FATF’s Role in Combating Terrorist Financing

 

Before delving into details of analyzing the role Financial Action Task Force (FATF) has been playing in addressing the problem of financing of terrorism, it may be in order to look at largely accepted definitions of terrorism. Terrorism knowing no boundaries has been hardly defined uniformly and hence we have to content with some elements that characterize terrorism in general though terrorist financing is confined to the use of funds for terrorist activities.

Terrorism or terrorist act “is the calculated act of violence or (the threat of violence) against civilians in order to attain goals that are political or religious or ideological in nature, that is done through intimidation or coercion or instilling fear”. Additionally, terrorism is understood to be the “use of violence and threats to intimidate or coerce especially for political purposes. It is the systematic use of terror especially as a means of coercion”.

The failure of the international community to agree on one particular form of definition despite several years of efforts in that direction, terrorism is accepted as a scourge and affront to humanity necessitating worldwide condemnation. On account of the global ramifications resulting from terrorism, countries around the world have realized that tackling such global menace requires concerted endeavors multilaterally.

It is this realization on the part of member states of the UN that has produced a number of multilateral conventions/treaties/agreements that aim at confronting the perils of terrorism. As technology has progressed so has the tactic of terrorists, who have been masterminding available knowhow for evil designs. In introducing newer technologies in terrorist activities, the role of financial resources has been found crucial. Should the terrorists be denied needed finance, maybe their destructiveness can be minimized considerably.

In consideration of above conviction the international community was prompted to negotiate and conclude accordingly a separate convention dealing specifically with the financing of terrorist act. This convention has been buttressed by a number of UN Security Council resolutions particularly 1267 (regarding al Qaeda and Taliban) and 1373 (adopted after 9/11 attacks).

To discourage the access to finance by the terrorists the G-7 (Canada, France, Germany, Italy, Japan, UK and U.S.) created Financial Action Task Force (FATF) in 1989. This body has been instrumental in strengthening UN sanctions imposed against the countries that fail to conform to anti-terrorist financing regulations. While acknowledging this value of FATF in combating financing of terrorist act, Stuart Levy and Christy Clark in their most recent (Sep-Oct, 2011) Foreign Policy essay have argued that a simple reform created for stopping terrorist financiers would dramatically strengthen international sanctions, and cut off the flow of funds to some of the world’s worst regimes.

Financial Action Task Force, undoubtedly world’s premier standard-setting body for combating terrorist financing and money laundering, should develop and enforce standards for sanctions implementation. The real problem in addressing the terrorist financing is not the lack of sanctions resolutions approved by the UN Security Council but their due enforcement. The above-mentioned essayists in the Foreign Policy magazine have enumerated how pathetic form the UN assumes while trying to punish the sanctions violators.

They illustrate how the UN attempts to deal with the cases of notorious sanctions-busting. To them the UN usually writes a letter to the relevant country seeking an explanation. Such letter is easily ignored and therefore paradoxically reinforces the notion that the violators enjoy the impunity. Sanctions are obligatory on the part of all member states of UN when the same are applied on the basis of Security Council resolutions. Hence, steps should necessarily be taken to ensure that each country builds the capacity it needs to implement and enforce those obligations.

In the wake of UN Security Council resolution 1373 a number of obligations have arisen for UN members with regard to assisting the international community in fighting terrorism, and against such background country like Nepal is constrained to fully conform to UN requirements due to lack of capacity to implement the resolution. Our need for capacity building including technology has to be given serious consideration in evaluating our performance in implementing resolution 1373, which is the most comprehensive in connection with terrorism.

In this vein comes the role of FATF, which since its creation has successfully changed the international landscape of financial controls and combating money laundering and terrorist financing. Both Stuart Levy and Christy Clark contend that by publishing standards—embodied in its “40+9” recommendations FATF has incentivized countries to continually improve. Most countries seek to be part of this process and gain FATF’s seal of approval, or at least not warrant its disapproval in their opinion.

It would be relevant to list the famous 9 recommendations which are as follows:

Ratification and implementation of UN instruments, Criminalizing the financing of terrorism and associated money laundering, Freezing and confiscating terrorist assets, Reporting suspicious transactions related to terrorism, International Cooperation, Alternative remittances, Wire transfer, Non-profit organization, and Cash couriers.

Besides the above there are two main counterterrorism financing recommendations. These recommendations help member countries meet UN sanctions obligations. One of them is to criminalize the financing of terrorism, terrorist acts and terrorist organizations. The other is related to the fact the countries “should implement measures to freeze without delay funds, or other assets of terrorists—in accordance with the UN resolutions and that each country should also adopt and implement measures, including legislative ones, which would enable the competent authorities to seize and confiscate property that is the proceeds of, or used in, or intended or collected for use in, the financing of terrorism, terrorist acts or terrorist organization”.

FATF’s evaluations are key to its success. Financial institutions utilize these evaluations in their decisions about how and where to do business, and in their customer risk assessments. A negative evaluation can make it more difficult for banks, companies, and even individuals in a country to access needed financial resources. Considering this fact, FATF has got an influential role in confronting the challenge of terrorist financing.