Disrupting terrorist financing with civil litigation.

• Author: Smith, Jack D.
• Position: The World Conference on Combating Terrorist Financing

While the direct costs of mounting individual terrorist attacks are relatively low, maintaining a terrorist network is an expensive undertaking. To promote a veil of legitimacy, large terrorist organizations must spend tens of millions on propaganda and ostensibly legitimate social or charitable activities such as hospitals, schools and other pubic works. They raise the money largely through fundraising efforts worldwide, including "witting and unwitting" contributions from mosques, non-governmental organizations, wealthy donors, and charitable foundations. Criminal prosecutions alone have not stopped such contributions because of insufficient prosecutorial resources and the high standards of proof required for criminal convictions. Unleashing legions of private attorneys to pursue civil actions against individuals and organizations, including charities and banks, involved in the chain of terrorist financing may be a much more credible deterrence, especially when combined with the triple damages provisions of 18 U.S.C. 2333 (a).

INTRODUCTION

The international community has taken numerous steps to thwart terrorism in the wake of the September 11, 2001 attacks in New York City and Washington, D.C. Most of these can be grouped under the four principles laid out in the Counter-Terrorism Strategy adopted by the European Union in 2005: "Prevent, Protect, Pursue, and Respond." (1) But perhaps the one that will prove most effective for suppressing terrorism over the long term is the severing of funding and support networks, which the European Union categorizes under the "Pursue" principle.

As recently stated by the Financial Action Task Force (FATF), "[d]isrupting funding flows creates a hostile environment for terrorism, constraining the overall capabilities of terrorists and helping frustrate their ability to execute attacks." (2) Governments invariably turn first to their criminal procedures to attack terrorist financial networks. However, our research and experience indicates that civil procedures may often be an even more effective tool to stop the financing of terrorism.

Part I of this article describes the vital importance of donations from sympathizers to large terrorist organizations and posits that the best way to dry up those funds is to freeze and confiscate the wealth of people who finance murder and terror. Part II describes some of the historical difficulties in recovering the assets of crime and corruption hidden overseas, and explains how the situation has improved since 2005 when the United Nations Convention against Corruption came into effect. Part III discusses the power, scope and legal issues surrounding 18 U.S.C. 2333(a), a 1992 statute that provides a civil remedy to victims of terrorism to recover damages from terrorists and those that provide them material support. Part IV discusses recent section 2333(a) filings against banks and private companies, as well as other civil court remedies useful in the fight against terrorist organizations. Our conclusion is that widening avenues for private attorneys to seek damages in the civil courts may prove to be the most effective weapon of all against the spread of terrorism.

1. WHY PURSUE ASSETS?

   Terrorist organizations do not need a lot of money to build bombs. The 2002 Bali Bombings by Jemaah Islamiya cost approximately $50,000, and the 2004 Madrid attacks by an Al Qaeda inspired terrorist cell cost approximately $10,000. (3) Trying to detect and thwart transfers of such small amounts is generally a fruitless exercise. Gary M. Osen, a New Jersey attorney who is leading a series of high profile terrorist financing actions against banks, aptly compares it with "trying to shut down the phone company by going to people's homes and apartments and individually smashing their phones instead of destroying the satellites and cables that conduct the signals." (4)

   The Financial Action Task Force (FATF) is an inter-governmental body composed of thirty-two countries and two regional organizations. (5) Established in 1989, its mission is the "development and promotion of national and international policies, to combat money laundering and terrorist financing." (6) In February 2008, the FATF released a report on Terrorist Financing, (7) which noted that although most direct terrorist operations require only tens of thousands of dollars, those expenses are just the tip of the financial iceberg. (8) There is a much larger requirement for funding which lays unseen under the water in the form of broader organizational requirements:

