2.9 Fighting against terrorism financing
2.9.4 Possible evolution of terrorism financing within the next 5 years
According to Neumann (176), efforts to combat terrorism financing have mainly focused on banks and financial institutions. He highlights four important issues that should be taken into account when following the money:
— Cash. It has been observed that most ISIS transactions have been in cash, because most people (98 %) in Syria and Iraq do not possess bank accounts and fewer have credit cards. Therefore, seeking ISIS’s money in the international financial system is unlikely to be successful. When dealing with ISIS, following the money means following the cash.
— Territory. When terrorist organisations hold territory, they start working within it by taxing people and selling resources, such as oil. This makes it very difficult to cut them off from outside. Therefore, cutting off their finances means taking away their territory by defeating them on the ground.
— Smuggling. Terrorists in conflict zones tend to be closely linked to illegal economies where smugglers have been working long before ISIS, Al-Qaeda or the Taliban existed. Thus, countering terrorism finance means countering illicit economies.
— Small-dollar terrorism. Since 2014, none of the attacks in Europe have cost more than EUR 10 000. In fact, the majority cost less than EUR 1 000. Often, they were funded by the terrorists themselves, who used their savings, salaries or money they had borrowed from friends or parents. Others were funded from the proceeds of crime. In practice, none went through the formal financial system, resulting in no suspicious transactions that could have been identified.
Against this backdrop, the same author recommends the following:
— Evidence-based countering of terrorism finance. Responses to terrorism financing must fit the reality. That can mean doing different things in different places. In some cases, it may involve the international financial system.
— Holistic approach to countering terrorism finance. Too much focus has been on the financial sector. There is a need to complement financial tools with political, diplomatic, military and law enforcement tools. In many cases, this requires partnerships with the private sector.
— Integrated approach to countering terrorism finance. There is a need to be more integrated with the rest of counterterrorism. Countering terrorism finance has been practised as an activity that is completely separate from the rest of counterterrorism.
Complementing the abovementioned list of challenges, the FATF (2015a) provides its own list:
— Understanding the nature of an isolated transaction (e.g. a money transfer). Is it legitimate (e.g.
a family remittance) or nefarious (e.g. used to support a terrorist group)? Financial intelligence units and operational authorities need to improve their ability to cooperate with the intelligence community and specific interagency task forces may need to be established.
— Rapid expansion of social media. This is a relatively new worldwide channel of exploitation used by terrorist groups to raise funds. Through targeted propaganda, social networks are used to coordinate large-scale and well-organised fundraising schemes (crowdfunding, fundraising through pre-paid cards and e-wallets) aimed at terrorism financing, which may involve several thousand sponsors and may raise significant amounts of cash.
— Exploitation of natural resources. Such activities allow terrorist organisations to control and occupy territory by sustaining burgeoning criminal activity related to this sector, such as extortion, smuggling, theft, illegal mining, kidnapping for ransom, corruption and other environmental crimes. The natural resources commonly exploited by terrorist groups are oil and gas, and mining.
(176) See International Centre for the Study of Radicalisation, ‘Beyond banking: Professor Neumann’s opening keynote address at ‘No money for terror’ summit in Paris’ (https://icsr.info/2018/04/26/beyond-banking-professor-neumanns-opening-keynote-address-no-money-terror-summit-paris/).
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Terrorist groups are increasingly relying on closed chat programs, as social networks have become heavily monitored by law enforcement institutions. Monitoring of these private communications is virtually impossible. An American strategy to install a backdoor in software by coercion has proven disastrous (177).
Cryptocurrencies have not been used frequently by terrorist groups, so their contribution to financing terrorism is so far negligible; nonetheless, a regulation is needed. It should be taken into consideration that, like money transfer operators and informal money transfer channels, digital currencies have begun to be used by migrants to send money home. Any anti-terrorism regulation should take this into consideration (178).
2.9.5 Stakeholders
2.9.5.1 European Union stakeholders
European Commission Directorate-General for Migration and Home Affairs
DG Migration and Home Affairs manages policies that aim to ensure that all activities necessary and beneficial to the economic, cultural and social growth of the EU can develop in a stable, lawful and secure environment. In particular, it looks at how terrorism financing links with organised crime, feeding terrorism through channels such as the supply of weapons, proceeds from drug smuggling and the infiltration of financial markets.
