University of Sydney The Financial War on Terrorism Discussion

Please read the Compulsory Reading
and do a thorough research to write 285 words of critical thinking based on the following ideas.

Idea: In order to remove obstacles to stopping terrorist financing, it is important not to confuse terrorist financing with money laundering and whether CTF is reliable.

Reference style: APA7th

The Financial War
on Terrorism
On September 11, 2001, 19 terrorists committed the largest and deadliest
terrorist attack in the United States of America. The response from the international community, and in particular the US, was swift. President George
Bush declared what has commonly been referred to as either the ‘War on
Terror’ or the ‘Global War on Terror’ on September 20, 2001. Four days later,
he instigated the ‘Financial War on Terrorism’. This book defines and identifies
the so-called ‘Financial War on Terrorism’. It provides a critical review of the
impact of counter-terrorist financing strategies enacted by both individual
jurisdictions and international organisations.
Taking a comparative approach, the book highlights the levels of
compliance in each selected jurisdiction and organisation with the requirements of the ‘Financial War on Terrorism’. The book analyses measures
introduced by the United Nations, including the UN sanctions against
terrorists and the operation of its anti-terrorist sanctions committees, and the
Recommendations of the Financial Action Task Force. It also reviews the
counter-terrorist financing measures of the European Union and the Council
of Europe, paying particular attention to the Framework Decisions on
Combating Terrorism, the Council Common Positions on Combating
Terrorism and the EU Anti-Terrorism Sanctions Regime. The book goes on
to review the measures put in place in the US following September 11, 2001.
Offering a much-needed legal analysis of the measures enacted under the
‘Financial War on Terrorism’, this book is a valuable resource for those
researching in law, terrorism studies, criminal justice, and finance.
Nicholas Ryder is a professor in Financial Crime at the University of West
England, Bristol. His research interests include financial crime, and he has
published numerous articles, four monographs and two textbooks.
The Law of Financial Crime
Series Editor: Nicholas Ryder
University of the West of England
Available titles in this series include:
Fighting Financial Crime in the Global Economic Crisis
Nicholas Ryder, Umut Turksen and Sabine Hassler
The Financial War on Terrorism
A review of counter-terrorist financing strategies since 2001
Nicholas Ryder
Forthcoming titles in this series include:
Environmental Crime and Money Laundering
Tracing the proceeds of crime from illegal wildlife trades
Onita Das and Mary Alice Young
The Financial War
on Terrorism
A review of counter-terrorist financing
strategies since 2001
Nicholas Ryder
First published 2015
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN
and by Routledge
711 Third Avenue, New York, NY 10017
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2015 Nicholas Ryder
The right of Nicholas Ryder to be identified as author of this work
has been asserted by him in accordance with sections 77 and 78 of
the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced
or utilised in any form or by any electronic, mechanical, or other means,
now known or hereafter invented, including photocopying and recording,
or in any information storage or retrieval system, without permission in
writing from the publishers.
Trademark notice: Product or corporate names may be trademarks or
registered trademarks, and are used only for identification and
explanation without intent to infringe.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
A catalog record for this book has been requested
ISBN: 978-0-415-64038-1 (hbk)
ISBN: 978-0-203-72258-9 (ebk)
Typeset in Garamond Three by
Florence Production Ltd, Stoodleigh, Devon, UK
Contents
Acknowledgements
Preface
vii
ix
1
Introduction
2
International counter-terrorist financing measures and
the ‘Financial War on Terrorism’
30
3
The United States of America
63
4
The United Kingdom
90
5
Australia
123
6
Terrorist financing – current threats and future trends
148
7
Conclusions and recommendations
173
Bibliography
Index
1
183
209
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Acknowledgements
This monograph is the culmination two years hard work. I would like to thank
Mark Sapwell and Katie Carpenter and the staff at Routledge for their support
throughout this project. There are two people in particular who have, once
again, put up with me during the writing of this monograph: my wife Ruth
and son Ethan. I would like to dedicate this monograph to my long suffering
parents-in-law, Richard and Kay, who have put up with my writing
endeavours since I married their daughter. Kay, no more books, I promise.
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Preface
The September 11 attacks cost al-Qaeda a relatively modest sum. The Federal
Bureau of Investigations estimates that al-Qaeda spent $175,000 to $500,000 on
the attacks and lost nineteen operatives. The damage to the United States was
estimated to be in excess of $135 billion and over 3,000 dead. The cost of making
a suicide bomb can be as low as five dollars, while deployment of a suicide bomber,
including transportation and reconnaissance, can cost as little as $200. A suicide
bomber is an asset that can be traded for weapons or cash, or who can, for a
relatively low cost, be deployed with ‘successful’ results. Terrorist organizations
often get enormous returns on their modest operational investments.1
I started researching financial crime in 2004 and my first publication in the
area was on the financing of terrorism for the Journal of Business Law in 2007.
The initial research I conducted on the financing of terrorism reviewed the
impact of the terrorist attacks on September 11, 2001 on the subsequent
policies of the international community, namely the United Nations, the
European Union and the Financial Action Task Force. The research also
investigated the response by two countries, the United States of America and
the United Kingdom. This was subsequently followed by two shorter pieces
that investigate the relationship between the financing of terrorism and
charities in the New Law Journal following the terrorist attacks in London in
July 2005. The next piece of research in this area, which was co-authored with
Dr Umut Turksen from the University of the West of England, was published
in 2009 in the Journal of Banking Regulation. This article once again
concentrated on the response towards terrorist financing in the United States
of America and investigated whether or not the policy was ‘islamophobic’.
The last article on the financing of terrorism was published in a special edition
of Contemporary Issues in Law, with Dr Umut Turksen, and investigated the
use of suspicious activity reports and the financing of terrorism. The next
bodies of research looked at identifying global money laundering policy and
the relationship between the 2008 financial crisis and financial crime. As a
1
Waszak, J. ‘The obstacles to suppressing radical Islamic terrorist financing’ (2004) Case Western
Reserve Journal of International Law, 36, 673–710, at 673.
x
Preface
result of this body of research I decided to revisit the relationship between
the financing of terrorism and the terrorist attacks in September 2001.
Therefore, this monograph started off with two objectives. Firstly, it attempted
to ascertain and develop a working definition of the ‘Financial War on
Terrorism’. Secondly, it would attempt ascertain how the ‘Financial War on
Terrorism’ had been implemented in a number of carefully selected countries.
However, as the project progressed, a third objective or question was added
to the monograph. To what extent has the ‘Financial War on Terrorism’
adversely affected a number of carefully selected terrorist groups. This last
objective was added to mainly due to the findings of the 2014 Global
Terrorism Index which concluded that there had been a 61 per cent increase
in the number of terrorist related deaths since 2013. The report also noted
that 80 per cent of these deaths had occurred in five countries: Iraq,
Afghanistan, Pakistan, Nigeria and Syria. A large number of these deaths
are associated with al-Qaeda, Islamic State, Boko Haram and Al Shabaab.
Therefore, it was essential to include a chapter that attempted to determine
the effect the ‘Financial War on Terrorism’ had on these terrorist groups.
The monograph begins with a detailed introduction that outlines the aims
and objectives of the research. The first chapter of the book provides an account
of the impact of the terrorist attacks on September 11, 2001 and briefly
comments on the response of international institutions including the United
Nations, European Union and the Financial Action Task Force. The chapter
also provides a detailed commentary on the extensive sources available to
terrorists and introduces the concept of ‘cheap terrorism’. The second chapter
attempts to achieve the first objective as outlined above, what is the ‘Financial
War on Terrorism’? This is achieved by critically reviewing the wide range
of legislative measures that were introduced after September 2001 by the
United Nations, the European Union and the soft law measures of the
Financial Action Task Force. This resulted in the identification of a working
definition of the ‘Financial War on Terrorism’:
Attacking, whether via criminalisation, confiscation, forfeiture, freezing,
sanctioning the financial assets of known or suspected terrorists.
Furthermore, the ‘Financial War on Terrorism’ also contains the use of
preventative methods that have previously been used for money laundering
and the collection of financial intelligence from suspicious activity reports.
Furthermore, the strategy to tackle the financing of terrorism is dependent
on limiting the number of sources available to terrorists, a multifaceted
preventative policy with a wide range of financial institutions, the freezing
of known or suspected terrorist financial assets and the use of economic
sanctions by nation states.
The next three chapters identify the extent to which the United States of
America, the United Kingdom and Australia have attempted to tackle the
financing of terrorism and to what extent they have implemented the ‘Financial
Preface
xi
War on Terrorism’. The United States was selected as a case study due to the
initial efforts of President Bill Clinton following the al Qaeda terrorist attacks
in Kenya and Tanzania and the apparent implementation of the ‘Financial War
on Terrorism’ by President George Bush in September 2001. The United
Kingdom offers an interesting comparison to the United States of America
because it has a long history of tackling domestic terrorism. Therefore, could
the United States learn any lessons from the counter-terrorist financing
provisions in the United Kingdom? The last case study is Australia, which
has adopted a similar approach to the United States and United Kingdom
regarding the financing of terrorism. However, Australia is the only case study
that has implemented the Recommendations of the Financial Action Task
Force directly into its counter-terrorist financing legislative framework. The
penultimate chapter offers a contemporary review of how the Financial War
on Terrorism has tackled the increasing threat posed by jihadist terrorist
groups including Boko Haram, Islamic State, and al-Qaeda. The final chapter
of the monograph concludes the research and presents its findings.
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1
Introduction
If radical ideology and extremism are the heart of terrorism today, finance is its
lifeblood. The threat of so-called ‘new terrorism’ lies not only in the weapons that
the terrorists can yield, but also in their ability to procure and use those weapons
through innovative, discreet and complex fund-raising and fund transfer
techniques. Like any commercial venture, access to finance and the means of
transfer is crucial for sustenance of terrorist organizations and vital in the
formulation and implementation of their activities.1
1.1 September 11, 2001 and the War on Terrorism
The synchronized suicide attacks of September 11, 2001, highlighted the
critical role financial and logistical support networks play in the operations
of international terrorist organizations. The challenge in tackling these
networks, however, is that they are well-entrenched, sophisticated, and
often shrouded in a veil of legitimacy.2
On September 11, 2001,3 19 terrorists committed the largest and deadliest
terrorist attack in the United States of America.4 On the morning of 9/11 alQaeda terrorists hijacked four commercial airliners: American Airlines flight
11 and United Airlines flight 175, which were flown into the South and
North Towers of the World Trade Centre in New York, American Airlines
flight 77, which was flown into the Pentagon building, and United Airlines flight 93, which crashed in Pennsylvania.5 A total of 2,977 people were
1 Acharya, A. Targeting Terrorist Financing – International Cooperation and New Regimes (Routledge
Cavendish: London, 2009) at 7.
