“The terrorists aren’t waiting for us to get our enforcement act together. While we struggle over how to restructure our agencies, they’re squirreling away money to fund their attacks. Shutting down terrorism financing must be an urgent and high priority,” warned Senator Chuck Grassley in March 2004 (1). Not everybody, however, shared his logic. Both the 9/11 Commission and the Treasury Department have, according to Treasury Under Secretary Stuart A. Levey, “recognized that the U.S. Government’s campaign against terrorist financing must be viewed as but one of many fronts in the global war on terror, rather than an as an end in itself” (2). Nonetheless, Levey admitted that “our counter-terrorism financing efforts are a vital part of the overall war. Terrorists require money to train, travel, communicate, indoctrinate, procure weapons, carry out attacks, and conceal themselves. Starving them of money debilitates every aspect of their operations and, ultimately, their ability to survive” (3).
Three years after September 11, the United States has designated 387 entities as terrorists or supporters of designated terrorists and frozen only $142 million in terrorist-related assets, $37 million of which has been frozen in the United States. In addition, the U.S. Government has identified and frozen over $4.5 million in al-Qaeda-related funds, while $72 million of al-Qaeda’s money has been frozen by other governments worldwide. Eighty countries have also introduced new terrorism-related legislation, and 94 have established Financial Intelligence Units. Altogether, more than 170 countries and jurisdictions have issued freezing orders, however, many frozen accounts have since been “defrosted” and the money returned to the account holders (4).
The mechanisms of terror financing have been described by Mark Cantor in his study for The American Society of International Law Task Force on Terrorism. He enumerated the means of terrorist funding to include “donations to charities, use of shell companies and otherwise legitimate businesses, and narcotics trafficking.” In addition to wire transfers through commercial banks, money was moved via trade mispricing, credit and debit cards, informal value and underground banking systems, and bulk cash smuggling. Kantor further noted that “the emergence of trust-based money transfer systems such as hawala for cross-border funds transfers creates even more enforcement difficulties, as those networks lie outside the regulatory system covering financial markets and clearing systems. The worldwide growth of bearer instruments in the capital and commodities markets also makes tracing the ownership of the value embodied in those instruments extremely difficult. In addition, the use of portable commodities such as diamonds and gold, rather than direct money transfers, requires that attention be paid to merchant markets outside the financial community. Techniques such as over- or under-invoicing, which convert a legitimate sales transaction into a device for illicitly transferring value, compound the challenges” (5).
In all European states, national legislators long ago realized that a terrorist group cannot act without an efficient infrastructure and substantial economic resources. Therefore, national criminal laws have long included a second category of offenses covering terrorist activities like attempts to steal property with the goal of obtaining funds to aid terrorist groups. Such laws were often supplemented with provisions on money laundering. After September 11, more rigorous action against money laundering was taken by extending the scope of the existing criminal laws, especially in states where financial institutions were used by the September 11 terrorists to move money (6). In most countries, September 11 caused the focus to shift from control to prevention.
Prior to September 11, terrorism financing was proscribed by the 1999 UN International Convention for the Suppression of the Financing of Terrorism. Adopted by the General Assembly in resolution 54/109 of December 9, 1999, this convention requires parties to take steps to prevent and counteract the financing of terrorists, whether direct or indirect, though groups claiming to have charitable, social or cultural goals or which also engage in such illicit activities as drug trafficking or gun running. It commits states to hold those who finance terrorism criminally, civilly or administratively liable for such acts. Finally, it provides for the identification, freezing and seizure of funds allocated for terrorist activities, as well as for the sharing of the forfeited funds with other states on a case-by-case basis, and eliminates bank secrecy as a justification for non-cooperation.
