WEBINTA KEY SUCCESS FACTOR FOR AML/CTF INVESTIGATIONS

WHITE PAPER

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INTRODUCTIONUnder the leadership of the FATF, and with the support of the IMF, Unit-ed Nations, World Bank, and other stakeholders, governments around the world have recognized the threat posed by money laundering and terror financing to the integrity of their financial markets, and even glob-al peace and security. From Washington and Brussels, to Singapore and Sydney; policymakers now are placing anti-money laundering (AML), and the counter financing of terrorism (CFT) at the top of their agendas.

But law enforcement agencies have found themselves outmatched and outgunned as they face increasingly adept criminal and terrorist ele-ments who exploit new technologies to channel illicit funds from drug trafficking, computer fraud, tax crimes, corruption, and terrorist activities across the globe. As a result, governments are placing the private sector on the front lines; obligating banks and other financial institutions to devote their resources to detect and report offenders seeking to exploit their services to clean their dirty money.

In this white paper, you will learn more about:

• The context of money laundering and terror financing

• The challenges that AML/CTF investigations face

• The reason why using a WEBINT solution is key for successful AML/CTF investigations

Glossary

AML Anti-Money Laundering

CTF Countering Terrorism Financing

FinCEN Financial Crimes Enforcement Network

FATF Financial Action Task Force

OSINT Open Source Intelligence

SAR Suspicious Activity Report

UNODC United Nations Office on Drugs and Crime

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MONEY LAUNDERING AND TERROR FINANCING

Figure 2 - The Money Laundering Cycle

In its 2009 report, the UNODC estimated the total amount of laundered money to be $1.6 trillion or 2.7% of global GDP annually with less than 1% being seized and frozen. According to the UNODC, these numbers have remained the same over the years, including 2019. In addition to working for organized criminal groups, professional money launderers also perform money laundering services on behalf of others as their core business.

This way, they can avoid detection by law enforcement agencies. Money laundering has three distinctive stages: Placement, which consists of moving the money in such a way that it cannot be traced to the committed crimes; Layering in order to avoid detection and criminal investigations; and Integration which means making the funds available again to the criminal elements. (UNODC)

Money laundering is used by criminal elements to hide their illegal profits from e.g., fraud, drug trafficking, human trafficking, organized crime, and corruption. The image on the right shows the pattern of money laundering in the UK. (Serious and Organised Crime Strategy 2018)

Figure 1 - Money Laundering in the UK

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According to global consultancy firm McKinsey & Company, the total value of AML reached USD 6,190,000,000.-- with 21 actions taken by law enforcement agencies. One of the reasons for that low number, is the fact that most AML activities require signifant manual effort, making them inefficient and difficult to scale.

Figure 2 - Total AML Value Compared to Actions Taken

Furthermore, regardless of all the AML legislations in place and law enforcement agencies making AML a top priority, the global effectiveness is only estimated at being 32% (Source: transparency.org)

Figure 3 - Average Global Anti-Money Laundering Effectiveness

THE MARKET

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THE AML/CTF ECONOMY

Crime syndicates are using professional money launderers/networks that operate independently of their criminal customers. With the growing popularity of cryptocurrencies as a new, unregulated alternative to the fiat currency system, its use by threat actors, criminal elements, and terrorists is expanding exponentially. This, combined with data volumes reaching record heights, law enforcement agencies and the private institutions they regulate all over the world are looking for tools to analyze the many layers of the dark web and related digital platforms to battle money laundering and financing of terrorism.

TRACING CRYPTOCURRENCY BY LAW ENFORCEMENT

UNODC’s challenge is to work within the United Nations system and with Member States to help to build the capacity to track and prevent money- laundering, strengthen the rule of law and prevent these funds from creating further suffering.

Yury Fedotov, Executive Director of UNODC

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“COMBATING TERRORISM FINANCING In 2014, the Islamic State of Iraq and the Levant (AKA ISIL, ISIS), shocked the world by capturing large swathes of territory in the Middle East. Backed by a well-oiled and diverse financing operation, its terror quickly spread to the streets of London, Paris, and elsewhere. Often cooperating with organized criminal groups, narco-traffickers, and smugglers, deadly terrorist groups exploit established money laundering schemes worldwide to find their attacks, brainwash their supporters, and destabilize entire regions.

Law enforcement needs powerful tools to follow online financial transactions and analyze financial intelligence in order to get key information on terrorist networks, links with alleged terrorist individuals, or foreign terrorist fighters (FTFs) or financiers.

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Figure 4 - Example of the Income Streams of Terrorist

THE DEADLY CONSEQUENCES OF TERRORISM FINANCING In 2016, ISIL was the world’s wealthiest and most destructive terrorist group with an estimated annual revenue of USD 2 billion in 2015 (Source: Global Terrorism Index)

HARNESSING THE POWER OF WEBINT TO FIGHT MONEY LAUNDERING AND TERROR FINANCING Banks and other financial institutions in many countries are now required by law enforcement to gather intelligence on their clients before conducting monetary transactions, in order to keep out dirty money. In 2020, the European Union will implement its Fifth Money Laundering Directive (5MLD), which will require banks to step up their intelligence capabilities in the form of Enhanced Customer Due Diligence (ECDD); forcing them to gauge the risk of their clients’ business activities, political connections, activities in risky countries, and criminal ties or face stiff fines or even criminal penalties.

The good news, is that key AML-related data can be found online, gathered and cross-referenced from government databases, investigative media reports, social media chatter, business directors, and other sources accessible in the various layers of the internet. The bad news, is that private sector entities, and often times national law enforcement, lack the training and tools to properly navigate the web’s ocean of information and fish out relevant data.