2 Levitt, M. ‘Stemming the flow of terrorist financing: practical and conceptual challenges’ (2003)
Fletcher Forum of World Affairs, Spring/Winter, 27, 59–68, at 59.
3 Hereinafter ‘9/11’.
4 Hereinafter the ‘US’.
5 See National Commission on Terrorist Attacks upon the United States The 9/11 Commission
Report (Norton and Company: New York, 2004) at 1–46. Hereinafter ‘9/11 Commission’.
2
The Financial War on Terrorism
murdered as a result of this act of terrorism.6 The response from the
international community and in particular the US was swift. President George
Bush declared what has commonly become referred to as either the ‘War on
Terror’ or the ‘Global War on Terror’ on September 20, 2001.7 It is not the
purpose of this monograph to critique and review in detail the ‘War on Terror’,
but to concentrate on a very specific aspect, the ‘Financial War on Terrorism’,
which was instigated by President George Bush four days later on September
24, 2001.8 The ‘Financial War on Terrorism’ was a direct reaction to the
financing of terrorism, which was previously neglected by the international
community. Pieth commented that that ‘when the hijacked airplanes struck
the twin towers of the World Trade Centre on 9/11, most observers would
have considered it obvious to mobilise all possible means to prevent terrorism
. . . including the interception of terrorist access to financial assets’.9 It has
been estimated that the costs of 9/11 were between $400,000 and $500,00010
and it has been suggested that economic damage to the US exceeded $135
billion,11 while other reports suggest the figure exceeded $3tn.12 As a result
of these terrorist attacks the development and preservation of Home Land
Security became the top priority for President Bush. This would result in the
implementation of a counter-terrorist financing13 strategy that resulted in
this type of white-collar crime being plucked from political obscurity and
6 CNN ‘September 11 anniversary fast facts’, September 11, 2013. Online. Available from
, accessed June 23,
2014.
7 For a full transcript of the speech by President George Bush see CNN ‘Transcript of President
Bush’s address’, September 20, 2001. Online. Available from , accessed January 20, 2014. For an interesting commentary on the appropriateness of the ‘Global War on Terror’ see Lehto, M. ‘War on terror –
armed conflict with Al-Qaida?’ (2009) Nordic Journal of International Law, 78(4), 499–511.
8 See President George Bush ‘President freezes terrorist assets’, September 24, 2001. Online.
Available from , accessed June 23, 2014.
For a more detailed commentary on the war on terror see Duffy, H. The ‘War on Terror’ and the
Framework of International Law (Cambridge University Press: Cambridge, 2005) and Walker,
C. Terrorism and the Law (Oxford University Press: Oxford, 2011).
9 Pieth, M. ‘Criminalising the financing of terrorism’ (2006) Journal of International Criminal
Justice, 4(5), 1074–1086, at 1074.
10 9/11 Commission, see n 5
11 Waszak, J. ‘The obstacles to suppressing radical Islamic terrorist financing’ (2004) Case Western
Reserve Journal of International Law, 36, 673–710, at 673.
12 Carter, S. and Cox, A. ‘One 9/11 Tally: $3.3 trillion’, September 8 2011. Online. Available
from , accessed October 6, 2014. Conversely, the International Monetary Fund estimated
that the costs were $27.2 billion. See Johnston, R. and Nedelescu, O. The impact of terrorism on
financial markets – IMF Working Paper WP/05/60 (International Monetary Fund: Washington
DC, 2005) at 3–4.
13 Hereinafter ‘CTF’. For a more detailed commentary on the impact of this see Ryder, N. The
Financial Crisis and White Collar Crime – the Perfect Storm (Edward Elgar: Cheltenham, 2014)
at 89–95.
Introduction
3
being driven to the top of the US white-collar crime strategy, wrongly at the
expense of other types of white-collar crime. Until this decision, US whitecollar crime strategies had concentrated on money laundering, insider trading
and fraud,14 whilst its efforts to tackle terrorist financing were very limited.15
1.2 The Financial War on Terrorism and terrorist financing
It is possible to identify terrorist financing, but highly improbable.16
On September 24, 2001, President George Bush famously declared ‘we will
starve terrorists of funding, turn them against each other, rout them out of
their safe hiding places, and bring them to justice’.17 This announcement was
followed by frequent declarations of the freezing of the assets of terrorists and
their supporters.18 These declarations can be referred to as the ‘Rose Garden
Strategy’.19 The ‘Financial War on Terrorism’ resulted in a seismic alteration
in the white-collar crime strategies of the international community.20 Acharya
correctly observed that prior to 9/11 terrorist financing was not a priority and
that:
Decades of work on money laundering was silenced by the assault on New
York and Washington. It seemed as if the world had been observed
14 For a more detailed discussion of these policies see Ryder, N. Financial Crime in the 21st Century
– Law and Policy (Edward Elgar: Cheltenham, 2011) at 20–33 and 102–123.
15 For a more detailed discussion of the US approach towards terrorist financing before September
11, 2001 see Chapter 3.
16 Lormel, D. ‘Testimony of Dennis M. Lormel House Committee on Homeland Security
Subcommittee on Counterterrorism and Intelligence’, May 18, 2012. Online. Available from
,
accessed July 17, 2014.
17 The White House ‘Fact sheet on terrorist financing executive order’, September 24, 2001.
Online. Available from , accessed June 9, 2014.
18 For a more detailed discussion see Hardister, A. ‘Can we buy peace on earth? The price of
freezing terrorist assets in a post-September 11 world’ (2003) North Carolina Journal of
International Law and Commercial Regulation, Spring, 28, 605–661 and more recently Gurule,
J. ‘The demise of the U.N. economic sanctions regime to deprive terrorist of funding’ (2009)
Case Western Reserve Journal of International Law, 4, 19–63.
19 Suskind, R. The One Percent Doctrine (Simon & Schuster: New York, 2006) at 142 as cited in
Eckert, S. ‘The US regulatory approach to terrorist financing’ in T. Biersteker and S. Eckert
(eds) Countering the Financing of Terrorism (Routlege Cavendish: London, 2008) at 229.
20 Harrison, K. and Ryder, N. The Law Relating to Financial Crime in the United Kingdom (Ashgate:
Farnham, 2013) at 39. Allen noted that the efforts of the international community were broader
and included ‘criminal enterprise of corporate fraudsters, drug traffickers, stock swindlers and
all those seeking to insulate their criminal money from the crime’. See Allen, W. ‘The war
against terrorism financing’ (2003) Journal of Money Laundering Control, 6(4), 306–310, at 306.
For a more detailed discussion on the global efforts to tackle money laundering see Ryder, N.
Money Laundering an Endless Cycle? A Comparative Analysis of the Anti-money Laundering Strategies
in the United States of America, the United Kingdom, Australia and Canada (Routledge: Oxon, 2012).
4
The Financial War on Terrorism
through the wrong end of a telescope. Money had been spirited around
the globe, by means and measures and in denominations that mocked
detection. The more immediate threat to well-being was ‘clean’ money
intended to kill, not illicit proceeds of crime looking for a place to hide.21
This is a view strongly supported by Alexander who stated that ‘terrorist
financing only became of international concern following the al-Qaeda attacks
on the United States’.22 Therefore, as argued by Eckert, ‘the events of 11
September precipitated a sea change [author’s emphasis] in the manner with
which regulators and financial institutions approached the issue of terrorist
financing’.23 Similarly, Roberge noted that 9/11 ‘propelled to the forefront of
the political agenda the issue of terrorist financing’.24 This is clearly illustrated
by the introduction of numerous CTF initiatives by the United Nations25 and
European Union26 and Financial Action Task Force.27
There are two integral or central terms that must be introduced and
defined at this stage of the monograph. The first is terrorist financing or terrorist
funding, which has been defined by the International Convention for the
Suppression of the Financing of Terrorism as including ‘assets of every
kind, whether tangible or intangible, movable or immovable, however
acquired, and legal documents or instruments in any form’.28 The International
Convention also states that a person commits the criminal offence of terrorist
financing ‘if that person by any means, directly or indirectly, unlawfully and
willfully, provides or collects funds with the intention that they should be
used or in the knowledge that they are to be used, in full or in part, in order
to carry out: (a) An act which constitutes an offence within the scope of and as
defined in one of the treaties listed in the annex; or (b) Any other act intended
to cause death or serious bodily injury to a civilian, or to any other person not
taking an active part in the hostilities in a situation of armed conflict, when
the purpose of such act, by its nature or context, is to intimidate a population,
21 Aufhauser, D. ‘Terrorist financing: foxes run to ground’ (2003) Journal of Money Laundering
Control, 6(4), 301–305, at 302.
22 Alexander, R. ‘Money laundering and terrorist financing: time for a combined offence’ (2009)
Company Lawyer, 30(7), 200–204, at 200.
23 Eckert above, n 19 at 209.
24 Roberge, I. ‘Misguided policies in the war on terror? The case for dismantling terrorist
financing from money laundering’ (2007) Politics, 27(3), 196–203, at 196. For a similar view
see O’Neill, M. The Evolving EU Counter-terrorism Legal Framework (Routledge: Oxon, 2012)
at 33.
25 Hereinafter the ‘UN’.
26 Hereinafter the ‘EU’.
27 Hereinafter ‘FATF’.
28 International Convention for the Suppression of the Financing of Terrorism (1999) Art.1 para.1.
Hereinafter ‘International Convention’. It is important to note that the first Special
Recommendation of the FATF provides that countries should endorse and apply the
International Convention. See Financial Action Task Force FATF IX Special Recommendations
(Financial Action Task Force: Paris, 2001) at 2.
Introduction
5
or to compel a government or an international organization to do or to abstain
from doing any act’.29 Other definitions have been offered by the World Bank
who stated that terrorist financing can be defined as providing ‘the financial
support, in any form, of terrorism or of those who encourage, plan, or engage
in it’.30 Furthermore, the International Monetary Fund stated that terrorist
financing ‘involves the solicitation, collection or provision of funds with the
intention that they may be used to support terrorist acts or organizations’.31
Terrorist financing has been referred to as ‘reverse money laundering’, which
is a practice whereby ‘clean’ or ‘legitimate’ money is acquired and then
funnelled to support terrorism.32 Conversely, money laundering involves the
conversion of ‘dirty’ or ‘illegal’ money into clean money via its laundering
through three recognised phases.33 The second term that needs to be defined
is the ‘Financial War on Terrorism’. In order to define this term it is necessary
to briefly outline the CTF measures introduced by the UN, EU and the FATF
since 9/11.34 The UN has implemented a series of Security Council Resolutions
that specifically addressed the threat posed by the financing of terrorism as a
result of 9/11.35 However, it is important to note that the UN introduced its
first CTF measures prior to 9/11.36 For example, in December 1999, the General
Assembly of the UN adopted the International Convention,37 and its aims were
29 International Convention for the Suppression of the Financing of Terrorism (1999) Art.2.
30 The World Bank Reference Guide to Anti-Money Laundering and Combating the Financing of
Terrorism (World Bank: Washington DC, 2006) at 19.