More specifically, this convention defines funds as “assets of every kind, whether tangible or intangible, movable or immovable, however acquired, and legal documents or instruments in any form, including electronic or digital, evidencing title to, or interest in, such assets, including, but not limited to, bank credits, travelers checks, bank checks, money orders, shares, securities, bonds, drafts, letters of credit.” Article 2 of the Convention stipulates that “any person commits an offence within the meaning of this Convention if that person by any means, directly or indirectly, unlawfully and willfully, provides or collects funds with the intention that they should be used or in the knowledge that they are to be used, in full or in part, to carry out…Any other act intended to cause death or serious bodily injury to a civilian, or to any other person not taking an active part in the hostilities in a situation of armed conflict, when the purpose of such act, by its nature or context, is to intimidate a population, or to compel a government or an international organization to do or to abstain from doing any act.” Section 5 further elaborates that any person also commits an offence if that person:
a) Participates as an accomplice in an offence
b) Organizes or directs others to commit an offence (e.g. incitement)
c) Intentionally contributes to the commission of one or more offences
Article 8, Section 1 calls on each State Party to the Convention to “take appropriate measures, in accordance with its domestic legal principles, for the identification, detection and freezing or seizure of any funds used or allocated for the purpose of committing the offences set forth in article 2 as well as the proceeds derived from such offences, for purposes of possible forfeiture.” Article 9, Section 1 says that “upon receiving information that a person who has committed or who is alleged to have committed an offence set forth in article 2 may be present in its territory, the State Party concerned shall take such measures as may be necessary under its domestic law to investigate the facts contained in the information.” Section 2 goes on to say that “upon being satisfied that the circumstances so warrant, the State Party in whose territory the offender or alleged offender is present shall take the appropriate measures under its domestic law so as to ensure that person’s presence for the purpose of prosecution or extradition.”
The 1999 Convention mandates further cooperation in Article 12, Section 2, which declares that “State Parties may not refuse a request for mutual legal assistance on the ground of bank secrecy” and in Article 18, Section 1, which stipulates that “State Parties shall cooperate in the prevention of the offences set forth in article 2 by taking all practicable measures, inter alia, by adapting their domestic legislation, if necessary, to prevent and counter preparations in their respective territories for the commission of those offences within or outside their territories, including: (a) Measures to prohibit in their territories illegal activities of persons and organizations that knowingly encourage, instigate, organize or engage in the commission of offences set forth in article 2; (b) Measures requiring financial institutions and other professions involved in financial transactions to utilize the most efficient measures available for the identification of their usual or occasional customers, as well as customers in whose interest accounts are opened, and to pay special attention to unusual or suspicious transactions and report transactions suspected of stemming from a criminal activity.”
On January 30, 2004, UN Resolution 1526 called for the freezing “without delay the funds and other financial assets or economic resources of these individuals, groups, undertakings and entities, including funds derived from property owned or controlled, directly or indirectly, by them or by persons acting on their behalf or at their direction, and ensure that neither these nor any other funds, financial assets or economic resources are made available, directly or indirectly, for such persons’ benefit, by their nationals or by any persons within their territory” (7).
As for national laws after September 11, in almost all countries a clear-cut separation can be made between prosecuting measures in place before 11 September 2001 and the introduction of new laws afterwards (8). Only Spain had not extended its provisions to international terrorism due to an existing international component in anti-terror legislation triggered by ETA terrorism in the French Basque country. However, all countries claimed that their provisions against money laundering could extend to terror financing. “The European Council in Tampere noted that money laundering is at the very heart of organized crime and should be rooted out wherever it occurs, and as the Extraordinary European Council of 21 September 2001 stressed that terrorism more and more relies on the methods of organized crime, the Council ensured that concrete steps are taken by the member states to punish these offences severely, and to trace, freeze, seize and confiscate the proceeds of crime by implementing the Framework Decision on money laundering and the Second Money Laundering Directive which includes, for the first time, the laundering of the proceeds of terrorism” (9).
Moreover, the UN Security Council passed several resolutions to combat terror financing. Security Council Resolution 1373 (September 2001) provides that all States shall:
(a) Prevent and suppress the financing of terrorist acts;
(b) Criminalize the willful provision or collection, by any means, directly or indirectly, of funds by their nationals or in their territories with the intention that the funds should be used, or in the knowledge that they are to be used, in order to carry out terrorist acts;
(c) Freeze without delay funds and other financial assets or economic resources of persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts; of entities owned or controlled directly or indirectly by such persons; and of persons and entities acting on behalf of, or at the direction of such persons and entities, including funds derived or generated from property owned or controlled directly or indirectly by such persons and associated persons and entities;
(d) Prohibit their nationals or any persons and entities within their territories from making any funds, financial assets or economic resources or financial or other related services available, directly or indirectly, for the benefit of persons who commit or attempt to commit or facilitate or participate in the commission of terrorist acts, of entities owned or controlled, directly or indirectly, by such persons and of persons and entities acting on behalf of or at the direction of such persons;…(10)
Resolution No. 1373 also obligates all States to “deny safe haven to those who finance [or] support…terrorist acts, or provide safe havens” and to “ensure that any person who participates in the financing…of terrorist acts or in supporting terrorist acts is brought to justice….” The Security Council’s Counterterrorism Committee (CTC) monitors the implementation of Resolution 1373 and tries to increase states’ ability to fight terrorism.
