Posted on 02/25/2005 5:36:34 AM PST by SJackson
“The terrorists aren’t waiting for us to get our enforcement act together. While we struggle over how to restructure our agencies, they’re squirreling away money to fund their attacks. Shutting down terrorism financing must be an urgent and high priority,” warned Senator Chuck Grassley in March 2004 (1). Not everybody, however, shared his logic. Both the 9/11 Commission and the Treasury Department have, according to Treasury Under Secretary Stuart A. Levey, “recognized that the U.S. Government’s campaign against terrorist financing must be viewed as but one of many fronts in the global war on terror, rather than an as an end in itself” (2). Nonetheless, Levey admitted that “our counter-terrorism financing efforts are a vital part of the overall war. Terrorists require money to train, travel, communicate, indoctrinate, procure weapons, carry out attacks, and conceal themselves. Starving them of money debilitates every aspect of their operations and, ultimately, their ability to survive” (3).
Three years after September 11, the United States has designated 387 entities as terrorists or supporters of designated terrorists and frozen only $142 million in terrorist-related assets, $37 million of which has been frozen in the United States. In addition, the U.S. Government has identified and frozen over $4.5 million in al-Qaeda-related funds, while $72 million of al-Qaeda’s money has been frozen by other governments worldwide. Eighty countries have also introduced new terrorism-related legislation, and 94 have established Financial Intelligence Units. Altogether, more than 170 countries and jurisdictions have issued freezing orders, however, many frozen accounts have since been “defrosted” and the money returned to the account holders (4).
The mechanisms of terror financing have been described by Mark Cantor in his study for The American Society of International Law Task Force on Terrorism. He enumerated the means of terrorist funding to include “donations to charities, use of shell companies and otherwise legitimate businesses, and narcotics trafficking.” In addition to wire transfers through commercial banks, money was moved via trade mispricing, credit and debit cards, informal value and underground banking systems, and bulk cash smuggling. Kantor further noted that “the emergence of trust-based money transfer systems such as hawala for cross-border funds transfers creates even more enforcement difficulties, as those networks lie outside the regulatory system covering financial markets and clearing systems. The worldwide growth of bearer instruments in the capital and commodities markets also makes tracing the ownership of the value embodied in those instruments extremely difficult. In addition, the use of portable commodities such as diamonds and gold, rather than direct money transfers, requires that attention be paid to merchant markets outside the financial community. Techniques such as over- or under-invoicing, which convert a legitimate sales transaction into a device for illicitly transferring value, compound the challenges” (5).
In all European states, national legislators long ago realized that a terrorist group cannot act without an efficient infrastructure and substantial economic resources. Therefore, national criminal laws have long included a second category of offenses covering terrorist activities like attempts to steal property with the goal of obtaining funds to aid terrorist groups. Such laws were often supplemented with provisions on money laundering. After September 11, more rigorous action against money laundering was taken by extending the scope of the existing criminal laws, especially in states where financial institutions were used by the September 11 terrorists to move money (6). In most countries, September 11 caused the focus to shift from control to prevention.
Prior to September 11, terrorism financing was proscribed by the 1999 UN International Convention for the Suppression of the Financing of Terrorism. Adopted by the General Assembly in resolution 54/109 of December 9, 1999, this convention requires parties to take steps to prevent and counteract the financing of terrorists, whether direct or indirect, though groups claiming to have charitable, social or cultural goals or which also engage in such illicit activities as drug trafficking or gun running. It commits states to hold those who finance terrorism criminally, civilly or administratively liable for such acts. Finally, it provides for the identification, freezing and seizure of funds allocated for terrorist activities, as well as for the sharing of the forfeited funds with other states on a case-by-case basis, and eliminates bank secrecy as a justification for non-cooperation.
More specifically, this convention defines funds as “assets of every kind, whether tangible or intangible, movable or immovable, however acquired, and legal documents or instruments in any form, including electronic or digital, evidencing title to, or interest in, such assets, including, but not limited to, bank credits, travelers checks, bank checks, money orders, shares, securities, bonds, drafts, letters of credit.” Article 2 of the Convention stipulates that “any person commits an offence within the meaning of this Convention 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, to carry out…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, or to compel a government or an international organization to do or to abstain from doing any act.” Section 5 further elaborates that any person also commits an offence if that person:
a) Participates as an accomplice in an offence
b) Organizes or directs others to commit an offence (e.g. incitement)
c) Intentionally contributes to the commission of one or more offences
Article 8, Section 1 calls on each State Party to the Convention to “take appropriate measures, in accordance with its domestic legal principles, for the identification, detection and freezing or seizure of any funds used or allocated for the purpose of committing the offences set forth in article 2 as well as the proceeds derived from such offences, for purposes of possible forfeiture.” Article 9, Section 1 says that “upon receiving information that a person who has committed or who is alleged to have committed an offence set forth in article 2 may be present in its territory, the State Party concerned shall take such measures as may be necessary under its domestic law to investigate the facts contained in the information.” Section 2 goes on to say that “upon being satisfied that the circumstances so warrant, the State Party in whose territory the offender or alleged offender is present shall take the appropriate measures under its domestic law so as to ensure that person’s presence for the purpose of prosecution or extradition.”
The 1999 Convention mandates further cooperation in Article 12, Section 2, which declares that “State Parties may not refuse a request for mutual legal assistance on the ground of bank secrecy” and in Article 18, Section 1, which stipulates that “State Parties shall cooperate in the prevention of the offences set forth in article 2 by taking all practicable measures, inter alia, by adapting their domestic legislation, if necessary, to prevent and counter preparations in their respective territories for the commission of those offences within or outside their territories, including: (a) Measures to prohibit in their territories illegal activities of persons and organizations that knowingly encourage, instigate, organize or engage in the commission of offences set forth in article 2; (b) Measures requiring financial institutions and other professions involved in financial transactions to utilize the most efficient measures available for the identification of their usual or occasional customers, as well as customers in whose interest accounts are opened, and to pay special attention to unusual or suspicious transactions and report transactions suspected of stemming from a criminal activity.”
On January 30, 2004, UN Resolution 1526 called for the freezing “without delay the funds and other financial assets or economic resources of these individuals, groups, undertakings and entities, including funds derived from property owned or controlled, directly or indirectly, by them or by persons acting on their behalf or at their direction, and ensure that neither these nor any other funds, financial assets or economic resources are made available, directly or indirectly, for such persons’ benefit, by their nationals or by any persons within their territory” (7).
As for national laws after September 11, in almost all countries a clear-cut separation can be made between prosecuting measures in place before 11 September 2001 and the introduction of new laws afterwards (8). Only Spain had not extended its provisions to international terrorism due to an existing international component in anti-terror legislation triggered by ETA terrorism in the French Basque country. However, all countries claimed that their provisions against money laundering could extend to terror financing. “The European Council in Tampere noted that money laundering is at the very heart of organized crime and should be rooted out wherever it occurs, and as the Extraordinary European Council of 21 September 2001 stressed that terrorism more and more relies on the methods of organized crime, the Council ensured that concrete steps are taken by the member states to punish these offences severely, and to trace, freeze, seize and confiscate the proceeds of crime by implementing the Framework Decision on money laundering and the Second Money Laundering Directive which includes, for the first time, the laundering of the proceeds of terrorism” (9).
Moreover, the UN Security Council passed several resolutions to combat terror financing. Security Council Resolution 1373 (September 2001) provides that all States shall:
(a) Prevent and suppress the financing of terrorist acts;
(b) Criminalize the willful 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;
(c) 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;
(d) 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 of persons and entities acting on behalf of or at the direction of such persons;…(10)
Resolution No. 1373 also obligates all States to “deny safe haven to those who finance [or] support…terrorist acts, or provide safe havens” and to “ensure that any person who participates in the financing…of terrorist acts or in supporting terrorist acts is brought to justice….” The Security Council’s Counterterrorism Committee (CTC) monitors the implementation of Resolution 1373 and tries to increase states’ ability to fight terrorism.
Building on 1373, subsequent Security Council Resolutions 1377 (12 November 2001) and 1390 (28 January 2002) underscore the international legal obligation of states to deny financial support and safe haven to terror supporters. In the case of Resolution No. 1390, which falls under Chapter VII of the UN Charter, all States are required to freeze the financial assets and economic resources of “Usama bin Laden, members of the Al-Qaeda organization and the Taliban and other individuals, groups, undertakings and entities associated with them,” as named on a continually updated list. However, nothing in these Resolutions outlines any consequences to a State from failing to fulfill its obligations (11).
The UN also launched a Global Program against Terrorism in October 2002 as a framework for UNODC’s operational activities in this field. The Global Program works through two technical assistance projects on strengthening the Legal Regime against Terrorism (12). As for the advocacy of terrorism, while generally “the public support of terrorist ideas as well as the incitement hereto and to religious and racial hatred are criminalized…in all democratic countries it has proven difficult to apply these provisions because they conflict with the freedom of expression.” This has been the case with Israeli, Spanish and British courts (13).
The Financial Action Task Force (FATF), which coordinates the global fight against terrorist finance and money laundering. was reauthorized for eight years when its 33 members pledged to extend its mandate through 2012 (14).