31 International Monetary Fund ‘Anti-money laundering/combating the financing of terrorism’
– Topics, n/d. Online. Available from , accessed June 26, 2014. Hereinafter ‘IMF’.
32 For a more detailed discussion of this process see Cassella, S. ‘Reverse money laundering’ (2003)
Journal of Money Laundering Control 7(1), 92–94.
33 The money laundering process contains three recognised stages: placement, layering and
integration.
34 For a more detailed discussion of the Financial Action Task Force see Hayes, B. ‘Counterterrorism, “policing laundering” and the FATF: legalizing surveillance, regulating civil society’
(2012) International Journal of Not-for-Profit Law, April, 14, 5–48 and Ping, H. ‘The measures
on combating money laundering and terrorist financing in the PRC: from the perspective of
financial action task force’ (2008) Journal of Money Laundering Control, 11(4), 320–330, at 321.
35 For a more detailed discussion of the measures introduced by the United Nations see
Ryder, N. and Turksen, U. ‘Banks in defence of the homeland: nexus of ethics, legality and
suspicious activity reporting in the United States of America’ (2013) Contemporary Issues in Law,
12(4), 311–338.
36 Hereinafter ‘CTF’.
37 54/109 of December 9, 1999. A copy of this can be accessed via United Nations ‘International
Convention for the Suppression of the Financing of Terrorism’, December 9, 1999. Online.
Available from: , accessed January 14, 2014. Ridley
and Alexander took the view that ‘in 1999 . . . the United Nations helped establish an
international convention against terrorist financing, namely, the International Convention for
Suppression of Financing of Terrorism’. See Ridley, N. and Alexander, D. ‘Combating terrorist
financing in the first decade of the twenty-first century’ (2012) Journal of Money Laundering
Control, 15(1), 38–57, at 40.
6
The Financial War on Terrorism
to ‘enhance international co-operation among States in devising and adopting
effective measures for the prevention of the financing of terrorism’.38 The
introduction of the International Convention was heavily influenced by the alQaeda terrorist attacks on the US embassies in Nairobi and Dar es Salaam on
August 13, 1998, which resulted in the death of 234 people.39 Indeed, Clunan
took the view that ‘prior to the terrorist bombings of the US embassies in
Tanzania and Kenya . . . the issue of terrorist financing was handled almost
entirely as a problem of state sponsors of terrorism, or money laundering and
criminal finance by non-state actors’.40 It is important to note that prior to the
terrorist attacks in September 2001, ‘only four States had acceded to the
Convention’.41 However, at the time of writing the International Convention
has been implemented by 186 nation states.42 In response to these terrorist
attacks on the US embassies, President Bill Clinton instigated ‘Operation
Infinite Reach’,43 which authorised a series of cruise missile attacks in the Sudan
and Afghanistan in August 1998.44 Supplementary, the UN Security Council
passed Resolution 1189 that strongly condemned the terrorist attacks.45
However, it is necessary to note that Presidential Executive Order 12,947 and
the powers granted by the International Emergency Economic Powers Act 1977
made a significant contribution towards international efforts to tackle terrorist
financing.46 Presidential Executive Order 12,947 prohibited the transfer of
funds, goods and services to people or organisations that threatened to disrupt
38 Abeyratne, R. ‘Suppression of the financing of terrorism’ (2011) Journal of Transportation
Security, 4, 57–71, at 58. For a more detailed discussion of the International Convention see
Chapter 2.
39 For a more detailed discussion see Mair, S. ‘Terrorism and Africa – on the danger of further
attacks in sub-Saharan Africa’ (2003) African Security Review 12(1) 107–110; and Raufer, X.
‘Al Qaeda: a different diagnosis’ (2006) Studies in Conflict & Terrorism, 26(3), 391–398.
40 Clunan, A. ‘The fight against terrorist financing’ (2006) Political Science Quarterly, 121(4),
569–596, at 574.
41 O’Neill, n 24 at 31.
42 United Nations ‘United Nations Treaty Collection – International Convention for the
Suppression of the Financing of Terrorism’, n/d. Online. Available from: , accessed October 15, 2014.
43 See Kittrich, J. ‘Can self-defence serve as an appropriate tool against international terrorism?’
(2009) Maine Law Review, 61, 133–169 and Wedgwood, R. ‘Responding to terrorism: the
strikes against Bin Laden’ (1999) Yale Journal of International Law, Summer, 24, 559–575.
44 See generally McIntyre, J. ‘U.S.: Sudan plant sample contains VX nerve gas precursor’. Online.
Available from , accessed
January 1, 2014.
45 A full copy of the Resolution can be accessed via United Nations ‘Resolution 1189 (1998)
adopted by the Security Council at its 3915th meeting’, August 13, 1998. Online. Available
from .
46 50 U.S.C. 1701–1706. For a more detailed discussion of this legislation see Gurule, J.
Unfunding Terror – The Legal Response to the Financing of Global Terrorism (Edward Elgar:
Cheltenham, 2008) at 194–196, 204–206, 213–214 and 299–301.
Introduction
7
the Middle East peace process.47 Supplementary, the UN issued Security
Council Resolution 1267, which generated a sanctions regime that applied to
people or entities that were associated with the Taliban, Osama bin Laden and
al-Qaida.48 This was followed by fulcrum of the ‘Financial War on Terrorism’,
UN Security Council Resolution 1373, which was unanimously adopted by the
UN on September 20, 2001. It contained four CTF related measures. First, it
requires states to thwart and control the financing of terrorism.49 Second,
it criminalises the collection of terrorist funds in states territory.50 Third, it
freezes the funds, financial assets and economic resources of people who
commit or try to commit acts of terrorism.51 Finally, it prevents any nationals
from within their territories providing funds, financial assets or economic
resources to people who seek to commit acts of terrorism.52 Akindemowo
stated that:
The response of the United Nations was immediately articulated in Special
Resolution 1373 . . . States were urged to join relevant international
conventions on terrorism, particularly the UN Convention for the
47 See Federal Register ‘Executive Order 12947 of January 23, 1995: Prohibiting transactions
With terrorists who threaten to disrupt the Middle East peace process’, January 23, 1995.
Online. Available from , accessed January 20, 2014. See briefly Donohue, L. ‘Anti-terrorist finance in the United
Kingdom and United States’ (2006) Michigan Journal of International Law, Winter, 27, 303–435,
at 352.
48 See United Nations ‘Resolution 1267 (1999) adopted by the Security Council at its
4051st meeting on 15 October 1999’, October 15, 1999. Online. Available from
, accessed January
20, 2014. For a more detailed discussion see Pacquee, D. and Dewulf, S. ‘Protecting human
rights in the war on terror: challenging the sanctions regime originating from Resolution 1267’
(1999) Netherlands Quarterly of Human Rights, 24(3), 607–640 and Diaz, W. ‘Dualist, but not
divergent: evaluating United States implementation of the 1267 sanctions regime’ (2011) Liberty
University Law Review, 5, 333–378.
49 S.C. Res, 1373, U.N. SCOR, 56th Sess., 4385th Mtg. Art.1(a).
50 Specifically the Resolution provides that countries should ‘criminalize the wilful provision or
collection, by any means, directly or indirectly, of funds by their nationals or in their territories
with the intention that the funds should be used, or in the knowledge that they are to be used,
in order to carry out terrorist acts’. S.C. Res, 1373, U.N. SCOR, 56th Sess., 4385th Mtg.
Art.1(b).
51 The Resolution provides that the nation stated must ‘freeze without delay funds and other
financial assets or economic resources of persons who commit, or attempt to commit, terrorist
acts or participate in or facilitate the commission of terrorist acts; of entities owned or
controlled directly or indirectly by such persons; and of persons and entities acting on behalf
of, or at the direction of such persons and entities, including funds derived or generated from
property owned or controlled directly or indirectly by such persons and associated persons and
entities’. See S.C. Res, 1373, U.N. SCOR, 56th Sess., 4385th Mtg. Art.1(c).
52 This part of the Resolution provides that countries must ‘prohibit their nationals or any persons
and entities within their territories from making any funds, financial assets or economic
resources or financial or other related services available, directly or indirectly, for the benefit
of persons who commit or attempt to commit or facilitate or participate in the commission of
terrorist acts, of entities owned or controlled, directly or indirectly, by such persons and
8
The Financial War on Terrorism
Suppression of the Financing of Terrorism. The Counter Terrorism
Committee was established as a sub-committee of the United Nations, with
the mandate of monitoring compliance with UN anti-terrorist measures.
Member States were required to criminalise the financing of terrorist acts,
and to prohibit the making of any funds, financial assets, economic
resources, financial or other such services available to terrorists. They were
also required to freeze without delay funds and other financial assets
belonging to terrorists.53
The scope and remit of Resolution 1373 has been amended by UN Security
Council Resolutions 1390,54 1456,55 and 1566.56 Therefore, the UN has
introduced a series of measures that have criminalised the financing of
terrorism, compelled nation states to tackle terrorist financing, legitimised
the freezing of terrorist assets and introduced a sanctions regime.
Additionally, the EU ‘adopted a framework decision on combating
terrorism’.57 For example, in December 2001, the European Council adopted
the Common Position on combating terrorism, which was the legal instrument
that implemented UN Security Council Resolution 1373.58 Furthermore,
Council Resolution 2580/2001 required members of the EU to freeze the
funds, financial assets and resources of people and for groups included in the
UN list.59 Additionally, Council Resolution 881/2002 included a ‘black list’
of names that were identical to the list determined by the UN Sanctions
Committee.60 The Council of Europe Convention on Laundering, Search,
53
54
55
56
57
58
59
60
of persons and entities acting on behalf of or at the direction of such persons’. See S.C. Res,
1373, U.N. SCOR, 56th Sess., 4385thMtg. Art.1(5).
Akindemowo, O. ‘The pervasive influence of anti-terrorist financing policy: post 9/11 nonbank electronic money issuance’ (2004) Journal of International Banking Law and Regulation, 19(8),
289–297, at 291.
United Nations ‘United Nations Security Council Resolution 1390: The situation in
Afghanistan’ January 28, 2002. Online. Available from , accessed October 10, 2014.