Building on 1373, subsequent Security Council Resolutions 1377 (12 November 2001) and 1390 (28 January 2002) underscore the international legal obligation of states to deny financial support and safe haven to terror supporters. In the case of Resolution No. 1390, which falls under Chapter VII of the UN Charter, all States are required to freeze the financial assets and economic resources of “Usama bin Laden, members of the Al-Qaeda organization and the Taliban and other individuals, groups, undertakings and entities associated with them,” as named on a continually updated list. However, nothing in these Resolutions outlines any consequences to a State from failing to fulfill its obligations (11).
The UN also launched a Global Program against Terrorism in October 2002 as a framework for UNODC’s operational activities in this field. The Global Program works through two technical assistance projects on strengthening the Legal Regime against Terrorism (12). As for the advocacy of terrorism, while generally “the public support of terrorist ideas as well as the incitement hereto and to religious and racial hatred are criminalized…in all democratic countries it has proven difficult to apply these provisions because they conflict with the freedom of expression.” This has been the case with Israeli, Spanish and British courts (13).
The Financial Action Task Force (FATF), which coordinates the global fight against terrorist finance and money laundering. was reauthorized for eight years when its 33 members pledged to extend its mandate through 2012 (14).
However, the UN has violated its own resolutions by financing terrorism. For example, UNRWA support of Hamas and other Palestinian terrorists. On October 4, 2004, Commissioner-General of the UN Relief and Works Agency (UNRWA) Peter Hansen unapologetically admitted to the Canadian Broadcasting Corporation (CBC) that the UN employs members of HAMAS, stating, “oh, I am sure that there are Hamas members on the UNRWA payroll, and I don’t see that as a crime.” Yet, over the past four years, thirteen Palestinians employed by UNRWA have been arrested for alleged involvement in terrorist activities. In one particularly egregious example, Nahed Rashid Ahmed Attalah, the agency’s director of food supplies for Gaza refugees, used his UN car and free travel permit to facilitate Popular Resistance Committee (PRC) terror acts. Indicted in September 2002, Attalah admitted to using his UN vehicle on multiple occasions during summer 2002 to transport arms, explosives, and PRC activists to carry out terrorist attacks (15). Only days after Hansen’s remark, thirteen more Palestinian employees of the UN were detained in connection with terrorism and are now to be indicted (16).
Even though Canada has outlawed HAMAS for its terrorist activities, Peter Hansen’s revelation to the CBC did nothing to stop Canada’s $10 million annual donation to UNRWA, a sum which accounts for 5% of the organization’s yearly budget (17). The US, which provides 30% of UNRWA’s budget, and the EU, which provides well over 55%, have both banned the military and civilian “wings” of HAMAS (18). Nevertheless, UNRWA continues to employ HAMAS members.
Thus far, the UN resolutions regarding terror financing have had impact only in countries that were interested in their implementation. However, the UN itself violated these resolutions outright by financing Saddam Hussein and numerous Islamist terrorist organizations through the Oil for Food Program. The excuse used by many UN Member States for not implementing the anti-terror financing resolutions is that there is no agreed definition of what constitutes a terrorist.
The UK Laws
In the UK, terrorism financing is covered under the 2000 Terrorism Act (19) and the 2001 Anti-Terrorism, Crime and Security Act (20). Under Schedule 1, paragraph 1(1) of the Anti-Terrorism, Crime and Security Act 2001, an authorized officer may seize any cash that he has reasonable grounds to suspect is terrorist cash, which is cash intended to be used for the purposes of terrorism, cash which consists of the resources of a proscribed terror organization, or cash which has been obtained through terrorism. Cash seized under the Act may be detained for an initial period of 48 hours, beyond which detention requires a court order. The law has been criticized for its use of magistrates’ courts, which do not possess the required specialist knowledge to address the complex issues of tracing and property ownership accompanying forfeiture cases.
