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Article Excerpt
Introduction
EFFORTS TO COUNTER THE FINANCING OF TERRORISM ARE AT THE FOREFRONT OF THE "war on terror." One academic has gone so far as to argue that "the War on Terrorism will not be fought on the battlefield.... (It will be) fought in the halls of our financial institutions" (Ayers, 2002: 449, 458). In Australia, the regulatory terrain of the financial war against terrorism has been significantly reconfigured since the September 11 attacks. The Suppression of the Financing of Terrorism Act 2002 (Cth) was one of first statutes passed by the Australian Parliament after these attacks. More recently, in an attempt to comply with the 40 + 9 Recommendations of the Financial Action Task Force (FATF) (1) (see Morais, 2002), the Australian Parliament enacted the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act), which significantly overhauls Australia's anti-money laundering and financing of terrorism regime.
Commentators have generally welcomed the passage of this act. Some see it as revamping a system that was "out of date," (2) while others claim it will "return Australia to the forefront of the fight against dirty money and the financing of terrorism" (Cass et al., 2006: 101). To be sure, funds are essential for launching terrorist acts (Napoleoni, 2004). Any effort to prevent terrorism in Australia should therefore include appropriate strategies to target funds, especially given evidence that funds are being raised in Australia to support the activities of Jemaah Islamiah (Chulov, 2006:11-40). Moreover, a key principle underlying the AML/CTF Act is that financial institutions should know their customers. Implementation of the KYC (Know Your Customer) principle will likely have the benefit of piercing through the cloak of secrecy surrounding the affairs of such institutions and may enhance efforts to prevent money-laundering and fraud.
Yet the benefits of the AML/CTF Act in preventing terrorism are uncertain at best. Speaking of similar regulatory endeavors by the United States government, Wolosky and Heifetz (2002: 1) observed, "there is scant indication that it will work." Perhaps we could say the same of the AML/CTF Act. By the Australian government's own admission, there is a general "difficulty in quantifying the benefits of the proposed legislation" and it is "perhaps even more problematic to accurately quantify" the benefit of the law in preventing terrorism (Explanatory Memorandum, Australian Money-Laundering and Counter-Terrorism Financing Bill 2006 (Cth), "AML/CTF Bill": 13).
Specifically, the act seeks to suppress the financing of terrorism by collecting a wider range of financial information. It is unclear; however, whether this strategy will enhance efforts to prevent terrorism. Doubts have been expressed about using what is essentially a money-laundering regime to deal with "reverse money-laundering" (Tan, 2003; Phillips, 2004). There is also the tremendous difficulty of identifying when funds will be used for terrorist purposes. Some have described the task of doing so as "looking for the needle in a large haystack" (Ayers, 2002: 449), while others go further by characterizing it as "akin to searching for an indistinguishable needle among a stack of needles" (Wolosky and Heifetz, 2002: 3).
More troublingly, the strategies adopted by the AML/CTF Act in countering the financing of terrorism give rise to particular dangers. This article seeks to highlight the risks of these strategies. First, it draws out how Australia's counterterrorist financing regime (CTF regime) is based on executive power to ban "terrorist" groups; such power raises the prospect of secret and arbitrary proscriptions. Second, it explains how flows of information under this regime are largely kept secret, raising questions for accountability. Third, it argues that, although the AML/CTF Act imposes increased obligations upon financial institutions, it also confers significant discretion upon these entities in relation to their compliance with the laws. Financial institutions have also had considerable say-so over the content of these laws. Such power is problematic: not only does it pose challenges to democracy and the privacy of citizens, it also gives rise to the risk of racial and religious discrimination.
Executive Power to Ban "Terrorist" Groups
At the base of Australia's CTF regime is a broad range of criminal offenses. Under the Criminal Code Act 1995 (Cth) (Criminal Code), it is illegal to intentionally provide, receive, or collect funds directly or indirectly to a "terrorist organization," knowingly or reckless as to whether that organization is a "terrorist organization." Intentional or reckless provision and collection of funds for the purpose of facilitating a "terrorist act" is also prohibited. The maximum penalties for these offenses range from the lower end of 15 years' imprisonment to life imprisonment (Criminal Code ss 102.6, 103). Under the Charter of the United Nations Act 1945 (Cth) (Charter of U.N. Act), it is punishable by a maximum of five years imprisonment to use or deal with the assets of a person or entity listed under the act. The same maximum penalty applies to provision of assets to a listed person or entity (Charter of U.N. Act ss 20-1).
Both acts allow the executive government to ban or proscribe groups. Under the Criminal Code, regulations can be passed listing an organization as a "terrorist organization" so long as the federal attorney-general is satisfied, on reasonable grounds, that the organization is "directly or indirectly engaged in, preparing, planning, assisting in or fostering the doing of a terrorist act (whether or not the terrorist act has occurred or will occur)" (Criminal Code s 102.1). To date, 19 organizations have been banned under this Act (Criminal Code Regulations). Similarly, under the Charter of U.N. Act, the foreign minister can list an entity if s/he is satisfied that it is owned or controlled by persons engaged in "terrorist acts." Over 100 organizations have been banned through this route. Groups can also be listed by regulation to give effect to United Nations Security Council resolutions. Another 100 or...
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