The Relationship Between Money Laundering and Terrorist Financing

I would like to emphasize that for the purpose of today's discussion on the importance of the transnational sharing of financial intelligence, the benefits apply both in the areas of fighting the laundering of money that is the proceeds of crime and in combating the financing of terrorism. A lot of emphasis has been placed upon the fact that terrorism might be financed out of funds that have been derived from legitimate economic activity, moved in transactions that themselves are neither large in value nor out of the ordinary, and as such would not be detectable by financial institutions. Indeed the 9/11 Commission concluded that "[t]he 9/11 plotters eventually spent somewhere between $400,000 and $500,000 to plan and conduct their attack."¹ Although the hijackers used U.S. bank accounts in their own names, there was no reason to raise suspicion among the banks involved.²

In efforts to detect, prevent and penalize both money laundering and terrorist financing, it is critical to "follow the money." Most criminal activity is motivated by financial gain, which leads to the laundering of proceeds. With respect to terrorist financing, I would like to quote statements from a few weeks ago, on April 1, 2008, by U.S. Treasury Under Secretary for Terrorism and Financial Intelligence, Stuart Levey, in testimony before Congress for the U.S. Senate Finance Committee.³

• The real value of all of our counter-terrorist financing efforts is that they provide us with another means of maintaining persistent pressure on terrorist networks. Terrorist networks and organizations require real financing to survive. The support they require goes far beyond funding attacks. They need money to pay operatives, support their families, indoctrinate and recruit new members, train, travel, and bribe officials. When we restrict the flow of funds to terrorist groups or disrupt a link in their financing chain, we can have an impact.
• With respect to the terrorist group that poses the greatest threat to the United States, al Qaida, we have made real progress. We have disrupted or deterred many of the donors on which al Qaida used to rely. At the very least, these donors are finding it far more difficult to fund al Qaida with the ease and efficiency provided by the international financial system. The same applies to many of the charities that al Qaida previously depended upon as a source of funds. To the extent we can force terrorists and their supporters out of the formal financial system, we force them into more cumbersome and riskier methods of raising and moving money, subjecting them to a greater likelihood of detection and disruption.

Terrorist financiers attempt to use the global markets and their vulnerabilities to their advantage in the same fashion as money launderers. In particular, they seek to hide behind anonymity and conceal their sources.⁴ This in turn makes them susceptible to some of the same tools in trying to track them down. Moreover, with respect to organized terrorist groups, the differences from organized criminal activity have become blurred in many cases where ill-gotten gains are a major source of funding.⁵ In actuality, this has been understood and recognized under international law for some time.

The United Nations General Assembly recognized in 1996 that with respect to measures designed to fight international terrorism that strengthen international cooperation, including information exchange to combat terrorism, among the sources of terrorist funding were organizations "engaged in unlawful activities such as illicit arms trafficking, drug dealing and racketeering, including the exploitation of persons for purposes of funding terrorist activities."⁶

The United Nations Security Council has created universal obligations upon states to combat the financing of terrorism, but a review of some of the earlier resolutions with respect to Afghanistan and the Taliban shows the connection between the criminal activity related to narcotics trafficking as a source of terrorism funding. UNSCR 1333 of 2000 "Demand[ed] that the Taliban, as well as others, halt all illegal drugs activities and work to virtually eliminate the illicit cultivation of opium poppy, the proceeds of which finance Taliban terrorist activities."⁷ That resolution in part amended UNSCR 1267 of 1999, which was groundbreaking in the obligations placed upon States, which ultimately then fell upon the financial industry, to freeze terrorist funds in particular for listed persons.⁸ But even before the obligation to freeze assets, the Security Council had already recognized that much of the Taliban assets were likely derived from illegal narcotics activities.⁹

Yet another example is the Revolutionary Armed Forces of Colombia (FARC), a notorious narco-terrorist organization. Under U.S. law, the FARC has been designated and subjected to sanctions not only as a significant foreign narcotics trafficker, but also as a Foreign Terrorist Organization and as a Specially Designated Global Terrorist.¹⁰

And even more isolated radical groups may seek to fund terrorist acts from criminal proceeds. Here in Spain, we cannot forget the tragedy of what is known here as 11-M, when four years ago on March 11, a series of bomb blasts on commuter trains left 191 dead and over 1800 injured. Early speculation of ties to al-Qaida or the separatist ETA was later dismissed. A month after the bombings, the global press carried the statements of �ngel Acebes, the Acting Interior Minister (who happens to be a graduate of the University of Salamanca faculty of law, which hosts the event at which I am speaking today) that the terrorists financed their plot, including paying for their apartment, with sales of drugs and even swapped narcotics for the explosive materials themselves.¹¹