Efficient and powerful WEBINT tools are therefore essential for proper AML/CFT investigations, and can be used to detect suspicious activity and shadowy connections of individuals that can raise red flags of money laundering or terror financing risk.

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WEBINT SOLUTIONS ARE KEY TO SUCCESSFUL AML/CTF INVESTIGATIONS

In 2016 FinCEN, the US Financial Intelligence Unit, released its Advisory to Financial Institutions on Cyber-Events and Cyber- Enabled Crime, which encouraged the reporting of cyber- related information through Suspicious Activity Reports (SARs). FinCEN advised law enforcement agencies to start generating cyber-related information also from external open sources. This way, the money transactions of criminal and errorist networks can be detected by identifying financial nodes, various tiers of associated actors, and exploitation of international finance infrastructures.

There are various open-source intelligence solutions on the market. Some of these function as search engines for making queries while others focus on data analysis. However, law enforcement agencies and private sector entities need a powerful, yet easy-to-use web querying solution that can concurrently search and access almost any database, social network and website to conduct targeted profiling using digital fingerprint reconstruction. Such collected information can then be analyzed to detect money laundering risks in the form of ties to risky business activities, organized crime, allegations of fraud, and other key factors that can be used by banks to detect, and reject, dirty money.

For gaining unmatched intelligence, a WEBINT solution can anonymously and automatically monitor and manage content from across all layers of the internet. Only such a solution can detect criminal activities even when those are deeply rooted in encrypted domains such as the dark web and mobile apps (in order to locate and prosecute money laundering and the financing of terror).

Such a solution must integrate leading forms of AI to pinpoint front-men, initiators of terrorist financial, and anyone else involved in the money laundering cycle. This will enable law enforcement agencies to generate targeted information and transform the collected data into measurable clues.

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But for AML/CTF investigations to be successful, they need to dig deeper in order to map and measure the relationships between identified networks which may be used to move illicit funds or to finance terror activities. Transnational criminal and terror organizations are using electronic banking systems also to launder funds online using cryptocurrencies thus successfully avoiding detection by AML/CTF authorities. This calls for a WEBINT solution that can detect the moving of illicit funds for financing terrorist activities. By following the digital trail left on the internet, the dark web, and mobile devices, law enforcement can prevent a compartmentalized cell in one country to plan and finance terror attacks in another country.

To help law enforcement agencies and private sector financial institutions to collect, analyze and monitor data within a tactical timeframe, Cobwebs Technologies has developed its state-of-the-art web intelligence platform. The platform consists of three subsystems (intelligence collection, avatar management, and a social engineering module) that can allow law enforcement officials and bank staffers alike to carry out safe, anonymous, and non-penetrative investigations. It also features powerful AI capabilities leveraging machine learning algorithms for classification, regression for forecasting, and clustering.

You get to a point where it gets very complex, where you have money laundering activities, drug related activities, and terrorist support activities converging at certain points and becoming one.Sibel Edmonds, former translator for the FBI and founder & editor-in-chief of the independent news website NewsBud.

Classification enables identifying objects within an image, such as a handgun or a suitcase, automatically. Regression allows for forecasting, such as predicting whether or not a specific profile belongs to a specific group of people monitoring a specific terrorist organization. Clustering quickly classifies the results according to predetermined parameters in clusters. These groups and sub-groups of people are displayed allowing for terrorist profiling, as an example.

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Our platform is already used by law enforcement agencies around the world to conduct faster and more effective investigations entirely online. Now, we’re going to empower the private sector with a proven, law- enforcement grade solution that will shield them from exploitation by criminal financiers using Web Intelligence. We provide automation of data filtration and extraction without involving any technical code writing for tactical Open Source Intelligence.

Udi Levy, Co-founder and CEO

of Cobwebs Technologies

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THE IMPORTANCE OF AN AUTOMATED WEBINT-BASED SOLUTION

The powerful solution handles huge amounts of data sources, conducts unconventional and jargon queries for data extraction, crawls and extracts insights from new data sources, enables targeted detail discovery and profiling, identifies critical social circles and connections, accesses vital targets with limited public information, and conducts real-time data analyses and alerts for optimal responsiveness.

With Cobwebs Technologies, law enforcement and governmental organizations will be able to monitor social media and the open, deep and dark web, process vast amounts of public data to detect, analyze the results automatically, and use the streamlined, automated insights for immediate action.

STREAMLINED ARTIFICIAL INTELLIGENCE Our exclusive technology extracts targeted intelligence from the web’s big data using the latest machine learning algorithms, automatically generating critical insights.

Live Data Extraction

Natural Language Processing

Automated Insights

Pattern Recognition

Predictive Analysis

Deep Image Analysis

WORLDWIDE PRESENCE With our solution deployed worldwide, Cobwebs is making the online and offline world a smarter and safer place. Our AI-driven solution is implemented and adopted by leading law enforcement and national security agencies, critical infrastructure brands, financial services and other sectors.

cobwebs.com info@cobwebs.com

ABOUTCobwebs Technologies is a global leader in Web Intelligence providing innovative solutions tailored to operational needs of the public and the private sectors by identifying threats and generating insights in real-time. The Company’s advanced artificial intelligence and machine learning algorithms deliver powerful threat intelligence by deciphering the intricacies of web layers and analyzing the complex details of structured and unstructured data. Its web intelligence platform monitors these vast sources of data for revealing hidden clues and generating insights for intelligence-enhanced security to keep the world safer.