United Nations ‘United Nations Security Council Resolution 1456: High-level meeting of the
Security Council: combating terrorism’, January 20, 2003. Online. Available from
, accessed October 10, 2014.
United Nations ‘United Nations Security Council Resolution 1566: Threats to international
peace and security caused by terrorist acts’, October 8, 2004. Online. Available from
, accessed October 10, 2014.
Brent, R. ‘International legal sources IV – The European Union and the Council of Europe’ in
R. Brent and W. Blair (eds) Banks and Financial Crime – The International Law of Tainted Money
(Oxford University Press: Oxford, 2008) at 114. For a more general discussion of the EU
response to terrorism see Peers, S. ‘EU responses to terrorism’ (2003) International & Comparative
Law Quarterly, 52(1), 227–243.
[2002] OJ L164/3.
[2001] OJ L344/93.
See Europa ‘Combating the financing of terrorism’, n/d. Online. Available from ,
Introduction
9
Seizure and Confiscation of the Proceeds of Crime and on the Financing of
Terrorism was authorised in December 2005 in Warsaw.61 Importantly, the
2005 Convention ‘takes into account the other international instruments in
this area, in particular the recommendations of the Financial Action Task Force
. . . This approach has made it possible among other things to extend the
Convention specifically to cover the financing of terrorism, in particular in
the light of the definition of financing of terrorism contained in the UN
Convention’.62 Prior to the terrorist attacks in September 2001, the EU had
largely concentrated its white-collar crime efforts on money laundering and
not the financing of terrorism. This is clearly illustrated in the scope of the
first two EU Money Laundering Directives. In 2004, the European Commission determined that it was necessary to introduce a Third Money
Laundering Directive, to replace the First Directive and amend the Second
Directive.63 The aim of the proposals was to further extend the number of
predicate offences and provide more guidance to improve customer identification procedures. Therefore, it was not until the EU introduced the Third
Money Laundering Directive that terrorist financing was criminalised.
These legislative measures are supported by the expansion of the remit of
the FATF to include the financing of terrorism in October 2001. Gurule noted
that ‘prior to this time [9/11], FATF’s responsibilities had been limited to
developing and promoting international standards against money
laundering’.64 The FATF, which was created in 1989, was initially mandated
to focus on the prevention of money laundering and this was evident by the
publication and scope of its ‘40 Recommendations’.65 In October 2001, the
FATF broadened its remit and included, at the time, an additional ‘Eight
Special Recommendations’ to tackle terrorist financing.66 This was extended
to the ‘Nine Special Recommendations’ which came to be referred to as the
61
62
63
64
65
66
accessed June 23, 2014. For a more detailed discussion see Mitsilegas, V. and Gilmore, B. ‘The
EU legislative framework against money laundering and terrorist finance: a critical analysis in
the light of evolving global standards’ (2007) International & Comparative Law Quarterly, 56(1),
119–140.
Abeyratne, n 38 at 69.
European Commission ‘The Council of Europe new Convention on laundering, search, seizure
and confiscation of the proceeds from crime and on the financing of terrorism’, September 21,
2005. Online. Available from ,
accessed October 15, 2014.
Alexander, R. ‘Reputational issues arising under the EU Third Money Laundering Directive’
(2006) Company Lawyer, 27(12), 373–375, at 373.
Gurule, n 46 at 9.
Financial Action Task Force FATF 40 Recommendations (Financial Action Task Force: Paris,
2003).
For a general discussion see Thony, J. and Png, C. ‘FATF special recommendations and UN
resolutions on the financing of terrorism: a review of the status of implementation and legal
challenges faced by countries’ (2007) Journal of Financial Crime, 14(2), 150–169 and Walters, A.
‘The Financial Action Task Force on money laundering: the world strikes back on terrorist
financing’ (2003) Law & Business Review of the Americas, 9, 167–180, at 172–175.
10
The Financial War on Terrorism
‘40+9 Recommendations’.67 The objectives of the ‘Special Recommendations’
were to ‘detect, prevent and suppress the financing of terrorism and terrorist
acts’.68 The first ‘Special Recommendation’ was aimed at encouraging countries
to implement and sanction both the International Convention and UN
Security Council Resolution 1373.69 The second Special Recommendation
relates to the criminalising of the financing of terrorism and related money
laundering.70 The third Special Recommendation reiterates the provision of
Security Council Resolution 1373 and deals with the freezing and confiscating
of terrorist assets.71 Special Recommendation four requires the reporting of
suspicious transactions that relate to terrorism.72 The fifth Special Recommendation seeks to encourage international cooperation in the battle against
the financing of terrorism.73 The next Special Recommendation considers
the financing of terrorism via alternative remittance systems.74 Special
Recommendation seven seeks to retain information about wire transfers.75 The
eighth Special Recommendation relates to non-profit organisations and
provides that ‘countries should review the adequacy of laws and regulations
that relate to entities that can be abused for the financing of terrorism’.76 The
final Special Recommendation considers the role of cash couriers and provides
that countries should ‘have measures in place to detect the physical crossborder transportation of currency and bearer negotiable instruments, including
a declaration system or other disclosure obligation’.77 It has been suggested
that because the Special Recommendations are only ‘soft law, it should not
be surprising that many have argued that this CTF program cannot be
effective enough against funding terrorism. These critics have contended that
the Nine Special Recommendations are weak because there is no way to
implement them fully or uniformly across all jurisdictions’.78 These were
amended in February 2012 and are now referred to as the International
67 For a more detailed discussion see Sykes, R. ‘Some questions on the FATF 40+9 and the
methodology for assessing compliance with the FATF _40+9 Recommendations’ (2007) Journal
of Banking Regulation, 8(3), 236–243.
68 Financial Action Task Force, n 28 at 2.
69 Ibid.
70 Financial Action Task Force, n 28 at 2.
71 Ibid.
72 Financial Action Task Force, n 28 at 2.
73 Ibid.
74 Financial Action Task Force, n 28 at 3.
75 Ibid.
76 Financial Action Task Force, n 28 at 3.
77 Ibid. For a more detailed discussion of the threat posed by cash couriers and the financing of
terrorism see Financial Action Task Force Terrorist Financing (Financial Action Task Force: Paris,
2008) at 24.
78 Martuscello, M. ‘The FAT’s nine special recommendations: a too soft approach to combating
terrorism’ (2011) Touro International Law Review, 14, 363–389, at 380–381.
Introduction
11
Standards on Combating Money Laundering and the Financing of Terrorism
and Proliferation.79 These measures are supported by the IMF, the World
Bank, the Egmont Group, and the Asia Pacific Economic Cooperation Forum
who have all ‘played key roles in marshalling political will, adopting
appropriate measures and addressing deficiencies in national systems to combat
terrorism and terrorist financing’.80
It has been argued that there are four policy goals towards tackling terrorist
financing: ‘to deprive terrorists of resources, to track operatives, to chart relationships, and to deter individuals from supporting terrorist organisations’.81
Conversely, it has been suggested that there are only two purposes. Firstly,
at a strategic level ‘a successful campaign against terror money denies terrorists
the means that help them sustain their activities’. Secondly, at a tactical
level ‘having financial controls in place helps security and intelligence agencies
track down the perpetrators of terrorist acts and their supporters’.82 Writing
in 2003, Aufhauser argued that tackling terrorist financing is dependent on
three key elements. Firstly, financial institutions must act as ‘gate keepers’
in order to protect the financial system.83 Secondly, in order to tackle the
financing of terrorism, the international community must form an ‘international coalition’ to freeze the assets of terrorists.84 Thirdly, the international
community must engage in ‘capacity building’ and the development of an
adequately resourced strategic approach towards the financing of terrorism’.85
Therefore, it is my contention that the ‘Financial War on Terrorism’ can be
defined as attacking, whether via criminalisation, confiscation, forfeiture,
freezing, or sanctioning, the financial assets of known or suspected terrorists.
Furthermore, the ‘Financial War on Terrorism’ also contains the use of
preventative methods that have previously been used for money laundering
and the collection of financial intelligence from suspicious activity reports.
In addition, the strategy to tackle the financing of terrorism is dependent
on limiting the number of sources available to terrorists, a multifaceted
preventative policy with a wide range of financial institutions, the freezing of
known or suspected terrorist financial assets and the use of economic sanctions
by nation states. However, as the next section of the chapter discusses, the
efforts and ability of international organisations and nation states to tackle
the financing of terrorism is limited by the incalculable collection of sources
of funding used by terrorists.
79 Financial Action Task Force Money Laundering and the Financing of Terrorism & Proliferation –
the FATF Recommendations (Financial Action Task Force: Paris, 2012).
80 Acharya, n 1 at 11.
81 Donohue, L. The Cost of Counterterrorism – Powers, Politics and Liberty (Cambridge University
Press: Cambridge, 2008) at 122.
82 Acharya, n 1 at 9.
83 Aufhauser, n 21 at 302. In the article Aufhauser described this as the ‘private sector’.
84 Ibid.
85 Aufhauser, n 21 at 302.
12
The Financial War on Terrorism
1.3 Sources of terrorist funding
What becomes clear after reviewing the literature on the financing of terrorism
is that there are a plethora of sources that are available to terrorists. This is
succinctly summarised by Forman who took the view that:
Terrorists use a variety of alternative financing mechanisms to earn, move
and store assets. Their assets are based on common factors that make these
mechanisms attractive to terrorist and criminal groups alike. For all three
purposes – earning, moving, storing – terrorists aim to operate in relative
obscurity, using mechanisms involving close-knit networks and industries
lacking transparency. More specifically, first, terrorists earn funds through
highly profitable crimes such as contraband cigarettes, counterfeit goods,
and illicit drugs . . . terrorists also earn funds using systems such as
charitable organizations that collect large sums in donations from both
witting and unwitting donors. Second, to move assets, terrorists seek out
mechanisms that enable them to conceal or launder their assets through
non-transparent trade or financial transactions such as the use of charities,
informal banking systems, bulk cash, and commodities that may serve as
forms of currency, such as precious stones and metals. Third, to store
assets, terrorists may use similar commodities, because they are likely to
maintain value over a longer period of time and are easy to buy and sell
outside the formal banking system.86
Terrorists have previously relied on sponsorship from countries or private
individuals.87 State-sponsorship of terrorism is where national governments
provide support to terrorist organisations. It is impossible to provide an
accurate statistical figure for the amount of funding that terrorists receive from
nation states but it has been suggested that considerable support has been
provided. For example, Richard took the view that ‘in the 1970s and 1980s,
the majority of terrorist groups were sponsored by sympathetic governments [and] . . . in the 1980s terrorist incidents were supported by Libya’.88
Whilst the role of state sponsored terrorism has been recognised by many
commentators, and at the time of writing the US has identified four state
86 Forman, M. ‘Combating terrorist financing and other financial crimes through private sector
partnership’ (2005) Journal of Money Laundering Control, 9(1), 112–118, at 113.
