Money Laundering Activities of the PKK

Transcription

1 Money Laundering Activities of the PKK Ozcan Ozkan, Ph.D. Turkish National Police, Turkey Page 1

2 Money Laundering Activities of the PKK Ozcan Ozkan, Ph.D. Abstract, PKK), an ethno-nationalist terrorist organization I, Syria, and Iraq, as well as in Europe have benefited from similar kinds of terrorism financing activities for a long time. To finance its activities it has engaged in terrorist financing methods and laundered its illicitly-gained funds by cash couriers or front companies through which it collects money under the name of donation or aid particularly in Europe where its financial infrastructure heavily relies upon. The PKK has long been known to have engaged in various methods to find funding for its activities. While the main concern is not money itself for the group, financial activities have forced the PKK to find ways to maintain relationship with drug and weapons dealers as well as human traffickers from whom it takes commission charges. The financing activities of the PKK particularly in Europe make it necessary for the group to deal with financial management including setting up front organizations for money laundering. Using various kinds of NGOs and media organizations has allowed the PKK to engage in money laundering activities. However, since the organization prefers not to use open financial institutions to move the funds, and its illegal money usually comes in the form of cash, it is becoming harder for law enforcement agencies to track money laundering activities of the group. Keywords: PKK, Terrorism, Money Laundering, Police Operation Introduction Money laundering has long been used by organized criminal groups and terrorist organizations, whose financial benefits have remarkably increased as a result of engaging in lucrative businesses such as drugs, arms, and humans trafficking to conceal the origin of their illicit funds. While money laundering may be traced back to the emergence of money itself, money laundering for terrorist purposes is not an old phenomenon. It has emerged by the rapid process of globalization, globalized nature of the terror threat, and increasing need for the legal instruments for financial activities both domestically and globally. A great deal of globalization process has taken place only after the second half of the twentieth century thanks to developments in technology and communication. Terrorist organizations and organized criminal groups alike have also gone global as a result of the rapid globalization for the last decades. Now, criminal groups and terrorist organizations can more easily use diverse countries for recruiting, collecting funds, organizing, propagating, and taking shelter. One of the main concerns of these organizations is to finance their activities. Although they can find little difficulty in getting money and funds for their operations, they have more difficulty in using the money for their acts since state-level, regional and global instruments for countering Page 2

3 the financing of terrorism have enhanced considerably as a result of tough measures set forth in multilateral agreements among states and international institutions. These measures have promptly necessitated terrorist organizations to use money laundering techniques for their financing. The fact that the financial markets have also been globalized has created new opportunities for both legitimate businesses and illegal organizations. Like everybody else, organized crime and terrorist groups, too, who wish to do business globally, have the opportunity to use open financial systems for rapid mobility of funds. Criminals thus take advantage of this mobility in order to launder the proceeds of their illegal acts and conceal their illegal wealth. There are numerous terrorist organizations that use sophisticated methods to move their illicit funds through financial systems both at home and across the globe. The Kurdistan Workers' Party (Kurdish: Partiya Karkerên Kurdistanê, PKK), an ethno-nationalist terrorist organization I, Syria, and Iraq, as well as in Europe have benefited from similar kinds of terrorism financing activities for a long time. To finance its activities it has engaged in terrorist financing methods and laundered its illicitly-gained funds by cash couriers or front companies through which it collects money under the name of donation or aid particularly in Europe where its financial infrastructure heavily relies upon. The PKK has long been known to have engaged in various methods to find funding for its activities. While the main concern is not money itself for the group, financial activities have forced the PKK to find ways to maintain relationship with drug and weapons dealers as well as human traffickers from whom it takes commission charges. The financing activities of the PKK particularly in Europe make it necessary for the group to deal with financial management including setting up front organizations for money laundering. Using various kinds of NGOs and media organizations has allowed the PKK to engage in money laundering activities. However, since the organization prefers not to use open financial institutions to move the funds, and its illegal money usually comes in the form of cash, it is becoming harder for law enforcement agencies to track money laundering activities of the group. Money Laundering and Terrorism Financing The term money laundering may be traced back to the 1920s when mafia groups in the United States showed an active interest in acquiring launderettes to launder the money derived from criminal activities and inject it into the legal instruments. According to a report of the World Bank and IMF on Combating Money Laundering and the Financing of Terrorism, money laundering is the process by which proceeds from a criminal activity are disguised to conceal their illicit origins. In the same report, the financing of terrorism is defined as the financial support of terrorism or of those who plan, encourage, or take part in terrorist acts. Money laundering is used for financing the activities of a criminal organization in a way that the organization can conceal the origin of the money in order to be immune from law enforcement control. Money laundering has also been used by terrorist organizations for a long time for financing their activities. In this regard, financing of terrorism and money laundering are interrelated. Both have similar objectives and characteristics as well as some differences. Page 3

