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Dozens of extremist fighters have returned to Canada from conflict zones as of 2017, and the country’s financial institutions should consider pinpointing and tracking funds tied to their arrival as well as new departures, according to Canada’s financial intelligence unit.

In a 29-page report published Thursday, the Financial Transactions and Reports Analysis Centre of Canada, or Fintrac, also warned institutions that payments involving specific cities within high-risk countries may warrant the filing of suspicious transaction reports, or STRs, and further instructed them to assess and respond to compliance-related risks beyond Canadian borders.

The report marks Canada’s first-ever assessment of its vulnerabilities to terrorist financing, according to Fintrac, which since the start of 2017 has forwarded 645 “disclosures” to law enforcement of suspected attempts to fund terrorism.

Given that roughly 190 people “with a nexus to Canada” have fought alongside Islamic State and similar groups in Syria and elsewhere, Canada’s top terrorist-financing risk remains the “extremist traveler,” Fintrac claimed in the report. Roughly 60 of those fighters had returned to Canada as of 2017.

“Despite Daesh’s loss of territory throughout 2017, and the departure or death of many extremist travelers in Syria and Iraq, the broader phenomenon of individuals traveling overseas to participate in foreign conflicts for political or ideological reasons will likely persist,” Fintrac claimed, referring to the Islamic State group.

Financial indicators of foreign fighters include cross-border wire transfers made for no apparent reason, a decision by a client to empty and then close their account, and dormant accounts suddenly filling with new sources of unexplained income, according to the report.

Fintrac also outlined the potential risks posed by more than a dozen countries and terrorist groups, as well as where and with what probability they may intersect with Canada. Those risks correspond to the relative size of the countries’ diaspora populations in Canada and the frequency with which they remit legitimate funds back home, according to Fintrac.

Fintrac identified Syria, Iraq and Turkey as presenting the largest terrorist-financing risk to Canada.

The report separately advises banks and money services businesses to focus on transactions linked to Turkey’s border with Syria for foreign fighters passing through the region. Specific cities “provided a powerful indicator of risk,” the financial intelligence unit claimed.

“Reporting entities should pay particular attention to businesses that appear to be engaged in remittance activity but that operate under names suggesting activity in another sector, especially when these businesses tend to only send or only receive international wire transfers,” Fintrac warned.

Fintrac also noted that while transactions between Canada and Lebanon remain voluminous, financial institutions should scrutinize funds tied to politically exposed persons and transfers of unusually small sums to areas likely controlled by Hezbollah.

Sanctions have reduced the volume of transactions between Canada and Syria, a development to which the latter nation has responded by turning to financial institutions in Turkey, the UAE and Lebanon to maintain access to the global financial system.

As for the UAE, Canadian financial institutions should watch for remittance firms and general trading companies with opaque ownership structures, unclear business models and operations in economic free zones, according to the report.

Matt McGuire, a financial-crime consultant in Toronto, told ACAMS moneylaundering.com that Canadian banks typically seek to meet their counterterrorist financing obligations by screening transactions against government designations and vendor-supplied blacklists, leaving them ill-equipped to drill down within specific foreign jurisdictions.

“Geographic risk in Canada has been exclusively focused on money laundering, and even for money laundering it’s not robust,” he said.

Contact Daniel Bethencourt at dbethencourt@acams.org