Financial controls and counter-proliferation of weapons of mass destruction.

• Author: Passas, Nikos
• Position: Confronting Complexities Through the Diversity of International Law

This paper focuses on financial controls and vigilance against the proliferation of Weapons of Mass Destruction (WMD). It refers to the new Financial Action task Force (FATF) Recommendations on this subject and outlines relevant provisions of the U.N. Security Council Resolutions (UNSCRs) and the considerable challenges facing the international community in their implementation. While it suggests that there is a good deal of work underway towards consistent and effective implementation, it points to some concrete measures and areas where counter-proliferation finance efforts could focus, particularly in the area of commerce and trade.

1. INTRODUCTION II. U.N. SECURITY COUNCIL RESOLUTIONS AND PROLIFERATION FINANCE III. IMPLEMENTATION CHALLENGES IV. CONCLUSION I. INTRODUCTION

   Neither the use of financial sanctions as a tool to apply pressure on governments nor controversies and diverse interpretations of their effects are new. An early example from classical Greece is the Megarian Decree, under which Athens introduced a trade embargo on Megara merchants during the Pericles era. (1) Aristophanes, (2) Thucydides (3) and others (4) offered very different views: some suggested that it was effective, while Thucydides regarded it as a pretext for the war that followed.

   The U.N. first introduced sanctions in the 1920s, but it employed them seldom in the years that followed. It was the 1990s that witnessed a significant growth in the use of such coercive measures. (5) Aimed at global security threats in ways that could be effective but less radical than the use of force, (6) their scope has widened, ranging from aggression and conflict to international terrorism and proliferation of weapons of mass destruction (WMD). (7) Multilateral sanctions have been considered and applied due to proliferation concerns in several countries, (8) but the most recent ones focus on non-state actors, the Islamic Republic of Iran, and the Democratic People's Republic of Korea (DPRK). (9) Originally, counter-proliferation measures revolved chiefly around export controls, but these are now supplemented by financial control requirements for both governmental and private sector actors.

   At the same time, "follow-the-money" approaches to crime control have been applied at both the national and international levels. (10) Financial controls have been increasingly employed to address serious crime and security problems ranging from organized criminal group activities to corruption and the support of terrorism. These can be used for investigative and intelligence-gathering objectives--they assist in identifying co-conspirators, facilitators, and supporters--as well as for deterrence, disruption, punishment and confiscation purposes. The most recent addition to the list of unlawful practices targeted with this approach is the financing of WMD proliferation. In February 2012, the Financial Action Task Force (FATF), a body setting international standards on money laundering and terrorism finance, revised its Recommendations and incorporated the issue of proliferation finance. (11) New Recommendation 7 is entitled "Targeted financial sanctions related to proliferation" and states that:

   Countries should implement targeted financial sanctions to comply with United Nations Security Council resolutions relating to the prevention, suppression and disruption of proliferation of weapons of mass destruction and its financing. These resolutions require countries to freeze without delay the funds or other assets of, and to ensure that no funds and other assets are made available, directly or indirectly, to or for the benefit of, any person or entity designated by, or under the authority of, the United Nations Security Council under Chapter VII of the Charter of the United Nations. (12) There is no legal and universally adopted definition of "proliferation finance." However, the FATF's working definition can be used for our purposes here:

   Proliferation finance refers to the act of providing funds or financial services which are used, in whole or in part, for the manufacture, acquisition, possession, development, export, trans-shipment, brokering, transport, transfer, stockpiling or use of nuclear, chemical or biological weapons and their means of delivery and related materials (including both technologies and dual use goods used for non-legitimate purposes), in contravention of national laws or, where applicable, international obligations. (13) This paper focuses on proliferation finance, outlines relevant provisions of the U.N. Security Council Resolutions (UNSCRs) and the challenges facing the international community in their implementation. While it suggests that there is a good deal of work towards consistent and effective implementation, it points to some concrete measures and areas where counter-proliferation finance efforts could focus. (14)

