On 17 March, the New Zealand Police Financial Intelligence Unit (FIU) released the New Zealand National Risk Assessment 2024 (NRA). The 2024 NRA provides key considerations on shifting money laundering and other financial crime risks. In particular, the 2024 NRA includes a revised assessment of financing of terrorism risk in New Zealand, which is discussed in this post.
Terrorism and financing of terrorism
Terroristic activities and financing of terrorism are two separate concepts. On the one hand, a terrorist act advances an ideological, political, or religious cause, that is intended to intimidate a population or coerce a government or international organisation.
Terrorism
A terrorist act can include death, damage to property, economic loss, or environmental damage – where there is a likely risk to endanger human life.
In the immediate aftermath of the March 2019 Christchurch terror attack, the domestic terrorist threat to New Zealand was raised to ‘High’ and has subsequently been lowered, to ‘Medium’. Even though a second terror attack occurred at Lynn Mall Auckland in September 2021, it did not significantly change the terrorism risk for New Zealand, which was further lowered in November 2022.
New Zealand’s national terrorism threat level is categorised as ‘Low’ on a five-level scale ranging from ‘Very low’ to ‘Extreme’, with ‘Low’ being the second lowest level.
Financing of terrorism
On the other hand, financing of terrorism is providing or collecting funds for a terrorist act, or to fund activities that support terrorism.
Financing of terrorism is a stand alone offence. It is not necessary to demonstrate that the funds were ultimately used to carry out a terrorist act. New Zealand can be vulnerable to financing of terrorism activity without being at significant risk of a terrorist attack. This is because financing of terrorism risks are not solely about New Zealand. As the NRA states (page 72): “Terrorism impacts the safety and security of many countries around the world. Preventing terrorism is a global responsibility.”
Therefore, even though the risks are low, complacency is also a risk, and New Zealand must remain vigilant to detect and deter financing of terrorism. This is particularly crucial because deaths from global terrorism in 2023 were at the highest level since 2017 and New Zealand has financial connectivity to countries with high terror crime occurrences.
International Threats
Traditionally, especially after the 9/11 terrorist attack in New York, financing of terrorism risks have been associated with Islamist fundamentalist threats. This assessment is not misplaced, the impact of terrorism is far higher in regions of Muslim majority, such as, Sub-Sahara Africa, the Middle East and North Africa, and South Asia. These three regions accounted for 94% of all deaths from terrorism in 2023 (globally in 2023, there were 8352 deaths from terrorism).
The international financing of terrorism threats have been exacerbated by ongoing armed conflicts in the Middle East that have occurred in countries such as Israel, Lebanon, Jordan, Yemen, Pakistan, Iran and Iraq. Within these jurisdictions, there is much humanitarian work undertaken by non-government organisations and non-profit organisations that require funding for their activities. The NRA reports that these non-governmental organisations present some financing of terrorism risks in that they can provide a financial corridor for moving funds into geographical locations where terrorist and terror organisations are present. This can occur either with or without the knowledge of the parties involved (i.e. the non-governmental organisations and the donors).
The NRA recognises the important roles that non-governmental organisations do and therefore stresses the importance of fighting financing of terrorism to ensure that these organisations can continue with their work.
Moreover, the international threat does not necessarily translate to a domestic terrorist threat. The NRA importantly notes that no not-for-profit organisations in New Zealand have been implicated in financing of terrorism. In the domestic context, not-for-profit organisations present extremely low or non-existent risks associated with domestic financing of terrorism.
Domestic Threats
The NRA recognises that far-right extremism has emerged as a global problem threat. A study of New Zealand's online extremists found that the extreme far-right has by far the most numerous and active online extremist presence, with half the total posts analysed by the researcher, and that the far-right extremist presence in New Zealand is comparable, on a per capita basis, with the United States, the United Kingdom, and Australia.
The NRA notes that (page 73): “The online presence of terrorist groups and the international connectivity via the internet means it is inevitable that people in New Zealand will have opportunity to be radicalised to the point that they may offer financial support to extremists.” For example, the NRA reports that New Zealand authorities have identified New Zealanders were purchasing Proud Boys’ merchandise, where the Proud Boys are a United States-based far-right militant organisation.
Another study showed that before 2001, attacks motivated by far-right beliefs were perpetrated by individuals affiliated with organised groups. These groups have now progressively disappeared, and far-right violence has been overwhelmingly perpetrated by lone actors, such as the March 2019 far-right terrorist attack in Christchurch.
Lone self-funded terror attacks undertaken at relatively short notice are regarded as the most likely type of terrorism expected in New Zealand. Funding may be limited to purchasing a knife or vehicle, acquiring legally or illegally obtained firearms, axes, hammers, screwdrivers etc. The NRA recognises that it is challenging to identify these types of criminals through isolated transactional activity; and suggests that what is required is the identification of a number of indicators that collectively provide grounds for concern.
This is in line with a 2021 report from the Financial Action Task Force, which states that the expenses for attacks from these types of lone-wolf terrorists are low and do not differ from ‘normal’ transactions, making it challenging for any financial institution to identify relevant red flags.
Suspicious Activity Reports
Reporting entities under the Anti-Money Laundering and Counter Financing of Terrorism Act have suspicious activity reporting duties. This means that reporting entities need to monitor customers’ behaviour and transactions and investigate potentially suspicious activities concerning money laundering, financing of terrorism and other crimes. Such suspicious activity reports are submitted to the FIU and they are used for adding to criminal investigations, making the work of reporting entities an invaluable source of financial intelligence.
For the drafting of the NRA, the FIU reviewed the suspicious activity reports submitted between 2018 and 2023 and found that 974 suspicious activity reports related to suspicion of financing of terrorism were submitted in the period (the total number of suspicious activity reports submitted within the period is not available). The FIU assessed a sample of such suspicious activity reports (however no further comments on the methodology for the sample selection are included in the NRA) and drew two key conclusions.
First, the vast majority of all financing of terrorism reporting has occurred from the banking sector. Other reporting entities include money remitters and virtual asset service providers. This finding is in line with the fact that these three named sectors are at higher risk for financing terrorism due to their ability to provide international fund transfer services (appealing for terrorism financiers who want to support terrorist groups abroad). However, this finding might also indicate that other sectors are not yet fully aware of their financing of terrorism risks.
Second, and on a positive note, the NRA notes that a review of the suspicious activity reports identified a shift from primarily Islamist-related reasons for suspicion, prior to 15 March 2019 (the date of the far-right terrorist attacks in Christchurch), to reporting focused on right-wing extremism after such date. This finding highlights a step forward in the maturity of New Zealand's financing of terrorism risk awareness.
Conclusions
In conclusion, the NRA highlights the evolving landscape of financing of terrorism risks both domestically and internationally.
While New Zealand’s national terrorism threat level remains low, the risk of financing of terrorism persists due to the country’s financial connectivity with regions affected by high levels of terrorism. The NRA emphasizes the importance of vigilance in detecting and deterring financing of terrorism, especially given the rise of international conflicts and far-right extremism.
The NRA also underscores the crucial role of financial institutions in identifying suspicious activity and providing valuable intelligence for investigations, with more work yet to be done by New Zealand reporting entities to understand their financing of terrorism vulnerabilities.
Giulia Dondoli
Dr Giulia Dondoli is the founder of Total AML, and she assists reporting entities in New Zealand and Australia in complying with anti-money laundering legislation.
