Counterterrorism Blog

A report issued October 4th by Canada’s Financial Intelligence Unit, Fintrac, estimated that “the total value of case disclosures of suspected terrorist activity financing and other threats to the security of Canada {during the 2006 reporting period} was approximately $256 million.” It’s rare these days to find terrorism financing related estimates in government reports, or, for that matter in any open literature on terrorism financing. But, extrapolating from the Canadian report, one can only conclude that terrorism financing remains big business. And that is why government agencies and financial institutions around the world are shouldering costs in trying to combat it. A recent article in the Economist, for example, estimated that UK banks alone expend some $500 million per year in order to comply with UK AML/CTF requirements.

So what’s happened to all those glowing reports, just a few years ago, that we were near victory in the war on terrorism financing? In 2002 British Chancellor Gordon Brown claimed that al Qaeda’s financing had been completely disrupted. And then-US-Treasury Secretary O’Neill’s claimed that “al Qaeda and other terrorist organizations are suffering financially as a result of our actions.” It seems it’s gotten a lot harder since then to find, prosecute, or put out of business, those funding the new generation of al Qaeda and its copycat cells around the world. And we have never really come to grips with cutting of funding to other terrorist groups such as Hizbollah and Hamas. I think we all now realize that we still have a sharp uphill battle when it comes to significantly curbing terrorism financing. And, I think, we still lack a coherent international strategy to accomplish this goal.

The strategy we use now relies, largely, on two basic approaches. The first involves bilateral intelligence and investigative cooperation to trace funds and find terrorists. The second involves using UN resolutions and international conventions to criminalize terrorism financing and to freeze the funds and other assets of those that materially support the terrorists. These tactics do make some sense. But the way we have implemented them does not. We have settled for half measures, diplomatic compromises and unfulfilled promises. The structure we have built, from FATF to the United Nations, is completely lacking in accountability or consequences, and its effectiveness is now quite doubtful.

The following commentary is drawn from remarks I delivered at the September 11-14, 2006 ICT Conference in Hertzlya, Israel

The bilateral arrangements we now have in place engage only a limited number of countries. These countries maintain close links between their intelligence and enforcement services, and are more or less open to sharing information between themselves. But the group is still quite small, and the gaps in information gathering support and sharing is still quite limited. Even within Europe, there remain serious shortcomings, as indicated recently by EU terrorism cooridinator, Gijs de Vries. Expanding such cooperation remains one of the EU’s highest priorities.

The cooperative intelligence gathering and sharing arrangements we now have in place have, as their principal goal, identifying and closing down terrorist cells located in our respective countries. The agencies involved are looking for suspected terrorism fund transfers, with the emphasis on tracing these funds to the terrorist recipients rather than back to their sources. And in most cases those providing the funds are not to be found within their borders. Even when the financial players are local, prosecutions are doubtful and difficult given the sensitive intelligence sources and methods being used. This is one important reason that we’ve had more success in finding the terrorists than we have had in putting their financiers out of business.

At the same time we have relied heavily on the United Nations to put in place an international legal framework for curtailing and criminalizing terrorism and terrorism financing. Unfortunately, these measures have suffered from inadequate implementation and enforcement, and need to be revamped and strengthened.

UN Security Council Resolution 1267 and subsequent resolutions direct that all countries identify and designate al Qaeda members and associates and that they “Freeze without delay their funds and other financial assets or economic resources.” This is potentially a strong measure, but it comes into play only after an individual or entity has been added to the special designation list maintained by the UN’s Al Qaeda and Taliban Sanctions Committee. That list is woefully inadequate and out of date. It includes only a very small subset of known al Qaeda agents and entities – including very few of the terrorist groups and cells that emerged after 9/11. Of course, Hizbollah and the various Palestian-related terrorist groups are not included within its purview.

There are now some 122 groups and entities that are identified on the list as associated with Al Qaeda. This means that their assets are to be frozen. But that is no longer happening. In fact, quite a few of these organizations continue in operation, and continue to solicit funds, in many cases openly. Take a look at the list of designated charities. Many of them are still around and still raising money. Some have simply changed their name. We all know about Lashkar e Taiba and its director Hafiz Sayeed, who, when Lashkar was designated simply started up Jamaat-ul-Dawa. It took the US State Department nearly two years to designate Jamaat as an alias of Laskhar. And the UN has still not acted on this. That means that Jamaat can still solicit funds openly today. Designating entities, but not the individuals that run them, is a half measures that we cannot afford. It has allowed such groups to easily regroup to circumvent the UN measures against them.