87 Ryder, N. ‘A false sense of security? An analysis of legislative approaches towards the prevention
of terrorist finance in the United States and the United Kingdom’ (2007) Journal of Business
Law, November, 821–850, at 823.
88 Richard stated that these terrorist attacks included the Lockerbie bombing in 1988, the
bombing of a French airliner over Niger in 1989 and the bombing of La Belle Disco in Berlin
in 1986. See Richard, A. Fighting Terrorist Financing: Transatlantic Co-operation and International
Institutions (Centre for Transatlantic Relations: John Hopkins University, 2005) at 6.
Introduction
13
sponsors of terrorism: Cuba,89 Iran,90 Sudan91 and Syria,92 there has been a
steady decline in the availability of this funding stream. Additionally, it has
been argued that other states, including North Korea, have also provided
terrorists with financial support and assisted in the planning of their
operations.93 Therefore, it is more likely that terrorists will receive funding
from private sponsors or donors. For example, Acharya took the view that:
With the gradual demise of state sponsorship, terrorist groups have learnt
to take advantage of prevailing political and economic conditions. The
opportunities provided by the easing of trans-border mobility, advances
in communications technologies and a global financial system networked
through electronic information technology have enabled terrorists to raise
and move money for their activities around the globe’.94
The demise of state sponsored terrorism was acknowledged by Hardouin
who stated that ‘state sponsorship has been decreasing (not disappearing) as
terrorist groups find it harder to obtain state support, and states that are not
respecting international standards are less willing to risk exposure to severe
international sanctions’.95 It has been suggested that there are two factors that
have contributed toward the decline in state sponsored terrorism. Firstly, ‘there
are fewer states engaged in supporting terrorists’.96 Secondly, ‘the new global
terrorist networks have arisen that no longer rely on states for support.
Instead, terrorist groups rely more and more on networks of private donors
and supporters and direct engagement with criminal activities to raise funds’.97
It has also been suggested that another key factor in the decline of state
sponsored terrorism was the end of the Cold War and that terrorists ‘began
to rely on a variety of sources for funding and logistical support, exploiting
front organisations, legitimate businesses, charities and nongovernmental
89
90
91
92
93
94
95
96
97
Cuba was added to the list on March 1, 1982.
Iran was added to the list on January 19, 1984.
Sudan was added to the list on August 12, 1993
Syria was added to the list on December 29, 1979. See Department of State ‘State sponsors of
terrorism’, n/d. Online. Available from , accessed
June 23, 2014 and Department of State Country Reports on Terrorism 2013 (Department of State:
Washington DC, 2014).
For a more detailed discussion see Jeewon, K. ‘Making state sponsors of terrorism pay: a
separation of powers discourse under the Foreign Sovereign Immunities Act’ (2004) Berkeley
Journal of International Law, 22, 513–540 and Chase, A. ‘Legal mechanisms of the international
community and the United States concerning state sponsored terrorism’ (2004) Virginal Journal
of International Law, 45, 41–137.
Acharya, n 1 at 7.
Hardouin. P. ‘Banks governance and public-private partnership in preventing and confronting
organized crime, corruption and terrorism financing’ (2009) Journal of Financial Crime, 16(3),
199–209, at 205.
Richard, n 88 at 6.
Ibid.
14
The Financial War on Terrorism
organisations, as well as turning to self-financing criminal activities’.98 Indeed
the National Commission on the Terrorist Attacks upon the United States
concluded that al-Qaeda relied on finances raised by private benefactors and
not from state sponsors.99 Therefore, the decline in state-sponsored terrorism
has forced terrorist organisations to diversify their funding activities and, in
effect, become self-sustainable. Indeed, Tupman noted that the IRA had
‘succeeded in funding itself for an awfully long time’.100
There are an abundant number of sources of funding available to terrorists,101 which means that terrorists are now able to ‘manipulate an
expanding array of tools to shield their wealth, without regard to international
borders’.102 D’Souza argued that terrorists have been able to secure finances
via a multitude of sources including state sponsors, individuals and corporate
donations, non-profit organisations and government programmes. Furthermore, D’Souza suggested that terrorists have also used illegal sources including
drugs, extortion, organised retail theft and fraud.103 This was a view illustrated
by an example provided by the FATF who stated:
A North African terrorist funding group accumulated details of nearly
200 stolen cards and raised more than £200,000 to fund the al-Qaeda
terrorist network through international credit card fraud. Twenty to
thirty ‘runners’ collected the names and credit card details of almost 200
different bank accounts from contacts working in service industries such
as restaurants. These details were not used in their country of origin (the
UK) but sent on to associates in Spain and the Netherlands. These
associates used the cards to fraudulently collect more than £200,000 for
al-Qaeda cells around Europe. The case illustrates that the high returns
achievable from credit card fraud are not lost on terrorists and that
sophisticated arrangements can be put in place to operate a fraud ring
linked to terrorism.104
98 Acharya, n 1 at 9.
99 9/11 Commission, n 5 at 172. For a more detailed discussion on how al-Qaeda is funded see
Comras, V. ‘Al Qaeda and funding to affiliated groups’ (2005) Centre for Contemporary Conflict,
4(1), 1–16.
100 Tupman, W. ‘Where has all the money gone? The IRA as a profit-making concern’ (1998)
Journal of Money Laundering Control, 1(4), 303–311, at 310.
101 For an excellent discussion of the threat posed by terrorist financing see Financial Action Task
Force Global Money Laundering & Terrorist Financing Threat Assessment – A View of How and Why
Criminals and Terrorists Abuse Finances, the Effect of this Abuse and the Steps to Mitigate These Threats
(Financial Action Task Force: Paris, 2010).
102 Alexander, K. ‘The international anti-money laundering regime: the role of the Financial Action
Task Force’ (2001) Journal of Money Laundering Control, 4(3), 231–248, at 241.
103 D’Souza, J. Terrorist Financing, Money Laundering and Tax Evasion – Examining the Performance
of Financial Intelligence Units (CRC Press: Florida, 2012) at 29–38. Tupman noted that ‘there
were strong suspicions that IRA personnel are involved in trafficking soft drugs’. See Tupman,
n 100 at 305.
104 Financial Action Task Force, n 77 at 18.
Introduction
15
Acharya took the view that ‘terrorists make money from diverse sources and
move the same quickly and anonymously across the globe, encompassing many
national jurisdictions and embroiling global markets’.105 It has also been
mooted that terrorist groups have obtained financing from misapplied
charitable donations,106 Islamic non-remittance systems such as Hawala,107 via
traditional criminal activities,108 the sale of conflict diamonds,109 and even drug
trafficking.110 The association between misapplied charitable donations and
terrorism has been well documented. For example, Walker noted that ‘the
potential link between charities and terrorism finance was signalled
internationally as an innate risk by the Financial Action Task Force’.111 He
added that the FATF identified three different classifications of charity abuse
including bogus charities set up by terrorists, the ‘fraudulent diversion of
property raised funds which are subverted to terrorist purposes’ and the
‘broader exploitation of a charitable umbrella, such as through recruitment
and payment of extremists’.112 The FATF noted that:
Terror networks often use compromised or complicit charities and
businesses to support their objectives. For example, some groups have links
to charity branches in high-risk areas and/or under-developed parts of the
world where the welfare provision available from the state is limited or
non-existent. In this context, groups that use terrorism as a primary means
to pursue their objectives can also utilise affiliated charities as a source of
financing that may be diverted to fund terrorist attacks and terrorist
recruitment by providing a veil of legitimacy over an organisation based
on terrorism’.113
In relation to the sale of conflict diamonds, Aufhauser took the view that
‘financial underwriters of terror have taken refuge in untraceable precious
stones and metals, thereby defying all convention of identification, location
105 Acharya, n 1 at 9.
106 See Ryder, N. ‘Danger money’, (2007) New Law Journal, 157(7300) 6, 8; Ryder, N. ‘Hidden
money’ (2008) New Law Journal, 158(7348), 36–37; Bell, J. ‘Terrorist abuse of non-profits and
charities: a proactive approach to preventing terrorist financing’ (2008) Kansas Journal of Law
& Public Policy, 17, 450–788; and Financial Action Task Force, n 77 at 25–26.
107 See Pathak, R. ‘The obstacles to regulating the hawala: a cultural norm or a terrorist hotbed?’
(2004) Fordham International Law Journal, 27, 2007–2061.
108 Financial Action Task Force FATF Report – Terrorist Financing in West Africa (Financial Action
Task Force: Paris, 2013) at 16.
109 Financial Action Task Force Money Laundering and Terrorist Financing Through Trade in Diamonds
(Financial Action Task Force: Paris, 2013).
110 Financial Action Task Force, n 77 at 15–16.
111 Walker, C. ‘Terrorism financing and the policing of charities: who pays the price?’ (2014) in
C. King and C. Walker (eds) Dirty Assets – Emerging Issues in the Regulation of Criminal and
Terrorist Assets (Ashgate: Farnham, 2014) at 230.
112 Ibid.
113 Financial Action Task Force, n 77 at 7.
16
The Financial War on Terrorism
and capture’.114 Another source of funding for terrorists through criminal
activities is drug trafficking.115 Similarly, the association between terrorist
funding and criminal activities was clearly illustrated by the funding activities
of the Irish Republican Army,116 who ‘robbed in-transit services, bookmakers,
retail establishments, and post offices’.117 Tupman noted that another avenue
of funding used by the IRA were post office and bank robberies.118 He
concluded that ‘illegal businesses associated with the Republican Movement
in Northern Ireland are extremely profitable’.119 Furthermore, Jonsson and
Cornell took the view that ‘the organisation [IRA] also received substantial
economic support from the Irish diaspora in the United States via organisations
such as Noraid . . . between 1981–1987; the IRA received substantial support
in money . . . from Muammar Qadaffi’s Libya’.120 Indeed, Tupman argued that
Iran provided the IRA with a ‘£20m slush fund in the mid-1980s’.121 Other
types of illegal activities used by the IRA included ‘tax fraud, extortion,
drinking clubs, taxi companies, smuggling operations, drug trafficking, and
kidnapping opened new revenue streams’.122 Commenting on the link between
terrorist financing and criminal behaviour, Hardouin noted that:
the spectrum of illegal activities to fund terrorism is wide. It ranges from
criminal actions, such as smuggling, counterfeit, various types of fraud,
robbery, narcotics trafficking, kidnapping and extortion, and – last, but
not least – low-level criminality. Legal businesses can be used by terrorists
and their supporters in order to disguise a variety of criminal activities.
