COMPLIANCE OFFICERS IN NORTH AMERICA CAN EXPECT INCREASED LAW ENFORCEMENT ACTIVITY ON TERRORIST FINANCING IN AFTERMATH OF ATTACK BY HAMAS

The widespread terrorist attack on Israel, conducted by Hamas agents against civilian and military targets in Israel yesterday, which can be judged a massive intelligence failure, will most likely have consequences for international banks in the United States and Canada. Hamas terrorist financing operations in the Western Hemisphere, which account for a large percentage of the income that the global terrorist organization receives annually, are expected to be a focal point for law enforcement agencies in North America, as a response to the pressure which is expected to be placed upon them for failure to detect indications of a terrorist attack of such magnitude.

While the international press has dwelled upon what it regards as an abject failure by Israel's intelligence community, it is important to understand that this inability to predict the outbreak of a major military operation by Hamas will also be seen as an American intelligence failure, and that will translate into pressure from US government leaders to order the suppression of existing Hamas financial pipelines, whereby it funnels the proceeds of its Western Hemisphere income-producing crimes to the Middle East.

It is also important that compliance officers understand that the leadership of our law enforcement agencies tasked with the will be anxious to demonstrate the effectiveness of  their counter-terrorist financing capability, by targeting any financial institution or NBFI found to have been facilitating any payments that ultimately ended up in Hamas' coffers. We may not like it, but political pressure will play a significant role in such ramped-up investigative action, and any banks found to be involved will end up as the likely targets of those agencies. Law enforcement will be in a mood to redeem itself, and there will be casualties in the financial world among those found to have been negligent. Call it a knee-jerk reaction, and understand that it is coming.

The leaders of compliance departments, who are responsible for CTF suppression at their banks should be sensitive to this, and it is suggested that their staff take a hard look, now, at any major transactions that ended up in the Middle East, to rule out the possibility that terrorist funding to Hamas transited their bank, rather than learn about it later, publicly, through the negative publicity that results from law enforcement and regulatory exposure of activity not uncovered initially by the bank's compliance officers.