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Article Excerpt
An effective counterterrorist strategy must reflect the adaptive and transnational nature of terrorism. The challenge presented to lead organizations in the fight against terrorism is assessing threats and understanding terrorist group behavior with the goal to structure and implement an effective transnational response. The fight to capture and shut down terrorist financing requires coordination points, flexibility, and robust commitment by states. The importance of the structure of such a response is central to the question of state compliance. The success of the Financial Action Task Force makes it an ideal case study for effective measures in response to the particular challenges of funding of global terrorism. This article details how the FATF has become adaptive, facilitating transnational effectiveness in the fight to counterterrorist financing and compliance through globally recognized standards, peer review evaluations, and sanctions. KEYWORDS: compliance, international standards, money laundering, counterterrorist financing, counterterrorism.
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The events of September 11, 2001--succeeded by attacks in Madrid, Bali, Casablanca, Saudi Arabia, Pakistan, Turkey, Chechnya, and London--have ushered in a new era of terrorism, manifest especially in the Al-Qaida network. Highlighting the changing nature of terrorism in the 1990s, scholars emphasize its global reach and adaptive nature. (1) There are three key features to the contemporary terrorist threat. First, there is evidence of a more global character with a majority of the attacks being carried out by associated cells with roots in the Middle East, Africa, Asia, and the Caucasus. (2) Second, terrorist attacks have increased since September 11 and this "drastic increase in the terrorist threat has been a result of al Qaeda's transformation from a group into a movement." (3) Lastly, there is significant evidence that Al-Qaida and other terrorist organizations have adapted their structure significantly.
The survival of any terrorist organization, but especially Al-Qaida, is rooted in its ability to adapt and create a support base for both logistical and financial resources. The strategic nature of terrorism and its adaptive qualities point to a need for an international counterterrorist organization with a similar modus operandi. A successful counterterrorist policy must be proactive, assessing threats and understanding the structure in which terrorists operate and their adaptive capabilities, and responding with resources and flexibility to head off the next move.
In this context of a morphing transnational threat, an equally dynamic counterterrorist strategy is required. This has been apparent in the UN struggle to demand that states increase vigor and compliance. In Security Council Resolution 1617 of late July 2005, the Security Council posited that the standard-setting, coordination, and capacity-building efforts of the Financial Action Task Force (FATF) constitute a model for crippling finances of terrorist groups. (4) Since 2001, the world community has relied on the FATF as the lead institution of its anti-money laundering (AML) regime, laws, and enforcement measures in this fight to detect and counteract terrorist financing. The success of the FATF makes it an ideal case study for effective measures in response to the particular challenges of the funding of global terrorism.
Attacking Terrorism's Money
The foundation of the FATF counterterrorist strategy has encountered three central challenges: real denial of assets, knowledge of terrorist threat, and robust state compliance. The goal of a counterterrorist policy, therefore, should be to constrain the environment to diminish, deny, and destroy terrorist capabilities, focusing not just on operational cells but also on the logistical and financial environment that enables its operations to continue. I will take each of these challenges in turn.
Real Denial of Assets
Existing political and financial networks are central to terrorist support and activities, thus demanding a counterterrorist strategy that dismantles the "enabling environment" of terrorism, with the real denial of assets rising to the top of the list of priorities. (5) The events of September 11 increased the international community's sensitivity to the central role of financing in international terrorist operations. Not surprisingly, the task to prevent a future terrorist attack has centered on disrupting terrorist financing; by "following the money," (6) state and international actors are able to dismantle terrorist networks. This task, however, remains daunting. Of the more than $2 trillion transferred by wire in 700,000 daily transactions, it is estimated that .05 to .1 percent is laundered, amounting to around $300 million. (7) Sufficient money is laundered daily to fund 600 to 750 operations similar to the attacks conducted on September 11.
To examine the role that financing plays in the larger counterterrorist strategy, it is necessary to understand the political economy of terrorist financing. Financial tracking and freezing has served other goals beyond severing finances in the antiterrorism regime. The authors of a government report on terrorist financing argue that tracking Al-Qaida financing has proven to be effective in helping authorities locate terrorist operatives and supporters to disrupt their structure. (8) By following the money, state and international actors are able to dismantle terrorist networks.
Money laundering, the process by which evidence of money's illicit origins has been obscured or removed through multiple, layered transactions in the financial system, is conceptually and empirically tied to contemporary terrorist activity. The goal is to conceal the tainted ownership of the money and provide legitimacy for it. In each case, the problems have both domestic and transnational aspects. Similarly, law enforcement is indispensable, but is not itself a complete solution. Coordinating efforts across governments, across levels of government, across agencies, among disciplines, and across the public, private, and civic sectors is both highly important and very difficult. (9)
Terrorism is unlike global crime in critical ways: the direction of the related financial transactions; the tolerance for failure; the motivations of the participants; and the scale of the activity to be suppressed. (10) Terrorist financing generally involves financial flows that originate in legitimate activities to support illegitimate activities rather than the reverse, introducing a significant complication for authorities following the money. (11) A leading terrorist expert notes that the "deep financial logic of terrorism, then, is to be found in the symbolic structures of philanthropy." (12) The emphasis must be on prevention; thus, the effort to block and seize funds is essential. The stakes are higher in combating terrorist financing; therefore, the goal is not to contain or reduce, but to eliminate. Moreover, traditional money laundering involves a profit motive while terrorist financing has noneconomic motives. A final distinction between the two activities is in their scale: traditional money launderers deal with large cash deposits while terrorists deal with a substantially lesser amount of money. This smaller scale makes detecting terrorist financing a more difficult task, leading to charges from skeptics that tracking money is a marginal strategy in countering terrorism. While the final figures of blocked and seized assets are certainly an indication of success, a UN report on sanctions to block Al-Qaida funds asserts:
The point isn't grabbing dollars in bank accounts ... it is destroying the financial infrastructure of terrorism. That means seizing money, but it also involves dismantling the channels of funding, deterring those who would give aid and support to terrorists, and following the leads to terrorist cells. (13)
In spite of the differences between money laundering and terrorist financing, the similarities allow countries to utilize the same techniques and institutions developed nationally and internationally to detect money laundering to identify terrorist financing. Regime tools such as customer due diligence and suspicious transaction reports can be used as investigative devices to ascertain not only the origins of funds but their destinations. (14) Moreover, international cooperation structures are in place for the exchange of information, blocking funds, and closing...
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