Ordinary business, small or big, might support terrorist activities’.123
The threat posed by the wide range of sources available to terrorists has been
clearly illustrated by the activities of terrorist groups in Kenya, Nigeria, Syria
114 Aufhauser, n 21 at 301.
115 Passas and Jones stated that several terrorist organisations including ‘Abu Sayyef, Lashkar-iTaiba, The Tamil Tigers, Northern Alliance affiliated groups, al-Qaeda, Fuerzas Armadas
Revolucionarias de Colombia and the Autodefensas Unidas de Colombia’ have obtained funding
via drug trafficking. See Passas, N. and Jones, K. ‘Commodities and terrorist financing: focus
on diamonds’ (2006) European Journal on Criminal Policy and Research, 12(1), 1–33, at 1. For a
contrasting view see Jonsson, M. and Cornell, S. ‘Countering terrorist financing’ (2007) Conflict
and Security, 8, 69–78, at 7.
116 Hereinafter ‘IRA’.
117 Donohue, n 81 at 126–127.
118 Tupman, n 100 at 305.
119 Ibid.
120 Jonsson and Cornell, n 115 at 70. For an excellent discussion of how the IRA were financed
see Horgan, J. and Taylor, M. ‘Playing the ‘Green Card’ – Financing of the Provisional IRA:
Part 1’ (1999) Terrorism and Political Violence, 11(2), 1–38 and Horgan, J. Taylor, M. ‘Playing
the ‘Green Card’ – Financing of the Provisional IRA: Part 2’ (2003) Terrorism and Political
Violence, 15(2), 1–60.
121 Tupman, n 100 at 306.
122 Donohue, n 81 at 126–127.
123 Hardouin, n 95 at 205.
Introduction
17
and Iraq in 2014. For example, the Islamic State of Iraq and Levant have
exploited the political and security weaknesses in Iraq by using a very wide
range of sources to fund their activities.124 It has been reported that since the
ISIS takeover of Mosul in June 2014, they have stolen an estimated $425m
from its Central Bank.125 Similarly, it has been estimated that ISIS ‘insurgents
seized as much as $400 million from the central bank . . . and reportedly
emptied the vaults in all the other banks in a city of more than one million
residents’.126 It has been estimated that the total assets of ISIS amount to
$900m prior to its capturing of Mosul, and that this now exceeds $2 billion.127
Jones noted that ‘ISIS has been catapulted into a position of unrivalled
wealth’.128 The position has become even more threatening due to its seizure
and control of several affluent oil fields.129 However, despite the plundering
of the Iraqi central bank ISIS was ‘well-funded in its quest to establish a Shariah
caliphate, thanks to a raging criminal enterprise of extortion, bank robbery
and petty theft, as well as donations from well-heeled sponsors throughout
the Arab world’.130 Additionally, it has also been suggested that ISIS has been
boosted by ‘citizens in Saudi Arabia and Kuwait have quietly funnelled vast
sums of money to and joined the ranks of ISIS and other jihadist groups
fighting’.131 Jones, citing Zelin, added that:
They’re [ISIS] probably the richest jihadi organization ever seen . . . they
get their money from trafficking weapons, kidnappings for ransom,
counterfeit currencies, oil refining, smuggling artefacts that are thousands
124 Hereinafter ‘ISIS’. For a brief discussion on ISIS see BBC News ‘Profile: Islamic State in Iraq
and the Levant (ISIS)’, June 16, 2014. Online. Available from , accessed June 27, 2014. Also see Chulov, M. ‘How an arrest
in Iraq revealed Isis’s $2bn jihadist network’, June 15, 2014. Online. Available from
,
accessed June 27 2014.
125 Jones, S. ‘Diverse funding and strong accounting give Isis unparalleled wealth’, June 22, 2014.
Online. Available from , accessed 27 June, 2014.
126 Nordland, R. and Rubin, A. ‘Iraq insurgents reaping wealth as they advance’, June 20, 2014.
Online. Available from , accessed June 26, 2014.
127 BBC News, n 124.
128 Jones, n 125.
129 See Tran, M. ‘Isis insurgents attack Iraq’s biggest oil refinery’, June 18, 2014. Online. Available
from ,
accessed June 27, 2014.
130 Fox News ‘Extortion, bank robbery fuel ISIS bloody drive to establish Sharia caliphate’,
June 14, 2014. Online. Available from , accessed June 27, 2014.
131 Hauslohner, A. ‘Jihadist expansion in Iraq puts Persian Gulf states in a tight spot’, June 13,
2014. Online. Available from , accessed June 27, 2014.
18
The Financial War on Terrorism
of years old and from taxes that they have for areas they are in – either
on businesses, or at checkpoints or on ordinary people’.132
However, these figures must be treated with an element of caution, if lessons
are to be learnt from 9/11. For instance, following the terrorist attacks, many
commentators, including several from within the Bush administration,
believed that al-Qaeda was the most affluently financed terrorist group.
Indeed, some commentators suggested that Osama bin Laden had sponsored
al-Qaeda from his own personal resources. As will be discussed in Chapter 6,
these estimates and reports have since been dismissed. Therefore, at the time
of writing it is impossible to estimate how much money ISIS has access to.
Another terrorist group that has utilised a vast array of sources is Al
Shabaab, who has obtained funding from the illegal smuggling of ivory.133
It has been asserted that Al Shabaab receives ‘£365,000 per month from
ivory alone, enough to support around 40 per cent of the salaries paid to
militants. Other sources of the group’s revenue include exporting charcoal
and collecting zakat, an informal Islamic tithe’.134 Harnish noted that Al
Shabaab ‘has the funds, weapons, technical expertise, and human resources
needed to conduct operations. It raises money by taxing international aid
organizations, collecting zakat from citizens, receiving remittances from
abroad, and receiving financial support from Eritrea’.135 It has also been
suggested that ‘Al Shabaab emerged as a regional threat funded by millions
of dollars from activities ranging from extortion to taxing charcoal exports’.136
The same report estimated that ‘Al Shabaab earned more than $25m a year
from illicit exports of charcoal to Gulf Arab states and from taxing the
trucking of charcoal to the Somali ports of Kismayu and Barawe’.137 The
UN noted that Al Shabaab receives a lot of its funding via charcoal exports
and the illegal importation of contraband sugar.138 Bergen and Sterman noted
that Al Shabaab has also received donations from supporters within the US.139
132 Jones, n 128.
133 Doshi, V. ‘Elephant Campaign: How Africa’s ‘white gold’ funds the al-Shabaab militants’,
February 3, 2014. Online. Available from , accessed June 27, 2014.
134 Ibid.
135 Harnish, C. The Terror Threat From Somalia – The Internationalization of Al Shabaab – A Report
of the Critical Threats Project of the American Enterprise Institute (American Enterprise Institute:
2010) at 2.
136 Maclean, W. ‘Shabaab finances face squeeze after Kenya attack’, September 26, 2013. Online.
Available from , accessed June 27, 2014.
137 Ibid.
138 United Nations Report of the Monitoring Group on Somalia and Eritrea Pursuant to Security Council
Resolution 2060 (2012): Somalia (United Nations: New York, 2012).
139 Bergen, P. and Sterman, D. ‘Al-Shabaab backed by money from US’, September 29, 2013.
Online. Available from ,
accessed June 27 2014.
Introduction
19
For example, in October 2011 two women were convicted of ‘providing
material support to a designated terrorist organization’.140 The Council of
Foreign Relations noted that:
al-Shabaab has benefited from several different sources of income over the
years, including revenue from other terrorist groups, state sponsors, the
Somali diaspora, charities, piracy, kidnapping, and the extortion of local
businesses. Saudi Arabia, Yemen, Syria, Iran, Qatar, and Eritrea have been
cited as prominent state backers.141
Another terrorist group that has been able to exploit a wide range of sources
of funding is Boko Haram, ‘an Islamist movement based primarily in the
north-eastern region of Nigeria’.142 It has been suggested that Boko Haram
are funded ‘through black market dealings, local and international benefactors,
and links to al-Qaida and other well-funded groups in the Middle East’.143
The Inter-governmental Action Group Against Money Laundering in West
Africa noted that Boko Haram has been partly financed through private
donors and misapplied charitable donations.144 The US House of Representatives has indicated that Boko Haram has attempted to become selfsufficient and adopted a ‘live-off-the land lifestyle and established a camp in
a remote area of northeast Nigeria’.145 Interestingly, the FATF provided
several examples of how Boko Haram acquires its financing which includes
140 Federal Bureau of Investigation ‘Two Minnesota women convicted of providing material
support to al Shabaab’, October 20, 2011. Available from , accessed October 15, 2014. Also see ‘San Diego jury convicts four Somali immigrants
of providing support to foreign terrorists’, February 22, 2013. Online. Available from
, accessed October 15, 2014.
141 Masters, J. ‘Al-shabab’, September 23, 2013. Online. Available from , accessed June 27, 2014.
142 Foster-Bowser, E. and Sanders, A. ‘Security threats in the Sahel and beyond: AQIM, Boko Haram
and al Shabaab’, April 2012. Online. Available from , accessed September 30, 2014. Boko Haram
gained notoriety following its kidnapping of 276 school girls in April 2014. See Abubakar,
A. ‘Boko Haram engaged in talks over kidnapped girls’. Online. Available from , accessed
October 10 2014.
143 McCoy, T. ‘Paying for terrorism: where does Boko Haram get its money from?’, June 6, 2014.
Online. Available from , accessed June 27, 2014.
144 Inter-governmental Action Group Against Money Laundering in West Africa Threat Assessment
of Money Laundering and Terrorist Financing in West Africa (Inter-governmental Action Group
Against Money Laundering in West Africa: 2010) at 94.
145 U.S. House of Representatives Committee on Homeland Security Subcommittee on
Counterterrorism and Intelligence Boko Haram Emerging Threat to the U.S. (Homeland U.S.
House of Representatives Committee on Homeland Security Subcommittee on Counterterrorism
and Intelligence: 2011) at 6.
20
The Financial War on Terrorism
the sale of goods and other lucrative activities, business profits/logistical
support, contributions from members of a terrorist group, begging by
vulnerable persons, extortion of civilians by means of intimidation, women
cash couriers and arms smugglers, and financial contributions from political
leaders.146 In relation to contribution from political leaders the FATF stated
that Boko Haram ‘exploits the security challenges in the north to coerce some
governors to co-operate in exchange for peace in their states. The case also
reveals the need to enhance the personal security of government officials
who may be intimidated and exploited by terrorist groups for protection
fees’.147 The US Department of States noted that Boko Haram acquires
funding via ‘commercial activities such as telecommunications; abuse of the
Nigerian financial system; illegal fundraising; extortion; cash couriers,
including the use of female cash couriers; and the active assistance of local
politicians in raising funds. Kidnapping for ransom was also a source of
terrorist financing’.148 It has also been suggested that Boko Haram, like other
terrorist groups have engaged in criminal activities to fund their activities.
