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The International Law of Terrorist Financing

Published online by Cambridge University Press:  27 February 2017

Ilias Bantekas
Ilias Bantekas*
Affiliation:
School of Law, University of Westminster
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Extract

The international dimensions of terrorism had been identified prior to World War II. Nonetheless, no agreement could be reached on an acceptable definition, or appropriate action, and the 1937 Convention on the Prevention and Punishment of Terrorism, adopted by the League of Nations, was ratified by a single country. The issue resurfaced in the late 1950s when private individuals perpetrated an alarming number of incidents endangering civil aviation during transnational flights. These incidents led to the adoption of three distinct conventions on the subject, namely the 1963 Tokyo Convention on Offenses and Certain Other Acts Committed on Board Aircraft, the 1970 Hague Convention for the Suppression of Unlawful Seizure of Aircraft, and the 1971 Montreal Convention for the Suppression of Unlawful Acts Against the Safety of Civil Aviation.

Type
Current Developments
Information
American Journal of International Law , Volume 97 , Issue 2 , April 2003 , pp. 315 - 333
Copyright
Copyright © American Society of International Law 2003

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References

1 Convention on the Prevention and Punishment of the Crime of Terrorism, opened for signature Nov. 16, 1937, Doc. C.546.M.383.1937.V, 19 League of Nations O.J. 23 (1938).

2 Bantekas, Ilias, Nash, Susan, & Mackarel, Mark, International Criminal Law 229 (2001)Google Scholar.

3 Convention on Offenses and Certain Other Acts Committed on Board Aircraft, Sept. 14, 1963, 20 UST 2941, 704 UNTS 219.

4 Convention for the Suppression of Unlawful Seizure of Aircraft (Hijacking), Dec. 16, 1970, 22 UST 1641, 860 UNTS 105.

5 Convention for the Suppression of Unlawful Acts Against the Safety of Civil Aviation (Sabotage), Sept. 23, 1971, 24 UST 564, 974 UNTS 177.

6 GA Res. 51/210 (Dec. 17, 1996), affirmed by GA Res. 53/108 (Dec. 8, 1998).

7 Bantekas, Nash, & Mackarel, supra note 2, at 238, 275–88; Beveridge, Fiona, The Lockerbie Cases, 48 Int’l & Comp. L.q. 658 (1999)CrossRefGoogle Scholar.

8 GA Res. 49/60, Annex II, op. paras. 4, 5 (Dec. 9, 1994); see also GA Res. 52/165 (Dec. 15, 1997); 53/108, supra note 6; 54/110 (Dec. 9, 1999); 55/158 (Dec. 12, 2000). See generally Murphy, John F., State Support of International Terrorism (1989)Google Scholar.

9 SC Res. 748 (Mar. 31, 1992).

10 SC Res. 1044 (Jan. 31, 1996).

11 SC Res. 1189 (Aug. 13, 1998).

12 SC Res. 1214 (Dec. 8, 1998). By Resolution 1267 of October 15, 1999, the Security Council approved a series of sanctions against Afghanistan and obliged states to freeze Taliban financial resources, establishing for this purpose a monitoring committee (the so-called Afghan Sanctions Committee).

13 SC Res. 1269 (Oct. 19, 1999).

14 International Convention for the Suppression of the Financing of Terrorism, Dec. 9, 1999, 39 ILM 270 (2000)Google Scholar [hereinafter Terrorist Financing Convention].

15 The prohibition of state financing was also strongly emphasized in Article 3 of the Organization of the Islamic Conference’s Convention on Combating International Terrorism, July 1, 1999, OIC Res. 59/26–P, annex [hereinafter OIC Convention], as well as in Article 3(1) of the 1998 Arab Convention for the Suppression of Terrorism, Apr. 22, 1998, reprinted in United Nations, International Instruments Related to the Prevention and Suppression of International Terrorism, at 152, UN Sales No. 01 .V.3 (2001). Both Conventions are available online at <http://www.un.org/English/Terrorism.asp>.