However, the UN has violated its own resolutions by financing terrorism. For example, UNRWA support of Hamas and other Palestinian terrorists. On October 4, 2004, Commissioner-General of the UN Relief and Works Agency (UNRWA) Peter Hansen unapologetically admitted to the Canadian Broadcasting Corporation (CBC) that the UN employs members of HAMAS, stating, “oh, I am sure that there are Hamas members on the UNRWA payroll, and I don’t see that as a crime.” Yet, over the past four years, thirteen Palestinians employed by UNRWA have been arrested for alleged involvement in terrorist activities. In one particularly egregious example, Nahed Rashid Ahmed Attalah, the agency’s director of food supplies for Gaza refugees, used his UN car and free travel permit to facilitate Popular Resistance Committee (PRC) terror acts. Indicted in September 2002, Attalah admitted to using his UN vehicle on multiple occasions during summer 2002 to transport arms, explosives, and PRC activists to carry out terrorist attacks (15). Only days after Hansen’s remark, thirteen more Palestinian employees of the UN were detained in connection with terrorism and are now to be indicted (16).
Even though Canada has outlawed HAMAS for its terrorist activities, Peter Hansen’s revelation to the CBC did nothing to stop Canada’s $10 million annual donation to UNRWA, a sum which accounts for 5% of the organization’s yearly budget (17). The US, which provides 30% of UNRWA’s budget, and the EU, which provides well over 55%, have both banned the military and civilian “wings” of HAMAS (18). Nevertheless, UNRWA continues to employ HAMAS members. Thus far, the UN resolutions regarding terror financing have had impact only in countries that were interested in their implementation. However, the UN itself violated these resolutions outright by financing Saddam Hussein and numerous Islamist terrorist organizations through the Oil for Food Program. The excuse used by many UN Member States for not implementing the anti-terror financing resolutions is that there is no agreed definition of what constitutes a terrorist.
The UK Laws
In the UK, terrorism financing is covered under the 2000 Terrorism Act (19) and the 2001 Anti-Terrorism, Crime and Security Act (20). Under Schedule 1, paragraph 1(1) of the Anti-Terrorism, Crime and Security Act 2001, an authorized officer may seize any cash that he has reasonable grounds to suspect is terrorist cash, which is cash intended to be used for the purposes of terrorism, cash which consists of the resources of a proscribed terror organization, or cash which has been obtained through terrorism. Cash seized under the Act may be detained for an initial period of 48 hours, beyond which detention requires a court order. The law has been criticized for its use of magistrates’ courts, which do not possess the required specialist knowledge to address the complex issues of tracing and property ownership accompanying forfeiture cases.
The Act also introduced the new instrument of account monitoring orders which, when issued by a judge, enable the police to require financial institutions to provide information on accounts for up to 90 days. The court’s powers to freeze assets under investigation are extended to prohibit a person from dealing with property regarding which a forfeiture order has been or could be made in criminal proceedings to a pre-trial period when a criminal investigation has been started by the police but no charges have yet been brought, thus reducing the risk that the funds will be used or moved before they can be frozen.
Part 2 of the Act introduces a new power enabling the Treasury to freeze the assets of overseas governments or residents who have taken or are likely to take action to the detriment of the UK’s economy or constituting a threat to the life or property of a UK resident or national. It empowers the UK to impose sanctions in cases of urgency, unilaterally if neither the UN or the EU agree, or where unilateral action is more appropriate. Freezing orders must be approved by both houses of Parliament before the end of 28 days.
In terms of incitement, Sections 11-13 of the Terrorism Act 2000 makes it an offense to: a) belong to or profess to belong to a proscribed organization; b) to invite support for a proscribed organization or to arrange a meeting in support of it; c) to wear in public items of clothing or other articles relating to a proscribed organization in such a way as to arouse suspicion of membership in or support of it. Sections 15-17 prohibit a person from raising, possessing or using money, or entering into funding arrangements, for the purposes of terrorism or a terrorist organization. Section 18 prohibits participation of laundering activities tied to terrorist property.
The Implementation
Implementing the abovementioned UN resolutions led to the freezing of 35 suspect bank accounts in the UK, comprising £63 million of funds. All bank accounts associated with the individuals and organizations named in US suspect lists were also frozen. In February 2003, Dr Basheer Musa Mohammed Nafi of London University was indicted for his role in running a racketeering enterprise that supported Palestinian Islamic Jihad since 1984, for conspiracy to kill and maim, conspiracy to provide material support to the group, extortion, and perjury. The following year, it was found that stringent anti-money laundering laws coming into force in February 2004 meant that dealers in high-value goods, such as cars and jewelry, would have to register with Customs and Excise if they conducted transactions involving cash payments of more than £10,000. The law also applied to professional services firms such as accountants, law firms and tax advisers.
In November 2002, British citizen Mr. O’Driscoll was arrested upon bringing back two boxes of Vatan magazine from Belgium, to be used in fundraising for DHKP-C, a Turkish organization proscribed under Section 3(4) of the 2000 Terrorism Act. He was detained overnight and then released, but his property was retained. The defendant applied for judicial review, arguing that the offence created in the Act was incompatible with the European Convention on Human Rights, but the Secretary of State for the Home Department argued the necessity of said restrictions to national security and public safety.
In July 2003, the Saudi-based Al Rajhi Banking and Investment Corporation sued the Wall Street Journal Europe in a libel case after the Journal included the company on a list of those whose bank accounts were being monitored by the Saudi Arabian monetary authority because they “may in the past have had an association with institutions suspected of terrorism.” The evidence provided by The Wall Street Journal to the British court led Al Rajhi to withdraw the case in 2004 (e.g. he lost).
In 2004, another drawn-out libel case regarding terrorist financing was filed by Jameel and Hartwell against Times Newspapers Ltd. Hartwell car tycoon and Saudi “Golden Chain” billionaire Yousef Jameel was alleged to have helped fund training for the September 11 terrorists. Mr Jameel and Hartwell separately sued the publishers for libel, claiming that the headline used suggested that Mr Jameel and his car company were associated with Osama Bin Laden. Hartwell lost on appeal, and Jameel continues to appeal (21).
Only recently, Treasury chief Gordon Brown ordered the Bank of England to freeze all assets belonging to Abu Musab al-Zarqawi’s Tawhid and Jihad group, after it claimed responsibility for the October 10th beheading of British engineer Ken Bigley. Following meetings with the World Bank and the IMF, Brown declared it a criminal offense for any financial institution to hold or facilitate funds held by the group, saying that “we must do all in our power to ensure there is no hiding place for terrorists and no hiding place for those who finance terrorism.” A spokesman said that Brown did not condemn Zarqawi’s group earlier despite its beheading of South Korean translator Kim Sun-il, American businessman Nicholas Berg, two Bulgarian truck drivers and the two American engineers kidnapped alongside Bigley because British “legislation requires a high standard of evidence to be there before the Chancellor can instruct action to be taken” (22). It seems that as long as British citizens are not the victims, the British government is in no hurry to enact the appropriate laws.
The EU
On 8 October 2001, the European Council reaffirmed “the determination of the EU and its Member States to play their full part, in a coordinated manner, in the global coalition against terrorism, under the aegis of the United Nations. The Council also reiterated the Union’s determination to attack the sources which fund terrorism, in close cooperation with the United States.” Within Article V, which governs the EU’s Common Foreign and Security Policy (CFSP), the Council then passed a series of Common Positions regarding terrorist financing.
European Council Regulation 2580/2001 declared that combating the funding of terrorism was a decisive aspect of the fight against terrorism and called upon the Council to “take the necessary measures to combat any form of financing for terrorist activities” (23). On 26 February 2001, pursuant to UNSC Resolution 1333(2000), the European Council adopted Common Position 2001/154/CFSP which provided for the freezing of funds of Osama bin Laden and individuals and entities associated with him. This ban was extended to al-Qaeda, the Taliban and other individuals or entities associated with them in the Council Common Position of 27 May 2002 (24).
On 27 December 2001, Article 1 of Common Position 2001/930/CFSP stipulated that “the wilful provision or collection, by any means, directly or indirectly, of funds by citizens or within the territory of each of the Member States of the European Union 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 shall be criminalized.” Article 2 added that “funds and other financial assets or economic resources of a) persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts; b) entities owned or controlled, directly or indirectly, by such persons; and c) persons and entities acting on behalf of or under 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, shall be frozen.” Article 3 went on to say that funds, financial assets or economic resources or financial or other related services shall not be made available, directly or indirectly, for the benefit of persons committing or supporting terrorist acts, or entities affiliated with such persons. Articles 6 and 7 prohibit Member States for giving safe haven or access to their territories to those who finance, plan, facilitate or commit terrorist acts. Article 8 requires the Member States to establish terrorist financing as a serious criminal offence and Article 9 provides for Member State cooperation in investigating or prosecuting terrorist financing cases.
Articles 2 and 3 of Common Position 2001/931/CFSP, passed that same day, enumerated a terrorist Annex (subject to amendment by the European Commission) and mandated that the European Community order the freezing of funds and other financial assets or economic resources of persons, groups and entities listed in that Annex, and prevent financial resources from being made available to such persons, groups or entities. Council Regulation 2580/2001 outlined specific definitions and measures pertaining to the EU’s fight against terrorism financing.
