Awosusi added.

In an exclusive interview with The PUNCH, Olusegun Adeniran, a Finance Lawyer at Dentons ACAS-Law, stated that entities operating platforms facilitating financial transactions were  obligated to comply with relevant anti-money laundering and counter-terrorist financing legislation and regulations in Nigeria.

He said, “Given that entities facilitating financial transactions may not accurately ascertain the potential misuse of their platforms, it is in their best interest to fully comply with the provisions of relevant legislation related to money laundering and combating the financing of terrorism in Nigeria. The laws set specific standards for compliance, including Know Your Customer documentation requirements, periodic customer information review, and account monitoring, among others.

“The laws specify the type of information finance service providers must collect from prospective customers before onboarding them onto the platform for financial services. This information typically includes full names, Bank Verification Numbers, government-issued IDs, and a verified proof of address. Subsequently, financial service providers are required to monitor and report any suspected financial activity of their customers to certain government bodies, including the Nigerian Financial Intelligence Unit.”

Adeniran noted that if there is an allegation of money laundering and the service provider could demonstrate compliance with legal requirements, it might not be culpable, as the collected and reported information would be helpful in tracking and investigating the crime.

“An example of this is seen in the case of Binance, the world’s largest cryptocurrency exchange, which recently pleaded guilty to charges filed by US authorities and agreed to pay a fine of up to $4.3bn. Binance’s CEO, Changpeng Zhao, also took a plea deal, requiring him to step down as the CEO, pay up to $200m in fines, and face up to 10 years in federal prison. Additionally, the law is clear that non-compliance would be an offence, and ignorance of the law is no excuse.”

Meanwhile, finance expert Leke Olushuyi emphasised the importance of conducting a background check when investing in a company. He advised investors to thoroughly research the company’s owners, shareholders, and top management staff. Olushuyi suggested that signs of a questionable structure and the inability to identify key figures behind the company could indicate potential risks. He also warned against investing in companies associated with individuals promoting terrorism.

Meanwhile, a finance expert, Leke Olushuyi, said when investing in a company, investors must do a background check.

He said, “When planning on investing in a company, it is essential to do a proper background check on the company’s owners, shareholders, and top management staff, among others. In addition, if you check on the personalities involved with the company, the signs would be there, like a shady structure and the inability to decipher the face behind the company.

“Also, if such a personality has traits of a questionable character or has been found in spaces or posts where terrorism is encouraged, then it’s best to not invest in such companies.”

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