Time to reexamine regulation designed to counter the financing of terrorism.

• Author: Barrett, Richard
• Position: The World Conference on Combating Terrorist Financing

1. INTRODUCTION

   The attacks in the United States on September 11, 2001, stunned the world and demanded an immediate response. But the perpetrators of the attacks were dead, their identities undiscovered, their cause obscure, and their associates hidden. Although the United States had the option to initiate immediate military action against the Taliban, Al Qaeda, even then, was too nebulous a target to defeat by military means alone. Instead, the U.S directed the main thrust of its non-military action against the financing of terrorism, and a great deal of new regulation resulted. It is not easily determined what impact this regulation has had on the terrorist threat, though it has had considerable consequences for the financial community.

   This article looks at the development of regulation designed to counter the financing of terrorism in the aftermath of the attacks of September 2001. It looks at Al Qaeda's financial needs and how it tries to meet them. It notes that the cost of mounting a significant attack need not be large, and points out that local terrorist cells generally raise money in unobtrusive ways. Against this background, the article questions whether the current amount of regulation of the financial sector has the impact that it intends. It suggests that it is time to reexamine rather than to increase regulation, and proposes bringing the private sector into closer cooperation with counter terrorist officials in order to design a more effective and more dynamic counter terrorist financing regime.

2. THE IMMEDIATE REACTION TO THE 9/11 ATTACKS

   Before September 11, 2001, the threat from terrorism initiated by Osama bin Laden and Al Qaeda had been of concern to counter-terrorist specialists but had attracted little political attention, especially at the international level. (1) The United Nations Security Council had instituted the most notable international action by imposing sanctions against the Taliban in Afghanistan pursuant to Resolution 1267 in 1999. (2) These sanctions were designed to put pressure on the Taliban to hand Osama bin Laden over for trial following the near simultaneous bombings of the United States Embassies in Nairobi and Dares Salaam in August 1998, for which bin Laden and his Al Qaeda organization were held responsible. (3)

   Serious as the East Africa attacks were, (4) the 9/11 attacks were of a different magnitude. (5) Osama bin Laden later claimed that the 9/11 attacks cost the U.S. economy $500 billion. (6) Although his estimate was an optimistic guess, the actual costs exceed that estimate when taking into account the cost of all resulting counter-terrorist measures, including the wars in Afghanistan and Iraq. (7) In addition to the deaths and economic consequences, the attacks had a profound psychological impact. The attacks were not only carried out on American soil, but also on global television, constantly replayed in every corner of the world. Even in 2001 people recognized that the attacks had caused a new departure in international relations. (8) Although it was not obvious where this new departure would lead, it was clear that the U.S. administration was determined to show its might and its reach as soon as possible, as evidenced by the immediate decision to declare a war on terrorism. (9)

   Seeking to strike back, the U.S. saw the Taliban regime in Afghanistan as its first and clearest target. The Taliban not only provided sanctuary to Osama bin Laden, but also allowed Al Qaeda a base from which to plan further attacks. (10) The "war on terrorism" took speedy form, and by October the Taliban had been chased from Kabul and Al Qaeda dispersed. (11) But the overthrow of the Taliban regime could not be the end of the story; it already was evident that Al Qaeda had no clear geographical limits, nor any dependence on an active, free and visible leadership. Al Qaeda was a loose-knit global movement with a sustained capacity to inflict real harm, and therefore demanded a response greater than the United States or its close allies could provide on their own. (12)

   The U.N. Security Council adopted Resolution 1373 on September 28, 2001, just seventeen days after the attacks. (13) This elaborate and far-reaching resolution passed unanimously, and since the Security Council had adopted the resolution under Chapter VII of the U.N. Charter, it had mandatory effect for all Member States. One of the primary consequences of the resolution was to oblige universal compliance with the main provisions of the 1999 United Nations international Convention for the Suppression of the Financing of Terrorism, (14) which had been negotiated through the General Assembly and had therefore already gained the support of a large number of the other 174 Member States of the United Nations. (15) Following the Security Council meeting, on October 21, 2001, the Financial Action Task Force, set up by the G7 in 1989, adopted eight special recommendations on terrorist financing to add to its existing forty recommendations on anti-money laundering. (16)

   From the start therefore, in addition to the military response, the U.S. and the rest of the international community were highly focused on preventing the financing of terrorism as a primary means of reducing the threat of further attacks. This was because of all the non-military actions that seemed necessary, perhaps dealing with the financing of terrorism seemed the most obvious. It also had two principal attractions: first there was already a great deal of work in hand, such as the negotiation of the international convention, and second, financing was an area where the terrorists had to interact with the non-terrorist world. The focus on financing allowed exploitation of an area of common ground where the advantage might lie with counter-terrorist efforts.

   Especially in the West, the idea that a group of relatively accomplished and well-educated men could be driven by such strong motivation to commit suicide in a well-planned, pre-meditated and outstandingly dramatic way, designed deliberately to cause the death of many others, was almost beyond understanding. There was no immediate effort to analyze what had given rise to this motivation, nor how to undermine it; it was assumed to be an expression of the Al Qaeda agenda, in itself opaque and seemingly irrelevant to the modern world. What was known in 2001 about the demands and grievances of Al Qaeda had been learned from statements made by its leaders, including Osama bin Laden's "Declaration of War Against the Americans Occupying the Land of the Two Holy Places," first published in the London newspaper Al-Quds Al-Arabi in August 1996. (17) These demands were not only unrealistic and unacceptable, they offered no basis for dialogue--not that there was then, nor has been since, any serious talk of negotiation. (18) What was required in response to Al Qaeda was international solidarity behind an effort to starve the movement of resources and stifle its development.

3. THE DEVELOPMENT OF REGULATION AND ITS IMPACT

   A new global regime emerged to counter the flow of money to Al Qaeda. This was based in part on the international regulation introduced by the United Nations and in part on regional...