1. Terrorist finance Perspectives on informal systems the UK Context.
Dr Karen Clubb 2014

2. IVTS – traditional model of operation
Jurisdiction A Jurisdiction B
transaction information/code
Payment Collection
settlement / consolidation
Payment pathway transaction information pathway
Client A
Client B
Hawaladar A
Hawaladar B

3. The Demonisation of Hawala the backdrop to UK regulation
Post 9/11 – increased scrutiny
FATF SR VI (Recommendation14)
Financial intelligence
Risk reduction - FATF technical note UK July 2011
Dr K Clubb October 2014

4. Money Laundering Regulations 2007
No differentiation by risk
No exemptions
Registration – fit and proper test Reg 28,30
Risk based approach - Part 2
Jurisdictional assessment – FATF R1, UK 2014, 4th EU Directive
Management of ML/TF profile
SARs reporting
Overseas agents
Dr K Clubb October 2014

5. Impact of regulation of MSBs
Increased transparency
‘Upskilling’ of operators
Increased formality
Change in operational structures
Disproportionate increased workload/ cost
Trade based laundering unaffected
RBA - reliant supervisory guidance
Risk averse attitude of banks
Little consideration of ‘cultural fit’ & financial inclusion
Concern re prosecution
Dr K Clubb October 2014

6. Assessing effectiveness
Prosecutions (Sproat 2010)
Volumes of assets frozen /seized
Number of SAR’s filed (NCA SARS Annual Report)
HMT Sanctions- compliance
HMRC - compliance/ enforcement - HMT 2012/13 report
Financial intelligence – TFU usefulness?
Independent review – cost/benefit
Effect on remittance users & activity
Dr K Clubb October 2014

7. Effectiveness of regulation
Merger of AML/ CTF questionable -
Terrorist finance - lower threshold for risk tolerance
Specific funding offences (Alexander 2009)
Seizure and forfeiture - little data
General deterrence from increased vigilance
Due diligence and suspicion
Non-compliance – supervisions and sanctions
Quality/ incidence of SARs reports
Lowering of transaction thresholds
Variable responses to risk
Methodology – FATF (Ryder 2013)
Promoting financial inclusion- Dahabshill MSB
Dr K Clubb October 2014

8. Lessons learnt conclusions
Wider considerations impact/ effectiveness
Jurisdictional risk assessments
Regulatory proportionality
Quality of supervision
Community support & outreach
Support of humanitarian/ charitable objectives
Pakistan Remittance initiative (2009)
Policy – multiagency working group ‘safe corridors’ 2013
Dr K Clubb October 2014

9. References
1 David Anderson QC Third Report on the operation of the Terrorist Asset Freezing etc Act 2010
( december 2013) para 2.37
2 World Bank Migration and Remittances: Recent Developments and Outlook 1 No 22 April
3 JMLSG Guidance in respect of Money Service Businesses 28 May 2014
4 Census statistics (2011) Office of National Statistics
Diagram slide 2 El Qorchi M, How does this informal funds transfer system
work, and should it be regulated? Available at Date
Accessed 27/09/2014
5 IMF ‘United Kingdom: Anti-Money Laundering/Combating the Financing of Terrorism
Technical Note’ IMF Country Report No. 11/231 July 2011
PhD Thesis ‘A critical examination of the anti-money laundering legislative framework for the prevention of terrorist finance with particular reference to the regulation of alternative remittance systems in the UK’ Karen Cooper, Leeds University 2014.
Dr K Clubb October 2014

10. Bibliography
Alexander R ;Money Laundering and Terrorist Financing how to fight terrorism without defeating the law;
FATF ;International Standards on Combatting Money Laundering and the Financing of Terrorism and Proliferation – The FAT Recommendations’ (2012)
FATF ‘Methodology for Assessing Technical Compliance with FAT Recommendations and Effectiveness if the AML/CTF systems’ (February 20130
FATF ‘National Money Laundering and Terrorist Financing Risk Assessment’ ( February 2013)
HM Treasury, ‘The Regulation of Money Service Business: A Consultation’ (September 2006)
HMRC Guidance for Money Services Businesses’ (MLR8 July 2010)
HM T’reasury Anti-Money Laundering and Counter Terrorist Finance Supervision Report’ (2012/13)
NCA, ‘Suspicious Activity Reports (SARs) Annual Report (2013)
Ryder N ‘To Confiscate or not to confiscate ? A Comparative Analysis of the confiscation of the proceeds of crime legislation in the United States and the United Kingdom’ 8 J Buis L 789
World Bank fact Book (2011
‘Terms of Reference for the Action Group on Cross Border Remittances’ available at
Dahabshiil Transfer Services Limited v Barclays Bank plc Harada Limited, Berkeley Credit and Guarantee Limited v Barclays Bank plc [2013] EWHC 3379
R v Patel [2012] EWCA Crim 2479
Dr K Clubb October 2014