16 Murphy, Sean D., Contemporary Practice of the United States, 93 AJIL 161 (1999)CrossRefGoogle ScholarPubMed. Israel and the United States have long argued that terrorist attacks justify the use offeree for defensive purposes. See the Israeli claim of preemptiveself-defense regarding the interception of a Libyan civil aircraft in 1986, UN Doc. S/PV.2655/Corr.1 (1986), and Protection Against Unconventional Threats to the Homeland and Americans Overseas, U.S. Pres. Decision Directive 62 (May 22, 1998), unclassified abstract available at <http://www.qjp.usdoj.gov/odp/docs/pdd62.htm>; Bantekas, Nash, & Mackarel, supra note 2, at 246.

17 SC Res. 1368 (Sept. 12, 2001), 1373 (Sept. 28, 2001), 40 ILM 1277, 1278 (2001).

18 U.S. Dep’t of State, Patterns of Global Terrorism (1999), at <http://www.state.gov/www/global/terrorism/1999report/intro.html>>Google Scholar. This argument is also supported by the Organisation for Economic Co-operation and Development, Financial Action Task Force, Report on Money Laundering Typologies (2001–2002), Doc. FATF-XII, at 2 (2002).

19 Boyes, Roger & Wright, Eske, Drugs Money Linked to the Kosovo Rebels, Times (London), Mar. 24, 1999 CrossRefGoogle Scholar, available in Lexis, World Library, Times File. The Security Council acknowledged that diamonds were fueling the civil warin Sierra Leone, and by Resolution 1306 (July 5, 2000) imposed a ban on the direct or indirect import of rough diamonds from areas not controlled by the government, through the establishment of a cerdficate-of-origin regime.

20 GA Res. 49/60, supra note 8. The Vienna Declaration and Programme of Action, adopted at the World Conferenceon Human Rights, emphasized that the linkage between terrorism and drug trafficking aims at the “destruction”of human rights and democracy. UN Doc. A/CONF.157/23 (1993), reprinted in 32 ILM 1661 (1993).

21 See Mylonaki, Emmanouela, The Manipulation of Organised Crime by Terrorists: Legal and Factual Perspectives, 2 Int’l Crim.L. Rev. 213 (2002)CrossRefGoogle Scholar.

22 Convention Against Organized Crime, Nov. 2, 2000, 40 ILM 335 (2001)Google Scholar.

23 Second session of the Ad Hoc Committee, UN Doc. A/AC.254/4/Rev.1 (1999).

24 Leader, Stefan & Wiencek, David, Drug Money: The Fuel for Global Terrorism, 12 Jane’s Intelligence Rev. 49 (2000)Google Scholar.

25 See generally Schmid, Alex P., The Links Between Transnational Organized Crime and Terrorist Crimes, 2 Transnat’l Organised Crime 40 (1996)Google Scholar.

26 “Estimates of the income derived by the Taliban from taxes levied on opium production range from $15 to $27 million per annum.” UN Doc. S/2001/511, para. 60.

27 SC Res. 1214, supra note 12.

28 SC Res. 1333 (Dec. 19, 2000).

29 International Monetary Fund, Brief Overview of Afghanistan’s Economy (IMF Working Paper No. 23248, 2001). Afghan farmers discovered that it was more profitable to cultivate poppies and sell to bin Laden than grow other crops, so that a relationship of trust and dependency was established with Al Qaeda. Letter Dated 15 January 2002 from the Chairman of the Security Council Committee Established Pursuant to Resolution 1267 (1999) Concerning Afghanistan, UN Doc. S/2002/65, paras. 24, 28, 31.

30 Joint Money Laundering Steering Group, Guidance Notes for the Financial Sector 136–39 (2001)Google Scholar, summarized at <http://www.jmlsg.org.uk/docs/JMLSG/45564> [hereinafter Guidance Notes].

31 Financial Action Task Force [FATF], Report on Money Laundering Typologies (2000–2001), Doc. FATF-XII, at 19–20 (Feb. 1, 2001).