For example, Boko Haram has carried out bank robberies and stolen oil.149
Therefore, the prevention and detection of terrorist finances is extremely
difficult if not impossible, due to the extensive financial tools used to fund
terrorist operations. Furthermore, what becomes clear is that there is an
increasing amount of literature that has attempted to identify the sources of
funding available to terrorists. However, despite the merits of these assertions,
they are only suggestions and the response to the threat posed by the finances
of ISIS is very similar to the immediate reaction to the estimated assets of alQaeda following 9/11. Nonetheless, these terrorists are still able to abuse a
wide range of funding avenues, which have been linked to the costs of
terrorism, which the chapter now turns to.
1.4 Cheap terrorism
Terrorist attacks do not cost large amounts of money. Very often these
operations can be financed by money, which can be obtained locally.150
In addition to the vast array of funding avenues available to terrorists, it is
also important to discuss one of the most contentious issues surrounding
terrorist financing, ‘cheap terrorism’.151 Prober stated that ‘an increasingly
146 Financial Action Task Force, n 108.
147 Ibid., at 23.
148 Department of State Country Reports on Terrorism 2013 (Department of State: Washington DC,
2014) at 40.
149 U.S. House of Representatives Committee on Homeland Security Subcommittee on
Counterterrorism and Intelligence, n 145 at 18.
150 Acharya, n 1 at 11.
151 For an interesting discussion see Whitlock, C. ‘Al-Qaeda masters terrorism on the cheap’,
August 24, 2008. Online. Available from , accessed June 11, 2014.
Introduction
21
accepted argument holds that terrorism has become a cheap enterprise’.152
Similarly, Simser warned that ‘combating or countering the financing of
terrorism involves finding relatively small sums in an ocean of money’.153
Richards warned that ‘some question whether terrorist financing is a central
issue in the fight against terrorism, if terrorist attacks can be pulled off quite
inexpensively’.154 The threat posed by cheap terrorism was identified by HM
Treasury who took the view that:
However, although the sums raised and required by terrorists may be
large, amounts of money needed to finance individual terrorist operations
may be small or concealed. . . . [The] UK experience bears out the
relatively low costs required for an effective terrorist attack. The
Bishopsgate bomb in the City of London in 1993 caused over £1bn worth
of damage to property yet cost only £3,000 to mount.155
One of the first examples of ‘cheap terrorism’ was the first attack on the World
Trade Centre in 1993, in which six people were murdered; over 1000 were
injured at an estimated cost of only $400.156 It is important to note that this
terrorist attack was ‘less devastating . . . because of the group’s limited
financial resources’.157 Two years after the World Trade Centre attack Timothy
McVeigh detonated a truck bomb outside Alfred P. Murrah Federal Building
in Oklahoma City in April. In an interview with MSNBC, Timothy McVeigh
estimated that the total costs of the attack, including the truck rental,
fertilizer, nitro methane and other costs amounted to $5,000.158 Another
example of cheap terrorism was the terrorist attacks by Al Shabaab on the
Westgate Mall in Kenya, which according to the US Department of Treasury
152 Prober, J. ‘Accounting for terror: debunking the paradigm of inexpensive terrorism’, November
1, 2005. Online. Available from , accessed August
11, 2014.
153 Simser, J. ‘Terrorism financing and the threat to financial institutions’ (2011) Journal of Money
Laundering Control, 14(4), 334–345, at 334. Simser added that ‘the bombing of the London
transit system in 2005 cost an estimated $15,000; the 2000 attack on the USS Cole in Yemen
cost $10,000 as did the 2004 train bombings in Madrid’.
154 Richard, n 88 at 5.
155 HM Treasury Combating the Financing of Terrorism. A Report on UK Action (HM Treasury: London,
2002) at 11.
156 Gaddis, J. ‘And now this: lessons from the old era for the new one’, in S. Talbott and N. Chander
(eds) The Age of Terror: America and the World After September 11 (Basic Books: New York, 2001)
at 6.
157 Biersteker, T. and Eckert, S. ‘The US regulatory approach to terrorist financing’ in T. Biersteker
and S. Eckert (eds) Countering the Financing of Terrorism (Routlege Cavendish: London, 2008)
at 1.
158 NBC News ‘The McVeigh tapes: confessions of an American terrorist’, 19 April, 2010. Online.
Available from ,
accessed October 6, 2014.
22
The Financial War on Terrorism
‘cost less than $5,000 to execute’.159 They added that the materials used in
the Boston Marathon bombings [in 2013] reportedly cost about $500.160 It
has been reported that the two explosive devices used by the suspected
bombers, Tamerlan and Dzhokhar Tsarnaev, cost as little of $100 each.161
However, these estimates must be treated with an element of caution as there
are ‘few reliable data on the cost of attempting terrorist attacks’.162 Another
illustration of the concept of cheap terrorism was several bombings carried
out by Armed Islamic Group in France in 1995.163 The first attacks occurred
on July 25, 1995 on the Saint-Michel train station that resulted in the death
of eight people and left a further 80 injured. Less than a month later, a further
17 people were injured following a bomb at the Arc de Triomphe and further
explosive devises were found in Lyon and Paris. Further attacks took place on
the Paris Metro including Maison Blanche, Musée d’Orsay, Saint-Michel and
Notre-Dame stations. Commenting on these terrorist attacks Richard noted
that these terrorists ‘who staged an attack on Paris in 1995 actually had key
receipts that added up to $100’.164
The terrorist attacks of 9/11 were estimated to have cost between $400,000
and $500,000 over a 2-year planning period.165 This is a view supported by
several commentators. For example, Lowe stated that ‘terrorists need relatively
small amounts of money to mount highly damaging attacks and even a
terrorist spectacular like 9/11 is estimated not to have cost more than $500,000
which is minute in terms of the devastation caused’.166 Gurule noted that
‘major terrorist attacks require substantial funding to plan and execute. It has
been estimated that the 9/11 attacks cost as much as $500,000 to stage’.167
Other examples of ‘cheap terrorism’ include a car bomb that exploded outside
the Sari Club Discotheque in Denpasar, Bali that killed 202 and injured over
159 Department of Treasury ‘Remarks of Under Secretary for Terrorism and Financial Intelligence
David Cohen before the Center for a New American Security on “Confronting New Threats
in Terrorist Financing”‘, March 4, 2014. Online. Available from , accessed September 22, 2014.
160 Ibid.
161 See Wallack, T. and Healy, B. ‘Tsarnaev brothers appeared to have scant finances’, April 24,
2013. Online. Available from , accessed
June 11, 2014.
162 Prober, n 152.
163 See Humi, P. ‘Bomb explodes on Paris subway’, October 17, 1995. Online. Available from
, accessed August 11, 2014. For
a brief discussion of the relationship between terrorism and France see Guillaume, G. ‘France
and the fight against terrorism’ (1992) Terrorism and Political Violence, 4(4), 131–135 and
Gregory, S. ‘France and the war against terrorism’ (2003) Terrorism and Political Violence, 15(1),
124–147.
164 Richard, n 88 at 5.
165 9/11 Commission, n 5 at 172. Also see Pieth, n 9 at 1076.
166 Lowe, P. ‘Counterfeiting: linking organised crime and terrorist funding’ (2006) Journal of
Financial Crime, 13(2), 255–257, at 255. Also see Acharya, n 1 at 13.
167 Gurule, n 46 at 23.
Introduction
23
300 people. It has been estimated that this terrorist attacks cost $74,000 to
fund.168 Gurule noted that:
in October 2002 a minivan, loaded with explosives was detonated in front
of two nightclubs located on the Indonesian island of Bali . . . in August
2003, a bombing at the Marriot Hotel in Jakarta . . . killed 12 people
and injured scores . . . [in] September 2004 a car bombing outside the
Australia Embassy in Jakarta that killed 11 and wounded more than 180
people . . . on October 1 2005 . . . bombs exploded in Bali killing 22
people . . . while the cost of the October 2002 Bali bombing alone is
estimated at $50,000, while the money required to finance the other three
. . . totalled tens, if not, hundreds of thousands of dollars more.169
This terrorist attack was followed by the Madrid Bombings on March 11,
2004, when ten explosive devises detonated killing 191 and injuring over
1,800 people.170 The costs to orchestrate and implement this attack amounted
to $70,000.171 However, O’Neill took the view that ‘the European Commission has calculated that the Madrid Bombings were estimated to have
cost a mere €8,000, with the funding of terrorist networks generally having
a small monetary value’.172 This figure was echoed by Walker who took the
view that ‘the 11 March 2003 Madrid bombers incurred costs of just
€8,315’.173 Furthermore, the terrorist attacks in London on July 7, 2005 were
estimated to have cost between £100 and £200.174 Waszak estimated that ‘the
cost of making a suicide bomb can be as low as $5, while the deployment of
a suicide bomber including transportation and reconnaissance, can cost as little
as $200’.175 Thus illustrating the paucity of finances needed to carry out the
terrorist attack in London. Danziger stated that ‘in marked contrast to the
cost of the 9/11 attacks, it is thought that the overall cost of the 7/7 bombings
was less than £8,000. The main costs were incurred in overseas trips, bombmaking equipment, rent, care hire and UK travel’.176 Worryingly, Danziger
168 Brisard, J. Terrorism Financing: Roots and Trends of Saudi Terrorism Financing (JCB Consulting:
Paris, 2003) at 6.
169 Gurule, n 46 at 23.
170 Baumert, T. and Buesa, M.C. ‘Dismantling terrorist economics: the Spanish experience’ (2014)
in C. King and C. Walker (eds) Dirty Assets – Emerging Issues in the Regulation of Criminal and
Terrorist Assets (Ashgate: Farnham, 2014), 291–315.
171 Reuters ‘Factbox: The Madrid train bombings and what happened next’, February 14, 2007.
Online. Available from ,
accessed June 11, 2014.
172 O’Neill, n 24 at 31.
173 Walker, n 111 at 232.
174 See Robinson, J. ‘Brown’s war just doesn’t add up: you can’t kill terrorists with a calculator’, The Times, February 14, 2006. Online. Available at , accessed November 10, 2014.
175 Waszak, n 11 at 673.
176 Danziger, Y. ‘Changes in methods of freezing funds of terrorist organisations since 9/11: a
comparative analyais’ (2012) Journal of Money Laundering Control, 15(2), 210–236, at 218.