The Act also introduced the new instrument of account monitoring orders which, when issued by a judge, enable the police to require financial institutions to provide information on accounts for up to 90 days. The court’s powers to freeze assets under investigation are extended to prohibit a person from dealing with property regarding which a forfeiture order has been or could be made in criminal proceedings to a pre-trial period when a criminal investigation has been started by the police but no charges have yet been brought, thus reducing the risk that the funds will be used or moved before they can be frozen.
Part 2 of the Act introduces a new power enabling the Treasury to freeze the assets of overseas governments or residents who have taken or are likely to take action to the detriment of the UK’s economy or constituting a threat to the life or property of a UK resident or national. It empowers the UK to impose sanctions in cases of urgency, unilaterally if neither the UN or the EU agree, or where unilateral action is more appropriate. Freezing orders must be approved by both houses of Parliament before the end of 28 days.
In terms of incitement, Sections 11-13 of the Terrorism Act 2000 makes it an offense to: a) belong to or profess to belong to a proscribed organization; b) to invite support for a proscribed organization or to arrange a meeting in support of it; c) to wear in public items of clothing or other articles relating to a proscribed organization in such a way as to arouse suspicion of membership in or support of it. Sections 15-17 prohibit a person from raising, possessing or using money, or entering into funding arrangements, for the purposes of terrorism or a terrorist organization. Section 18 prohibits participation of laundering activities tied to terrorist property.
Implementing the abovementioned UN resolutions led to the freezing of 35 suspect bank accounts in the UK, comprising £63 million of funds. All bank accounts associated with the individuals and organizations named in US suspect lists were also frozen. In February 2003, Dr Basheer Musa Mohammed Nafi of London University was indicted for his role in running a racketeering enterprise that supported Palestinian Islamic Jihad since 1984, for conspiracy to kill and maim, conspiracy to provide material support to the group, extortion, and perjury. The following year, it was found that stringent anti-money laundering laws coming into force in February 2004 meant that dealers in high-value goods, such as cars and jewelry, would have to register with Customs and Excise if they conducted transactions involving cash payments of more than £10,000. The law also applied to professional services firms such as accountants, law firms and tax advisers.
In November 2002, British citizen Mr. O’Driscoll was arrested upon bringing back two boxes of Vatan magazine from Belgium, to be used in fundraising for DHKP-C, a Turkish organization proscribed under Section 3(4) of the 2000 Terrorism Act. He was detained overnight and then released, but his property was retained. The defendant applied for judicial review, arguing that the offence created in the Act was incompatible with the European Convention on Human Rights, but the Secretary of State for the Home Department argued the necessity of said restrictions to national security and public safety.
In July 2003, the Saudi-based Al Rajhi Banking and Investment Corporation sued the Wall Street Journal Europe in a libel case after the Journal included the company on a list of those whose bank accounts were being monitored by the Saudi Arabian monetary authority because they “may in the past have had an association with institutions suspected of terrorism.” The evidence provided by The Wall Street Journal to the British court led Al Rajhi to withdraw the case in 2004 (e.g. he lost).
In 2004, another drawn-out libel case regarding terrorist financing was filed by Jameel and Hartwell against Times Newspapers Ltd. Hartwell car tycoon and Saudi “Golden Chain” billionaire Yousef Jameel was alleged to have helped fund training for the September 11 terrorists. Mr Jameel and Hartwell separately sued the publishers for libel, claiming that the headline used suggested that Mr Jameel and his car company were associated with Osama Bin Laden. Hartwell lost on appeal, and Jameel continues to appeal (21).
Only recently, Treasury chief Gordon Brown ordered the Bank of England to freeze all assets belonging to Abu Musab al-Zarqawi’s Tawhid and Jihad group, after it claimed responsibility for the October 10th beheading of British engineer Ken Bigley. Following meetings with the World Bank and the IMF, Brown declared it a criminal offense for any financial institution to hold or facilitate funds held by the group, saying that “we must do all in our power to ensure there is no hiding place for terrorists and no hiding place for those who finance terrorism.” A spokesman said that Brown did not condemn Zarqawi’s group earlier despite its beheading of South Korean translator Kim Sun-il, American businessman Nicholas Berg, two Bulgarian truck drivers and the two American engineers kidnapped alongside Bigley because British “legislation requires a high standard of evidence to be there before the Chancellor can instruct action to be taken” (22). It seems that as long as British citizens are not the victims, the British government is in no hurry to enact the appropriate laws.
