Are Student Loans Being Used To Fund Terrorism?

When we produced the first draft of our What is Money Laundering Presentation  back in 2011, one key point was that the costs to fund the (then) recent terror attacks were minimal:

What Is Money Laundering 2017

Unfortunately the recent attacks in Nice, Manchester and London (to name a few) have continued this trend, with minimal funding being used to pay for the horrific acts. The small amounts involved in funding the attacks pose a real challenge for financial organisations to detect any red flags and to assist in the fight against terrorism.

The UK’s “Daily Telegraph” has reported that the Manchester suicide bomber, Salman Abedi, may have used student loans and benefits to fund the terror attack at the Manchester Arena in May 2017. Student loans in the UK are funded by the government to help students to pay for their tuition fees and living costs. The recipient then repays the loan (with minimal interest) once they have completed their course and earn above a certain threshold.  From my experience and initial research, it appears that there are limited know your customer (KYC) checks applied to student applicants, thus enabling a UK based terrorist outside of London to borrow up to £9,000 per academic year.

The idea of student loans being used to finance terrorism was highlighted back in 2015 by Tom Keatinge. In his report for the Royal United Services Institute (RUSI), he noted that the loans (and similar sources of funding) are:

“ideal for the limited costs associated with lone actor or small cell attacks”.

Perhaps poignantly, the report expands on the issue further:

“In 2012, a court in London heard that a group accused of planning a suicide terrorist attack tried to fund its operations from sources including a payday lender and the Metropolitan Police have highlighted ‘a number of cases’ of fraudulent student loan applications being made by terrorists.”

Furthermore, the loans are provided before the student has to attend their course, so potential terrorists can apply for – and receive – the loans (providing they have the offer of a place), with no intention of ever attending their course.

Moving forward, perhaps it should be argued that more robust KYC procedures need to be applied to student loans and similar financing schemes. The current focus appears to be on how much financial support a student is eligible for, rather than any KYC and terrorism red flags they might have.

However, one of the major challenges facing financial institutions is the detection and identification of such red flags: much of the funding for terrorist acts is derived from legitimate sources and the transaction amounts often fall below reporting standards.

One thing for sure is that the following statement in the US 9/11 Commission Report is still as relevant today as it was back in 2004:

While the 9/11 hijackers were not experts on the use of the US financial system, nothing they did would have led the banks to suspect criminal behaviour, let alone a terrorist plot to commit mass murder…no financial institution filed a Suspicious Activity Report with respect to any of the transactions of any of the 19 hijackers before 9/11. Nor should SARs have been filed.

Further Reading

Proximal Consulting will shortly release a new fact sheet on terrorist financing. You can view our existing fact sheets and online resources here

RUSI report:  Lone-Actor and Small Cell Terrorist Attacks: A New Front in Counter-Terrorist Finance?

Daily Telegraph: Exclusive: Manchester suicide bomber used student loan and benefits to fund terror plot

The National Commission on Terrorist Attacks Upon the United States: Complete 9/11 Commission Report

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