Terrorist Financing

AML/CFT – Anti-Money Laundering and Combating the Financing of Terrorism

Money laundering is the process by which proceeds from a criminal activity are disguised in order to conceal their illegal origin. Terrorist financing is the soliciting, collection, or provision of funds with the intention that they be used to support terrorist acts or organizations. Money-laundering and financing terrorism techniques are very similar, and in many cases, identical.

Drug Trafficking and the Financing of Terrorism: United Nations

From the very start in the fight against money laundering at the international level, the
United Nations has taken an active role to promote the harmonization of countermeasures and the strengthening of international cooperation. The United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, adopted in December 1988 in Vienna, was the first international instrument to address the issue of proceeds of crime, and to require States to establish money laundering as a criminal offence.

The rationale of the fight against money laundering is to attack transnational criminal
organizations at their weak point. Money generated by criminal activities is difficult to hide; it
sometimes constitutes primary evidence of the crime. Transfer of criminal funds in financial
systems can be identified, if proper alert mechanisms are in place. Since the end of the 1980’s,
States have endeavoured to establish these alert mechanisms, to ensure that criminal assets can be identified, seized, and confiscated wherever they are.

The Office on Drugs and Crime has been mandated to ensure that there are no gaps or
loopholes in the international machinery by assisting Member States in the implementation of
their anti-money laundering policies, including the enactment of relevant legislation
encompassing anti-money laundering measures and internationally recognized standards in the regulation of financial services. The Political declaration adopted in June 1998 at the UN General Assembly Special Session on drugs reaffirms the appropriateness of this strategy. Ten years after the 1988 convention, the General Assembly upgraded and updated it through the adoption of a plan of action, “Countering Money Laundering” to fine-tune and further strengthen the action of the international community against the global criminal economy.

The United Nations Convention against Transnational Organized Crime was opened for
signature in December 2000. The scope of money laundering under the terms of the Convention includes proceeds deriving from all serious crimes. The Convention urges State Parties to cooperate with one another in the detection, investigation and prosecution of money laundering.

Parties are obliged to reinforce requirements for customer identification, record-keeping and the reporting of suspicious transactions. Parties are also recommended to set up financial intelligence units to collect, analyse and disseminate information.

Further to the events of September 11, 2001, UN Member States underlined the links
between terrorism, transnational organized crime, the international drug trade and money
laundering, and called on the States that had not done so to become parties to the relevant
international conventions, including the 1999 International Convention for the Suppression of the Financing of Terrorism. The UN Security Council adopted resolution 1373 (2001) through which it established the Counter-Terrorism Committee (CTC); which is mandated to monitor the implementation of the resolution urging States to prevent and suppress the financing of terrorist acts. In order to comply with the terms of the resolution, many States have been using preventive and criminal anti-money laundering measures to combat the financing of terrorism.

INSTRUMENTS AGAINST THE FINANCING OF TERRORISM

International Convention for the Suppression of the Financing of Terrorism
Resolution 1373 (2001): Adopted by the Security Council at its 4385th meeting, on 28 September 2001
Resolution 1377 (2001): Adopted by the Security Council at its 4413th meeting, on 12 November 2001