On 8 October 2001, the European Council reaffirmed “the determination of the EU and its Member States to play their full part, in a coordinated manner, in the global coalition against terrorism, under the aegis of the United Nations. The Council also reiterated the Union’s determination to attack the sources which fund terrorism, in close cooperation with the United States.” Within Article V, which governs the EU’s Common Foreign and Security Policy (CFSP), the Council then passed a series of Common Positions regarding terrorist financing.
European Council Regulation 2580/2001 declared that combating the funding of terrorism was a decisive aspect of the fight against terrorism and called upon the Council to “take the necessary measures to combat any form of financing for terrorist activities” (23). On 26 February 2001, pursuant to UNSC Resolution 1333(2000), the European Council adopted Common Position 2001/154/CFSP which provided for the freezing of funds of Osama bin Laden and individuals and entities associated with him. This ban was extended to al-Qaeda, the Taliban and other individuals or entities associated with them in the Council Common Position of 27 May 2002 (24).
On 27 December 2001, Article 1 of Common Position 2001/930/CFSP stipulated that “the wilful provision or collection, by any means, directly or indirectly, of funds by citizens or within the territory of each of the Member States of the European Union with the intention that the funds should be used, or in the knowledge that they are to be used, in order to carry out terrorist acts shall be criminalized.” Article 2 added that “funds and other financial assets or economic resources of a) persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts; b) entities owned or controlled, directly or indirectly, by such persons; and c) persons and entities acting on behalf of or under the direction of such persons and entities, including funds derived or generated from property owned or controlled directly or indirectly by such persons and associated persons and entities, shall be frozen.” Article 3 went on to say that funds, financial assets or economic resources or financial or other related services shall not be made available, directly or indirectly, for the benefit of persons committing or supporting terrorist acts, or entities affiliated with such persons. Articles 6 and 7 prohibit Member States for giving safe haven or access to their territories to those who finance, plan, facilitate or commit terrorist acts. Article 8 requires the Member States to establish terrorist financing as a serious criminal offence and Article 9 provides for Member State cooperation in investigating or prosecuting terrorist financing cases.
Articles 2 and 3 of Common Position 2001/931/CFSP, passed that same day, enumerated a terrorist Annex (subject to amendment by the European Commission) and mandated that the European Community order the freezing of funds and other financial assets or economic resources of persons, groups and entities listed in that Annex, and prevent financial resources from being made available to such persons, groups or entities. Council Regulation 2580/2001 outlined specific definitions and measures pertaining to the EU’s fight against terrorism financing.
A major problem that neither the Council of Europe nor the UN, nor even the US, has addressed is how to define “clean money” that is sent legitimately to be used illegally by terrorist organizations (e.g. laws regarding the “soiling” of clean money). The excuse used by many EU countries for not implementing EU resolutions in full stems from the reluctance of many to recognize HAMAS and Hizbollah as terrorist organizations (25).
The EU and the Palestinians
Former PA Interior Minister Mohammad Dahlan confessed to The Guardian August 2004, that all of the funds which foreign countries had donated to the Palestinian Authority, a total of $5 billion, “have gone down the drain, and we don’t know to where.” An independent international study found that between 1993 and 2002, the EU became the largest single contributor of direct budgetary assistance to the Palestinian Authority (PA), contributing over €2 billion itself and a further €2 billion through the individual member states (26). Nigel Roberts of the World Bank notes that total financial aid to the Palestinians constitutes “the highest per capita aid transfer in the history of foreign aid anywhere.” Despite this statement, the World Bank continued to transfer money to the corrupt Palestinian Authority, disregarding its own obligations for transparency and accountability.