24
The Financial War on Terrorism
described the London bombers as ‘self-financed, using money obtained through
employment, drawing on multiple bank accounts, use of credit cards and
personal loans’.177 This was a view supported by the HM Government’s
official report into the attacks which stated that ‘current indications are that
the group was self-financed. There is no evidence of external sources of income.
Our best estimate is that the overall cost is less than £8,000’.178 The threat
posed by self-funded terrorist cells was highlighted by the FATF who referred
to a terrorist incident in Germany:
In July 2006, rail employees found two unattended suitcases on two
German regional trains. Improvised explosive and incendiary devices
were discovered in each suitcase consisting of a propane tank, an alarm
clock as a timer, batteries for energy supply, various detonating agents
as well as a plastic bottle filled with petrol. The instructions for building
an explosive device were taken from an al-Qaeda-linked website, with
components purchased in ordinary shops, costing no more than € 250.
No suspicious funding from abroad was required, and the suspect’s
primary source of funding during this period was from family members
to pay for his education. The only transactions that appear to have been
linked to the planned attack were for plastic bottles, which when filled
with petrol and linked to propane tanks would have made an improvised
explosive device.179
1.5 Rationale
Therefore, the monograph attempts to identify and outline the composite parts
of the ‘Financial War on Terrorism’. Furthermore, it seeks to provide a critical
review of the impact of the CTF strategies in three carefully selected
jurisdictions and also provides a review of the CTF measures that existed before
the terrorist attacks in 9/11. The monograph begins by highlighting the
impact of 9/11 on the legislative measures of the UN, the EU and the soft
law measures of the FATF. The remaining chapters of the monograph seek
to highlight the CTF strategies adopted by the US, UK, Australia against
carefully selected terrorist groups.
1.6 Why the United States of America?
Since the terrorist attacks of 9/11 and the ‘Financial War on Terrorism’ the
US has taken the lead role towards tackling terrorist financing. The influence
of the US government and its federal agencies, including the Department of
177 Ibid.
178 House of Commons Report of the Official Account of the Bombings in London on 7th July 2005 (House
of Commons: London, 2005) at p.23, para. 63.
179 Financial Action Task Force, n 77 at 15.
Introduction
25
Treasury,180 and its Office of Foreign Assets Control are well documented.181
Levitt noted that:
Since September 2001, America . . . has spearheaded a groundbreaking
and comprehensive disruption operation to stem the flow of funds to and
among terrorist groups. Combined with the unprecedented law enforcement and intelligence efforts to apprehend terrorist operatives worldwide
and thereby constrict the space in which terrorists can operate, cracking
down on terrorist financing denies them the means to travel,
communicate, procure equipment, and conduct attacks.182
However, as previously argued, the ‘Financial War on Terrorism’ was originally
instigated by President Bill Clinton following the al-Qaeda terrorist attacks
on two US embassies. Therefore, it is only at this point that the US began to
diversify and widen its white collar crime strategy and include the financing
of terrorism. Until this point, US authorities had concentrated on money
laundering, fraud and insider trading. Indeed, the 9/11 Commission Monograph on Terrorist Financing stated that prior to 2001, ‘terrorist financing
was not a priority . . . and there was little interagency strategic planning or
coordination . . . most fundamentally, the domestic strategy for combating
terrorist financing within the United States never had any sense of urgency’.183
This is a view supported by Eckert who noted that ‘prior to the events of 11
September, little public attention was focused on terrorist financing only a
few regulatory programmes addressed the issue and the topic was considered
arcane, within the purview of a handful of experts’.184 The terrorist attacks
resulted in the introduction of the aptly named Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act 2001185 and Presidential Executive Order 13,224.
1.7 Why the United Kingdom?
The second case study that was selected for this monograph is the UK, which
unlike the US, has a long history of tackling terrorism and has introduced an
180 Gordon took the view that ‘following the terrorist attacks of September 11, 2001, the US
Treasury Department began immediately to push other members of the FATF to include
terrorism financing as a central part of the organisation’s mandate’. See Gordon, R. ‘Trysts or
terrorists? Financial institutions and the search for bad guys’ (2008) Wake Forest Law Review,
43, 699–738, at 715.
181 Hereinafter ‘OFAC’.
182 Levitt, n 2 at 61.
183 National Commission on Terrorist Attacks Upon the United States Monograph on Terrorist
Financing (National Commission on Terrorist Attacks Upon the United States: Washington
DC, 2004) at 4.
184 Eckert, n 19 at 209.
185 Hereinafter ‘USA Patriot Act 2001’.
26
The Financial War on Terrorism
embarrassment of related legislation. O’Neill stated that ‘some countries
unfortunately have greater experience of tackling terrorism from a law
enforcement perspective. All countries are going through a learning process
when it comes to counter-terrorism financing’.186 This point is supported by
Alexander who stated:
terrorist financing only became of international concern following the
attacks by Al Qaeda on the United States on September 11, 2001. It was,
however, an issue of concern in the United Kingdom considerably earlier,
because of the ongoing conflict in Northern Ireland. Beginning in 1969,
this conflict soon led to the passing of successive Prevention of Terrorism
Acts from the early 1970s onwards. These were explicitly emergency
measures: each Act’s title carried the phrase, ‘Temporary Provisions’. More
permanent legislation was, however, introduced in the form of the
Terrorism Act 2000, passed over a year before 9/11.187
For example, the development of the UK’s terrorist related legislation is
associated with the end of the eighteenth and start of the nineteenth century.
Such legislative measures included the Explosive Substances Act 1883, the
Criminal Law and Procedure (Ireland) Act 1887, and the Civil Authorities
(Special Powers) Act (Northern Ireland) 1922.188 Donohue took the view that
‘it is difficult to unravel the United Kingdom’s efforts to interrupt terrorist
finance in the three-quarters of the twentieth century. From 1912 to 1972,
the Northern Ireland Executive maintained extensive authority to seize
private assets, but very little information appears in the public record office
in Belfast or London that details the manner in or extent to which such powers
issued’.189 Jonsson and Cornell took the view that ‘terrorist financing is not
a new phenomenon [in] . . . the United Kingdom’.190 This is a view supported
by Alexander who stated that terrorist financing was a ‘concern in the United
Kingdom considerably earlier, because of the ongoing conflict in Northern
Ireland’.191 Other terrorist financing-related legislation included the Prevention of Terrorism (Temporary Provisions) Act 1989 which criminalised
terrorist financing,192 attempted controls of terrorist financing193 and imposed
forfeiture and criminal penalties.194 The next legislative amendment was the
Criminal Justice Act 1993 which brought the terrorist financing provisions
186 O’Neill, n 24 at 3.
187 Alexander, n 22 at 200.
188 Brandon, D. ‘Terrorism, human rights and the rule of law: 120 years of the UK’s legal response
to terrorism’ (2004) Criminal Law Review, December, 981–997, at 982.
189 Donohue, n 81 at 129.
190 Jonsson and Cornell, n 115 at 69.
191 Alexander, n 22 at 200.
192 Prevention of Terrorism (Temporary Provisions) Act 1989 (repealed) s. 9.
193 Prevention of Terrorism (Temporary Provisions) Act 1989 (repealed) ss. 9 and 11.
194 Prevention of Terrorism (Temporary Provisions) Act 1989 s. 13.
Introduction
27
in line with the anti-money laundering measures. Additionally, the Criminal
Justice (Terrorism and Conspiracy) Act 1998 permitted the courts to forfeit
any property connected with proscribed terrorist organisations.195 Additionally, the Terrorism Act 2000 created a number of criminal offences relating
to the financing of terrorism.196 These were further extended by the Antiterrorism, Crime and Security Act 2001, which permitted the freezing and
seizing of potential terrorists assets.
1.8 Why Australia?
The third case study is Australia, which as one of the largest financial markets
in the Asia-Pacific region, makes it very susceptible to illicit financial activities.
Australia, like the US and UK, introduced a plethora of money laundering
related legislation following the implementation of the Vienna Convention.
This includes the Proceeds of Crime Act (1987), the Financial Transaction
Reports Act (1988), the National Crime Authority Act (1984), and the
Mutual Assistance in Criminal Matters Act (1987). However, the deficiencies
in the legislation were highlighted by a Mutual Evaluation report by the FATF
which criticised Australia’s level of compliance.197 The Australian government
responded by introducing the Anti-Money Laundering and Counter-Terrorism
Financing Act (2006), the Anti-Money Laundering and Counter-Terrorism
Financing Rules (2007) and the Anti-Money Laundering and CounterTerrorism Financing Regulations (2008). Australia has been selected as
forming a key part of this monograph due to the implementation of this
draconian legislation but also the recent threat it faces from terrorists associated
with ISIS. Furthermore, the threat posed to Australia by terrorist financing
was recognised by AUSTRAC which stated:
Terrorism financing poses a serious threat to Australians and Australian
interests at home and abroad. At its most damaging, it can fund the
activities of domestic extremists, including attacks on Australian soil.
More commonly, terrorism financing raised in Australia can help sustain
terrorist groups overseas and support foreign attacks and insurgencies.
Terrorism financing also poses a threat to the credibility of Australia’s
financial institutions and financial system. Even an unwitting association
with terrorism financing involving small amounts of money could damage
the reputation of Australian financial institutions, companies and not-forprofit organisations.198
195 Criminal Justice (Terrorism and Conspiracy) Act 1998, s. 4(3).
196 Terrorism Act 2000, ss. 15–19.
197 McNeil, C. ‘The Australian anti-money laundering reform in the international context’ (2007)
Journal of International Banking Law and Regulation, 22(6), 340–344.
198 AUSTRAC Terrorism Financing in Australia 2014 (AUSTRAC: 2014) at 1.
28
The Financial War on Terrorism
1.9 Terrorist financing: current threats and future trends
The final case study of this monograph concentrates on the impact of the
‘Financial War on Terrorism’ on al-Qaeda, ISIS, and Boko Haram. These
terrorist groups have been able to acquire funding via what this monograph
refers to as ‘traditional’, ‘customary’ or ‘historical’ sources of finance including
donations, misapplied charitable donations and criminal activities, not from
new methods of acquiring funding. Therefore, this presents a unique opportunity to determine to what extent, and if at all, the component parts of the
‘Financial War on Terrorism’, as identified above, are able to disrupt the
sources of jihadist terrorist financing.
1.10 Contents overview
Chapter 2 reviews the CTF measures introduced by the UN, EU and the FATF.
The chapter also considers the UN sanctions against terrorists and the
operation of its anti-terrorist sanctions committees. Additionally, the chapter
seeks to provide a detailed analyt…