In the effort to combat terrorism financing, the European Commission’s role is to support Member States.
Through the DG’s Directorate E, Migration and Security Funds — Financial Resources and Monitoring, funding is provided to projects addressing this topic.
https://ec.europa.eu/home-affairs/what-we-do/policies/crisis-and-terrorism/financing_en European External Action Service
The EEAS is the EU’s diplomatic service. A key aspect of the work of the EEAS is its ability to work closely with the foreign and defence ministries of the EU Member States and with EU institutions. It also has a strong working relationship with the UN and other international organisations. It helps the HR/VP to implement the EU’s CFSP.
In 2016, the EU took unprecedented steps to increase internal cooperation in the field of security and defence. The HR/VP launched the EU global strategy on security and defence, which aims to invest in a stronger EU and, at the same time, in a stronger cooperation with EU partners. Combating terrorism financing is one of the priorities of the global strategy.
https://eeas.europa.eu/headquarters/headquarters-homepage_en
European Union Agency for Law Enforcement Cooperation (Europol)
Europol is the EU’s law enforcement agency. It supports the EU Member States in their fight against terrorism, cybercrime and other serious and organised forms of crime. It also works with many non-EU partner states and international organisations.
In January 2016, Europol created the ECTC, which is an operations centre and hub of expertise that aims to strengthen the EU’s response to terror and ensure an effective response to terrorism-related challenges. The ECTC focuses on several activities, including sharing intelligence and expertise on terrorism financing (through the TFTP and financial intelligence units). It also carries out the following activities:
— provision of operational support for investigations upon request from an EU Member State;
— tackling foreign fighters;
— addressing online terrorist propaganda and extremism (through the EU IRU);
— fighting against illegal arms trafficking;
— international cooperation among counterterrorism authorities.
(177) Counter Extremism Project, ‘Terrorists on Telegram’ (https://www.counterextremism.com/terrorists-on-telegram); Vox, ‘Terrorists’
love for Telegram, explained’ (https://www.vox.com/world/2017/6/30/15886506/terrorism-isis-telegram-social-media-russia-pavel-durov-twitter).
(178) https://cointelegraph.com/news/crypto-is-a-poor-form-of-money-for-terrorists-congressional-hearing-concludes; consulted on 4 December 2018.
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Since 2007, Europol has made available to the public EU terrorism situation and trend reports (Europol, 2017, 2018b). These provide the European Parliament and all national governments and police forces with an annual overview of the European terrorism situation. A section of each report is dedicated to terrorism financing.
https://www.europol.europa.eu/about-europol/european-counter-terrorism-centre-ectc Eurojust
Eurojust was established in 2002 as the EU’s Judicial Cooperation Unit. It is considered central to the EU’s pursuit pillar, for its capacity to improve cooperation between judicial authorities in tackling terrorism financing and depriving terrorists of their means of attack and communication. Eurojust has consistently aided in the investigation and prosecution of cross-border terrorism cases by coordinating cooperation among Member States and building relationships with judicial authorities in non-EU countries.
http://www.eurojust.europa.eu/Pages/home.aspx
2.9.5.2 International stakeholders
United Nations Office on Drugs and Crime, Terrorism Prevention Branch
The Terrorism Prevention Branch of UNODC works on the legal aspects of countering the financing of terrorism, including promoting the ratification of the relevant universal legal instruments, in particular the International Convention for the Suppression of the Financing of Terrorism (Tofangsaz, 2018), and the implementation of these international standards. This entails reviews of domestic legislation, to ensure proper criminalisation of offences related to the financing of terrorism, and legislative drafting, developing the capacity of criminal justice and law enforcement officials to investigate, prosecute and adjudicate terrorism financing through the provision of specialised training on issues related to special investigation techniques, freezing, seizing and confiscating terrorist assets, and strengthening regional and international cooperation against the financing of terrorism.
https://www.unodc.org/unodc/en/terrorism/news-and-events/terrorist-financing.html Financial Action Task Force
The FATF is an intergovernmental body established in 1989 to build on the G7’s efforts to develop policies to combat money laundering in drug trafficking. In 2001, it widened its mandate to include terrorism financing.
Its objectives are to set standards and promote the effective implementation of legal, regulatory and operational measures to combat money laundering, terrorism financing and other related threats to the integrity of the international financial system. The FATF is therefore a policymaking body that works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.