4 While money laundering includes laundering illicit funds in legal channels in order to conceal the origins of the funds, terrorist financing includes both legally and illegally acquired funds for the support of terrorism. In short, while terrorism financing is aimed at providing funds to final destination, money laundering deals with legitimization. Profits made by organized crime and terrorist organizations need to be laundered to be used in the future. While terrorist organizations engage in money laundering for terrorism financing, for most of them money not the primary goal since money is only used as a means leading to their ends. However, for law enforcement units, tracking money is of great importance. One of x w meaning criminals and their networks can be more easily traced, uncovered, and disrupted. On the other hand, once the methods of terrorism financing are identified and traced by law enforcement agencies, it is more likely for terrorist organizations to go into bankruptcy and degenerate, which will consequently bring an end to most of their activities. Offences and Methods of Money Laundering The major aim of money laundering is to inject the dirty money into the legal economy. While there are different kinds of methods of terrorist financing and money laundering, there are four general kinds of offences related to money laundering set forth by the United Nations Convention against Transnational Organized Crime (the Palermo Convention), which contains a broad range of provisions to fight international organized crime: 1. Conversion or transfer of proceeds of crime: In this method, criminals try to convert financial assets from one type to another. For instance, illegally-acquired cash money is used to purchase real estate, to sell criminally-derived real estate, or to buy precious metals. 2. Concealment or disguise of proceeds of crime: This offense takes place where criminals intentionally conceal or disguise the proceeds of crime. This includes intentional deception of law enforcement units. 3. Acquisition, possession or use of proceeds: In this section, in addition to those who provide illegal proceeds, recipients who acquire, possess or use property have also responsibility. 4. Participation in, association with or conspiracy to commit, attempts to commit and aiding, abetting, facilitating and counseling. As to the offences related to money laundering and terrorism financing, the Financial Action Task Force (FATF) designated categories of offences as such: Joining an organized criminal group and racketeering; Terrorism and terrorist financing; Humans trafficking and migrant smuggling; sexual exploitation, including sexual exploitation of children; illicit drugs trafficking and trafficking in psychotropic substances; illegal arms trafficking; illicit trafficking in stolen and other goods; corruption including bribery; Page 4

5 fraud; counterfeiting currency; counterfeiting and piracy of products; environmental crime; murder, grievous bodily injury; kidnapping, hostage-taking; robbery, theft; smuggling; extortion; forgery; piracy; and insider trading and market manipulation. For above offences, the FATF recommendations require financial institutions and non-financial businesses and professions such as casinos (which also includes internet casinos), real estate agents, dealers in precious metals, dealers in precious stones, lawyers, notaries, other independent legal professionals, accountants, and trust and company service providers to apply national measures to combat money laundering and terrorist financing, and in particular, in detecting and reporting suspicious transactions. As to the process, money is laundered in three essential stages. Placement is the first stage in which illicit funds are separated from their illegal source and injected into the financial system. It also includes carrying of proceeds of crime, such as cash, across borders. Layering is the second stage where laundering the funds usually involves creating multiple layers of transactions that further separate the funds from their illegal source in order to make it more difficult to trace these funds to the illegal source. The last stage, integration, includes injecting the illegal funds into the legitimate economy so that criminals can use the funds without raising suspicion that might trigger investigation and prosecution. The PKK and Money Laundering The PKK was founded in 1978 by Abdullah Ocalan who was caught in 1999 and is now serving his life sentence in Turkey. Turkey has been suffering from the PKK terrorism since 1979 when the terrorist organization first started its violent campaign in Turkey by an attempt to kill a member of the Turkish Parliament in his house. To date, it is responsible for nearly Turk deaths. One of the reasons why the PKK, has remained capable of operating, recruiting, and carrying out terrorist attacks not just inside the country but also in E w economically by terrorism financing tools and control a huge amount of money, circulating especially in narcotic and other areas. In addition, money laundering activities of the PKK have also been an important component of its operations inside and outside the country. The terrorist organization PKK has long been known to engage in terrorism financing methods such as commission charges from all kinds of smuggling, extortion, and taxing. The drug dealing is considered as one of the biggest sources of the PKK. Although the PKK is believed to control 80% of the drug market in Europe, the organization usually deny any participation in the drug market. This could be explained by two reasons. First, if the PKK is seen as a drug Page 5

