Counter terrorist financing policies – time for a rethink?

Marco Merlino and Dr Nicholas Ryder, Commercial Law Research Unit, Department of Law, Faculty of Business and Law, University of the West of England, Bristol.

Introduction

It is ten years since the terrorist attacks in the US led to the instigation of the financial war on terror by President George Bush. The events of 11 September 2001 propelled counter-terrorist financing to the summit of the international community’s financial crime agenda. Traditionally terrorist have relied on two different source of funding including state and private sponsored. Nevertheless, state funding has declined in the last twenty years, as there are fewer states willing to risk exposure to severe international sanctions. Therefore, terrorists actively seek to vary their funding activities and in many cases have become self-sufficient. More recently, sources of financing terrorism derive from both legal and illegal sources. This was clearly illustrated by the terrorist attacks in London in July 2005. One of the main targets of the financial war on terror was the alternative or non-remittance underground banking systems, which included for example the Hawala system. However, there was no evidence that these systems were used to fund either the attacks of 11 September 2001 or those in London in 2005. However, it is important to point out that these systems are susceptible to abuse by money launderers and organised criminals as they are cost-effective, quick, reliable, and represent a ‘safe’ means of transferring funds.