In particular, it monitors progress in implementing the 40 FATF Recommendations (179). It works in collaboration with other international stakeholders to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse. The FATF Secretariat is housed at the OECD headquarters in Paris.
http://www.fatf-gafi.org/
Global Initiative against Transnational Organized Crime
The Global Initiative was founded in 2013 and headquartered in Geneva. It comprises a network of nearly 300 independent global and regional experts working on human rights, democracy, governance and development issues, in relation to which organised crime has become increasingly pertinent.
It provides a platform to promote greater debate and innovative approaches as the building blocks for an inclusive global strategy against organised crime. It commissions and shares research globally, curates a robust resource library of 2 000 reports and tools specific to organised crime, and uses its tremendous convening power to unite the private and public sectors against organised crime.
The Global Initiative seeks to project the expertise of its members outwards and to make it available to a broad range of stakeholders, including by developing the evidence basis for policymaking, convening and
(179) The FATF developed 40 recommendations that are recognised as the international standard for countering money laundering and financing of terrorism and proliferation of weapons of mass destruction. They were first issued in 1990 and were revised in 1996, 2001, 2003 and 2012 to ensure that they remain relevant.
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facilitating multisectoral dialogue, and developing tools and programmes needed to further the development of effective responses.
http://globalinitiative.net
North Atlantic Treaty Organization
NATO is a political-military alliance between 29 member states who have agreed to mutual defence based on the North Atlantic Treaty, signed on 4 April 1949, in response to an attack by any external party. NATO’s headquarters are located in Brussels, Belgium, while the headquarters of Allied Command Operations is near Mons, Belgium. NATO’s purpose is to guarantee the freedom and security of its members through the following means:
— political — by promoting democratic values and promoting members to consult and cooperate on defence- and security-related issues to solve problems, build trust and, in the long run, prevent conflict;
— military — if diplomatic efforts fail, NATO has the military power to undertake crisis management operations, which are executed under the collective defence clause of NATO’s founding treaty, under Article 5 of the Washington Treaty or under a UN mandate, alone or in cooperation with other countries and international organisations.
As part of its counterterrorism strategy, NATO collects intelligence in a multidisciplinary manner through cooperation across sectors and among member states on many fronts: defence, diplomacy, healthcare, law enforcement, the military and finance. In 2005, NATO, together with UNODC and OSCE, agreed on the need to gather and exchange data on terrorism financing and develop relevant international financial standards (180).
https://www.nato.int/
International Monetary Fund (IMF)
The IMF is an organisation of 189 countries that works to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. Created in 1945, the IMF is governed by and accountable to its member countries. Like money laundering, terrorism financing can threaten a country’s economic stability.
Thus, IMF is very active in supporting and promoting the FATF recommendations among IMF member countries. After 20 years, combating terrorism financing has become part of IMF’s core work, with activities including analysis and policy advice, assessing the health and integrity of financial sectors, providing financial assistance when needed, and helping countries build institutions and increase operational effectiveness.
http://www.imf.org/external/np/leg/amlcft/eng/
International Criminal Police Organisation (Interpol)
Interpol’s Counter-Terrorism Fusion Centre investigates the organisational hierarchies, training, financing, methods and motives of terrorist groups. Its activities are global in scope and implemented through regionally focused but interlinked projects. The aim is to improve the exchange of law enforcement information across borders and to enrich law enforcement practices. Interpol considers disrupting money flows of terrorist groups to be a fundamental pillar of its worldwide efforts to combat terrorism. It currently has information on over 43 000 foreign terrorist fighter profiles, which the world’s police can access and consult. Its Criminal Analysis File (300 000 entities) includes financial identifiers and phone numbers. This growing repository of multidisciplinary and multisectoral intelligence information facilitates the mapping and understanding of critical information chain linkages among terrorist activities.
https://www.interpol.int/Crimes/Terrorism
2.9.6 Legislation and reference documents
— Council Regulation (EC) No 2580/2001 of 27 December 2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism, OJ L 344, 28.12.2001, p. 70-75.
— Council Framework Decision 2002/475/JHA of 13 June 2002 on combating terrorism, OJ L 164, 22.6.2002, p. 3-7.
(180) NATO, ‘International organisations join forces to combat terrorist financing’
(https://www.nato.int/cps/su/natohq/news_21590.htm?selectedLocale=en).
