Terrorist Financing

The United Nations (UN) has made numerous efforts to fight terrorism and the mechanisms used to finance it. The UNís International Convention for the Suppression of the Financing of Terrorism (1999) states that:
1. Any person commits an offense within the meaning of this Convention if that person by any means, directly or indirectly, unlawfully and willingly, 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, in order to carry out:
a. An act which constitutes an offence within the scope of and as defined in one of the treaties listed in the annex; or
b. Any other act intended to cause death or serious bodily injury to a civilian, or to any other person not taking any 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 an act.

2. For an act to constitute an offense set forth in the above paragraph (paragraph 1), it shall not be necessary that the funds were actually used to carry out an offense referred to in paragraph 1, subparagraph (a) or (b).

The difficult issue for some countries is defining terrorism. Not all of the countries that have adopted the convention agree on specifically what actions constitute terrorism. The meaning of terrorism is not universally accepted due to significant political, religious and national implications that differ from country to country. Nonetheless, FATF urges countries to ratify and implement the 1999 United Nations International Convention for Suppression of the Financing of Terrorism. Thus, the above definition is the one most countries have adopted for purposes of defining terrorist financing.

The Link Between Money Laundering and Terrorist Financing

The techniques used to launder money are essentially the same as those used to conceal the sources of, and uses for, terrorist financing. Funds used to support terrorism may originate from legitimate sources, criminal activities, or both. Nonetheless, disguising the source of terrorist financing, regardless of whether the source is of legitimate or illicit origin, is important. If the source can be concealed, it remains available for future terrorist financing activities.

Similarly, it is important for terrorists to conceal the use of the funds so that the financing activity goes undetected. For these reasons, Finacial Action Task Force (FATF) has recommended that each country criminalize the financing of terrorism, terrorist acts and terrorist organizations, and designate such offenses as money laundering predicate offenses.

Finally, FATF has stated that the nine Special Recommendations combined with The Forty Recommendations on money laundering15 constitute the basic framework for preventing, detecting and suppressing both money laundering and terrorist financing.Efforts to combat the financing of terrorism also require countries to consider expanding the scope of their AML framework to include non-profit organizations, particularly charities, to make sure such organizations are not used, directly or indirectly, to finance or support terrorism.

CFT efforts also require examination of alternative money transmission or remittance systems. This effort includes consideration of what measures should be taken to preclude the use of such entities by money launderers and terrorists. As noted above, a significant difference between money laundering and terrorist financing is that the funds involved may originate from legitimate sources as well as criminal activities. Such legitimate sources may include donations or gifts of cash or other assets to organizations, such as foundations or charities that, in turn, are utilized to support terrorist activities or terrorist organizations. Consequently, this difference requires special laws to deal with terrorist financing. However, to the extent that funds for financing terrorism are derived from illegal sources, such funds may already be covered by a countryís AML framework, depending upon the scope of predicate offenses for money laundering. (source: Anti-Money Laundering and Combating the Financing of Terrorism, World Bank, 2006)

News & Updates

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