The War Against Money Laundering, Terrorism and The Financing of Terrorism

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The War Against Money Laundering &Terrorism
THE WAR AGAINST MONEY LAUNDERING, TERRORISM, AND

THE FINANCING OF TERRORISM
Herbert V Morais*
In terms of magnitude and impact, the September 11, 2001 terrorist attacks in the United
States will be remembered as the worst such incident in the history of internationalterrorism.
This tragedy has brought a new sense of urgency and determination to fighting the war
againstmoney laundering,internationalterrorism and thefinancing of terrorism. This article
reviews the legal and financial measures that have been taken, both at the internationaland
national levels, to combat these crimes. These measures have led to a growing convergence of
the rules for combating financial crime and terrorism. But to win this war a number of
formidable challengesneed to be overcome.'
1 Introduction
The September 11, 2001 terrorist attacks on the World Trade Centre in New York
City and the Pentagon in Washington, D.C. have brought a new sense of urgency to
the war against money laundering, international terrorism 2 and the financing of
terrorism. Among other things, the brazenness and the ease with which these attacks
were executed have exposed in a dramatic way serious gaps and weaknesses in legal
and financial systems worldwide. 3 International efforts have now moved into high
gear to strengthen legal, financial and law enforcement measures to combat these
crimes.
Investigations carried out after these attacks, both in the United States and other
countries especially in Europe, the Middle East and Asia, have revealed a pervasive
network of underground banking and other financing channels that have been used to
finance terrorist activities. As a result, the immediate international response to this
problem has been to take action to freeze the assets of persons and entities involved in
terrorist activities, shut down businesses and other entities that have been used to
finance such activities, and strengthen measures to criminalize terrorism and the
financing of terrorism.
LLB Honours (Singapore), LLM, SJD (Harvard). Partner, Dewey Ballantine LLP,
Washington, DC. Formerly Assistant General Counsel, International Monetary Fund; Chief
Counsel, The World Bank; and Assistant General Counsel, Asian Development Bank. The
author is currently the leader of an international consultants' team executing an Asian
Development Bank-financed regional technical assistance project to combat money laundering
in the Asian and Pacific Region, covering the following nine countries: Indonesia, the
Philippines, Thailand, Cook Islands, Fiji, Marshall Islands, Nauru, Samoa and Vanuatu.
This paper reflects the personal views of the author.
I A much shorter version of this article under the title "Behind the lines in the war on terrorist
funding" was published in InternationalFinancialLaw Review, December 2001.
2 The focus of international legal and financial measures is against international terrorism. Acts
of terrorism committed within national boundaries are normally covered by domestic criminal
and/or anti-terrorism laws. Therefore, the term "terrorism" as used in this article refers to
international terrorism.
For an analysis of the September I I attacks and related issues, see, for example, the various
articles collected in James F Hoge, J R & Gideon Rose (eds), How Did This Happen?
Terrorism and the New War (2001); and Strobe Talbott & Nayan Chanda (eds), The Age of
Terror.-America and the World after September 11 (200 1).
[20021 LAWASIA Journal
The recent terrorist attacks have also once again drawn attention to the fact that
several Asian and Pacific countries are being used as havens or conduits for money
laundering and the financing of terrorism. Of the nineteen countries worldwide that
are currently classified as "non-cooperative countries or territories" in the
international fight against money laundering, seven are from this region: Indonesia,
the Philippines, the Cook Islands, the Marshall Islands, Myanmar, Nauru and Niue.4
Thus, the governments of the Asian and Pacific region must give high priority to the
eradication of this very serious problem to safeguard the integrity of their financial
systems and avoid the sanctions of the international community.
This article will provide a broad overview of the international legal measures that
have been taken in recent years to combat money laundering, ferrorism and the
financing of terrorism. The primary focus of the article will be on money laundering
and the financing of terrorism, both of which involve abuse of the financial system.
International terrorism as such will be discussed only to provide the setting and
context for this article.
5
2 Money Laundering
It is best to begin with a discussion of money laundering because it provides part of

the backdrop for an understanding of the financing of terrorism. Money laundering is
one of the channels for financing terrorism. Although money laundering and the
financing of terrorism raise somewhat different legal, financial and political issues,
they share some features and raise some common issues for consideration.
2.1 What is Money Laundering?
Money laundering is the processing of the proceeds of crime so as to disguise their