The Palestinian Authority, since its inception in 1993, has systematically abused and misused the international aid it has been receiving. A minor example is the 7,000 fictitious names discovered on the PA payroll. Like the fish that begins rotting from its head, the Palestinian authority’s infamous corruption begins with nepotism by Chairman Arafat, whose wife and family are regular beneficiaries of millions of dollars in aid which was designated to the Palestinian people. The same is true of Prime Minister Ahmed Qurei and other members of Arafat’s government and security forces. EU allocations are not fully monitored, as claimed, and the ability of the EU’s anti-fraud office OLAF to safeguard taxpayers’ money is lacking. Meanwhile, the Al-Aksa Martyrs, which the EU has outlawed, remains on the PA payroll. A BBC interview with Fatah leaders in November 2003 revealed that the PA had reimbursed $50,000 of monthly expenses to the Martyrs Brigade. Other paramilitary terror groups such as “Force 17” and “Tanzim,” as well as group leaders such as Marwan Barghouti, likewise draw their salaries and expenses from the Palestinian Authority’s budget. Not surprisingly, significant portions of donated funds never reach their intended civilian recipients. This is why, in the words of a Palestinian human rights activist, “The biggest problem the Palestinians are facing today is the fact that they have a leadership that is continuing to steal their money” (27).
Following border closures at the start of the 2000 intifada, EU funding to the PA increased dramatically; in January 2003 — June 2004, the EU donated $112.79 million, over 26% of total funding bound for the PA. However, the growing economic hardship among Palestinians was a clear indication that much of the aid was diverted for the use of the Palestinian leadership and terrorist organizations. Meanwhile, international aid for crises like the 2004 humanitarian disaster in Sudan is flagging, placing a grater onus on the donors to make sure that the large sums they allocate towards the Palestinian cause are being used effectively.
The EU continues to maintain that the IMF closely monitors use of donated funds, but in the IMF’s own words, it “does not and cannot control downstream spending by the various Palestinian agencies,” ultimately leaving the matter to be decided between the PA and the donors. The IMF further found that what little PA reform did take place in 2004 only began when international donors stopped sending funds indiscriminately. A widely circulated 2003 petition led to the formation of a Working Group of MEPs on Budgetary Assistance to the PA in the European Parliament. MEP went on record as saying that ‘Israel really shouldn’t exist,’ that it ‘should be replaced by Palestine,’ and that as a result ‘Only if the DNA of the suicide bombers will match the DNA of those who received Euros will we accept it as evidence’ (28). Unsurprisingly, the Working Group’s findings the following year marked no “conclusive evidence” of EU funds going to finance terrorists. Similarly, Jaweed Al-Ghussein, who for 12 years was chairman of the Palestine National Fund, the financial arm of the Palestine Liberation Organisation, acknolwedged that Mr. Arafat received monthly checks amounting to £67 million per annum despite the lack of any audit or accounting system to control either donations received or expenditures made by Mr Arafat.
When Theresa Villiers, a London MEP, raised the issue of misused funds before the European Commission, External Relations Commissioner Chris Patten explicitly denied that any EU aid had been misused by Chairman Arafat and the Palestinian Authority (29). But tracing individual euros is practically impossible because money is fungible. Indeed, all foreign aid to the PA is deposited in a single general-purpose bank account. Moreover, the Working Group found but neglected to mention that the same administrators in charge of EU-funded budgets were caught by the IMF in the process of diverting at least $900 million from other Palestinian taxes and revenues. A November 2003 60 Minutes report also found that Chairman Arafat had stashed close to $1 billion in a secret portfolio, accumulated from public funds that were supposed to be used to benefit the Palestinians. Just before his death on November 4, 2004 in Paris, new information regarding much larger amounts of money stolen by Arafat was revealed (30).
Despite these revelations, EU member states continue to fund the PA. The UK alone has contributed more than £190 million for EU funding to the West Bank and Gaza between 1994 and 2003, and a further £12 million via the World Bank. According to British Foreign Secretary Jack Straw, in June 2004 the UK was spending over £21 million on assistance programs in Gaza and the West Bank, with £19 million more going to UNRWA and 7 million to the new World Bank Trust Fund. In addition to the EU, the World Bank, and UNWRA, the US government’s contribution to the Palestinians through USAID since 1993 has amounted to $1.3 billion.
Despite the well-documented and pervasive abuse of international funds, and the Palestinian Authority’s direct involvement in terrorist activities, international aid keeps pouring into the pockets of the PA’s corrupt leadership.
In another demonstration of the EU’s disregard for the War on Terror, Javier Solana and his colleagues, in the October 2004, signed the Syria-EU Association Agreement in Brussels. This Agreement and its trade provisions mean that the EU will be helping to finance Syria’s terror machine despite the fact that Syria remains on US terror list and embargoed (31).
