The Financial War on Terrorism

A Review of Counter-Terrorist Financing Strategies Since 2001

Nicholas Ryder

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781134447046
• Edition: 1
• Topic: Law
• Subtopic: Financial Law
• Index: Law

On September 11, 2001, 19 terrorists committed the largest and deadliest terrorist attack in the United States of America. The response from the inter-national community, and in particular the US, was swift. President George Bush declared what has commonly been referred to as either the 'War on Terror' or the 'Global War on Terror' on September 20, 2001. Four days later, he instigated the 'Financial War on Terrorism'. This book defines and identifies the so-called 'Financial War on Terrorism'. It provides a critical review of the impact of counter-terrorist financing strategies enacted by both individual jurisdictions and international organisations.

Taking a comparative approach, the book highlights the levels of compliance in each selected jurisdiction and organisation with the requirements of the 'Financial War on Terrorism'. The book analyses measures introduced by the United Nations, including the UN sanctions against terrorists and the operation of its anti-terrorist sanctions committees, and the Recommendations of the Financial Action Task Force. It also reviews the counter-terrorist financing measures of the European Union and the Council of Europe, paying particular attention to the Framework Decisions on Combating Terrorism, the Council Common Positions on Combating Terrorism and the EU Anti-Terrorism Sanctions Regime. The book goes on to review the measures put in place in the US following September 11, 2001.

Offering a much-needed legal analysis of the measures enacted under the 'Financial War on Terrorism', this book is a valuable resource for those researching in law, terrorism studies, criminal justice, and finance.

1 Introduction

DOI: 10.4324/9780203722589-1

If radical ideology and extremism are the heart of terrorism today, finance is its lifeblood. The threat of so-called ‘new terrorism’ lies not only in the weapons that the terrorists can yield, but also in their ability to procure and use those weapons through innovative, discreet and complex fund-raising and fund transfer techniques. Like any commercial venture, access to finance and the means of transfer is crucial for sustenance of terrorist organizations and vital in the formulation and implementation of their activities. ¹

¹ Acharya, A. Targeting Terrorist Financing – International Cooperation and New Regimes (Routledge Cavendish: London, 2009) at 7.

1.1 September 11, 2001 and the War on Terrorism

The synchronized suicide attacks of September 11, 2001, highlighted the critical role financial and logistical support networks play in the operations of international terrorist organizations. The challenge in tackling these networks, however, is that they are well-entrenched, sophisticated, and often shrouded in a veil of legitimacy. ²

² Levitt, M. ‘Stemming the flow of terrorist financing: practical and conceptual challenges’ (2003) Fletcher Forum of World Affairs, Spring/Winter, 27, 59–68, at 59.

On September 11, 2001, ³ 19 terrorists committed the largest and deadliest terrorist attack in the United States of America. ⁴ On the morning of 9/11 al-Qaeda terrorists hijacked four commercial airliners: American Airlines flight 11 and United Airlines flight 175, which were flown into the South and North Towers of the World Trade Centre in New York, American Airlines flight 77, which was flown into the Pentagon building, and United Airlines flight 93, which crashed in Pennsylvania. ⁵ A total of 2,977 people were murdered as a result of this act of terrorism. ⁶ The response from the international community and in particular the US was swift. President George Bush declared what has commonly become referred to as either the ‘War on Terror’ or the ‘Global War on Terror’ on September 20, 2001. ⁷ It is not the purpose of this monograph to critique and review in detail the ‘War on Terror’, but to concentrate on a very specific aspect, the ‘Financial War on Terrorism’, which was instigated by President George Bush four days later on September 24, 2001. ⁸ The ‘Financial War on Terrorism’ was a direct reaction to the financing of terrorism, which was previously neglected by the international community. Pieth commented that that ‘when the hijacked airplanes struck the twin towers of the World Trade Centre on 9/11, most observers would have considered it obvious to mobilise all possible means to prevent terrorism … including the interception of terrorist access to financial assets’. ⁹ It has been estimated that the costs of 9/11 were between $400,000 and $500,000 ¹⁰ and it has been suggested that economic damage to the US exceeded $135 billion, ¹¹ while other reports suggest the figure exceeded $3tn. ¹² As a result of these terrorist attacks the development and preservation of Home Land Security became the top priority for President Bush. This would result in the implementation of a counter-terrorist financing ¹³ strategy that resulted in this type of white-collar crime being plucked from political obscurity and being driven to the top of the US white-collar crime strategy, wrongly at the expense of other types of white-collar crime. Until this decision, US white-collar crime strategies had concentrated on money laundering, insider trading and fraud, ¹⁴ whilst its efforts to tackle terrorist financing were very limited. ¹⁵

