Assessment of International Counter-Financing of Terrorism Efforts Needed For Next Administration & Congress

By Andrew Cochran

Last week, in an interview for the MoneyLaundering.Com subscription newsletter, I recommended a complete review of the outcomes of the laws, regulations, and structures governing the counter-terrorist financing effort by the U.S. government and our international relationships. "It is time to take a fresh look at anti-terrorist financing and anti-money laundering regulations as we enter the next administration and next Congress and see what has worked, and what hasn't, how methods have changes and how to change the Patriot Act, the Bank Secrecy Act and other regulations to go along with that." By this fall, our experience with Title III of the Patriot Act, the anti-money laundering and counter-financing of terrorism (AML-CFT) provisions, and the terrorist designation process put in place after the attacks through Executive Order and UNSCR resolutions will be seven years old, long enough to have judged the burdens, successes, and failures.

On this site and others, and in innumerable panels, seminars, and hearings, experts have discussed the strengths and weaknesses of the regime put in place following the 9-11 attacks; its costs and benefits; and the impacts on the financing of terrorism. Existing sanctions programs were significantly enhanced in order to choke off terrorist financing. At the same time, the US engaged in unprecedented cooperation with other countries. Hundreds of millions of dollars of assets were frozen, tougher legislation was passed in numerous countries, and the well-established network of money transfers that had been intensively used by terrorists before the 9-11 attacks was dismantled. But it's obvious that terrorists have adapted their funding strategies and sources in order to stay one step ahead of the authorities. Extremist groups now rely on a combination of private donations, smuggling rings (of drugs, human beings, and weapons), and a secretive, complex network of clandestine financial institutions (the latest example being a FARC-linked Colombian money service business which the Treasury Department has just designated). Terror “franchises” are increasingly raising their money through petty crime, drugs, money laundering, and front companies. Regulatory mechanisms imposed on financial institutions do not reflect successes in some areas and the changes in sources and methods. Regional bodies in the Middle East and Southeast Asia appear to stepped into the shoes of the U.N. as a recent source of AML-CFT guidance for individual countries, which could enhance local prevention and enforcement efforts but also lead to inconsistent international definitiions, standards, and sanctions.

A comprehensive review by government officials, the broader CT community, and financial institutions is needed to chronicle the current threats and weaknesses of terrorist financing and develop an improved and credible strategy for combating them. A previous example of the effort which I envision was the Council on Foreign Relations' 2002 report on terrorist financing (70 pages), which greatly assisted the Members of Congress for whom I worked on the House Financial Services Committee. I know that many experts in the private sector are ready to participate in such an effort, and I hope to post on progress during the remainder of the year.

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