A major problem that neither the Council of Europe nor the UN, nor even the US, has addressed is how to define “clean money” that is sent legitimately to be used illegally by terrorist organizations (e.g. laws regarding the “soiling” of clean money). The excuse used by many EU countries for not implementing EU resolutions in full stems from the reluctance of many to recognize HAMAS and Hizbollah as terrorist organizations (25).
The EU and the Palestinians
Former PA Interior Minister Mohammad Dahlan confessed to The Guardian August 2004, that all of the funds which foreign countries had donated to the Palestinian Authority, a total of $5 billion, “have gone down the drain, and we don’t know to where.” An independent international study found that between 1993 and 2002, the EU became the largest single contributor of direct budgetary assistance to the Palestinian Authority (PA), contributing over €2 billion itself and a further €2 billion through the individual member states (26). Nigel Roberts of the World Bank notes that total financial aid to the Palestinians constitutes “the highest per capita aid transfer in the history of foreign aid anywhere.” Despite this statement, the World Bank continued to transfer money to the corrupt Palestinian Authority, disregarding its own obligations for transparency and accountability.
The Palestinian Authority, since its inception in 1993, has systematically abused and misused the international aid it has been receiving. A minor example is the 7,000 fictitious names discovered on the PA payroll. Like the fish that begins rotting from its head, the Palestinian authority’s infamous corruption begins with nepotism by Chairman Arafat, whose wife and family are regular beneficiaries of millions of dollars in aid which was designated to the Palestinian people. The same is true of Prime Minister Ahmed Qurei and other members of Arafat’s government and security forces. EU allocations are not fully monitored, as claimed, and the ability of the EU’s anti-fraud office OLAF to safeguard taxpayers’ money is lacking. Meanwhile, the Al-Aksa Martyrs, which the EU has outlawed, remains on the PA payroll. A BBC interview with Fatah leaders in November 2003 revealed that the PA had reimbursed $50,000 of monthly expenses to the Martyrs Brigade. Other paramilitary terror groups such as “Force 17” and “Tanzim,” as well as group leaders such as Marwan Barghouti, likewise draw their salaries and expenses from the Palestinian Authority’s budget. Not surprisingly, significant portions of donated funds never reach their intended civilian recipients. This is why, in the words of a Palestinian human rights activist, “The biggest problem the Palestinians are facing today is the fact that they have a leadership that is continuing to steal their money” (27).
Following border closures at the start of the 2000 intifada, EU funding to the PA increased dramatically; in January 2003 — June 2004, the EU donated $112.79 million, over 26% of total funding bound for the PA. However, the growing economic hardship among Palestinians was a clear indication that much of the aid was diverted for the use of the Palestinian leadership and terrorist organizations. Meanwhile, international aid for crises like the 2004 humanitarian disaster in Sudan is flagging, placing a grater onus on the donors to make sure that the large sums they allocate towards the Palestinian cause are being used effectively.
The EU continues to maintain that the IMF closely monitors use of donated funds, but in the IMF’s own words, it “does not and cannot control downstream spending by the various Palestinian agencies,” ultimately leaving the matter to be decided between the PA and the donors. The IMF further found that what little PA reform did take place in 2004 only began when international donors stopped sending funds indiscriminately. A widely circulated 2003 petition led to the formation of a Working Group of MEPs on Budgetary Assistance to the PA in the European Parliament. MEP went on record as saying that ‘Israel really shouldn’t exist,’ that it ‘should be replaced by Palestine,’ and that as a result ‘Only if the DNA of the suicide bombers will match the DNA of those who received Euros will we accept it as evidence’ (28). Unsurprisingly, the Working Group’s findings the following year marked no “conclusive evidence” of EU funds going to finance terrorists. Similarly, Jaweed Al-Ghussein, who for 12 years was chairman of the Palestine National Fund, the financial arm of the Palestine Liberation Organisation, acknolwedged that Mr. Arafat received monthly checks amounting to £67 million per annum despite the lack of any audit or accounting system to control either donations received or expenditures made by Mr Arafat.
When Theresa Villiers, a London MEP, raised the issue of misused funds before the European Commission, External Relations Commissioner Chris Patten explicitly denied that any EU aid had been misused by Chairman Arafat and the Palestinian Authority (29). But tracing individual euros is practically impossible because money is fungible. Indeed, all foreign aid to the PA is deposited in a single general-purpose bank account. Moreover, the Working Group found but neglected to mention that the same administrators in charge of EU-funded budgets were caught by the IMF in the process of diverting at least $900 million from other Palestinian taxes and revenues. A November 2003 60 Minutes report also found that Chairman Arafat had stashed close to $1 billion in a secret portfolio, accumulated from public funds that were supposed to be used to benefit the Palestinians. Just before his death on November 4, 2004 in Paris, new information regarding much larger amounts of money stolen by Arafat was revealed (30).
Despite these revelations, EU member states continue to fund the PA. The UK alone has contributed more than £190 million for EU funding to the West Bank and Gaza between 1994 and 2003, and a further £12 million via the World Bank. According to British Foreign Secretary Jack Straw, in June 2004 the UK was spending over £21 million on assistance programs in Gaza and the West Bank, with £19 million more going to UNRWA and 7 million to the new World Bank Trust Fund. In addition to the EU, the World Bank, and UNWRA, the US government’s contribution to the Palestinians through USAID since 1993 has amounted to $1.3 billion.
Despite the well-documented and pervasive abuse of international funds, and the Palestinian Authority’s direct involvement in terrorist activities, international aid keeps pouring into the pockets of the PA’s corrupt leadership.
In another demonstration of the EU’s disregard for the War on Terror, Javier Solana and his colleagues, in the October 2004, signed the Syria-EU Association Agreement in Brussels. This Agreement and its trade provisions mean that the EU will be helping to finance Syria’s terror machine despite the fact that Syria remains on US terror list and embargoed (31).
Germany Laws
To prevent incitement to terrorism, the abolition of the religious privilege in the Associations Act resulted in the banning of organizations like the Turkish Islamic group ‘Kalifatsstaat’ and its sister organizations, which campaigned against democracy and party pluralism, and disseminated anti-Semitic and anti-Zionist slogans. More than 200 bank accounts of individuals and entities associated with al-Qaeda and the Taliban were also frozen under article 3 of Regulation (EC) No 337/2000 (adopted by the European Council on Feb 14, 2000), article 2 of Regulation (EC) No 467/2001 (32) and article 2 of Regulation (EC) No 881/2002 (33), and under sections 2 to 7 of the German Foreign Trade and Payments Act (Auenwirtschaftsgesetz), implementing Resolutions 1267, 1333, 1373 and 1390 of the Security Council. Germany likewise signed the UN Convention for the Suppression of the Financing of Terrorism on July 20, 2002. Germany also has fully incorporated the FATF Forty Recommendations for combating money laundering and its Eight Special Recommendations regarding the financing of terrorism, including questionable actions carried out via the Internet (34).
The financing of terrorism falls under Section 129a of the German Criminal Code (35). Moreover, under the August 2002 Law for the Improvement of the Fight Against Money Laundering and the Fight Against the Financing of Terrorism, an independent unit responsible for the surveillance of suspicious financial streams was established within the Federal Office of Criminal Investigation. This law was prompted in part by the finding that the September 11 terrorists had moved money through German financial institutions, as well as by the EU’s second money laundering directive (36).
Section 8, paragraphs 5 to 8 of the Federal Constitution Protection Act allows authorities, under certain conditions, to obtain information from credit institutes, financial service institutions, finance companies, postal service providers, aviation companies, and companies providing telecommunications services and teleservices on bank accounts, account-holders and other authorized persons, monetary transactions and investments.
The Fourth Financial Market Promotion Act pursues the objectives of closing gaps in the defenses against money laundering, facilitating the tracking down of illegal money derived from criminal activity, and fighting the financing the terrorism. The powers of the Federal Agency for Financial Services to identify money laundering and illegal banking practices and transactions used to finance the logistics of terrorism have been enhanced. Section 25a, paragraph 1(4) of the Banking Act also stipulates that financial institutions are obliged under the “know your customer principle” to create adequate internal security systems for fighting money laundering and fraudulent activities (37).
Implementation
After September 11, the German government responded quickly to freeze over 30 accounts of entities associated with terrorists, but the bulk of these assets were afterwards released, so that at the end of 2003, only 13 accounts containing 3532 euros remained frozen (38). Later, the efforts of German authorities led to a 2002 seizure of $296,000 which had been collected by a Hamas front organization (39). On May 25, 2004, the German Embassy in Washington D.C. brought together 100 participants for a bilateral conference titled “Money Laundering and Terrorist Financing: What Has Been Achieved in Countering Abuse of the Financial System? What Needs to be Done” (40)? Altogether, Germany is conducting a total of 181 investigations against suspected participants in Islamist terrorism, of which 51 cases fall under section 129a (Formation of Terrorist Organizations) of the Criminal Code (41).
