Terrorism Financing and Money Laundering Dr Marieke de Goede, European Studies, University of Amsterdam m.degoede@uva.nl
Can Terrorism Financing be subsumed under Money Laundering? • FATF task after 9/11 • Conflation in academic/policy literature • ‘clean’ financial sector key?
Substantial differences between Terrorism Financing and Money Laundering • ‘Money dirtying’ • Methods • Amounts • Effectiveness?
“In reality, shifting resources from money laundering to terrorist financing caused terrible mismatches. Those trained to spot global financial crime, and Spanish-speaking specialists in the Latin American drug trade, found themselves chasing Islamic terrorists, leaving the business of money laundering unattended.” Ibrahim Warde, Le Monde Diplomatique , 2006
Is terrorism financing big or small? Recent Estim ates Terrorism Financing Amount Author Year Based on $ 1,5 billion Napoleoni 2003 Globally circulating dollars $ 20-50 million Schneider 2004 Macro-economic p.a. calculations; assumption of central organisation $ 10-20 million 9/ 11 2004 CIA information p.a. Commission
But….. “The crucial point to bear in mind about terrorism, of course, is that it is cheap. This is part of its appeal. The attack on September 11th is probably the most expensive terrorist operation in history, and it is estimated to have cost half a million dollars. It takes a great deal less to buy some fertilizer, rent a truck, and use them to bring down a building.” Louise Richardson, 2003
Costs Recent Terrorism Attacks City Year Amount Costs Sources New York, 2001 € 300.000- Flying lessons, rent, Wire transfers Washington 370.000 costs of living. from Dubai; (9/ 11) financing through central organisation Casablanca 2003 € 4.000 Taxis, costs of living Self-financing Istanbul 2003 € 30.000 n/ a n/ a Madrid 2 0 0 4 € 5 4 .2 7 1 Rent, explosives, Self-financing; ( 1 1 M) m obile phones. drugs London 2 0 0 5 € 1 2 .0 0 0 Travel costs, Self-financing ( 7 / 7 ) explosives, rent. ( jobs, loans)
Network costs? • Current threat in Europe: • ‘homegrown’, local groups • Expenses (travel, training, communication) relatively small • Not always externally funded • Often self-financing
Conclusions • Subsuming terrorism financing under AML is problematic; • TF is relatively insignificant in comparison to fraud or drugs money; • TF typologies are practically impossible: • “Maybe you have people financing terrorist activity by holding down a job. If you have somebody who is working, depositing their paychecks into their bank and periodically withdrawing money, and at night buying components for a bomb and constructing a bomb in their basement, what is the bank going to do about it?” Douglas Greenberg, 2006. • Pursuing TF needs intelligence and criminal prosecution, NOT refocusing of AML regimes
“The underground networks of terrorists and their supporters are dwarfed by the everyday culture of secrecy and profit-seeking global ‘fiddle factories’ provided by banks, trusts and corporations, and fronted by accountants, lawyers and financiers… Without addressing the secrecy facilitated by corporate structures, trusts, tax havens and business advisers, no government will ever succeed in controlling the flow of funds to terrorists.” Prem Sikka, 2006
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