32 FATF, Special Recommendations on Terrorist Financing (Oct. 31, 2001), available at <http://www.oecd.org/fatf/pdf/SRecTF_en.pdf>.

33 FATF, supra note 18, at 19–21.

34 Id. at 28.

35 For information on the function of the hawala system, see FATF, Report on Money Laundering Typologies (1999–2000), Doc. FATF-XI, at 4–8 (Feb. 3, 2000).

36 Hawalas are not generally unlawful, but after September 11, some countries with lax banking systems favoring their operation were forced to prosecute those underground or alternative remittance systems included on FBI or Security Council lists. See Williams, Daniel, Swiss Probe Illustrates Difficulties in Tracking Al Qaeda’s Cash, Wash. Post, Nov. 12, 2001, at A19 Google Scholar, available in LEXIS, News Library, WPost File (referring to the reluctant prosecution by Swiss authorities of the Al Taqwa Management Organization).

37 Exec. Order No. 13, 224, Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism, 31 C.F.R. pt. 595 (2001).

38 UN Doc. S/2002/65, supra note 29, para. 32.

39 FATF, supra note 18, at 3–4.

40 Lormel, Dennis M., chief, Financial Crimes Section, Statement Before the Subcomm. on Oversight and Investigations of the House Comm. on Financial Services (Feb. 12, 2002), at <http://www.fbi.gov/congress/congress02/lormel021202.htm>>Google Scholar.

41 Id.

42 Guidance Notes, supra note 30, at 4–5.

43 See Financial Crimes Enforcement Network, U.S. Dep’t of the Treasury, Aspects of Financial Transactions Indicative of Terrorist Funding, SAR Bull. Jan. 2002, at <http://www.treas.gov/fincen/sarbul0201-f.pdf>>Google Scholar (providing indicators that “should raise the level of concern about potential terrorist financing or other criminal context” through five cases involving Suspicious Activity Reports (SARs)).

44 FATF, supra note 18, at 6. The report cites four actual cases where terrorist funds were received through foreign investment and subsequent donations, suspicious money transfers and deposits with relief organizations, the purchase of checks and wire transfers by suspected terrorists, and suspicious purchases of money orders at amoney remittance company. Id. at 4–7.

45 Lormel, supra note 40.

46 GA Res. 51/210, supra note 6, para. 3(f).

47 Subsequent to September 11, FATF adopted the Special Recommendations on Terrorist Financing, supra note 32, Article VII of which asks states to review the adequacy of laws regarding nonprofit organizations to ensure that they are not used for terrorist financing.

48 FATF, Guidance for Financial Institutions in Detecting Terrorist Financing, para. 17 (Apr. 24, 2002), available at <http://www.oecd.org/fatf/TerFinance_en.htm> [hereinafter FATF Guidance].

49 Id., Annex 1, para. D (4).

50 Paz, Reuven, Targeting Terrorist Financing in the Middle East (Oct. 23, 2000), at <http://www.ict.org.il>>Google Scholar.

51 Id.

52 In accordance with §8 of the UK Charities Act, 1993, c. 10.

53 UK Charity Commission, Iran Aid (Dec. 10, 2001), available at <http://www.charity-commission.gov.uk/investigations/inquiryreports/iran.asp> Sections l5 and 16 of the UK Terrorism Act of 2000, infra note 101, criminalize fund-raising, as well as the use and possession of funds destined for terrorist purposes. Although no reference is made to either charities or trusts, both may be used as vehicles for terrorist financing, and therefore clearly fall within the ambit of the Act.

54 FATF, supra note 31, at 9–10.

55 Id. at 10.

56 Id. at 11–12.

57 Terrorist Financing Convention, supra note 14, Art. 2(1) (a), (b). Article 2(d) of the OIC Convention, supra note 15, states, inter alia, that “[a]ll forms of international crimes, including illegal trafficking in narcotics and human beings, money laundering, aimed at financing terrorist objectives shall be considered terrorist crimes.”