The single, central, federal financial intelligence unit (FIU) established in 2002 within the Bundeskriminalamt (National Police Office) functions as an administrative unit in charge of financial market supervision, customs, and legal oversight. It is responsible for developing money laundering cases before they go to prosecutors for formal investigation, and it also exchanges information with its counterparts in other countries. German federalism has meant that actual enforcement has been carried out by individual states’ customs/police/financial investigations unit (“GFG”), which works closely with the federal FIU.
However, Germany’s strict data privacy laws have made it difficult for authorities to monitor and take action against financial accounts and transfers used by terrorist networks (42).
France Laws
Laws to prevent terrorism were passed in 2001 and 2003. Their focus was to suppress weapons trading, drug trafficking and the use of new technologies, seeking prevention through curbing the flow of weapons and financial support. Like Germany, France is a party to the Convention on the Suppression of the Financing of Terrorism, the most recent addition to French terrorism law on 10 April 2002. However, French law does not explicitly stipulate a penalty for failure to report suspicious activities. Moreover, neither French nor German law explicitly defines the term “terrorism.”
Article 421-1 of the Penal Code (43) stipulates that insider trading and money-laundering constitute an offence if a person by any means, directly or indirectly, unlawfully or willfully, provides or collects funds with the intention that they should be used or in the knowledge that they are to be used to carry out acts of terrorism. Article L-152-1 of the Monetary and Financial Code stipulates that all persons who transfer funds, securities or financial instruments worth 7,600 Euros or more into or out of the country without going through a credit institution or service organization, must file a declaration with customs. Failure to comply can result in confiscation of the object in question. Article L-561-1 of the Monetary and Financial Code requires the reporting of operations which are known to proceed from drug trafficking or the activities of criminal organizations, or suspicious transactions that might be linked to terrorist activities (44).
Implementation
In October 2002, French newspapers and anti-terrorism investigators faulted Britain for failing to extradite an Algerian man accused of financing the Paris metro bombings in 1995. Two other Algerian men went on trial in Paris, accused of an Islamic extremist terror campaign which killed eight people and injured more than 200. The court decided to postpone the trial of Rachid Ramda, 33, who has been in prison in Britain since shortly after the attack while the Home Office and courts considered requests from Paris for his extradition. In 1996, a British court originally ruled that he should be sent to France but the Government failed to implement the order. The Home Secretary, David Blunkett, finally decided that Mr. Ramda should be extradited in October 2001, but his decision was overturned by the High Court, which ruled that Mr Ramda could not be guaranteed a fair trial in France.
In June 2003, French magistrates put 17 members of the People’s Mojahedeen of Iran under formal investigation for aiding terrorism, “criminal association in relation with a terrorist enterprise” and “financing of a terrorist enterprise.” Earlier 1,300 agents raided 13 addresses in the Paris area, seizing computers, files and nine million dollars in cash. But almost all of the 159 people detained were later released.
The French government’s behavior regarding the war on terrorism can best be described as hypocritical: although it acknowledges most terrorist groups, it maintains that both HAMAS and Hizbollah are political movements, and continues to facilitate the transfer of funds to these organizations. It also supports the Syrian government, despite the US embargo on Syria. And finally, its involvement with the financing of Saddam Hussein’s regime has been well-documented in the Duelfer Report (45).
Italy Laws
Italy saw the post-9/11 inclusion of a new paragraph in Article 270(b) of the Criminal Code defining international terrorism and rendering mandatory the confiscation of goods used in this context. Law 135 of Mar 29, 2001 provided for the reform and consolidation of tourism laws in Gazzetta ufficiale on April 20, 2001 (46). Law number 431 of December 14, 2001 adopted the UN Security Council and EU regulations on international terrorism financing (47). Other organizations such as the Military Police Unit at the Office of the Prime Minister and the Committee on Security and Public Order (48) chaired by the Minister of Home Affairs have also stepped up their activities. As far as international cooperation is concerned, Italy has ratified the twelve United Nations Conventions to combat terrorism (49).
Italy is actively contributing to the implementation of the European Union Council Plan of Action which adopted the framework decisions on combating terrorism, the European Arrest Warrant and the establishment of joint investigative teams. The Government has approved the Bill ratifying the “Convention on Judicial Assistance in Criminal Matters”, and has also issued measures to amend the Code of Criminal Procedure accordingly. It has also taken steps to encourage the full use of the innovative instrument of Community “lists” for the purpose of freezing the assets of individuals and groups engaged in terrorist acts which were drawn up at the end of 2001, and are regularly expanded and updated.
Implementation
In March 2004, Italy submitted ten al-Qaeda loyalists to be listed as terrorists by the United Nations, and the US Treasury Department confirmed their terrorist designation. Headed by Specially Designated Global Terrorist Djamel Lounici, these ten men used their relationship with the Armed Islamic Group (GIA) to provide financial and material support for terrorist activities in Algeria and abroad, and assisted in illegal immigration to Italy. All ten individuals were convicted by the Tribunale di Napoli (50). In June 2004, the US Treasury Department identified six more members of an al-Qaeda cell operating in Italy’s Lombardi region. Mohamed Ben Mohamed Abdelhedi, Kamel Darraji, Mohamed El Mahfoudi, Imed Ben Bechir Jammali, Habib Ben Ahmed Loubiri, and Chabaane Ben Mohamed Trabelsi were part of a cell that engaged in the trafficking of arms and chemical materials, and has supplied its members with false travel documents. The cell was associated with the Salafist Group for Preaching and Combat (GSPC), which is on the United Nations’ list of terrorist entities linked to bin Laden, and thus triggered international obligations requiring all U.N. member countries to freeze the cell’s assets (51).
Spain Laws
Article 3 of Spain’s law No. 19/1993 on the prevention of money laundering imposes obligations on financial entities and other persons involved in the transfer of capital (including charitable organizations), stipulating that they must refrain from any transaction in which the issuer or recipient of funds might be a person linked to activities involving armed groups or terrorist organizations. Article 575 of the Penal Code, determining the sanctions for crimes against property, defines “crimes of terrorism” to include attempts to steal property with the goal of obtaining funds to aid terrorist groups. Article 301 features regulations against money laundering and elevates sanctions for crimes against property in those cases when they are deemed crimes of terrorism.
In a court case, the initiation of criminal proceedings entails the precautionary seizure of all money or other assets used to commit the terror act, following Articles 13, 326, 334 and 589 of the Criminal Prosecution Act. Law No. 40/1979 on Exchange Controls and Law No. 41/1999 on Payment Systems provide for the freezing of funds and assets in third-party countries with respect to persons involved in terrorist acts.
Since September 11, 2001, the draft legislation on Prevention and Blockade of the Financing of Terrorism allows the government to block financial accounts and operations when it considers that this might prevent terrorist activities. Whereas before only judges could block accounts meant for terrorist acts as a preventative or repressive measure, the government now also has that power, though Administration decisions remain under the Audiencia National’s judicial control and the maximum term of blockade is six months.
As for incitement, Article 9 of the New Party Act, Organic Law 6/2002 of June 27, 2002 stipulates that a political party will be declared illegal if it systematically harms fundamental rights and freedoms by promoting, justifying or exonerating attacks against the right to life and the integrity of the individual, if it foments, facilitates or legitimizes violence, or complements and supports the actions of terrorist organizations.”
Implementation
In March 2003, Spanish national police in Valencia arrested four Spaniards and one Pakistani accused of belonging to a financial network involved in laundering money bound for al-Qaeda operatives. The Spanish Ministry of Interior also linked these suspects to a terrorist attack that took place in April 2002 in Yerba, Tunisia, in which 19 people were killed. On 12 March 2003, a Spanish judge ordered two of these suspects remanded to prison pending further investigation of the case, while the other three were released. According to Spanish authorities, the March 2004 Madrid bombing was funded by drug trafficking (52). In 2003, Spain chaired with the United States the Financial Action Task Force (FATF) Terrorism Finance Working Group. It is also pressing to become a standing member of the G-8’s Counterterrorism Action Group on the basis of its high level of technical counterterrorism assistance to third countries. Although Spain had been actively pursuing al-Qaeda cells and arresting members of that and related organizations, no substantial amounts of money were frozen.
Russia Laws
Russia has extensive federal legislation targeting acts of terrorism and other extremist activities, and providing countermeasures against terrorist behavior (53). Russia’s Money Laundering Act (MLA) of 1 February 2002 imposes disclosure obligations on banks and other non-banking financial institutions, and introduces a mandatory suspicious transaction reporting regime. Government Decree No. 211 of 2 April 2002 establishes the Financial Monitoring Committee, and Government Decree No. 245 of 17 April 2002 specifies reporting procedures for designated financial institutions.
The MLA requires banks and other financial institutions to check the identity of each participant in a transaction and each beneficial owner of the funds involved, and to report any suspicious transaction to the Financial Monitoring Committee, which reviews such reports and refers them to the appropriate law enforcement body if it finds sufficient evidence for money laundering. The MLA also empowers the authorized bodies to monitor, freeze or seize financial resources when ordered within the framework of mutual international judicial assistance.