To prevent incitement to terrorism, the abolition of the religious privilege in the Associations Act resulted in the banning of organizations like the Turkish Islamic group ‘Kalifatsstaat’ and its sister organizations, which campaigned against democracy and party pluralism, and disseminated anti-Semitic and anti-Zionist slogans. More than 200 bank accounts of individuals and entities associated with al-Qaeda and the Taliban were also frozen under article 3 of Regulation (EC) No 337/2000 (adopted by the European Council on Feb 14, 2000), article 2 of Regulation (EC) No 467/2001 (32) and article 2 of Regulation (EC) No 881/2002 (33), and under sections 2 to 7 of the German Foreign Trade and Payments Act (Auenwirtschaftsgesetz), implementing Resolutions 1267, 1333, 1373 and 1390 of the Security Council. Germany likewise signed the UN Convention for the Suppression of the Financing of Terrorism on July 20, 2002. Germany also has fully incorporated the FATF Forty Recommendations for combating money laundering and its Eight Special Recommendations regarding the financing of terrorism, including questionable actions carried out via the Internet (34).
The financing of terrorism falls under Section 129a of the German Criminal Code (35). Moreover, under the August 2002 Law for the Improvement of the Fight Against Money Laundering and the Fight Against the Financing of Terrorism, an independent unit responsible for the surveillance of suspicious financial streams was established within the Federal Office of Criminal Investigation. This law was prompted in part by the finding that the September 11 terrorists had moved money through German financial institutions, as well as by the EU’s second money laundering directive (36).
Section 8, paragraphs 5 to 8 of the Federal Constitution Protection Act allows authorities, under certain conditions, to obtain information from credit institutes, financial service institutions, finance companies, postal service providers, aviation companies, and companies providing telecommunications services and teleservices on bank accounts, account-holders and other authorized persons, monetary transactions and investments.
The Fourth Financial Market Promotion Act pursues the objectives of closing gaps in the defenses against money laundering, facilitating the tracking down of illegal money derived from criminal activity, and fighting the financing the terrorism. The powers of the Federal Agency for Financial Services to identify money laundering and illegal banking practices and transactions used to finance the logistics of terrorism have been enhanced. Section 25a, paragraph 1(4) of the Banking Act also stipulates that financial institutions are obliged under the “know your customer principle” to create adequate internal security systems for fighting money laundering and fraudulent activities (37).
After September 11, the German government responded quickly to freeze over 30 accounts of entities associated with terrorists, but the bulk of these assets were afterwards released, so that at the end of 2003, only 13 accounts containing 3532 euros remained frozen (38). Later, the efforts of German authorities led to a 2002 seizure of $296,000 which had been collected by a Hamas front organization (39). On May 25, 2004, the German Embassy in Washington D.C. brought together 100 participants for a bilateral conference titled “Money Laundering and Terrorist Financing: What Has Been Achieved in Countering Abuse of the Financial System? What Needs to be Done” (40)? Altogether, Germany is conducting a total of 181 investigations against suspected participants in Islamist terrorism, of which 51 cases fall under section 129a (Formation of Terrorist Organizations) of the Criminal Code (41).
The single, central, federal financial intelligence unit (FIU) established in 2002 within the Bundeskriminalamt (National Police Office) functions as an administrative unit in charge of financial market supervision, customs, and legal oversight. It is responsible for developing money laundering cases before they go to prosecutors for formal investigation, and it also exchanges information with its counterparts in other countries. German federalism has meant that actual enforcement has been carried out by individual states’ customs/police/financial investigations unit (“GFG”), which works closely with the federal FIU.
However, Germany’s strict data privacy laws have made it difficult for authorities to monitor and take action against financial accounts and transfers used by terrorist networks (42).
Laws to prevent terrorism were passed in 2001 and 2003. Their focus was to suppress weapons trading, drug trafficking and the use of new technologies, seeking prevention through curbing the flow of weapons and financial support. Like Germany, France is a party to the Convention on the Suppression of the Financing of Terrorism, the most recent addition to French terrorism law on 10 April 2002. However, French law does not explicitly stipulate a penalty for failure to report suspicious activities. Moreover, neither French nor German law explicitly defines the term “terrorism.”
