convergence

Threat Finance
ultimately threatens the trustworthiness of the financial system. 3 It is the process of making
financial proceeds from illicit activities appear legal through the following three stages:
In the initial stage of money laundering—placement—the launderer introduces his
“dirty” illegal profits into the legitimate financial system. This might be done by breaking up
large amounts of cash into less conspicuous sums that are then deposited directly into bank
accounts, or by purchasing a series of monetary instruments (checks, money orders, etc.) that
are then collected and deposited into accounts at other locations.
After the funds have entered the financial system, the second stage—layering—takes
place. The launderer engages in a series of conversions or movements of the funds to distance
them from their sources. The funds might be channeled through the purchase and sales of
investment instruments, or the launderer might simply wire the funds through a series of accounts
at various banks across the globe. This use of widely scattered accounts for laundering is
especially prevalent in jurisdictions that do not cooperate in money-laundering investigations.
In some instances, the launderer disguises the transfers as payments for goods or services,
giving them a legitimate appearance.
Having successfully processed his criminal profits through the first two phases, the
launderer then moves them to the third stage—integration—in which the now “clean” funds
reenter the legitimate economy. The launderer might choose to invest the funds into real estate,
luxury assets, or business ventures. 4
Terrorist Financing. Terrorist financing refers to the processing of funds to sponsor or
facilitate terrorist activity. A terrorist group, like any other criminal organization, builds and
maintains an infrastructure to facilitate the development of sources of funding, channel those
funds to the providers of materials and services to the organization, and possibly launder the
funds used in financing the terrorist activity or resulting from that same activity.
Terrorist organizations derive income from a variety of sources, often combining both
lawful and unlawful funding. The agents involved do not always know the illegitimate end of
that income. The forms of financing can be grouped in two types:
Financial support comes in the form of donations, community solicitation, and other
fundraising initiatives. It may originate with states and large organizations or individuals.
Revenue-generating activities provide income derived from criminal activities such as
kidnapping, extortion, smuggling, and fraud. Income may also be derived from legitimate
economic activities such as diamond trading or real estate investment. 5
As demonstrated, criminal and terrorist financing are similar in that “they often exploit
the same vulnerabilities in financial systems that allow for anonymity and non-transparency
in the execution of financial transactions.” 6 For the purposes of studying the financial activities
of illicit networks, these similarities (and crossover via the crime-terror nexus) outweigh the
differences.
Common Modes of Threat Finance
Financing is essential for any organization and its activities, and this axiom applies equally
to illicit networks. Their activities can be categorized into operational and support activities.
Operational activities include surveillance and reconnaissance, rehearsal, final preparations,
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