Terrorist Financing

Terrorism has been a major concern for the United States government for many years. Citizens of the United States have been immune to the terrorist attacks that are taking place overseas. When The World Trade Center was attacked using a car bomb in 1993, terrorism was brought upon the door steps of Americans. What was once a headline on the daily news has now became a reality in the life of the American citizen. An essential element in the strategy for the war on terrorism is to dismantle or disrupt the financial network used by terrorist. After the September 11 attack the Federal Government took several steps to combat terrorist financing, resulting with "More than $140 million in terrorist's assets have been frozen across the some 1,400 bank accounts worldwide." (Kaplan, 2006, Council on Foreign Relations) The United States government along with several other countries worked together and passed several laws to combat terrorist financing. After September 11, 2001, the thought of another attack weighed heavy on the minds of the federal investigators. Tracking and stopping the money flow to the terrorist may help stop another attack. We will examine the steps taken to minimize the cash flow to international terrorist organizations and the results of the actions implemented.

The Financial Anti-Terrorism Act was passed on October 17, 2001. The Financial Anti-Terrorism Act provides the Federal Bureau of Investigation (FBI) with the tools needed to control, monitor, investigate and prosecute the financial supporters of terrorism. The Financial Anti-Terrorism Act specified the procedures needed to obtain federal subpoenas for records of funds in correspondent bank accounts. It also gave federal jurisdiction over foreign money and money launderers using foreign banks. This Act required banks and financial institutions to form an anti-money laundering program.

On October 26, 2001, President George W. Bush signed the Patriot Act into effect combining the Financial Anti-Terrorism Act with the Uniting and Strengthening America Act of 2001 (USA Act) creating the Patriot Act. The Patriot Act was also inspired by the RICO Act, which was designed to prosecute racketeering and organized crime. The Patriot Act would change the laws effecting banking, money laundering and immigration, including amending the Foreign Intelligence Surveillance Act (FISA) which would turn out to be the most controversial. The main topic in the Patriot Act related to this paper is Title III, International money laundering abatement and anti-terrorist financing act of 2001. This portion of the Patriot Act expands the money laundering abatement to include international terrorism. The Patriot Act modifies the Bank Secrecy Act (BSA) which was passed in congress in 1970. The combined Acts require a Currency Transfer Report of any cash transactions of $10,000 or more, either single or combined during the same business day and must be filed with the Internal Revenue Service (IRS). A Monetary Instrument Log will be kept of monetary transaction of using money orders, cashier's checks, and traveler's checks totaling from $3,000 to 10,000 and file with the IRS. If any transaction where a customer seems to be avoiding the BSA reporting requirements a Suspicious Activity Report will be completed by the financial institution which are not allowed to notify the customer that a report is being made. The report will be filed with the Financial Crimes Enforcement Network ("FinCEN"). Any transaction in violation of these requirements will obligate institutions to implement specific measures in identifying and freezing terrorist related funds. There are stiff penalties for individuals or institutions that fail to comply with the reporting process. While implementing these measures it exposed unknown weakness and deficiencies in the domestic and international banking system.

In October of 2001 the Treasury Department established Operation Green Quest. "Operation Green Quest is a multi-agency terrorist financing task force that brings the full scope of the Treasury's financials expertise to beat upon identifying, disrupting, and dismantling the financial infrastructures and sources of terrorist funding". (U.S. Customs Service publication No. 0000-0171, October 2002) According to the U.S. Customs Service, Green Quest is in constant contact with law enforcement, intelligence, and financial establishments worldwide. Green Quest identifies several indicators of suspicious activity to serve as "red flags" or "indicators" for the banking community to further scrutinize. Operation Green Quest intends to target illicit charities, corrupt financial institutes, and underground financial systems known as Hawala which support terrorist organizations. The Green Quest initiative will also target credit card fraud, identity theft, counterfeiting, drug trafficking and bulk currency smuggling. The U.S. customs, Operation Green Quest, request the assistance from the individual banker, accountant, stock and commodity broker to report unusual or suspected transactions on voluntary basis. Listed in the pamphlet are 12 "Red Flag" indicators to be used for guidance.

The Financial Action Task Force on Money Laundering (FAFT) was founded in 1989 by the G7 countries. The G7 countries consisted of the seven countries that represent 68% of the world's economy, at that time there are now eight countries and is now called G8. There 33 participating countries supporting FAFT and 24 countries listed as uncooperative in the fight against financial crimes. The purpose of FAFT was to design and implement policies to combat money laundering and terrorist financing. Over the past several years FAFT has been updated and modified to include the changes brought upon by September 11. FAFT issued forty recommendation requiring countries to place regulations on their financial institutions. These mandates include many controls over money transfers including; criminalizing money laundering and enabling authorities to confiscate the proceeds, mandate identity verification, record keeping and suspicious transaction reporting, and to establish a financial intelligence unit to receive and disseminate information. FAFT recommended "counter measures" against countries not making sufficient improvements to the regulations. Since the conception of FATF only three countries has been reprimanded, Myanmar, Nauru and the Ukraine. The countermeasures have been withdrawn from all three countries and as of mid 2006 there are no counter measures against any country.

Internationally, The United Nations (UN) Security Council passed Resolution 1373 which the UN members must take measures against those who commit terrorist acts including freezing their funds. Canada was one of the