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— European Commission, Commission communication, ‘Prevention of and the fight against terrorist financing through measures to improve the exchange of information, to strengthen transparency and enhance the traceability of financial transactions’ (COM(2004) 700 final), Brussels, 20 October 2004.
— European Commission, Commission communication, ‘Preparedness and consequence management in the fight against terrorism’ (COM(2004) 701 final), Brussels, 20 October 2004.
— Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, OL L 309, 25.11.2005, p. 15-36.
— European Commission, Commission communication, ‘The prevention of and fight against terrorist financing through enhanced national level coordination and greater transparency of the non-profit sector’ (COM(2005) 620 final), Brussels, 29 November 2005.
— Regulation (EC) No 1781/2006 of the European Parliament and of the Council of 15 November 2006 on information on the payer accompanying transfers of funds, OJ L 345, 8.12.2006, p. 1-9.
— Council Decision 2007/124/EC, Euratom, of 12 February 2007 establishing for the period 2007 to 2013, as part of General Programme on Security and Safeguarding Liberties, the Specific Programme
‘Prevention, Preparedness and Consequence Management of Terrorism and other Security-related risks’, OJ L 58, 24.2.2007, p. 1-6.
— European Commission, Commission communication, ‘Stepping up the fight against terrorism’
(COM(2007) 649 final), Brussels, 6 November 2007.
— Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC, OJ L 319, 5.12.2007, p. 1-36.
— Council Decision 2010/412/EU of 13 July 2010 on the conclusion of the agreement between the European Union and the United States of America on the processing and transfer of financial messaging data from the European Union to the United States for the purposes of the Terrorist Finance Tracking Program, OJ L 195, 27.7.2010, p. 3-4.
— European Commission, Commission communication, ‘The EU counter-terrorism policy: main achievements and future challenges’ (COM(2010) 386 final), Brussels, 20 July 2010.
— European Commission, Commission communication, ‘A European terrorist finance tracking system:
available options’ (COM(2011) 429 final), Brussels, 13 July 2011.
— European Commission. Commission staff working document, ‘Report on the second joint review of the implementation of the agreement between the European Union and the United States of America on the processing and transfer of financial messaging data from the European Union to the United States for the purposes of the Terrorist Finance Tracking Program’ (SWD(2012) 454 final), Brussels, 14 December 2012.
— European Commission, Commission communication, ‘A European terrorist finance tracking system (EU TFTS)’ (COM(2013) 842 final), Brussels, 27 November 2013.
— European Commission, Commission communication, ‘Pursuant to Article 294(6) of the Treaty on the Functioning of the European Union concerning the position of the Council on the adoption of a directive of the European Parliament and of the Council on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing’ (COM(2015) 188 final), Brussels, 27 April 2015.
— European Commission, Commission communication, ‘The European agenda on security’ (COM(2015) 185 final), Strasbourg, 28 April 2015.
— Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC, OJ L 141, 5.6.2015, p. 73-117.
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— Regulation (EU) 2015/847 of the European Parliament and of the Council of 20 May 2015 on information accompanying transfers of funds and repealing Regulation (EC) No 1781/2006, OJ L 141, 5.6.2015, p. 1-8.
— European Commission, Commission communication, ‘Action Plan for strengthening the fight against terrorist financing’ (COM(2016) 50 final), Strasbourg, 2 February 2016.
— European Commission, Commission communication, ‘Delivering on the European agenda on security to fight against terrorism and pave the way towards an effective and genuine security union’
(COM(2016) 230 final), Brussels, 20 April 2016.
— European Commission, Commission report, On the joint review of the implementation of the agreement between the European Union and the United States of America on the processing and transfer of financial messaging data from the European Union to the United States for the purposes of the Terrorist Finance Tracking Program (COM(2017) 31 final), Brussels, 19 January 2017.
— Directive (EU) 2017/541 of the European Parliament and of the Council of 15 March 2017 on combating terrorism and replacing Council Framework Decision 2002/475/JHA and amending Council Decision 2005/671/JHA, OJ L 88, 31.3.2017, p. 6-21.
— European Commission, ‘Reflection paper on the future of European defence’ (COM(2017) 315 final), Brussels, 7 June 2017.
— Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU, OJ L 156, 19.6.2018, p. 43-74.