Australian jihadists are increasingly taking out small bank loans with no intention of paying them back and maxing out credit cards or overdraft limits immediately before travelling to Syria and Iraq, Westpac's former chief financial crime officer says.
As terrorism financing grows exponentially in Australia, the detection of suspicious bank payments is "like finding the eye of the needle in a haystack, rather than the needle itself", said Julie Beesley, now a doctoral researcher at the University of Sydney.
In the past financial year, there was a 300 per cent increase in reports to the national financial intelligence agency, AUSTRAC, of suspicious transactions relating to terrorism. This totalled $53 million that had moved through Australian financial institutions.
Ms Beesley, who will address a University of Sydney forum on crime trends on Thursday, said discussions were under way to legislate for banks to be forced to hand over IP addresses of customers to help counter-terrorism investigations, similar to the way telcos have been legislated to provide metadata.
"Data and more importantly, that related to financial intelligence, is simply becoming the weapon of choice for law enforcement," Ms Beesley said.
AUSTRAC can ask banks for customers' addresses, telephone numbers and transactional history when "suspicious matter reports" are filed but not locations and IP addresses from mobile phones or computers where transactions were made.
Ms Beesley said individual transactions are becoming smaller, sometimes tiny amounts elicited via social media and sent to foreign fighters for food, clothing or travel.
"If somebody wants to buy a flight ticket that is defined as terrorism funding but it's really hard for a bank to detect that and virtually impossible without additional intelligence," she said.
Collaboration with intelligence agencies is growing and banks are increasingly providing "some of the jigsaw pieces", she said.
"There's been a shift in policing from telephone taps and physical surveillance ... to obtaining the financial profiles as the starting point of collating intelligence."
In its annual report released this week, AUSTRAC attributed the 300 per cent spike in suspicious transactions – up to 367 in the past financial year – to the flow of foreign fighters to Syria and Iraq, coupled with better vigilance from financial institutions.
Foreign fighters are now considered one of the main forms of material support for Islamic State and they are usually self-funded, said the Financial Action Task Force in its October report on emerging risks.
"The novel aspect for jurisdictions is the challenge in identifying these individuals because of the relatively low amounts of funding they require and the speed with which they can acquire it," the global task force said.
In addition to small loans and maxing out credit cards, banks are also grappling with an increasing number of customers who open bank accounts and provide the debit or credit card to a member of a terrorist group to allow them to make withdrawals from overseas ATMs, the task force's report said.
Australia's major banks stopped servicing remitters in recent months due to the risk of terrorism funding. Bisotel Rieh, a remittance provider run by notorious terrorist Khaled Sharrouf's sister, who has publicly criticised her brother, was shut down by AUSTRAC last year.
Banking insiders say the cost of regulation has exploded into the hundreds of millions, as entire teams are hired to trawl for terror-related transactions.
The Australian Bankers Association said banks take their obligations to report suspicious transactions "very seriously".
"This includes developing risk-based systems and controls that are tailored to the nature, size and complexity of a bank's business and proportionate to the level of money laundering and terrorism financing risk," a spokeswoman said.
