Funding Weapons of Mass Destruction through Proliferation Financing

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Indicators: 

• High-Risk Jurisdiction (HRJ) and sector.
• Client X was a dual national of Lebanon, however, he was born in Iran, a high-risk PF jurisdiction as identified by the Jersey Financial Services Commission (JFSC) Appendix D2 Countries list⁴ and jurisdictions that are under increased monitoring⁵, and assumed to have continued familial links to this jurisdiction and in Lebanon, also a HRJ⁶.
• Transactions in and out of the bank accounts involved individuals or entities in foreign countries that were close to countries with proliferation concerns.
• The companies’ descriptions of goods were vague, and the financial institution did not hold full beneficial ownership information for either company.
• The companies lacked an internet presence, which is normally expected from the type of business they undertake. They were newly incorporated and managed by Directors in the UAE and Lebanon.

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Suspicious Activity:

• There was no information or references relating to the transfers, and the invoices supplied to the bank contained inconsistencies and were handwritten instead of typed. 
• Individual wire transactions conducted in large, even USD amounts, with rapid unexplained movement of funds. 
• Unusual business activity—Pass-through transactions are usually the same day, which is not normally expected from the type of business conducted. 
• Transactions involved individuals or companies (particularly trading companies) located in countries with weak export control laws or weak enforcement of export control laws.

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FIU Actions:

• The FIU automatically prioritises PF and HRJ-related cases, and all intelligence officers have fundamental or intermediate training and awareness on PF. 
• The FIU engages with domestic competent authorities and internationally with global FIU’s and specialist Counter Terrorism / PF units to share intelligence and often request assistance obtaining further information.
• Intelligence shares were made with international FIUs connected to the countries of interest and on client X.
• The FIU undertook further research, including open source intelligence (OSINT) collection and exploitation of other sources and details of the relevant companies and their activities and information regarding the suspected transactions.
• The FIU undertook further Open Source Intelligence (OSINT) research to identify verified sources and details from other FIUs that supported or negated the allegations.
• The FIU will assess the risks associated with PF, identifying potential breaches, non-implementation, or evasion of targeted financial sanctions.

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Outcomes:

• Consent to exit was not provided due to an ongoing investigation.
• The transactional information corroborated parts of the initial adverse media reporting identifying client X’s links to subject Z, a sanctioned individual indirectly involved in proliferation activity on behalf of Iran.
• The above indicators gave context to the transactions conducted by client X and various related companies and individuals to obtain illicit funds and layer them through Jersey. 
• Freezes were placed over the accounts by the financial institution.

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FIU Comment:

• Institutions should seek to distinguish the extent of the different risks and similarities between PF, Money Laundering (ML) and TF⁷, even if indicators may appear similar. This helps ensure information relating to PF is clearly identified, helping businesses understand their vulnerabilities against different threats.
• Institutions should verify the identities and backgrounds of their clients, understand the intended use of purchased/sold goods, and monitor for any suspicious activity or inconsistencies. Additionally, institutions should utilise red flag indicators and have knowledge of or use reference material to check against dual-use goods⁸ which may indicate potential evasions of export controls and sanctions. By identifying and acting on these red flags, institutions can help mitigate the risk of illicit procurement efforts.
• Public-Private Partnerships (PPPs) support effective communication channels and intelligence sharing with partners domestically and internationally. They can also help understand and identify trends and typologies and, therefore, help enable a risk-based approach to customer relationships.
• FIU maintains ongoing public-private engagements, including the local Jersey Financial Intelligence Network (JFIN) and participation in thematic working groups such as Europol-led European Financial Intelligence Public Private Partnership (EFIPPP).
• PF networks can be persistent, resilient, and adaptable to pressures imposed by sanctions and other controls. Once companies are identified and sanctioned, they can disappear and operate under different aliases or names.
• The close geographic proximity between the UAE and Iran facilitates more straightforward and quicker movement of goods, people, and money, which can be exploited for illicit activities. In addition, because the UAE is a significant trade and transshipment hub, it is easier for proliferators to disguise the end destination of goods, which could be used for illicit means, including items used in WMD programmes.
• Both the IRGC and the Ministry of Defence and Armed Forces Logistics (MODAFL), along with their related entities, are listed on the following consolidated lists: Office of Financial Sanctions Implementation (OFSI), Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals (SDN) and Blocked Persons list, United Nations Security Council (UNSC) and Jersey Financial Sanctions Implementation Unit (FSIU), due to their involvement in the research, development, and manufacturing, including support for Iran’s missile and nuclear programmes.

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¹ https://www.fatf-gafi.org/en/countries/detail/iran.html

² https://www.fatf-gafi.org/content/dam/fatf-gafi/reports/Trade-Based-Money-Laundering-Trends-and-Developments.pdf

³ https://www.bbc.co.uk/news/world-middle-east-47852262

⁴ https://www.jerseyfsc.org/industry/financial-crime/amlcftcpf-handbooks/appendix-d2-countries-and-territories-identified-as-presenting-higher-risks/

⁵ https://www.fatf-gafi.org/en/publications/High-risk-and-other-monitored-jurisdictions/increased-monitoring-february-2025.html

⁶ https://www.knowyourcountry.com/lebanon#:~:text=FATF%20Status,having%20strategic%20AML%2FCFT%20deficiencies

⁷ https://www.fatf-gafi.org/en/countries/detail/iran.html

⁸ https://www.fatf-gafi.org/content/dam/fatf-gafi/reports/Trade-Based-Money-Laundering-Trends-and-Developments.pdf