In November 2002 the MLA was revised and converted in the Financing Terrorism Act (FTA). This improvement created new banking prohibitions, facilitating the monitoring of accounts and the freezing of administrative accounts of “certified” terrorist organizations. The requirement to report now also includes any financial operation to or from a country that is non-cooperative in combating terror financing, or when one of the parties is a holder of an account in a bank registered in such a country. Article 6.2 of the FTA also introduces a special control regime for financial operations by any person or organization certified to be involved in extremist activity, and of any legal entity which is directly or indirectly owned or controlled by such a person or organization. Articles 115 and 116 of the Penal Code allow seizure of funds when criminal proceedings have been opened.
Articles 174 and 174.1 of the Criminal Code stipulate anywhere from a 4-year sentence with fine to a ten-year sentence with confiscation for money laundering. A 2002 amendment to the Criminal Code makes terror financing a separate criminal offense under Article 205.1, punishable with four to eight years of imprisonment (fifteen years in case of a repeat offence or offence using an official position). Article 205.1 CC and Article 1 of the Extremism Bill broadly define financing as providing funds and other financial support for the commission of a terrorist act or a terrorist organization, irrespective of intention.
Implementation
Since banking and financial institutions are not properly regulated in Russia, it was probably not too difficult for Chechen leader Shamil Basayev to get the 8,000 euros he claims to have spent organizing the Beslan school massacre of August 2004 (54). Russian authorities have said that the massacre was financed in part by a Saudi charity and planned by Saudi nationals who joined the Chechen revolt a decade ago (55).
Latin America
The abovementioned UN Convention and resolutions likewise apply in the Latin-American context, but area-specific organizations such as the Organization of American States (OAS) also bring their own antiterrorism provisions to the table. Founded in 1948, the OAS includes all 35 independent countries of the Americas, with Cuba alone denied participation since 1962. OAS features a specialized committee against terrorism, called the Comite Interamericano contra el terrorismo (CICTE), which was created following two conferences, Lima in 1996 and Mar del Plata in 1998.
CICTE “has taken a lead in developing concrete strategies for confronting the threat of terrorism. In its annual meetings, it has recommended that countries enact a range of measures to strengthen border security, tighten customs controls, and improve the quality of identification and travel documents. Other recommendations included financial controls to prevent money laundering and the financing of terrorist activities.”
Partially in response to the September 11 attacks, OAS created The Inter-American Convention against Terrorism. The treaty, produced after the September 11 attacks, “seeks to prevent the financing of terrorist activities, strengthen border controls and increase cooperation among law enforcement authorities in different countries, among other measures. It calls terrorism “a serious threat to democratic values and to international peace and security.” It entered into force on July 10, 2003, and has been ratified by eight countries: Antigua and Barbuda, Canada, El Salvador, Mexico, Nicaragua, Panama, Peru and Venezuela.
Article 4 of the Treaty outlines measures intended to prevent, combat, and eradicate the financing of terrorism. Section 1 calls on state parties to institute a legal and regulatory regime to prevent, combat, and eradicate the financing of terrorism which includes “a comprehensive domestic regulatory and supervisory regime for banks, other financial institutions, and other entities deemed particularly susceptible to being used for the financing of terrorist activities,” which shall emphasize requirements for customer identification, record-keeping, and the reporting of suspicious or unusual transactions. The regime must also include “measures to detect and monitor movements across borders of cash, bearer negotiable instruments, and other appropriate movements of value,” subject to safeguards that do not impede the movement of legitimate capital. Finally, there is a provision for “measures to ensure that the competent authorities…have the ability to cooperate and exchange information at the national and international levels within the conditions prescribed under its domestic law. To that end, each state party shall establish and maintain a financial intelligence unit to serve as a national center for the collection, analysis, and dissemination of pertinent money laundering and terrorist financing information” and inform the OAS Secretary General of these designated units. Section 2 of Article 4 mandates that state parties follow the recommendations “developed by specialized international and regional entities, in particular the Financial Action Task Force and, as appropriate, the Inter-American Drug Abuse Control Commission, the Caribbean Financial Action Task Force, and the South American Financial Action Task Force.”
Article 5 covers the seizure and confiscation of terrorist assets. It mandates that each state party take necessary measures to identify, freeze or confiscate for the purposes of possible forfeiture “any funds or other assets constituting the proceeds of, used to facilitate, or used or intended to finance, the commission of any” terrorist offenses, both within and outside the jurisdiction of the state party. Article 6 calls on each state party to ensure that its domestic money laundering legislation also includes those offenses established in the Convention.
Meanwhile, the IMF and World Bank collaborated to introduce Financial Sector Assessment Programs (FSAP) intended to facilitate efforts to promote the soundness of financial systems in member countries. As part of the report, FSAP assess the country’s framework to combat money laundering and terrorism. Available reports for countries investigated can be found at http://www.imf.org/external/np/fsap/fsap.asp. The IMF and the World Bank prepare Reports on the Observance of Standards and Codes (ROSCs), which summarize the extent to which countries observe certain internationally recognized standards and codes, and are published at the request of the member country. These may be found at http://www.imf.org/external/np/rosc/rosc.asp.
Back in 1990, the OECD’s Financial Action Task Force (FATF) on Money Laundering established 40 proposals against money laundering (56). These were revised in 1996 and in 2003. After September 11, FATF amplified its 40 recommendations with eight specific recommendations against terrorist financing. These commit member states to 1) take immediate steps to ratify and implement the relevant United Nations instruments; 2) criminalize the financing of terrorism, terrorist acts and terrorist organizations; 3) freeze and confiscate terrorist assets; 4) report suspicious transactions linked to terrorism; 5) provide the widest possible range of assistance to other countries’ law enforcement and regulatory authorities for terrorist financing investigations; 6) impose anti-money laundering requirements on alternative remittance systems; 7) strengthen customer identification measures in international and domestic wire transfers; and 8) ensure that entities, in particular non-profit organizations, cannot be misused to finance terrorism. Of the Latin American states, however, only Argentina, Brazil, and Mexico belong to FATF, and until recently Guatemala was actually listed as a non-cooperative country.
The following section covers anti- terror financing laws Argentina, Chile, Colombia, Mexico, Panama, Paraguay, Peru, and Uruguay. These Latin American countries have been dealing with terrorism for years, and most already have counter-terrorism legislation in their Penal Code. In addition, several countries have statues to prevent and stop money laundering activities. Finally, only a few of the countries investigated have laws that deal specifically with the financing of terrorist activities. Nevertheless, it should be noted that all countries investigated are part of the international efforts to stop terrorism and the financing of terrorist activities.
Tri-Border Region: Argentina, Brazil, Paraguay
The area where the 3 countries meet has been described as the regional center for the funding of Hizballah and Hamas. This lawless area is also used for arms trafficking, money laundering, and smuggling. There have also been unconfirmed reports of an Al-Qaeda presence in the area (57). To address the problem, the three countries and the US recently established “Grupo 3+1,” which serves as a regional framework for discussion and problem solving. On December 3, 2003, the delegations of Argentina, Brazil, Paraguay and the United States met in the city of Asuncion in the framework of the 3+1 Group on Tri-Border Area Security to discuss and analyze preventive actions against terrorism. The discussions covered terrorist training, the strengthening of financial institutions, money-laundering legislation, the financing of terrorism, drug and arms trafficking, border controls, as well as cooperation on the exchange of information and law enforcement on this matter (58).
Argentina
Argentina does not have legislation to deal specifically with the crime of financing of terrorism, and its regulations regarding support of terrorism and criminal association insufficiently cover the area of terrorist financing (59). According to the State Department’s “Patterns of Global Terrorism, 2003” report, Argentina lacks new anti-terrorism legislation despite its oft-stated commitment to the fight against terrorism (60).
Argentina’s Article 210b covers crimes by unlawful association, mandating a prison term of 5-20 years to individuals that take part in, cooperate, or help to form and maintain an illicit group that endangers the National Constitution. It is essentially an anti-conspiracy law which goes into effect if at least two of the following conditions are met: a) the group is composed of ten or more members; b) it is organized in a military manner; c) it is composed of cells; d) it has military weapons or powerful offensive explosives; e) it operates in more than one political jurisdiction; f) it is composed by one or more military or security officials; g) it has connections with similar domestic or foreign organizations; or h) it receives aid or direction from public officials. Its anti-money laundering legislation includes Drug Law no. 23.737 (1989) and its Bill on Money Laundering, Law 25.246 (2000), which creates the Financial Information Unit (FIU).
Argentina has yet to bring to justice former President Carlos Menem and his associates for facilitating Hizbollah’s activities and bombings of the Buenos Aires Jewish Center and the Jewish Embassy in 1992 and 1994, respectively.
Brazil
Brazil is a member of the Financial Action Task Force and has extensive legislation criminalizing terrorist offences (61). The main legal texts regarding terrorism are the Penal Code, The Code of Criminal Procedure, the National Security Act, the Heinous Crimes Act, the Act for the Oversight of the Export of Services and Items for Military Use, Dual-Use and Use in the Nuclear, Chemical or Biological Fields, the Money Laundering Act, and the Act establishing the Brazilian Intelligence System (SISBIN).