Article 421-1 of the Penal Code (43) stipulates that insider trading and money-laundering constitute an offence if a person by any means, directly or indirectly, unlawfully or willfully, provides or collects funds with the intention that they should be used or in the knowledge that they are to be used to carry out acts of terrorism. Article L-152-1 of the Monetary and Financial Code stipulates that all persons who transfer funds, securities or financial instruments worth 7,600 Euros or more into or out of the country without going through a credit institution or service organization, must file a declaration with customs. Failure to comply can result in confiscation of the object in question. Article L-561-1 of the Monetary and Financial Code requires the reporting of operations which are known to proceed from drug trafficking or the activities of criminal organizations, or suspicious transactions that might be linked to terrorist activities (44).
In October 2002, French newspapers and anti-terrorism investigators faulted Britain for failing to extradite an Algerian man accused of financing the Paris metro bombings in 1995. Two other Algerian men went on trial in Paris, accused of an Islamic extremist terror campaign which killed eight people and injured more than 200. The court decided to postpone the trial of Rachid Ramda, 33, who has been in prison in Britain since shortly after the attack while the Home Office and courts considered requests from Paris for his extradition. In 1996, a British court originally ruled that he should be sent to France but the Government failed to implement the order. The Home Secretary, David Blunkett, finally decided that Mr. Ramda should be extradited in October 2001, but his decision was overturned by the High Court, which ruled that Mr Ramda could not be guaranteed a fair trial in France.
In June 2003, French magistrates put 17 members of the People’s Mojahedeen of Iran under formal investigation for aiding terrorism, “criminal association in relation with a terrorist enterprise” and “financing of a terrorist enterprise.” Earlier 1,300 agents raided 13 addresses in the Paris area, seizing computers, files and nine million dollars in cash. But almost all of the 159 people detained were later released.
The French government’s behavior regarding the war on terrorism can best be described as hypocritical: although it acknowledges most terrorist groups, it maintains that both HAMAS and Hizbollah are political movements, and continues to facilitate the transfer of funds to these organizations. It also supports the Syrian government, despite the US embargo on Syria. And finally, its involvement with the financing of Saddam Hussein’s regime has been well-documented in the Duelfer Report (45).
Italy saw the post-9/11 inclusion of a new paragraph in Article 270(b) of the Criminal Code defining international terrorism and rendering mandatory the confiscation of goods used in this context. Law 135 of Mar 29, 2001 provided for the reform and consolidation of tourism laws in Gazzetta ufficiale on April 20, 2001 (46). Law number 431 of December 14, 2001 adopted the UN Security Council and EU regulations on international terrorism financing (47). Other organizations such as the Military Police Unit at the Office of the Prime Minister and the Committee on Security and Public Order (48) chaired by the Minister of Home Affairs have also stepped up their activities. As far as international cooperation is concerned, Italy has ratified the twelve United Nations Conventions to combat terrorism (49).
Italy is actively contributing to the implementation of the European Union Council Plan of Action which adopted the framework decisions on combating terrorism, the European Arrest Warrant and the establishment of joint investigative teams. The Government has approved the Bill ratifying the “Convention on Judicial Assistance in Criminal Matters”, and has also issued measures to amend the Code of Criminal Procedure accordingly. It has also taken steps to encourage the full use of the innovative instrument of Community “lists” for the purpose of freezing the assets of individuals and groups engaged in terrorist acts which were drawn up at the end of 2001, and are regularly expanded and updated.
In March 2004, Italy submitted ten al-Qaeda loyalists to be listed as terrorists by the United Nations, and the US Treasury Department confirmed their terrorist designation. Headed by Specially Designated Global Terrorist Djamel Lounici, these ten men used their relationship with the Armed Islamic Group (GIA) to provide financial and material support for terrorist activities in Algeria and abroad, and assisted in illegal immigration to Italy. All ten individuals were convicted by the Tribunale di Napoli (50). In June 2004, the US Treasury Department identified six more members of an al-Qaeda cell operating in Italy’s Lombardi region. Mohamed Ben Mohamed Abdelhedi, Kamel Darraji, Mohamed El Mahfoudi, Imed Ben Bechir Jammali, Habib Ben Ahmed Loubiri, and Chabaane Ben Mohamed Trabelsi were part of a cell that engaged in the trafficking of arms and chemical materials, and has supplied its members with false travel documents. The cell was associated with the Salafist Group for Preaching and Combat (GSPC), which is on the United Nations’ list of terrorist entities linked to bin Laden, and thus triggered international obligations requiring all U.N. member countries to freeze the cell’s assets (51).
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