The demise of the U.N. economic sanctions regime to deprive terrorists of funding.

• Author: Gurule, Jimmy
• Position: The World Conference on Combating Terrorist Financing

In response to the September 11, 2001 terrorist attacks and the growing prevalence of terrorist activities around the world, the U.N. Security Council devised and implemented a global economic sanctions regime to freeze the funds, financial assets, and economic resources of individuals and entities who finance and support acts of terrorism. Pursuant to Chapter VII of the U.N. Charter, the Security Council adopted Resolutions 1267 (1999) and 1333 (2000), which impose duties on States to prevent and suppress the financing of terrorism. The international economic sanctions regime established by these resolutions has been characterized as "the sole vehicle for truly global action against the twin threats of Al-Qaida and the Taliban." To date, pursuant to Resolutions 1267 and 1333, approximately 490 individuals and entities have been placed on a list, known as the "Consolidated List," and their assets are required to be frozen by Member States.

Despite its importance in combating global terrorism, the Security Council's asset freeze program has reached a critical juncture. Senior counter-terrorism officials are less enthusiastic about the economic sanctions regime than ever before. Increasingly fewer names are being submitted for designation under Resolutions 1267 and 1333, and terrorist-related assets are no longer being frozen. As a result, al Qaeda and the Taliban retain ample funding to sustain their lethal operations and finance deadly terrorist attacks. In short, based on every objective measurement, the U.N. counter-terrorism sanctions program appears to be failing. Unless significant measures are taken to hold States accountable for their failure to comply with their duty to freeze terrorist assets, the anti-terrorist financing sanctions regime will cease to be relevant in the fight against global terrorism.

This article examines the evolution, operation, and implementation of the U.N. sanctions regime to freeze terrorist assets, and makes several important recommendations for enhancing the effectiveness of the counter-terrorism sanctions program.

1. THE INTERNATIONAL LEGAL DUTY TO FREEZE TERRORIST-RELATED ASSETS

   In response to the September 11, 2001 terrorist attacks and the growing prevalence of terrorist activities around the world, the United Nations Security Council devised and implemented a global economic sanctions regime to freeze the funds, financial assets, and economic resources of individuals and entities who finance and support acts of terrorism. Pursuant to its Chapter VII authority, (1) the Security Council has adopted numerous resolutions imposing duties on Member States to prevent and suppress the financing of terrorism. (2) Among other things, these resolutions require countries to "freeze without delay" the funds, financial assets and economic resources of Osama bin Laden, members of al Qaeda, the Taliban and persons and entities associated with them. (3) The international economic sanctions regime established by these resolutions has been characterized as "the sole vehicle for truly global action against the twin threats of Al-Qaida and the Taliban." (4)

   The 1999 International Convention for the Suppression of the Financing of Terrorism (Terrorist Financing Convention), also recognizing the need for the world community to work cooperatively to deprive terrorists of funding, complements the work of the Security Council. (5) On June 25, 2002, the United States ratified the Terrorist Financing Convention. (6) Among other important duties, it requires parties to the Terrorist Financing Convention to enact domestic legislation to criminalize and punish as a grave offense those persons who willfully provide or collect funds with the intention or knowledge that they will be used to carry out acts of terrorism. (7) The Terrorist Financing Convention further requires State Parties to hold legal entities, such as banks, liable for providing financial services to terrorists by the imposition of criminal, civil, or administrative sanctions. (8) Most importantly, the Terrorist Financing Convention imposes a legal obligation on signatories to freeze any funds used or allocated for the purpose of committing a terrorist offense. Article 8(1) provides that "[e]ach State Party shall take appropriate measures ... for the identification, detection and freezing or seizure of any funds used or allocated for the purpose of committing [terrorist-related] offences." (9)