³ Hereinafter ‘9/11’. ⁴ Hereinafter the ‘US’. ⁵ See National Commission on Terrorist Attacks upon the United States The 9/11 Commission Report (Norton and Company: New York, 2004) at 1–46. Hereinafter ‘9/11 Commission’. ⁶ CNN ‘September 11 anniversary fast facts’, September 11, 2013. Online. Available from <http://www.cnn.com/2013/07/27/us/september-11-anniversary-fast-facts/>, accessed June 23, 2014. ⁷ For a full transcript of the speech by President George Bush see CNN ‘Transcript of President Bush’s address’, September 20, 2001. Online. Available from <http://edition.cnn.com/2001/US/09/20/gen.bush.transcript/>, accessed January 20, 2014. For an interesting commentary on the appropriateness of the ‘Global War on Terror’ see Lehto, M. ‘War on terror – armed conflict with Al-Qaida?’ (2009) Nordic Journal of International Law, 78(4), 499–511. ⁸ See President George Bush ‘President freezes terrorist assets’, September 24, 2001. Online. Available from <http://webcache.googleusercontent.com/search?q=cache:http://georgewbush-whitehouse.archives.gov/news/releases/2001/09/20010924–4.html>, accessed June 23, 2014. For a more detailed commentary on the war on terror see Duffy, H. The ‘War on Terror’ and the Framework of International Law (Cambridge University Press: Cambridge, 2005) and Walker, C. Terrorism and the Law (Oxford University Press: Oxford, 2011). ⁹ Pieth, M. ‘Criminalising the financing of terrorism’ (2006) Journal of International Criminal Justice, 4(5), 1074–1086, at 1074. ¹⁰ 9/11 Commission, see n 5 ¹¹ Waszak, J. ‘The obstacles to suppressing radical Islamic terrorist financing’ (2004) Case Western Reserve Journal of International Law, 36, 673–710, at 673. ¹² Carter, S. and Cox, A. ‘One 9/11 Tally: $3.3 trillion’, September 8 2011. Online. Available from <http://www.nytimes.com/interactive/2011/09/08/us/sept-11-reckoning/cost-graphic.html?_r=0>, accessed October 6, 2014. Conversely, the International Monetary Fund estimated that the costs were $27.2 billion. See Johnston, R. and Nedelescu, O. The impact of terrorism on financial markets – IMF Working Paper WP/05/60 (International Monetary Fund: Washington DC, 2005) at 3–4. ¹³ Hereinafter ‘CTF’. For a more detailed commentary on the impact of this see Ryder, N. The Financial Crisis and White Collar Crime – the Perfect Storm (Edward Elgar: Cheltenham, 2014) at 89–95. ¹⁴ For a more detailed discussion of these policies see Ryder, N. Financial Crime in the 21st Century – Law and Policy (Edward Elgar: Cheltenham, 2011) at 20–33 and 102–123. ¹⁵ For a more detailed discussion of the US approach towards terrorist financing before September 11, 2001 see Chapter 3.

1.2 The Financial War on Terrorism and terrorist financing

It is possible to identify terrorist financing, but highly improbable. ¹⁶

¹⁶ Lormel, D. ‘Testimony of Dennis M. Lormel House Committee on Homeland Security Subcommittee on Counterterrorism and Intelligence’, May 18, 2012. Online. Available from <http://homeland.house.gov/sites/homeland.house.gov/files/Testimony%20-%20Lormel.pdf>, accessed July 17, 2014.

On September 24, 2001, President George Bush famously declared ‘we will starve terrorists of funding, turn them against each other, rout them out of their safe hiding places, and bring them to justice’. ¹⁷ This announcement was followed by frequent declarations of the freezing of the assets of terrorists and their supporters. ¹⁸ These declarations can be referred to as the ‘Rose Garden Strategy’. ¹⁹ The ‘Financial War on Terrorism’ resulted in a seismic alteration in the white-collar crime strategies of the international community. ²⁰ Acharya correctly observed that prior to 9/11 terrorist financing was not a priority and that:

¹⁷ The White House ‘Fact sheet on terrorist financing executive order’, September 24, 2001. Online. Available from <http://georgewbush-whitehouse.archives.gov/news/releases/2001/09/20010924–2.html>, accessed June 9, 2014. ¹⁸ For a more detailed discussion see Hardister, A. ‘Can we buy peace on earth? The price of freezing terrorist assets in a post-September 11 world’ (2003) North Carolina Journal of International Law and Commercial Regulation, Spring, 28, 605–661 and more recently Gurule, J. ‘The demise of the U.N. economic sanctions regime to deprive terrorist of funding’ (2009) Case Western Reserve Journal of International Law, 4, 19–63. ¹⁹ Suskind, R. The One Percent Doctrine (Simon & Schuster: New York, 2006) at 142 as cited in Eckert, S. ‘The US regulatory approach to terrorist financing’ in T. Biersteker and S. Eckert (eds) Countering the Financing of Terrorism (Routlege Cavendish: London, 2008) at 229. ²⁰ Harrison, K. and Ryder, N. The Law Relating to Financial Crime in the United Kingdom (Ashgate: Farnham, 2013) at 39. Allen noted that the efforts of the international community were broader and included ‘criminal enterprise of corporate fraudsters, drug traffickers, stock swindlers and all those seeking to insulate their criminal money from the crime’. See Allen, W. ‘The war against terrorism financing’ (2003) Journal of Money Laundering Control, 6(4), 306–310, at 306. For a more detailed discussion on the global efforts to tackle money laundering see Ryder, N. Money Laundering an Endless Cycle? A Comparative Analysis of the Anti-money Laundering Strategies in the United States of America, the United Kingdom, Australia and Canada (Routledge: Oxon, 2012).

Decades of work on money laundering was silenced by the assault on New York and Washington. It seemed as if the world had been observed through the wrong end of a telescope. Money had been spirited around the globe, by means and measures and in denominations that mocked detection. The more immediate threat to well-being was ‘clean’ money intended to kill, not illicit proceeds of crime looking for a place to hide. ²¹

²¹ Aufhauser, D. ‘Terrorist financin...

Table of contents

• Cover Page
• Half-Title Page
• Title Page
• Copyright Page
• Table of Contents
• Acknowledgements
• Preface
• 1 Introduction
• 2 International counter-terrorist financing measures and the ‘Financial War on Terrorism’
• 3 The United States of America
• 4 The United Kingdom
• 5 Australia
• 6 Terrorist financing – current threats and future trends
• 7 Conclusions and recommendations
• Bibliography
• Index