2. U.N. SECURITY COUNCIL RESOLUTIONS AND PROLIFERATION FINANCE

   Chapter VII of the U.N. Charter provides that when the Security Council establishes a threat or breach of the peace or acts of aggression, it has the power to introduce measures ranging from "provisional measures" to the use of force. (15) Article 41 lays down the legal basis on which sanctions can be applied:

   The Security Council may decide what measures not involving the use of armed force are to be employed to give effect to its decisions, and it may call upon the Members of the United Nations to apply such measures. These may include complete or partial interruption of economic relations and of rail, sea, air, postal, telegraphic, radio, and other means of communication, and the severance of diplomatic relations. (16) The obligations stemming from Resolutions issued under Chapter VII of the U.N. Charter are generally mandatory. Yet, room for interpretation exists in the language of some provisions. For instance, when the Resolutions state that Security Council "decides" or that Member States "shall" do something, there is no debate about their mandatory nature. However, when Member States are "called upon" to take certain measures, some argue that these provisions are not mandatory, while others believe that they are mandatory nonetheless. Such diverse interpretations obviously affect different countries' implementation and practices.

   The international community has reached a broad consensus on the need to prevent WMD proliferation, but the use of financial controls to this effect is novel to both government agencies and the private sector. How exactly the new counter-proliferation tools can be integrated with or supplement more traditional controls is not entirely clear--even in countries strongly supportive of the new measures.

   It is important to clarify what sort of measures are provided for by the various UNSCRs. The UNSCRs most relevant to a review of financial vigilance measures are:

   * 1540, 1673, 1810, 1887, 1977 on non-state actor proliferation;

   * 1695, 1718, 1874 on DPRK; and

   * 1696, 1737, 1747, 1803, and 1929 on Iran.

   These Resolutions establish Committees and occasionally Expert Groups in order to support and monitor their implementation. Their measures cover not only export- and border-control issues, but also:

   * financial controls and vigilance;

   * activity-based financial prohibitions;

   * specific vigilance measures and actions on designated banks;

   * freezing of assets;

   * international cooperation and information sharing; and

   * financial and technical assistance.

   Resolution 1540 requires that States refrain from supporting by any means non-State actors from developing, acquiring, manufacturing, possessing, transporting, transferring or using nuclear, chemical or biological weapons and their delivery systems. (17) The Resolution obliges States to establish domestic controls to prevent the proliferation of nuclear, chemical and biological weapons, and their means of delivery, including by establishing appropriate controls over related materials. (18)

   It also mandates that States:

   [A]dopt and enforce appropriate effective laws which prohibit any non-State actor to manufacture, acquire, possess, develop, transport, transfer or use nuclear, chemical or biological weapons and their means of delivery, in particular for terrorist purposes, as well as attempts to engage in any of the foregoing activities, participate in them as an accomplice, assist or finance them. (19) Subsequently, the Security Council stressed the need for work under this and successor Resolutions to be coordinated with that of Committees operating under counter-terrorism Resolutions. Thus, UNSCR 1810 urged the enhanced cooperation "between the 1540 Committee, the Security Council Committee established pursuant to resolution 1267 (1999), concerning Al-Qaida and the Taliban, and the Security Council Committee established pursuant to resolution 1373 (2001)...." (20)

   With respect to Iran, UNSCR 1737 (2006) and subsequent Resolutions, the Security Council has adopted measures that include:

   * An embargo on providing to Iran proliferation-sensitive nuclear and ballistic missile-related items listed in the main text or in annexes; (21)

   * A ban on the procurement of any arms and related materiel from Iran and a ban on the supply of seven categories of conventional weapons and related materiel to Iran; (22)

   * A travel ban and an assets freeze on specific persons and entities listed in annexes. This assets freeze also applies to any individuals or entities acting on behalf of, or at the direction of, the designated persons and entities, and to entities owned or controlled by them. (23)

   The UNSCR financial measures regarding Iran are more specific than those relative to non-state actors...