   The Financial Action Task Force on Money Laundering and Terrorist Financing (FATF), an inter-governmental body responsible for developing and promoting international standards to combat money laundering and terrorist financing, also acknowledges the importance of international action to freeze terrorist assets. (10) The FATF is comprised of thirty-four member countries, associate members, FATF-style regional bodies, and several international organizations. (11) In response to the 9/11 terrorist attacks, FATF adopted Nine Special Recommendations on Terrorist Financing, including a provision on terrorist asset freezing. Special Recommendation III: Freezing and Confiscating Terrorist Assets provides that "[e]ach country should implement measures to freeze without delay funds or other assets of terrorists, those who finance terrorist organizations in accordance with the United Nations resolutions relating to the prevention and suppression of the financing of terrorist acts." (12) Special Recommendation III is intended to implement the obligations imposed on States by Resolution 1267 (1999) and 1373 (2001) to freeze terrorist-related assets. The combination of these three authorities--the U.N. Security Council anti-terrorist financing resolutions, the Terrorist Financing Convention, and the FATF's Special Recommendation III: Freezing and Confiscating Terrorist Assets--makes a compelling case that every country has a legal duty to freeze the funds and curtail the flow of financial assets to terrorists and their financial supporters.

   The successful implementation of an effective terrorist asset freezing regime is critical in combating the financing of terrorism. The U.N. working group of counter-terrorism experts, established by 2004 Security Council Resolution 1566, states that "freezing of financial assets is an indispensable tool in curtailing terrorism." (13) It is estimated that approximately $85 million in terrorist-related funds have been frozen under the international sanctions regime. (14) However, the economic sanctions program serves several other valuable purposes. First, asset freeze acts as a deterrent against those who otherwise might be willing to finance terrorist activity. (15) Second, persons designated under relevant Security Council resolutions are isolated from the international financial community. Their funds, financial assets and economic resources are subject to being frozen anywhere in the world. Thus, the fear of having their funds and other assets frozen may cause potential donors to reconsider funding terrorist activities. Second, asset freeze reduces the flow of money and other support to terrorists and makes the transfer of funds more difficult to effect. (16) The economic sanctions program "terminate[s] terrorist cash flows by shutting down pipelines used to move terrorist-related assets." (17) Third, an effective financial ban may expose terrorist financing "money trails" that may generate leads to previously unknown terrorist cells and financiers. (18) Finally, asset freeze may restrict terrorists from operating extensive terrorist networks, training camps and social programs for funding the families of homicide bombers. (19)

   The U.N. Security Council has been at the forefront of developing and monitoring the implementation of the anti-terrorism asset freeze program. In addition to adopting numerous resolutions that impose a legal duty on Member States to freeze terrorist assets, the Security Council has established various committees and expert working groups to monitor the action taken by States to comply with measures imposed by these resolutions. (20) Furthermore, the Council has created a list, known as the "Consolidated List" or "Sanctions List," of individuals and entities associated with bin Laden, al Qaeda, or the Taliban whose assets are required to be frozen by Member States. (21) Each year, however, fewer and fewer names are being submitted by States for inclusion on the Consolidated List for asset freeze. (22) For example, in 2007, only eight names were added to the Sanctions List, the lowest annual rate ever, continuing a downward trend observable since 2001. (23) Equally disturbing, the amount of terrorist assets frozen over the last several years has stalled. There has been no increase in terrorist assets frozen since 2004. (24) In fact, the trend is moving in the opposite direction. At the end of 2007, approximately $85 million remained frozen under the sanctions regime, down from a previous high of $91.4 million. (25) The continuing viability of the U.N. anti-terrorist financing sanctions program is further threatened by numerous legal challenges. While the European Court of First Instance denied claims that the designation process violates fundamental human rights and due process principles, two cases have been appealed to the Court of Justice of the European Communities. (26) In a January 2008 advisory opinion, an Advocate General for the higher court rejected the lower court's conclusion that it lacked competence to review actions implementing Security Council resolutions issued under Chapter VII of the U.N. Charter against European Union due process and human rights standards. The Advocate General found that the European Union regulation implementing the economic sanctions, EC 881/2002, infringed on the right to be heard, the right to effective judicial review by an independent tribunal, and the right to property. (27) If the Advocate General's position is adopted by the European...