There are now some 218 persons named on the Al Qaeda list. Most of these are operatives rather than financiers. Many are behind bars or in hiding. Some of them are financiers who got put on the list right at the outset during the first round of asset freezes. Included on the list are such deep pocket donors, such as Youssef Nada, Ahmid Idris Nasreddin, Yasin Al Qaeda and Wael Hamza Julaidan. But these guys quickly discovered just how easy it was to circumvent these UN mandated sanctions. They continue to operate using trusts, shell companies, and beneficial ownership arrangements to insulate themselves from the sanctions.

Let’s turn to the other key UN Security Resolution – 1373 (2001). That resolution goes beyond Al Qaeda and the Taliban and directs that all countries criminalize terrorism and terrorism financing. It requires all countries to freeze the funds and other assets and economic resources of any person or persons who commit, or attempt to commit terrorist acts, or who provide material support for such persons. And these obligations are replicated in numerous international treaties and conventions and specifically in the UN Convention for the Suppression of Terrorism Financing. But,there is still little beef in this bun! Implementation of 1373 has been tangled up by two major problems. The first is that the measures only come into play after terrorist acts have been attempted or carried out. There is nothing automatic here. Local judicial or administrative proceedings are required before any of the assets can be frozen or transactions stopped. And this can entail considerable delay – the money just doesn’t wait around to be frozen.

Another serious problem is the lack of consensus on a clear definition of terrorism. The International community has been struggling with this definition for over a decade. Without a common definition countries remain free to interpret their own obligations and define for themselves which groups are terrorists and which are “freedom fighters.” Saudi Arabia uses this distinction, for example, to get away with funding Hamas, while Iran and Syria use it to provide funds and support to Hezbollah. Many other countries also avoid taking steps to freeze funds or take other civil or criminal action against those individuals or groups which they support.

So What Should We Do To Develop a More Coherent and Workable International Strategy to Combat Terrorism Financing? Let me put forth six buzz words that I think are essential for such a strategy (1) clarity, (2) commitment, (3) capacity, (4) cooperation, (5) accountability, and (6) consequences.

Clarity requires a simple and direct definition of terrorism. We certainly all know terrorism when we see it. How can you call a suicide bomber attacking a restaurant or a mall anything else? If the General Assembly can’t agree on that than maybe the Security Council should act. If the Security Council can’t act, than let those countries that can agree on such a common standard or definition adopt one on their own and act accordingly.

Combating terrorism and terrorism financing takes more than passing laws and regulations. It requires a dogged commitment to implement these laws and go after those that support terrorism. That requires political will to act against those who commit or support terrorist acts even if we support their ultimate goals. And commitment, in turn requires capacity. We need to insure that all countries that have the will to combat terrorism and terrorism financing do not lack the resources to do so. This was a goal set by the G-8 several years ago, but relatively little has been done to date to realize it. This is what CTAG and the UN’s CTED are supposed to do. Well they certainly need to get a move on.

It’s also essential that we broaden further the circle of cooperation and information sharing that has been at the vanguard of our efforts to combat terrorism and terrorism financing. This might best be done by establishing new functional arrangements, outside the United Nations, that can better handle sensitive intelligence and investigative information and provide direct support for judicial cooperation.

Accountability is key. This means effective oversight and reporting on what is actually being done by countries to implement the UN resolutions and measures against terrorism. I think we need to establish a team of qualified objective observers, freed from the current diplomatic shackles imposed by the Al Qaeda and Taliban Sanctions Committee. They should be appointed for fixed terms and empowered to report directly to the Security Council on the actions that countries are actually taking or not taking to carry out their counter-terrorism responsibilities.

Finally, there must be consequences. Lets start with seeing the al Qaeda and Taliban Sanctions Committee, or its monitoring tearm begin calling to task countries which are not living up to their international commitments. And if that’s not enough to foster compliance, lets consider ostracizing those countries which egregiously are out of step with their Chapter VII responsibilities.

Consequences also means making sure that strict penalties are imposed on those that engage in, or support terrorist acts. Let’s really put those responsible for financing terrorism out of business. Unfortunately, that’s not what’s happening today.

These are some of the key steps that must be taken if we want to see real progress in combating terrorism financing.