Resources

Notes

See Also

Further Reading

Pieth, Mark and Eymann, Stephanie, “Combating the Financing of Terrorism: Is It Working?”, Verlag Peter Lang, May
Berti, Benedetta, “The Economics of Counterterrorism: Devising a Normative Regulatory Framework for the Hawala System”, MIT International Review, Spring 2008, pp. 14-21.
Demetis, Dionysios S and Angell, Ian O, “The risk based approach to AML: representation, paradox, and the 3rd directive”, Journal of Money Laundering Control, Vol. 10, No. 4, 2007, pp. 412-428.
Gordon, Philip H, “Can the War on Terror Be Won? How to Fight the Right War”, Foreign Affairs, November/December 2007, pp. 53-66.
Thony, Jean-François and Png, Cheong-Ann, “FATF Special Recommendations and the UN Resolutions on the financing of terrorism – A review of the status of implementation and legal challenges faced by countries”, Journal of Financial Crime, Vol. 14, No. 2, 2007, pp. 150-169.
Veng Mei Leong, Angela, “Chasing dirty money: domestic and international measures against money laundering”, Journal of Financial Crime, Vol. 10, No. 2, 2007, pp. 140-156.
De Koker, Louis, “Money laundering control and suppression of financing of terrorism -Some thoughts on the impact of customer due diligence measures on financial exclusion”, Journal of Financial Crime, Vol. 13, No. 1, 2006, pp. 26-50.
Broome, John, Anti-Money Laundering – International Practise and Policies, Thomson, Sweet & Maxwell Asia, 2005.
Cassella, Stefan D, “Terrorism and the Financial Sector: Are the Right Prosecutorial Tools Being Used?”, Journal of Money Laundering Control, Vol. 7, No. 3, 2004, pp. 281-285.
Farah, Douglas, Blood From Stones: The Secret Financial Network of Terror, New York: Broadway Books, 2004.
Francis, David R, “The War on Terror Money”, Christian Science Monitor, April 8, 2004, p.14.
Masciandaro, Donato (ed), Global Financial Crime: Terrorism, Money Laundering and Offshore Centers, Aldershoy [UK] and Burlington, VT: Ashgate, 2004.
Norgren, Chris, “The Control of Risks Associated with Crime, Terror and Subversion”, Journal of Money Laundering Control, Vol. 7, no. 3, Winter 2004, pp. 201-205.
Reuter, Peter and Truman, Edwin, Chasing Dirty Money – The Fight Against Money Laundering, Institute for International Economics, November 2004.
Sanderson, Thomas M, “Transnational Terror and Organized Crime: Blurring the Lines”, SAIS Review, Vol. 24, no. 1, Winter 2004, pp. 49-61.
Bantekas, Ilias, “The International Law of Terrorist Financing”, American Journal of International Law, Vol. 97, no. 2, April 2003, pp. 315-333.
Ehrenfeld, Rachel, Funding Evil: How Terrorism is Financed — and How to Stop It, Chicago, Bonus Books.
Levitt, Matthew, “Stemming the Flow of Terrorist Financing: Practical and Conceptual Challenges”, Fletcher Forum of World Affairs, Vol. 27, no. 1, Winter-Spring, 2003, pp. 59-70.
Lilley, Peter, Dirty Dealing, The Untold Truth About Global Money Laundering, International Crime and Terrorism, Stylus Pub Llc, 2003.
Meyer, Josh, “Cutting Money Flow to Terrorists Proves Difficult”, Los Angeles Times, September 28, 2003, p.A1.
Napoleoni, Loretta, Modern Jihad: Tracing the Dollars Behind the Terror Networks. London, UK and Sterling, VA: Pluto, 2003.
Taylor, Robert M, “Anti-Money and Anti-Terrorist Financing Requirements Applicable to Financial Institutions”, Banking Law Journal, Vol. 120, no. 6, June 2003, pp. 497-504.
Herbert V Morais, “The War against Money Laundering, Terrorism, and the Financing of Terrorism”, Journal of the Law Association for Asia and the Pacific, LAWASIA 2002.
Aenlle-Rocha and Fernando L, “Correspondent Banking After September 11”, Los Angeles Lawyer, September 2002, pp. 27-31.
Aninat, Eduardo; Hardy, Daniel, and Johnston, Barry R, “Combatting Money Laundering and the Financing of Terrorism”, Finance and Development, Vol. 39, no. 3, September 2002, pp. 44-47.
El-Qorchi, Muhammed, “Hawala: How Does This Informal Funds Transfer System Work, and Should It Be Regulated?”, Finance and Development, December 2002, pp. 31-33.
“Essential Laws of the United States on Money Laundering and Terrorist Financing”, Money Laundering Alert, Miami, FL: Alert Global Media, 2002.
Pieth, Mark (ed), Financing Terrorism. Dordrecht [Neth] and Boston {MA}: Kluwer Academic, 2002.
Herbert V Morais, Behind the Lines in the War on Terrorist Financing, originally published in the December 2001 issue of the International Financial Law Review.