Law No. 9.613 of March 3, 1998 first defined and criminalized money laundering, laid out the principal preventative measures and established the Financial Intelligence Unit (62). This unit, known as the Financial Activities Control Council (COAF), oversees financial and non-financial entities that fall outside of the jurisdiction of the major supervisory authorities (63).
Brazilian law prohibits money-laundering, or converting the proceeds of a crime into licit assets, and punishes it with three to ten years in prison, along with confiscation of the funds involve (64). Knowingly using the proceeds of crime in a group set up to commit terrorism is punishable by 30 years in prison. Supporting a terrorist organization or committing criminal acts to fund such a group also constitutes the crime of financing terrorism. In Brazil, narcotics trafficking is considered to be the single largest generator of criminal proceeds, followed by firearms, contraband and illegal gambling. An individual found guilty of money laundering automatically surrenders any assets generated by the predicate offence to the government; this includes proceeds obtained from or for terrorist groups as well as the funds of individual terrorists.
The secrecy provisions of Brazilian banking law once posed a significant obstacle to the system’s effectiveness, as they prevented the COAF from accessing some portions of reports or from providing them to a foreign jurisdiction. However, the government passed a complimentary act for the lifting of bank secrecy rules in the course of criminal investigations, especially ones having to do with terrorism. The Code of Criminal Procedure and international agreements govern instances in which seizure of assets requires two countries to recognize the crime. Brazil participates in the MERCOSUR working group on terrorism. It is party to the Convention for the Suppression of the Financing of Terrorism and the United Nations Security Council resolution 1373 (2001). However, despite its sound foundation, the relatively-new Brazilian anti-money laundering system has not yet resulted in any successful prosecutions or convictions, and if Brazil’s past implementation of laws is any guide, it is unlikely that any headway in fighting terror financing is to be made.
Paraguay
Paraguay recognizes that it lacks effective counter-terrorism legislation, and acknowledges the possible laundering of funds used towards terrorist causes. It has asked other governments for assistance as the shortcomings of its own national legal system leave it incapable of prosecuting suspected terrorists (65). Despite these shortcomings and a low rating on Transparency International’s Corruption Perceptions Index 2003, it has sent to trial Hezbollah fundraisers. Two of these — Sobhi Fayad and Ali Nizar Dahroug — were sentenced, albeit under laws that covered crimes of tax evasion rather than terrorist financing (66). Fund collector Assad Ahmad Barakat, who was accused of terrorist financing by the US Department of Treasury, was likewise extradited from Brazil to Paraguay in 2003 for tax evasion (67).
Uruguay
Uruguay is party to eight of the 12 international conventions and protocols relating to terrorism. “Although Uruguay does not have the financial or military resources to play a direct role in the war on terrorism, it provides troops to international peacekeeping missions in Africa and the Middle East. In 2002, Uruguayan law-enforcement authorities assisted with international investigations to monitor the movements and activities of suspected terrorists, and the Parliament is currently drafting new terrorism laws that will further facilitate domestic and international counterterrorism efforts. The Uruguayan Government readily cooperates with US Government requests to investigate individuals or financial transactions linked to terrorism.”
Cooperation has not been flawless, however. Egypt has asked Uruguay to extradite suspected al-Gama’a al-Islamiyya (Islamic Group) terrorist al-Said Hassan Mokhles, wanted in connection with the 1997 attack on tourists in Luxor, Egypt. He has been held in Uruguay since early 1999 on charges of document fraud, but Uruguay and Egypt have been unable to agree on the terms for extradition, in part because Egypt has not guaranteed in writing that Mokhles will not be subject to the death penalty” (68).
Colombia
While Colombia has no specific laws regarding terrorism financing, some of the laws in the area of money laundering are applicable (69). New measures in the Colombia Penal Code raised the rank of a crime of willfully providing funds for terrorist acts or to engage in terrorist activities. Although Colombian legislation contains no specific procedure for ‘freezing’ funds or financial assets of persons or entities suspected of supporting terrorist activities, any assets linked to criminal activities, including terrorism, are subject to confiscation by order of the Prosecutor-General in the context of a criminal procedure, as provided in article 67 of the new Code of Criminal Procedure (70).
Article 343 of the Penal Code defines terrorism and establishes a penalty of 10-15 years plus fine. Article 345 stipulates a penalty of 6-12 years for those who administer money or goods related to terrorist activities (71). Furthermore, the Penal Code’s chapter on money laundering mandates the reporting of any suspicious transaction. Accordingly, “any employee or director of a financial institution or savings and loan cooperative who, with a view to concealing or disguising the illicit origin of the money, fails to comply with the control mechanisms established by the legal system with respect to cash transactions, shall be liable to a term of imprisonment.” Both Decree No. 663 of the Financial Institutions Statute and Act No. 190 of the Anti-Corruption Statute require the reporting of irregularities. Moreover, Article 53 of the Organic Statute of the Financial System (EOSF) expressly prohibits the operation of informal banks in Colombian territory. The Superintendent of Banks is likewise charged with ensuring that no one undertakes informal or irregular banking activity in Colombia, and is empowered to conduct inspection visits to suspect locations as well as to adopt necessary preventive measures.
The Financial Analysis Unit of the Ministry of Finance concludes agreements with financial tracking bodies in other countries to exchange information used in carrying out initial checks, with particular reference to recent international measures to combat Colombian terrorist groups (72).
Chile
There are no specific laws covering the financing of terror activities in Chile, although terrorist acts are defined in the Penal Code and their prosecution is provided for (73). In 2003, Chile approved a Financial Intelligence Unit “with the goal of preventing the use of the financial system and economic sectors for criminal acts as named by the law” but subsequent rulings of the Constitutional Court eliminated the FIU’s sanctioning powers, limited its discretion in requesting date on suspicious transaction records and denied its access to information protected by bank secrecy, thus hindering investigations and the disclosure of potential offences. Likewise, securities firms, insurance companies and foreign exchange retail operators also fall short in monitoring compliance.
Also noteworthy is Iquique, a port city and free trade zone in Chile, which the Bush Administration has designated as a terrorist hot spot. There have been ties between Iquique, Hizbollah and the Tri-border region, and investigators are focusing on individuals of Pakistani origin running businesses in Iquique that could have links with Islamic groups operating on the Pakistani-Afghan border.
Mexico
The financing of terrorism is not characterized as an individual offence under Mexico penal law, but various penal characterizations and provisions may be applied in order to prosecute and punish specific types of conduct considered to constitute the financing of terrorist acts (74). Mexico’s geographic situation and extensive financial sector means that drug smuggling, financial crime, organized crime and trafficking in arms and human beings all contribute to the accumulation of illegal assets. The anti-money laundering law of 1990 was reinforced by the government in 1997, and progressive improvements have eliminated remaining loopholes, defined requirements and generally added to the system’s effectiveness. The Mexican Bankers Association has put in place a comprehensive training program, and the National Banking and Securities Commission (CNBV) has created examiners manuals that cover money laundering, in addition to the CNBC’s annual on-site supervision of institutional money-laundering controls and policies.
Article 400b of the Penal Code broadly covers money laundering offences and gives a court the discretion to reverse burden of proof regarding the origin of the property given sufficient proof by the prosecution. Few convictions have been attained under this law, however, and many cases remain stuck in court or under investigation. Mexico is about to complete the procedures to become a party to the International Convention for the Suppression of the Financing of Terrorism. It is also studying the legislative reforms that will be required in order to make the financing of terrorism an autonomous offence. Mexico is also working actively with global initiatives, especially with the Financial Action Task Force on Money-Laundering (FATF), of which it is a full member, to implement international policies against the financing of terrorist organizations.
Mexico has already met or exceeded most of the FATF minimum requirements for preventive measures in the financial sector. The key operational bodies in the anti-money laundering system are the Attached General Directorate for Transaction Investigations (DGAIO) of the Secretariat of Finance and Public Credit and the money laundering unit of the General Attorney’s Office (PGR). These well-resourced units have been very active in introducing and promoting money laundering legislation, and serve a central coordination and cooperation function. However, bank secrecy laws impede the direct and timely transmission of reports to the DGAIO and of criminal investigation requests to financial institutions. The elimination of burdensome intermediary steps would result in reports being transmitted more quickly.
To date, there have been no reports on the freezing of terrorist assets in Mexico.
Panama
Panama, the center for all sorts of money-laundering in Central America, is a good example of how lip service can be paid to the war on terrorism by passing all the appropriate laws. It not only has a special law, which Law 50 added with a special chapter on terrorism (VI) to Title VII of the Second Book of the Penal Code, it also has laws to prohibit terror financing. Chapter VI defines terrorism as "belonging to an unlawful organization whose goal it is to alter constitutional order and public safety", and punishes it with 15-20 years imprisonment. Financial Intelligence Unit (FIU), established by Presidential Directive No. 163 in 2000. It has also signed and ratified most international conventions and treaties on money laundering, including the 40 + 8 FATF recommendations. It has also passed two extensive pieces of domestic legislation, Law #48 (2003) and article 3 of Law 50 (2003), to improve oversight of financial institutions and boost control of financial transactions and operations. Article 264-B goes on to say that those who intentionally finance, fund, hide or transfer money or goods to be used in any of the terrorist acts mentioned before likewise receive 15-20 years in jail.