58 Convention on the Prevention and Punishment of Crimes Against Internationally Protected Persons, Including Diplomatic Agents, Dec. 14, 1973, 28 UST 1975, 1035 UNTS 167.

59 Terrorist Financing Convention, supra note 14, Art. 5(1).

60 U.S. courts have upheld their jurisdiction over subsidiaries in cases where the actions of the parent company produce effects in the United States. United States v. Aluminum Co. of America, 148 F.2d 416 (1945). The European Court of Justice has adopted an approach that views the parent company and its subsidiary as a single entity, allowing for jurisdiction over the parent company by the state where the subsidiary is incorporated. United Brands Co. v.Commission, 1978 ECR 207, [1978] 1 C.M.L.R. 429.

61 Terrorist Financing Convention, supra note 14, Art. 8(1).

62 Id., Art. 12 (1), (2). This provision was pivotal in persuading member states of the Egmont Group of Financial Intelligence Units to extend, on October 31, 2001, their obligations to the field of terrorist financing. The Egmont Group was set up to facilitate the mutual disclosure of financial information around the world and is active in the area of money laundering. Egmont Group, Principles for Information Exchange Between Financial Intelligence Units for Money Laundering Cases (June 13, 2001), available at <http://www.oecd.org/farf/pdf/EGstat-200106_en.pdf>.

63 Terrorist Financing Convention, supra note 14, Art. 18(l)(b).

64 Article 18 (1) (b) (ii) requires, with regard to legal persons, the following: “proof of incorporation, including information concerning the customer’s name, legal form, address, directors, and provisions regulating the power tobind the entity.“ Subparagraph 1 (b) (iv) further requires that financial institutions “maintain, for at least five years, all necessary records on transactions, both domestic or international.” Id., Art. 18(1).

65 FATF Guidance, supra note 48, at 3.

66 Terrorist Financing Convention, supra note 14, Art. 18(2).

67 Id, Art. 7

68 Id., Art. 10.

69 Id., Art. 11.

70 Id., Art. 6.

71 Id., Art 13.

72 SC Res. 1267, supra note 12; SC Res. 1333, supra note 28; SC Res. 1363 (July 30, 2001).

73 SC Res. 1373, supra note 17.

74 Id., op. para. 1. In practice, however, this also includes national law enforcement authorities, such as the FBI, the CIA, and the Office of Foreign Assets Control of the Treasury Department.

75 Id., op. para. 2.

76 Id., op. para. 6.

77 Note Verbale, Submission of Reports Pursuant to Paragraph 6 of Resolution 1373 (2001), available at <http://www.un.org/Docs/sc/committees/1373/reptse.htm> (visited May 1, 2003).

78 UN Doc. S/2002/34.

79 UN Doc. S/2001/1297.

80 UN Docs. S/2001/1317 (Sudan), S/2001/1332 (Iran), S/2001/1323 (Libya), and S/2001/1291 (Iraq), respectively.Iraq submitted a two-page report in which, while making slight reference to its antiterrorist legislation, it accused the United States of supporting terrorist activity against it.

81 U.S. Dep’t of the Treasury, Press Release, O’Neill Cites U.S.-Saudi Action Against Terror (Mar. 11, 2002), available at <http://usinfo.state.gov/topical/pol/terror/>. Similarly, on U.S.-Bahraini cooperation in enhancingIslamic banking regulations and promoting international accounting standards, see U.S. Dep’t of the Treasury, Press Release, U.S., Bahrain Cooperate to Block Terrorist Acts (Mar. 4, 2002), available at id.

82 FATF, supra note 32.

83 FATF Guidance, supra note 48.

84 IMF Board Discusses the Fund’s Intensified Involvement in Anti-Money Laundering and Combating the Financing of Terrorism, IMF Public Information Notice No. 01/120 (Nov. 16, 2001), available at <http://www.imf.org/external/np/sec/pn/2001/pn01120.htm>.

