Kidnap for ransom a terror finance threat that could legally ensnare banks, sources say

Photographer: REUTERS/Kacper Pempel

Banks involved in payments to al-Qaeda affiliated kidnappers could face civil, or even criminal, penalties, experts said after the U.S. Treasury Department’s top terror finance official recently called such kidnappings for ransom a top terrorism-financing threat.

During the past eight years, terrorist organizations around the world have collected roughly $120 million in ransom payments, Treasury Under Secretary for Terrorism and Financial Intelligence David Cohen said during a speech delivered to Chatham House, a London think tank, earlier this month.

Cohen said that while al-Qaeda has experienced a decrease in funding, its affiliates in the Sahel region of North Africa and Yemen “are doing better financially, in large part by raising enormous sums of money through kidnapping for ransom.”

He added that two other terrorist groups — Tehrik-e Taliban in Pakistan and Abu Sayyaf in the Philippines – have also generated millions of dollars through kidnapping in recent years.

“[The al-Qaeda affiliates] have turned this age-old tactic into a successful money-generating scheme, turning kidnapping for ransom into our most significant terrorist financing threat today. The numbers speak for themselves,” Cohen said.

Although Cohen mentioned in passing the piracy off the coast of Somalia, he did not mention that some of the ransom money paid to the pirates has reportedly ended up in the hands of al-Qaeda-linked Islamist group al Shabaab.

Dennis Lormel, who previously headed the Federal Bureau of Investigation’s Terrorist Financing Operations Section and now runs an anti-money laundering consultancy, said that while drug trafficking and wealthy donors probably contribute the most to terrorist coffers, “kidnapping has certainly increased quite a bit in the last few years.”

Possible criminal charges

Lormel said that in the wake of the USA PATRIOT Act, which requires financial institutions to do more to combat terrorist financing, banks should at least consider possible legal risks when transferring funds to kidnapping hot spots for customers or turning over bulk cash lots without getting valid business explanations for the transactions.

“If you’re facilitating the payment of money to terrorists then you could be criminally culpable. U.S. authorities have to decide who they want to go after, but banks could be culpable,” he said.

When asked how a bank might protect itself in such a situation, Lormel suggested that filing a suspicious activity report with authorities would be a good step.

Possible precedent

To date the Justice Department has not prosecuted any companies for paying ransoms, sources said. They added, however, that a case involving a U.S.-based transnational company that was targeted by the Justice Department for paying extortion funds to militant groups in Colombia might provide a model for prosecution of firms that pay ransoms to terrorists.

In 2007 Chiquita Brands International pleaded guilty to a federal charge — admitting it engaged in transactions with a terrorist group through a subsidiary — for paying extortion money to a paramilitary group in Colombia to keep the company’s workers safe and its highly profitable operations running.

“Funding a terrorist organization can never be treated as a cost of doing business,” Jeffrey Taylor, then the U.S. Attorney for the District of Columbia, said when announcing Chiquita’s plea deal.

Chiquita paid the Justice Department $25 million, but its legal woes did not end there. Since then it has been fighting a number of lawsuits filed by the families of victims of violence in Colombia.

Furthermore, while the U.S. government does not have a history of “going after” people or entities that pay ransoms, “there may be a set of circumstances where they would feel compelled to do so because of the specific nature of the ransom,” Lormel said.

A lot could depend on where the ransom was paid, said John Cassara, a former Treasury agent and author of “Hide and Seek: Intelligence, Law Enforcement, and the Stalled War on Terrorist Finance.”

“If it was in the United States my guess would be that if the bank knowingly facilitated such payments, there would be penalties involved,” he said.

A Justice Department spokesman declined to comment on the likelihood of criminal charges against banks that facilitate ransom payments.

Typical kidnap transactions

Mike Ackerman, head of The Ackerman Group, a Miami-based firm that specializes in ransom negotiations with kidnappers, said that in the wake of a corporate kidnapping, the victim corporation generally arranges for a bank transfer to move ransom money as close as possible to the area where it is to be paid.

The funds, which are withdrawn as cash, are then turned over to a firm such as The Ackerman Group for delivery to the kidnappers.

“My assumption is that client corporations do not take the bank into their confidence, but that the banks know exactly what is going on and report the transaction if required to do so. Requirements vary from country to country,” Ackerman said.

He added that in some regions, such as North Africa, local banks might not be capable of providing large sums of cash. In those cases, the money would likely be flown in from abroad.

Possible Treasury Department action

Lormel said that in addition to possible terror finance charges from the Justice Department, any bank that provides cash for delivery to terrorists might face civil penalties from the Treasury Department’s Office of Foreign Assets Control (OFAC), which enforces U.S. sanctions and maintains the government’s blacklist.

However, he noted that because the kidnappers may not reveal their terrorist affiliations, and middlemen would likely be involved, it might be difficult for OFAC to act in many cases.

“On the financial institution end, it might be two or three links removed from the money actually being paid to the terrorists,” he said.

Ackerman said it is very difficult to “nail down” OFAC’s policy on ransom payments.

“I don’t know of any instance where the U.S. government has come down on anybody for paying a ransom,” he said. “But I just don’t know what they would do.”

OFAC is trying to address the issue.

Compliance Complete has learned that in one instance last year an entity disclosed to OFAC the kidnapping of several staff members and the negotiation and payment of a ransom to a group believed to be a terrorist organization. While OFAC ultimately opted not to take enforcement action against the entity, it noted that the case involved a specific set of circumstances and would not necessarily portend a similar outcome in future cases.

A Treasury Department official told Compliance Complete that while Treasury continues to work to combat all forms of terrorist financing, “the growing importance of kidnap-for-ransom demands that Treasury highlight its significance and stress that the international community work together to combat it.”

When asked whether Treasury would target banks involved in the payment of ransoms to terrorist groups, the official declined to comment.

“We will, however, take steps to combat this threat as appropriate,” the source said.

(This article was produced by the Compliance Complete service of Thomson Reuters Accelus ( . Compliance Complete ( provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 230 regulators and exchanges. Follow Accelus compliance news on Twitter at: )