Suppression Of Terrorist Financing. Hamed Tofangsaz
which contains the following features:
• The money involved in the process of money laundering is, in all cases, derived from illegal activities.
• Money laundering is a derivative crime or an output of predicate crimes.
• The main purpose in money laundering is to disguise the origin of proceeds in order for criminals to enjoy their ill-gotten gains.12
• Money laundering takes place when principal crimes (predicate crimes) have already been committed. The necessity of laundering makes detecting criminals by chasing the proceeds of their illegal activities more possible.
However, in regard to financing terrorism, there is a different story. Terrorist financing can be divided into “a framework with three levels”: activities done to make and raise funds for terrorist purposes,13 strategies used to move the funds whence they have been collected to where they need to be held, and methods used to move funds to frontline terrorists.14 It seems that terrorist financing is a phenomenon which begins with fund-raising and ends by distributing the funds to terrorist cells.
The emphasis, in such a case, is not on the legitimization and accumulation of funds, but making funds available to terrorist cells; so, terrorist funds do not inevitably need to go through those money laundering stages by which the proceeds of organized crime are processed. However, money laundering can be a part of terrorist financing process in some cases.
Regarding the nature and characteristics of terrorist financing, terrorist funds can be processed under three scenarios:
Scenario one: When the funds have been derived from legal sources, nothing appears illegal except the future use of the money. The funds, in this case, can be transferred by noncriminal individuals or legal entities like charities and front companies, and through the legal financial system.
Scenario two: Terrorists are involved with criminal activities in order to generate funds for their terrorist purposes. So, they may need to launder the proceeds of their crime if they wish to invest proceeds to produce regular revenue. If the funds come under scrutiny at this stage, there may be no connection with terrorist activities. Also, after having been laundered, the disguised origin of money might not be identifiable because the connection between the funds and their illegal source has already been interrupted; as a result, the funds have a legitimate appearance.
Scenario three: The proceeds of crime are directly (without being laundered) used by terrorist cells. In this case, terrorists do not need to launder the money, because the amount of money on the move may be small.
In comparison with money laundering, the main characteristics of the terrorist financing process are:
• Unlike money laundering the subject matter of which is money derived from the commission of crime, in terrorist financing “funds” is defined very broadly. They include “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, travellers cheques, bank cheques, money orders, shares, securities, bonds, drafts, letters of credit.”15
• Terrorist financing involves preparing funds for the commission of another crime. So, it is an input into terrorism, and preparatory in its nature.
• When terrorist financing occurs the principal crime (terrorism) has not been committed or even attempted yet; so, the relationship between the funds and terrorist activities may or may not be identifiable.
• The purpose in terrorist financing is not accumulation, but distribution. In result, the amount of funds on the move may often be very small.16
• The attempt in terrorist financing is to hide the destination of the funds.
Discussion on the Relationship of Terrorist Financing and Money Laundering
There has been a continuing argument about whether the measures provided to counter money laundering are able to prevent and counteract terrorist financing. Those who support the integration of terrorist financing into anti-money laundering measures base their argument on two inaccurate assumptions: the link and nexus between terrorism and criminal activities,17 and the involvement of terrorist financing in money laundering.18
Terrorists’ Involvement in Criminal (Organized) Activities
The first assumption, which emphasizes and exaggerates the involvement of terrorists in criminal (especially organized) activities as the main source of terrorist financing,19 considers terrorism as a criminal activity potentially resulting in proceeds in regard to which money laundering may occur. From a logical perspective, this approach assumes that terrorism as a criminal activity, which produces proceeds, precedes money laundering.20 The reflection of this argument can be explicitly seen in the Council of the European Communities Directive of June 10, 1991 on prevention of the financial system for the purpose of money laundering where it provides that
since money laundering occurs not only in relation to the proceeds of drug-related offences but also in relation to the proceeds of other activities (such as organized crime and terrorism), the Member States should, within the meaning of their legislation, extend the effects of the Directive to include the proceeds of such activities, to the extent that they likely to result in laundering operations justifying sanctions on that basis.21
This assumption is to some extent based on reality. Regarding the evidence and studies on terrorist financing typologies mentioned in chapter 1, it has been proved that terrorist groups, in some cases, are involved in criminal activities such as hostage taking for ransom. However, complete reliance on the assumption to justify the inclusion of terrorism into the instruments related to repression of organized crime (and as result, inclusion of terrorist financing into anti-money laundering measures) can be problematic for the following reasons.
First of all, it is a category error to presume that terrorism is a crime for the purpose of making money. Terrorists are generally motivated by ideology greater than personal impulses or material benefits.22 Their engagement in crime to fund their activities needs to be considered as an instrumental purpose.23 This feature distinguishes it from other criminal acts, especially organized crime, which are not afforded any kind of excuse as criminals seek personal or financial gains.24 More importantly, terrorist funds can be acquired from legal sources. This considerably differentiates terrorist financing from organized criminal activities.
In addition to the distinct motivations, terrorists measure their conduct against the standards and “codex” of the ideology that they follow.25 So, even though an act is unlawful according to the law of a state or to international law, it might be legitimate and appropriate from the terrorists’ perspective. Emphasizing the significant consequence of this feature, some argue that “standard criminology” cannot apply to the case of terrorism since “the notion of deterrence is largely irrelevant, with the language of terrorists often entirely divorced from that of the normal criminal offender.”26
Moreover, it is impossible to estimate the extent and spread of terrorists’ involvement in criminal (organized) activities.27 In 2003, in the United States, it was reported that fourteen of the thirty-six groups designated as terrorist organizations on the U.S. Department of State list were engaged in drug trafficking.28 This fact was applied to argue that the war on drugs and the war on terrorism need to continue to be linked. However, this conclusion was correctly criticized as “there are hundreds of terrorist organizations and drug trafficking groups, but it is usually the same dozen or so groups that get identified as being involved in both types of activities.”29
From an international law perspective, the inclusion of the concept of terrorism within the scope of international instruments relating to organized crime is also problematic. The problem lies in the nature and definition of terrorism. While there is not a consensus on a concrete definition of terrorism, and on the designation of groups as terrorist groups,