illegal origin.6 Organized criminal syndicates, drug traffickers and corrupt politicians,
for example, need to quickly transfer and transform their dirty money into clean funds.
They do this for at least two reasons: first, to separate such funds from the crimes
which generated them and thereby to avoid criminal prosecution; and, second, to
protect those funds from seizure and confiscation by the law enforcement authorities.
Typically, under national anti-money laundering laws or general criminal laws, the
crime of money laundering is defined by reference to the predicate crimes. Predicate
crimes are usually defined by : (a) the enumeration of a list of serious offences such as
drug trafficking, smuggling, prostitution, corruption, tax evasion, terrorism,
embezzlement and gambling; or (b) reference to all serious offences that carry a
minimum penalty such as one year's imprisonment and/or a specified fine. It is
4 See further, Sections I.D., under the discussion of the work of the Financial Action Task Force
(FATF).
5 For a good discussion of the international legal aspects of money laundering, See Guy
Stessens, Money Laundering (2000). See also the websites of the United Nations Office of
Drug Control and Crime Prevention (ODCCP) (http://www.undcp.org) and the Financial
Action Task Force (http://www.oecd.org/fat). For an anecdotal discussion of the subject, see
Jeffrey Robinson, The Laundrymen (1994).
6 This is the definition used by the FATF: see the FATF website at http://www.oecd.org/fatf.
important to appreciate that the objective of the international war against money
laundering is not simply to stop money laundering as such. While that is certainly one
of the objectives, the primary objectives are to prevent or eradicate the predicate
crimes themselves and to deny criminals the opportunity to enjoy the fruits of their
crimes.
Folklore has it that money laundering originated in the United States with the Mafia
and Watergate. 7 The concept of "laundering" funds grew out of the practice of Mafia
groups that purchased and used launderettes as a cover for laundering funds from their
general criminal activities. In more recent years, money laundering came to be
associated with the rise in the illicit production of and trafficking in narcotic drugs.
Thus, the international war against money laundering was initially launched by the
United Nations to attack the worldwide drug problem. Today, money laundering is
used to disguise a much wider range of crimes.
8
The process of money laundering normally involves three stages:
" Placement. The first stage is when the criminal introduces the proceeds of his
crime into the financial system. This is usually done by breaking up large
sums of cash into smaller, less conspicuous amounts that are then deposited
into a bank account or used9 to purchase financial instruments such as checks,
money orders or securities.
* Layering. This second stage involves a series of transactions to convert or

transfer the funds, usually to other foreign jurisdictions and financial
institutions, including offshore financial centres. Such conversion or transfer
typically occurs through wire transfers and the purchase and sale of investment
instruments. Often, such conversion or transfers are disguised as payments for
goods or services through false invoicing so as to give them the appearance of
legitimacy.
" Integration. In the third and final stage, the funds re-enter the legitimate
economy as "clean" money. The criminal then freely uses this money to invest
in a variety of assets such as real estate including office buildings and houses,
automobiles, yachts and jewellery, or to enter into new business ventures.
Because of the clandestine nature of money laundering, it is very difficult to determine

the precise magnitude of the money laundered globally on an annual basis. The
International Monetary Fund places the estimate at between two and five per cent of
Robinson, supra n 5, at 4-6.

For a more detailed discussion of these stages, see the ODCCP website at
http://www.undcp.org; and the FATF website at http://www.oecd.org/fatf.
The reason for breaking up large sums of cash into smaller amounts for deposit and/or transfer
is to get around the legal requirement in many countries for banks to report to the financial
regulatory or law enforcement authorities transactions above a threshold amount (for example,
$10,000).
[2002] LAWASIA Journal
the world's gross domestic product.10 Using 1996 figures, this translates to between
$600 billion and $1.5 trillion.
2.2 Emerging Trends in Money Laundering
In the Asian and Pacific region, criminal proceeds tend to originate from a number of
different sources. The Golden Triangle encompassing the region including Myanmar,
Thailand and Laos has been notorious as a centre for the trafficking of drugs.
Organized crime, gambling, corruption, prostitution and trafficking in children are
some of the other sources of criminal proceeds in this region. On the other hand, in
the Pacific islands, there is growing evidence that foreign crime syndicates (including
Russian criminal groups and South American drug kingpins) have used these small
countries to launder their illicit funds through a variety of channels including offshore
financial centres, shell companies, trusts and international business companies using
false account names or local proxies. Several Pacific islands have also been identified
by the Organization for Economic Cooperation and Development (OECD) as
engaging in harmful tax practices, including serving as tax havens for wealthy foreign
individuals and corporations seeking to evade taxes in their own countries.
The traditional pattern of money laundering essentially involved making deposits into
banks and then arranging wire transfers of those funds to other financial institutions,
usually in foreign jurisdictions. However, as legal measures and law enforcement
efforts worldwide have continued to tighten the noose around money launderers,
criminals have shown remarkable determination and ingenuity in devising new
methods and schemes to launder their funds, over and above traditional money
laundering techniques using the formal banking system. Some of these new methods
and schemes are more difficult to detect and also present law enforcement authorities
with new challenges in collecting and presenting evidence to prosecute money
laundering crimes.
A fly in the ointment of law enforcement efforts to track down, freeze and confiscate
the proceeds of crime is that some of these funds are moved through informal
financing channels or alternative remittance systems that pre-date the arrival of
Western-style banking systems. One good example of this is the hawala system
(meaning "in trust", in Hindi) used mainly in India, Pakistan and the Middle East for
transferring money or value across borders without involving any physical movement
of money or paper transactions. Such transactions thereby escape the attention or
scrutiny of financial regulators and law enforcement authorities. Hawala brokers
(hawaladars)usually work out of small storefront operations. This is how the hawala
system works: A Pakistani living in Baltimore approaches a hawaladarin this city
with a request to transfer $5,000 to his brother in Quetta, Pakistan. He negotiates a
fee and the exchange rate, and then delivers $5,000 in cash plus the fee to the
hawaladar. This hawaladar immediately instructs (usually by telephone) another
hawaladarin Quetta to deliver the rupee equivalent of the funds to the brother under a
pre-arranged code, usually a set of numbers. The transaction takes one to two days,
which is faster than most bank wire transfers. The whole transaction is consummated
10 Address by Michel Camdessus, Managing Director of the International Monetary Fund, to the
FATF Plenary meeting, Paris, 10 February 1998.
without leaving a paper trail. There is no opening of accounts and no maintenance of