85 UN Doc. S/2001 /1297, supra note 79, at 4. When the Afghan Sanctions Committee published its list of terrorist organizations, the EC Council adopted Regulation 467/2001, as subsequently amended by Council Regulation 881/2002, 2002 O J. (L 139) 9, by which it decided to freeze all designated funds and other financial resources.In response to Security Council Resolution 1373, on measures taken to combat terrorist financing, the EU noted hat Council Directive 91/308, adopted in 1991, 1991 O.J. (L 166) 77, as subsequently amended by EC Money Laundering Directive 2001/97, 2001 O.J. (L 344) 76, which aims at preventing the use of financial systems for money laundering, would be applicable.

86 UN Doc. S/2002/34, at 5.

87 Financial Institutions at Risk to Be Unwittingly Used by Terrorists, Interpol Press Release (Oct. 29, 2001), available at <http://www.interpol.com/Public/ICPO/PressReleases/>>Google Scholar.

88 See UN Doc. S/2001/1274, at 4–8. An act of November 15, 2001, rendered terrorist financing an autonomous offense and brought insider trading and money laundering within the list of terrorist acts. Law No. 2001–1062 of Nov. 15, 2001, Art. 33, Journal Officiel, Nov. 16, 2001, p. 18, 215.

89 UN Doc. S/2001/1284, at 3–5.

90 UN Doc. S/2001/1270.

91 UN Doc. S/2002/76, at 3.

92 18 U.S.C. §2339B (2000).

93 28 U.S.C. §1605(a)(7) (2000).

94 18 U.S.C. §2339A(2000).

95 Id.

96 Pub. L. No. 107–56, 115 Stat. 272 (2001).

97 18 U.S.C. §§1956, 1957 (2000). The IMLA extended the range of predicate crimes that give rise to money laundering offenses under sections 1956 and 1957. The definition of “specified unlawful activity” was expanded to include terrorist-related offenses. The jurisdictional scope of such predicate offenses was also extended to include offenses committed outside the United States for which the United States would be required by treaty to extraditethe alleged offender or prosecute him if he was in its territory.

98 Patriot Act §372 (to be codified at 31 U.S.C. §5317(c)).

99 Id. §371 (c) (to be codified at 31 U.S.C. §5332 (the new bulk cash smuggling offense)).

100 UN Doc. S/2001/1220, at 10–12.

101 Terrorism Act, 2000, c. 11, §§62, 64. For the Convention, see International Convention for the Suppression of Terrorist Bombings, Jan. 9, 1998, 37 ILM 249 (1998).

102 Terrorism Act, supra note 101, §§63, 64.

103 Id. §1(4).

104 Id. §1(5).

105 Id. §3(4), (5); see Bantekas, Nash, & Mackarel, supra note 2, at 231–32.

106 Terrorism Act, supra note 101, §§15, 16, 17, 18, respectively.

107 Terrorism (United Nations Measures) Order 2001, SI 3365. The order became effective on October 10, 2001.

108 UN Doc. S/2001/1232, at 5–6.

109 Assets Frozen in the United States, UK Financial Services Authority, Press Release, Doc. FSA/PN/125/2001 (Sept. 25).

110 On the Egmont Group, see note 62 supra.

111 European Banking Federation, Recommendations for Drafting, Interpreting and Implementing Financial Sanctions Regulations (Dec. 21, 2001), available at <http://www.fbe.be/pdf/y1077aey.pdf>.

112 Wolfsberg AML Principles (Oct. 30, 2000), available at <http://www.ubs.com>.

113 Wolfsberg Statement on the Suppression of the Financing of Terrorism (Jan. 28, 2002), available at id.

114 The Basel Committee on Banking Supervision, available at <http://www.bis.org/bcbs/aboutbcbs.htm> (visited May 2, 2003).

115 Basel Committee on Banking Supervision, Customer Due Diligence for Banks (BIS Paper No. 85, 2001), available at <http://www.bis.org/bcbs/publ.htm>.

116 Basel Committee on Banking Supervision, Sharing of Financial Records Between Jurisdictions in Connection with the Fight Against Terrorist Financing 1–3 (BIS Paper No. 89, 2002), available at <http://www.bis.org/bcbs/publ.htm>