Peru
Peru’s long struggle with the Sendero Luminoso has provided for anti-terrorism legislation. Decree Law No. 25475 of May 1992 (75) punishes the crime of terrorism and Article 2 defines a terrorist as "anyone who carries out acts against the life, physical integrity, health, freedom or security of individuals or against property…or affects the international relations or safety or society or the State." Article 4 of the Decree criminalizes collaboration with terrorists, including securing, collecting or supplying any goods or means or aid to further the goals of a terrorist group. Under this Decree Law, providing economic assistance "for the purpose of financing the activities of terrorist elements or groups shall be punished by a term of imprisonment of not less than 20 years." Laundering of funds from narco-terrorism is also penalized under Article 296-B of the Peruvian Penal Code by life imprisonment. Since 2001, "new laws have been enacted to permit more effective investigation into cases of corruption." These laws may also be used to investigate terrorist actions. Procedural Act No. 27379 provides for special restrictions on individual rights during preliminary investigations. This includes the freezing of assets and the lifting of bank secrecy and tax confidentiality. Supreme Decree No. 084-2001-RE of 2001 ratifies the International Convention for the Suppression of the Financing of Terrorism. Like many other Latin American states, Peru has also created a Financial Intelligence Unit under Law No. 27.693 (2002).
Conclusion
Despite the laws on the books of European and Latin American states, cases pertaining to terror financing are rarely brought to court. To Kantor, this trend suggests that "absent a dramatically different approach, efforts at interdicting flows of terror money could prove even less successful than efforts at interdicting flows of drug money. The sums involved in terrorist operations and terrorist capital expenditures are far smaller than the many billions of dollars spent each year as part of the illegal drug trade" (76). Thus, to make the war on terror count, signatories to the abovementioned national and international legislation must aggressively check all terror-sponsoring regimes, including Saudi Arabia, Syria, Iran and the Palestinian Authority, the same way as the US did the Taliban in Afghanistan.
For its part, the US should try to persuade international financial organizations to withhold financial aid from terror-supporting countries, and to sanction such states as Saudi Arabia, Iran, Indonesia, Sudan, Libya and North Korea. For too long, America’s non-confrontational approach towards "friendly" regimes such as the House of Saud has undermined the safety of its citizens in return for political expediency (77).
Yet even when America is proactive, European states impede transatlantic cooperation on combating terror financing. They argue that new anti-money laundering laws aimed at broadening the US government’s power over the assets of foreign individuals, businesses and financial institutions fall outside the provisions of mutual legal assistance treaties signed between Washington and most European countries. But as Schmahl has argued, "in times of globalization and transnational operation, terrorism can no longer be dealt with solely by means of isolated action but has to be addressed in addition through the cooperation of all States even in criminal prosecution matters." Across Justice and Home Affairs (aka. the "third pillar"), if not across the Atlantic, the new terrorist threat has been a strong impetus for legal cooperation and integration (78). In addition, unilateral U.S. action is bound to be ineffective if alternative financial centers are able to operate outside the reach of U.S. controls (79).
Heraldo Muñoz’s UN Security Council Analytical Support and Sanctions Monitoring Team recently found that changing Al-Qaeda terrorist methodology called for new anti-financing measures. Its August 2004 report stated that "while the sanctions against the financing of terrorism have had some effect, and some millions of dollars in assets have been frozen, there is scope to update them based on how al-Qaeda now raises and transfers its money." While national and international action is said to have decreased Al-Qaeda’s funding, its need for money may have also decreased. The number of people in camps under its control is now much smaller, and it no longer has to pay $10-20 million annually to its Taliban hosts. But Al-Qaeda’s growing popularity has probably increased the flow of money to the organization and its surrogates, thus its need to move new funds around. This growing popularity means that more new sources and new methods are utilized to channel the money, and therefore new regulations are needed to better trace the movement of the funds. Measures to curb the abuse of hawala, cash couriers, and Islamic charities could further slow the movement of terrorist moneys. Reports submitted by UN Member States under resolution 1455 show that a legal basis for freezing Al-Qaeda and related terrorist assets now exists in all but three Member States.
However, the UN Security Council Monitoring Team found the reporting culture of some Member States partially to blame for the poor, nonspecific quality of their reports, and more importantly for their failure to act. States often found it easier to report what had been done politically rather than at the operational level. This prompted the Monitoring Team to suggest a half-baked solution—voluntary visits to those states most at risk from Al-Qaeda infiltration. But since these visits have to be agreed upon by the states in question, the element of surprise and discovery is greatly diminished.
While legislation establishing a legal framework for terror financing countermeasures is a basic prerequisite, it accomplishes little without proper enforcement. Instead, a pervasive lack of cooperation, objectivity and political will allows those who finance terrorism to remain beyond the pale of the law.
*
Special thanks to Alex Angert, and to Edith Tsouri for the help with the research.
Notes
1. "Grassley and Baucus Call for ‘Fundamental Reform’ Within War on Terror Financing." US Senate Committee of Finance. March 29, 2004. www.senate.gov/~finance/press/Gpress/2004/prg032904a.pdf, 1.
2. Stuart A. Levey. Under Secretary, Terrorism and Financial Intelligence U.S. Department of the Treasury. Testimony before the Senate Committee on Banking, and Urban Affairs. September 29, 2004. http://www.treasury.gov/press/releases/js1965.htm
3. Ibid.
4. "Three Years of Progress in the War on Terror." The White House. October 22, 2004. http://www.whitehouse.gov/news/releases/2004/09/20040911.html
5. Kantor, Mark. "Effective Enforcement of International Obligations to Suppress the Financing of Terror." The American Society of International Law. Task Force on Terrorism. September 2002. http://www.asil.org/taskforce/kantor.pdf, p. 2.
6. Schmahl, Stefanie. ‘Specific Methods of Prosecuting Terrorists in National Law.’ Presented at the Max Planck Society Conference entitled "Terrorism as a Challenge for National and International Law." http://edoc.mpil.de/conference-on-terrorism/present/schmahl.pdf, p. 12-3.
7. S/RES/1526 (2004). http://www.treas.gov/offices/enforcement/ofac/legal/unscrs/1526.pdf
8. Schmahl, p. 3.
9. Schmahl, p. 14.
10. S/RES/1373 (2001).
11. Kantor, p. 6.
12. The projects can be found at http://www.unodc.org/unodc/en/terrorism.html
13. Schmahl, p. 16.
14. "Anti-Terrorist Finance Group Reauthorized for Eight Years." Embassy of Japan. May 14, 2004. http://japan.usembassy.gov/e/p/tp-20040517-03.html
15. Matthew Levitt. "Terror on the UN Payroll?" Peacewatch. No. 475. October 13, 2004.
16. "Israel Arrests 13 UN Employees." UPI. October 5, 2004.
17. Michael Freund. "Canada Refuses to Cut UNRWA Funding." Arutz-7 Israel National News. October 25, 2004. http://www.israelnationalnews.com/news.php3?id=70964
18. Matthew Levitt. "Terror on the UN Payroll?" Peacewatch. No. 475. October 13, 2004.
19. The Terrorism Act (2000): http://www.hmso.gov.uk/acts/acts2000/20000011.htm
20. The Anti-Terrorism, Crime and Security Act (2001): http://www.legislation.hmso.gov.uk/acts/acts2001/20010024.htm
21. The Supreme Court of the Judicature, Court of Appeal (Civil Division), On Appeal from the High Court of Justice, Queen’s Bench Division (Mr. Justice Gray), HQ03X01813 and HQ03X01775. Citation Number [2004] EWCA (Civ) 983. May 11, 2004. Jameel and Another vs. Times Newspapers Limited. http://www.courtservice.gov.uk/judgmentsfiles/j2687/jameel-v-times.htm
22. Michael Mcdonough. "England Orders Terror Group Assets Frozen." Lancaster Online. October 14, 2004. http://www.lancasteronline.com/pages/news/ap/4/britain_terror_assets
23. European Council Regulation 2580/2001. December 27, 2001. http://europa.eu.int/eur-lex/en/archive/2001/l_34420011228en.html
24. A full listing of EU anti-terror legislation.
25. HAMAS relies for its funding on Saudi Arabia.
26. "Managing European Taxpayer’s Money: Supporting the Palestinian Arabs – A Study in Transparency." Funding for Peace Coalition. August 2004.
27. "Managing European Taxpayer’s Money: Supporting the Palestinian Arabs – A Study in Transparency." Funding for Peace Coalition. August 2004, p. 6.
28. http://www.nationalreview.com/comment/ehrenfeld200312100915.asp and Dr. Rachel Ehrenfeld, as interviewed by the Funding for Peace Coalition.
29. Written Question E-2033/04 by Theresa Villiers (PPE-DE) to the Commission and E-2033/04EN Answer given by Mr. Patten on behalf of the Commission. October 20, 2004.
