Money laundering has always been about concealing the true source of the proceeds of organised crime, such as drug trafficking, corruption and other illicit operations. The heinous events of 11 September also highlighted the need for a comprehensive and bold strategy to prevent and suppress the funding of terrorist activities.The Financial Action Task Force (FATF), an international government organisation, is spearheading this global fight by deploying its expertise in combating money laundering to help deal with terrorist financing.
Money laundering and terrorist financing have several similarities. Both are, by their very nature, secretive financial activities on a global scale. But the financing of terrorism differs from the usual money laundering pattern where criminals have to find a way to launder their illicit profits, because terrorist financing includes legal, as well as illegal, sources of funds.
The sums involved are enormous; there is no way of knowing the total amount of money involved worldwide. The challenge for the FATF has been to use its expertise to map out effective measures to combat terrorist financing and to engage all nations to implement them. The FATF has drawn up eight Special Recommendations against terrorist financing and agreed on a comprehensive action plan.
These recommendations are a set of international standards designed to deny terrorists and their supporters access to the international financial system, to track down and intercept the assets of terrorists, and to pursue individuals and countries suspected of participating in, or supporting, terrorism. They supplement the FATF’s existing Forty Recommendations, which are the accepted global anti-money laundering standard.
The special recommendations focus on: ensuring that terrorist financing is specifically listed as a criminal offence in a country’s legislation; the seizure of terrorist assets; the reporting of suspicious financial transactions linked to terrorism; international co-operation; and measures to prevent the misuse of wire transfers and other remittance systems. They also cover ways to prevent legal entities such as non-profit organisations from being used as a source of terrorist funds.
Effective measures against terrorist financing can only be achieved through a combination of tougher legislation and enforcement and increased international co-operation. The FATF has been working to ensure that its own members comply with the Special Recommendations while encouraging and helping non-FATF members to do so as well. FATF members are currently assessing whether their national legal systems comply with the recommendations or whether they need to take further action, and are due to report back by June 2002. The assessment is based on a questionnaire covering areas such as whether a jurisdiction has ratified the 1999 UN International Convention on suppressing terrorist financing and complies with UN resolutions on the issue. Among OECD members, seven have ratified the convention (Austria, Canada, France, Iceland, The Netherlands, Spain and United Kingdom). The questionnaire also covers provisions for information sharing and co-operation with other countries and asks countries whether they have the power to freeze terrorist-related assets. Most FATF members comply fully or partially with the recommendations and all are working towards achieving full compliance by June 2002. As part of its efforts to encourage the widest possible international compliance, the FATF has invited non-members to assess their own legal systems using the same questionnaire and intends to initiate a process in June 2002 to identify jurisdictions that lack appropriate measures to combat the financing of terrorists.
To help financial institutions and other vulnerable entities to detect and report terrorist financing activities through existing anti-money laundering channels, the FATF is now developing a special guide on the techniques and mechanisms used in terrorist financing and the types of financial activities involved. It covers all kinds of criminal activity, from credit card fraud and armed robbery by terrorists to the abuse of legally registered groups such as charities or relief organisations by terrorist groups to raise funds from innocent donors.
Building international co-operation is vital for success, of course, and the FATF has intensified co-operation with bodies such as the United Nations – whose Counter-Terrorism Committee encourages states to participate in the FATF self-assessment exercise – the Egmont Group of the Financial Intelligence Unit, the International Monetary Fund, the World Bank and the G-20 Finance Ministers and Central Bank Governors.
Moreover, I have written to all UN Ambassadors inviting their governments to participate in the self-assessment exercise. International support for this approach was echoed in Hong Kong in February when some 60 jurisdictions from FATF and regional bodies in Asia, Eastern and Southern Africa, South America, the Caribbean and Europe, the Offshore Group of Banking Supervisors, and nine international organisations agreed on the importance of global adoption and implementation of the FATF Recommendations.
Whether trying to trace laundered funds derived from terrorism, corruption, drug trafficking or organised crime, the FATF believes solutions can be found by adopting effective counter-measures, such as freezing assets and information sharing, and working closely with others on both the domestic and international fronts. The FATF will not waver in its efforts to promote this cause.
* Editor's note: There are no reliable estimates of global terrorist funds. The US government has been keeping record of terrorist attacks blocked in the Unites States and by its coalition partners since 11 September, and these totalled more than US$100 million as of mid-April 2002.
©OECD Observer No 231/232, May 2002