6 dealer it may lose its support in Europe. Second, if it engages in drug dealing this may lead its members to use drug, thus degenerating the relations within the organization. Therefore, except for taking commission charges from drugs and weapons dealers, the PKK claims not to deal with the narcotic N, of narcotic trafficking was accepted by the international community including the U.S. government. Given its significant involvement in international drug trafficking and money laundering, the PKK was recognized by the US Drug Enforcement Agency (DEA) as well established in the production and distribution of a variety of opiate products, and to be deeply involved in money laundering. The U.S. also designated the PKK as a narcotic kingpin in I, A x by Kurdish businessmen in Turkey and Europe. The PKK also engages in protection rackets targeting Kurdish owned businesses across Europe where it collects millions of dollars annually from Kurdish businesses and individuals in Europe. In addition, the Kurdish Diaspora voluntarily provides funds to the organization through cultural associations and information centers such as Europe-based the Kurdish Employers Association, the Kurdish Islamic Movement, and the Kurdish Red Crescent, which also deals with money transfers through subsidiary foundations in Switzerland, Britain, Sweden, Belgium, Denmark and Cyprus. The accounts of former PKK members interviewed also revealed that the organization funding comes from various sources including: kidnapping, commission charges from drug dealers, w weapons, fuel oil, cigarette, food, cattle, etc., forcefully-taken revolutionary tax and donation from ordinary citizens, artists and businessmen of Kurdish origin, benefits of media outlets, donation to charities and NGOs, funds collected in social and entertainment activities, direct funds from some states (state-sponsored terrorism financing), and direct provision of weapons, trainings, bombs, and ammunition from various countries. Given the above-mentioned financial activities of the group, one can argue that the PKK has gone beyond a mere ideologically-based terrorist organization since the PKK who claimed to defend the Kurdish rights in the region has walked away from a traditional politicallymotivated organization to a more complex and profit/interest-based and economically-driven criminal network. This inevitably leads the organization to engage in money laundering activities. While the PKK commits in financial intermediaries as other organized crime groups do. Rather, the group prefers using cash couriers consisting of its armed units who carry the funds from different sources to the finance center of the organization in northern Iraq. Money involved in the PKK activities Page 6

7 usually comes in the form of cash, which makes it harder for law enforcement agencies to follow the money. In addition, for the PKK, money is not considered as an end, but as a means to continue the fight and trade for supplies. Like many other transnational terrorist organizations, the PKK has benefited from dealing with organized crime groups that engage in lucrative businesses such as illegal trafficking of drugs, humans, and weapons as well as money-laundering activities mainly in Europe. As EU Terrorism Situation and Trend Report (2007) put it, two PKK members were arrested in France in July 2006 for money laundering aimed at financing terrorism. At the end of 2005, three members of the PKK were arrested in Belgium and another one in Germany suspected of financing the PKK. In Belgium, the authorities seized receipt booklets indicating that the arrested suspects were collecting tax from their fellow countrymen. The most prominent evidence that the PKK engaged in money laundering came out of the Sputnik operations in 1996 and in In the first Sputnik operation conducted simultaneously by the British Scotland Yard and the Belgian Police in London and Brussels, as well as in Germany and Luxembourg, it was revealed that the PKK was laundering the illicit financial gains from its drugs and weapons smuggling via the MED-TV Broadcasting Company, a media outlet and a screen corporation founded by a British citizen of Kurdish origin in 1995 and acting for the PKK. In that operation, the police were able to link an amount of $11 million seized from an account belonging to MED-TV to drugs, weapons, and human trafficking activities of the terrorist organization. The Belgian Police discovered that the PKK conducted its money laundering activities through fifteen different companies. The case of MED-TV is very crucial to understand the money laundering activities of the PKK in that it served both for the media propaganda for the group and as a legal company to launder the dirty money of the organization. When the members of the PKK had difficulty to launder their illicitly-obtained money, they decid A E Sw Sw MED-TV under the disguise of donations and consolidations. The second Sputnik operation conducted by the Belgian and the French police in 2002 revealed that a Paris-based company linked to the PKK involved in money laundering activities. The PKK operatives detained in this operation confessed that money had been transferred to the PKK under the auspices of a company called the Kurdish Foundation Trust, which was located in the British controlled Jersey Islands, known as an offshore haven for international money laundering. Another international police operation led by Belgian authorities and assisted by the Italian and F w j Belgium on March 4, The operation resulted in arresting many high profile PKK members including two of its leading figures, Remzi Kartal and Zubeyir Aydar who since October 2009 have been on a US list of drug traffickers suspected of using smuggling proceeds to fund the PKK. The operation was based on the allegation directed against Roj TV-a successor to MEDYA TV which is also a successor to MED TV that was banned after the above-mentioned Sputnik operations- and chief operatives of the PKK in Europe regarding its involvement in the financial fraud and tax evasion as well as distributing PKK propaganda, Page 7

