US Banking Dominance in Terror Financing: A Deeper Examination

Terror Financing

US Banking


Written by

Grant Matik

Published on

Nov 04, 2023

In the global fight against terrorist financing, traditional banking systems wield significant influence. This article sheds light on the critical role played by US banking institutions in facilitating illicit funds, drawing insights from the 2022 National Terrorist Financing Risk Assessment.

Section I: US Banking Transactions

US banking institutions form the backbone of financial transactions for millions. With nearly 95% of American households utilizing bank or credit union accounts, they serve as vital channels for domestic and international fund transfers.

Volume and Visibility:

  • Banks process trillions of dollars in global transactions daily, making it challenging to distinguish terrorist-related transactions amidst the sheer volume of legitimate ones.

  • Transaction monitoring systems in banks are pivotal in detecting financial activity linked to known and unknown terrorist operatives.

Challenges and Mitigations:

  • Differentiating terrorist-related financial activity from legitimate flows proves to be a complex task, underlining the need for contextual information.

  • Correspondent banking services can inadvertently facilitate the movement of funds associated with terrorism, necessitating stringent risk mitigation practices.

Real-World Examples:

  • BNP Paribas and HSBC paid nearly $8.9 billion and $1.3 billion respectively for concealing and conducting transactions on behalf of sanctioned customers, including Iran, showcasing the susceptibility of traditional banking systems to illicit financing.

  • Berkshire Hathaway, despite its crypto-skeptic stance, faced fines for "egregious" violations of US sanctions on Iran in 2020, further highlighting the lapses within traditional financial sectors.

While cryptocurrencies have gained attention in discussions surrounding terrorist financing, the traditional banking industry continues to be a primary enabler of illicit funds. Understanding the vulnerabilities within established financial systems is vital for crafting effective mitigation strategies. Collaborative efforts between financial institutions, regulators, and law enforcement agencies remain paramount in this ongoing battle against terror financing.