A Clear and Present Danger: Developing Models to Combat Proliferation Financing – ACAMS 2017 Panel
Tensions with North Korea continue to reach a frightening breaking point, including the latest statement from that nation’s foreign minister that it would shoot down U.S. bombers if they fly near the border again.
In the face of this escalating crisis, a panel discussion on a closely-related issue — “A Clear and Present Danger: Developing Models to Combat Proliferation Financing” — closed out day one of the ACAMS 2017 Conference in Las Vegas. Specifically, how AML professionals play a part in combating efforts by key foreign regimes to acquire goods and materials required to build weapons – nuclear, chemical, and/or biological – and means to deliver them.
As Dennis Lormel, president and chief executive officer, DML Associates, explained, the topic is not far removed from the issue of terrorist financing – a well-worn topic among AML experts. The difference, as the panel noted, is that that proliferation financing tends to deal with formal financing tools and institutions and often involves trying to uncover the purpose behind legitimate purchases of high grade good and materials, often from the west.
Jonathan Brewer, visiting professor, King’s College, London, explained dilemmas such as, how does someone determine the use of 7.6 tons of aluminum alloy, worth $100,000, when it can be used to build a factory as well as weapons. Among the countries proliferation experts monitor are North Korea, Syria, India and Pakistan.
In the case of North Korea, Jende Huang, financial crimes consultant, Wells Fargo, explained, the regime has been engaged in illegal activities since the 1970s, so “they know what they are doing.” And while it is easy to pin the leaders of the Kim regime as “madmen,” as Melissa Hanham, senior research associate, James Martin Center for Nonproliferation Studies, noted, their continued arms race is to ensure the safety and security of the regime.
And while Hanham pores over photos and footage of North Korean weapons tests and parades to determine where weapons come from and if they are viable, an underutilized key to containing the regimes’ ambitions lies in the expertise of finance and AML professionals. Huang agreed, citing that mastery of how financial tools operate, specifically wire transfer patterns, can halt the development of North Korean weapons. Brewer added that collaboration with trade professionals is also needed to determine how goods are moved, and spot when items may be mislabeled to circumvent monitoring of exports.
He also suggested four categories that can effectively aid proliferation efforts:
1. Screening for designated persons on sanctions lists
2. Try to screen goods and materials
3. Maintain good relations with government intelligence agencies
4. Look at patterns in financial transactions
While this is a good place to start, Huang cautioned underestimating the creative banking abilities of North Korea. As Lormel added, moves to sanction the regime can work, but it also means they may transition to alternate means of getting funding mechanisms, including shell companies, cryptocurrency and more.
As the panel described, this means that partnerships between academia, the financial sector, government and intelligence groups are needed to confront these threats.
As Hanham said, AML professionals have a national security job.