8 educating PKK members, recruiting members for the PKK, human trafficking, counterfeiting, and racketeering. The operation in which 300 Belgian police officers as well as tax inspectors from the finance ministry participated was launched in coordination with Turkish intelligence, which provided Belgian authorities with information and evidence on the links between the PKK and its European operatives. The PKK has often laundered illegal money under the name of donation or aid via so-called business, cultural, children, and women associations in London, Frankfurt, Paris, Brussels and other European cities in order to be spent for its television channels, weapons, explosives, militia training etc. One of these organizations that provide money to the PKK in Europe is International Kurdish Businessmen and Employers Union (known as KARSAZ). The PKK acquired its arms and ammunition from the funds provided by KARSAZ which operates in Germany. T ARSAZ drug money to be sent to mainly the PKK camps in northern Iraq for purchasing weapons and ammunition. The cross-border transportation of currency known as cash couriers, has been often used by the PKK for laundering money. The money collected from donations and businessmen in Turkey E w, Defense Force known in Kurdish as Hêzên Parastina Gel (HPG), in northern Iraq and Iran by the reliable cash couriers. On the other hand, using the banking system is rare in the case of the PKK. However, hawala system or other money transfer methods such as Western Union were used to transfer money from Europe to its supporters in different countries such as Armenia and Syria to finance the daily needs of the members. Conclusion It is no doubt that the PKK, just like many terrorist organizations, engaged in terrorism financing methods. And it is evident that as a fundraiser not just in Turkey but also in Europe, the PKK and the PKK-affiliated entities have needed to launder the illicit money through legal channels if possible (as seen in the case of media and front companies), and illegal channels if not possible such as using cash couriers. Beyond being a terrorist organization, the PKK has also acted like a mafia by dealing with organized crimes mainly the drug market and money laundering. The fact that the PKK has walked away from a traditional politically/ideologically-motivated organization to a more complex and profit/interest-based and pragmatically/economically-driven criminal network has made it difficult for the governments to dissolve the group by traditional counter-terrorism methods since the current members and would-be members consider the PKK as a profitable organization that they can get respect and power by controlling this huge array of financial activities. Therefore, the policy makers should pay much more attention to the economic w and end the violent campaign in the region. In this regard, the PKK, both as a regional and a global threat, not only harms the regional stability in the Middle East but also endangers the Western and international security by taking advantage of democracy and liberal economy. Therefore, it becomes very important to cut Page 8

9 resources of the PKK by tracing illegal money transacted under the name of donations, aids, and fundraising, and by freezing the financial assets of its members while taking appropriate law enforcement measures in all countries they are operating. Given that the Achilles heel of any criminal organization is its financial survival, cutting lucrative businesses of the PKK will lead to degeneration and finally dissolution of the terrorist organization. About the Author Ozcan Ozkan, Ph.D. is affiliated with Turkish National Police, Turkey. His address is: References FATF 40 Recommendations (2003), retrieved on November 15, 2015 from %2040%20Recommendations%20rc.pdf. Houlton, S. (2010, March 17) Belgian authorities raid houses and businesses associated with the PKK. Deutsche Welle. Retrieved on November 15, 2015 from L, S 2008) D S M S November, from Lilley, P. (2006). Dirty Dealing: The Untold Truth about Global Money Laundering, International Crime and Terrorism (3 rd ed.). London: Kogan Page. Marcus, A. (2007). Blood and Belief: The PKK and the Kurdish Fight for Independence. NYU Press. Roth, M. P., & Sever, M. (2007). The Kurdish Workers Party (PKK) as Criminal Syndicate: Funding Terrorism through Organized Crime, A Case Study. Studies in Conflict & Terrorism, 30(10), Schott, P. A. (2006). Reference Guide to Anti-Money Laundering and Combating the Financing of Terrorism. World Bank Publications. Sollier, J. (2007). The United Nations Security Council: and the Effort to Combat Money Laundering and the Financing Of Terrorism. In W. H. Muller, C.H. Kalin and J. G. Goldsworth (Eds.) Anti-Money Laundering: International Law and Practice. John Wiley & Sons, pp United Nations/Commonwealth Secretariat/International Monetary Fund (2009). Model Page 9

10 Provisions on Money Laundering, Terrorist Financing, Preventive Measures and Proceeds of Crime (for common law legal systems), retrieved on November 15, 2015 from World Bank & IMF (2009). Combating Money Laundering and the Financing of Terrorism: A Comprehensive Training Guide (Workbook). World Bank Publications. Page 10