30. Issam Abu Issa, former chairman of the Palestine International Bank. "Arafat’s Swiss Bank Account." Middle East Forum. http://www.meforum.org/article/645#_ftn3
31. "Syria-EU Association Agreement-Signing." SANA: Official Syrian News Agency. October 19, 2004. http://www.sana.org/english/headlines/19%2010/syria3.htm
32. Adopted by the Council on March 6, 2002.
33. Adopted by the Council on May 27, 2002.
34. "International Narcotics Control Strategy Report: Germany." Bureau for International Narcotics and Law Enforcement Affairs. March 2004. http://www.state.gov/g/inl/rls/nrcrpt/2003/vol2/html/29921.htm
35. Section 129a: Formation of Terrorist Organizations.
36. Directive 2001/97/EC of the European Parliament and of the Council of 4 December 2001.
37. Gesetz zur Bekämpfung des international terrorsimus. (Combating Terrorism) Law of 9 Jan 2002 in Bundesgesetzblatt I pg. 361, in force 1 Jan 2002; and Law of 22 Aug 2002 in Bundesgesetzblatt I pg. 3,390, which amends the Criminal Code regarding foreign criminal and terrorist organizations and enables confiscation of property.
38 "International Narcotics Control Strategy Report: Germany." Bureau for International Narcotics and Law Enforcement Affairs. March 2004. http://www.state.gov/g/inl/rls/nrcrpt/2003/vol2/html/29921.htm
39. "Specter Calls for Criminal Prosecution of Financial Contributors to HAMAS." August 6, 2002. http://specter.senate.gov/index.cfm?FuseAction=PressReleases.Detail&PressRelease_id=251&Month=8&Year=2002
40. "Countering Terrorist Financing an International Concern." German Embassy, Washington D.C. May 26, 2004. http://www.germany-info.org/relaunch/business/new/bus_money_laundering_conf.html
41. "Measures taken by the German government to fight international terrorism." The Federal Government of Germany. October 27, 2004. http://www.bundesregierung.de/en/artikel-,10001.623975/Measures-taken-by-the-German-g.htm
42. "International Narcotics Control Strategy Report: Germany." Bureau for International Narcotics and Law Enforcement Affairs. March 2004. http://www.state.gov/g/inl/rls/nrcrpt/2003/vol2/html/29921.htm
43. "Loi n° 96-647 du 22 juillet 1996 art. 1 Journal Officiel du 23 juillet 1996" and "Loi n° 98-467 du 17 juin 1998 art. 84 Journal Officiel du 18 juin 1998" at http://www.legislationline.org/. The Code of Criminal Procedure, sections 706-16–706-25-1, is likewise at http://www.legislationline.org/
44. Loi 647 of 22 Jul 1996 (prevention of terrorism, amending the Criminal Code, Code of Criminal Procedure and Civil Code) in Journal officiel pg. 11,104. This act is embodied in the texts of the various codes, e.g., Criminal Code, sections 421-1–422-5.
45. Charles Duelfer. "Comprehensive Report of the Special Advisor to the DCI on Iraq’s WMD." October 6, 2004. http://www.lib.umich.edu/govdocs/duelfer.html
46. "Riforma della legislazione nazionale del turismo." L. 135/01. Parlamento Italiano. March 29, 2001. http://www.parlamento.it/leggi/elelenum.htm
47. "Conversione in legge, con modificazioni, del decreto-legge 12 ottobre 2001, n. 369, recante misure urgenti per reprimere e contrastare il finanziamento del terrorismo internazionale." L. 431/01. Parlamento Italiano. December 14, 2001. http://www.parlamento.it/leggi/elelenum.htm
48. See www.interno.it
49. http://www.esteri.it/eng/4_28_63_60.asp
50. "Fact Sheet: Designation of Ten Individuals Tied to an al Qaeda Cell in Italy." U.S. Treasury Office of Public Affairs. March 18, 2004. http://www.treasury.gov/press/releases/reports/js1243factsheet.pdf
51. "U.S. Designates Additional Members of Italian Al Qaeda Cell." Department of the Treasury. June 24, 2004.
52. Dale Fuchs. "Spaniard Says Drugs Financed Train Bombings." International Herald Tribune. April 15, 2004. http://www.iht.com/articles/515273.html
53. Federal law 130-FZ of July 25, 1998 can be found at http://www.fas.org/irp/world/russia/docs/. Federal law 103-FZ of July 24, 2002, Federal law 112-FZ of July 25, 2003 and Federal law 114-FZ of July 25, 2002 can be found in SZRF 2002 no. 30, item 3,028, at www.foreignlawguide.com/ip/flg/ RussiaIntroduction.com
54. Jill Dougherty. "Chechen ‘claims Beslan attack’." CNN.com. September 17, 2004. http://www.cnn.com/2004/WORLD/europe/09/17/russia.beslan/
55. "Ideofact." September 26, 2004. http://www.ideofact.com/archives/000389.html
56. See http://www1.oecd.org/fatf/40Recs_en.htm
57. "Patterns of Global Terrorism, 2003." U.S. State Department. http://usembassy.state.gov/colombia/wwwsft13.shtml
58. "Communiqué of 3+1 Group, December 2003." Inter-American Committee Against Terrorism. http://www.cicte.oas.org/documents.htm
59. According to the GAFI(FATF) report in lavadodedinero.com.
60. "Patterns of Global Terrorism, 2003." U.S. State Department. http://www.state.gov/s/ct/rls/pgtrpt/2003/31640.htm
61. A partial list of legislation concerning the suppression of terrorism financing, money laundering, and freezing assets includes Complementary Act 105 of January 2001, Articles 1, 9; the Code of Criminal Procedure, Decree-Law 3689 of October 1941, Articles 125-144, sections VI, VII; the Constitution of Brazil, Articles 5, 173, 225; the National Security Act, Act 7170 of December 1983, Articles 20, 24; the Penal Code, Article 91; Decrees No. 3267, 3755, 3976, and 4150; Articles 21 and 26 of the Civil Code; Article 66 of Act No. 10406 of the New Civil Code; Act 9532/97, Articles 12, 15; and Act 9790/99, Article 4.
62. Act 9.613 of March 3, 1998. Articles 1, 2, 4, 8, 9, 10, 11, 14 (Amended by PLS-117/2002).
63. COAF (Consejo de Control de actividades financieras) Resolutions No. 01 (1999), No. 03 (1999), No. 04 (1999), No. 05 (1999), No. 08 (1999), No. 09 (2000) approved legislation making the financing of terrorism a crime.
64. "Brazil." International Human Rights Law Institute. October 24, 2004. http://www.law.depaul.edu/institutes_centers/ihrli/_downloads/publications/ Brazil.pdf
65. "Patterns of Global Terrorism, 2003." U.S. State Department. http://usembassy.state.gov/colombia/wwwsft13.shtml
66. Marc Perelman. "Tracking Terror’s Money Trail in Lawless Frontier." The Forward. December 13, 2002. http://www.forward.com/issues/2002/02.12.13/news2.sidebar.html
67. "Commentary: Brazil extradites terror suspect." UPI. November 18, 2003. http://quickstart.clari.net/qs_se/webnews/wed/bb/Ubrazil-terror.RsAC_DNI.html
68. "Patterns of Global Terrorism, 2003." U.S. State Department. http://usembassy.state.gov/colombia/ wwwsft13.shtml
69. This includes the Anti-corruption Statute, Act No. 190: reporting of irregularities; Article 325 of the Penal Code: non-compliance with control mechanisms; Decree No. 1957: reporting of documents linked to money-laundering activities; Financial Institutions Statute, Decree No. 663: reporting of irregularities; Act No. 333, Article 2, paragraph 4: termination of ownership rights; and Article 67 of the Code of Criminal Procedure: freezing of any assets linked to criminal activities, including terrorism.
70. "Colombia." International Human Rights Law Institute. October 24, 2004. www.law.depaul.edu/institutes_centers/ihrli/_downloads/publications/Colombia.pdf
71. Colombian Penal Code, Section 345 – Management of Resources Linked to Terrorist Acts.
72. http://www.secretariasenado.gov.co/leyes/
73. Marcelo Venegas. "Proyecto de ley que crea la unidad de analysis financiero y modifica el codigo penal en material de lavado de dinero." Comunidad Virtual de Gobernabilidad. http://www.gobernabilidad.cl/modules.php?name=News&file=article&sid=359
74. These include the Federal Organized Crime Act, Article 29; the Federal Penal Code, Articles 40 and 41; and the Federal Code of Criminal Procedure, Article 181. Legislation may be found at www.law.depaul.edu/institutes_centers/ ihrli/_downloads/publications/Mexico.pdf
75. For a comprehensive list of legislation, see www.law.depaul.edu/institutes_centers/ ihrli/_downloads/publications/Peru.pdf
76. Kantor, p. 13.
77. Rachel Ehrenfeld. Funding Evil. Illinois: Bonus Books, 2003, p.176.
78. Schmahl, p. 43.
79. Kantor, p. 15.
--------- This research was made possible by the generous support of the Michael Cherney Foundation. -----------
*Dr, Rachel Ehrenfeld, author of Funding Evil, How Terrorism is Financed– and How to Stop It, is Director of the New York based American Center for Democracy, and a member of the Committee on the Present Danger. This paper was presented at the Jerusalem Summit, Jerusalem, November 27-30, 2004.
(At least I've never heard of one, and I follow the news closely.)
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