   Funds are required to promote a militant ideology, pay operatives and their families, arrange for travel, train new members, forge documents, pay bribes, acquire weapons, and stage attacks. Often, a variety of higher-cost services, including propaganda and ostensibly legitimate social or charitable activities are needed to promote a veil of legitimacy for organizations that promote objectives through terrorism. (9) As an example, the Central Intelligence Agency (CIA) estimates that Al Qaeda spent about $30 million a year to sustain its activities before September 11, 2001. (10) Contrary to popular belief, Osama bin Laden did not use his personal wealth, which he inherited from the Bin Laden construction company when his father passed away. Instead, Al Qaeda's activities were supported largely through fundraising efforts worldwide, including "witting and unwitting" contributions from mosques, non-governmental organizations, internet users, wealthy donors, and charitable foundations. (11)

   These contributions constitute the life blood of large terrorist organizations. They are essential not just to executing bombing operations, but also to win and keep the hearts and minds of their supporters. This is the money that law enforcement must target to sap community support of the terrorists and to devitalize their attacks. The FATF Report recognizes that: "Even the best efforts of authorities may fail to prevent specific attacks. Nevertheless, when funds available to terrorists are constrained, their overall capabilities decline, limiting their reach and effect." (12) This was brought home in 1995 by Ramzi Yousef, one of the terrorists captured after the 1993 World Trade Center bombing, as he was being flown over the twin towers on his way to a New York jail. When an FBI agent pointed out that the towers were still standing, Yousef replied, "They wouldn't be if I had enough money and explosives." (13)

   There is no doubt that in the absence of an effective deterrent, passionate appeals such as "Islam is under attack" can bring in large amounts of money from sympathizers. However, there are limits to how far empathy goes, and for most ordinary people it does not stretch to the point of jeopardizing their personal savings. Even the most dedicated criminals are more concerned about losing their personal fortunes than spending time in jail. One of the best statements of this mindset came from Gaspare Mutolo, a Mafia don turned pentito, (14) during his testimony before the Anti-Mafia Commission hearings held in Italy in 1992: "The worst feeling is when our money is taken away from us. People prefer to be put behind bars and keep their money than to stay free without the money. Money is the main thing." (15)

   Mutolo's confession provides insight to a best practice: in order to dry up funding to terrorist organizations, authorities need to do more than just prosecute contributors and put them in jail. They must also freeze and confiscate the wealth of people who finance murder and terror. As discussed below, it is fortuitous from a global perspective that there has never been a better time to recover assets tainted by crime than now.

2. INTERNATIONAL DEVELOPMENTS IN ASSET RECOVERY

   In the past, efforts by developing countries to recover stolen, corrupt, or illicit assets stored in foreign countries were long and complicated affairs. For example, the Philippines spent seventeen years in litigation before recovering $658 million of the estimated $3 billion looted and stashed overseas by former President Ferdinand Marcos. (16)

   The historic practices of financial institutions, which stored stolen funds, explain the reasons behind lengthy and complicated recovery efforts. When a "victim" country tried to pursue corrupt assets, the institution storing the funds would interpose the well-established legal privilege of bank secrecy. That would frustrate the recovery effort absent an extraordinary intervention by the government of the "recipient" country. However, before the government of a recipient country would act, it would often require the victim country to first obtain a criminal judgment or other official determination against the alleged guilty party. Without help from the recipient countries, such determinations were difficult to obtain. How could the victim country demonstrate that there was stolen money stashed in the recipient country unless the recipient country helped by providing bank records and evidence? It was a vicious "catch 22." Therefore, successful international efforts at asset recovery were few and far between. The inability to engage in effective asset recovery became a larger and larger problem for developing countries. When public officials opportunistically engaged in corruption--whether by stealing domestic tax revenues, skimming aid payments donated for development by non-governmental organizations (NGOs), international organizations or foreign governments, or taking kickbacks from sweetheart deals--storing those funds in foreign financial institutions provided a great deal of protection. (17)

   As the developed world ignored the situation, corruption festered and retarded efforts to help developing countries grow out of poverty. In 2003, the United Nations reported that during the 1990s, a period in which people were relatively euphoric about global progress, "54 countries actually got poorer." (18) International...