records. While this informal system is widely used for transfers of legitimate funds,
such as remittances by overseas workers to their families at home, it is also believed to
be one of the key channels for money laundering and the financing of terrorism
because of the anonymity that it provides.
A second alternative remittance system originating in Asia is known as the Chinese or

East Asian system. This system is based on the use of "chits" or "tokens" and is,
therefore, often referred to as the "chit system." It has also spread to other parts of the
world through immigration. A third alternative remittance system is the Black Market
Peso Exchange used in the Western Hemisphere to support both legitimate trade and
smuggling between North and South America. These two systems operate very much
like the hawala system, and involve the use of a local remittance service and a sister
company overseas. Variations of these alternative remittance systems also exist in
Europe and Africa.
Money laundering typologies exercises carried out by the concerned international anti-
money laundering agencies in recent years have also revealed the emergence of other
new techniques for money laundering. Among these techniques are the use of Internet
gambling and other Internet "services"; online banking; trusts, international business
companies, shell companies, and other non-corporate vehicles, using local proxies to
shield the true beneficial owners; "gatekeepers" such as lawyers, accountants,
financial consultants, securities and insurance professionals; new payment
technologies such as electronic purses and Smartcards; trade and false invoicing for
the supply of goods and services; real estate vehicles; and gold and other precious
metals.
2.3 Negative Economic Effects ofMoney Laundering
Very little research has been carried out to analyze the negative effects of money
laundering on a country's economic development. Much of the analysis so far has
focused on quantification of the money laundering problem and assessing its
consequences on the global financial system rather than on individual national
economies.
There is no question that money laundering can have a devastating impact on a

country's financial system and its economic development. At2 least four major
negative economic effects of money laundering may be identified:'
For a detailed discussion of the money laundering trends and typologies discussed in this
section, see for example, Financial Action Task Force on Money Laundering, Report on
Money Laundering Typologies, 2001-2002, dated 1 February 2002; and Financial Action Task
Force on Money Laundering, Report on Money Laundering Typologies, 2000-2001, dated I
February 2001; see the FATF website at http://www.oecd.org/fatf.
12 For a fuller discussion of the negative economic implications of money laundering, see Peter
Quirk, Macroeconomic Implications of Money Laundering, IMF Working Paper No. 96/66;
Vito Tanzi, Money Laundering and the InternationalFinancial System, IMF Working Paper
No. 55/96; and Brent L Bartlett, Negative Effects of Money Laundering on Economic
Development (an Economic Research Report prepared for the Asian Development Bank, June
2002). In summarizing the negative economic effects of money laundering for this section, the
First, money laundering erodes the integrity of financial institutions and thereby
gradually weakens and destroys its character as a repository of trust and confidence in
the eyes of investors and depositors. Invariably, money laundering can only thrive
when bank officials fail to exercise due diligence by strictly enforcing Know-Your-
Customer rules and also fail to comply with laws requiring them to report suspicious
transactions to the financial regulatory or law enforcement authorities. In the long
run, there is also the very real risk that criminal interests could assume greater control
of the financial institutions.
Second, there is strong evidence that weak and corrupt financial institutions seriously
weaken the financial sector's role in a country's economic growth and development.
The Asian financial crisis demonstrated this fact forcefully in Indonesia, Korea and
Thailand. Therefore, financial institutions that allow themselves to be abused by
money laundering activities are likely not only to destroy their institutions, but also to
seriously harm their country's economic growth and development.
Third, money laundering diverts resources to less productive activity and facilitates
domestic corruption and crime, which in turn depresses economic growth. Money that
is laundered, especially through channels other than financial institutions, tends to end
up in "sterile" investments such as real estate or luxury goods instead of other higher
priority productive sectors of the country's economy. Money laundering reduces the
cost of crime for the criminals, thereby increasing the level of crime. Higher crime
and corruption, in turn, reduces investment and economic growth. Finally, money
laundering depresses government revenues and effectiveness, particularly where tax
evasion is involved.
Fourth, money laundering has a depressing effect on the external sector. As money
laundering frequently involves transfer of funds to other jurisdictions, it facilitates
capital flight although some of these illicit funds may return "cleansed" to the country
of origin. By the same token, if a country's financial system suffers from reputational
problems due to money laundering, this can also adversely affect the willingness of
foreign investors to make inward investments and discourages foreign banks from
establishing or continuing banking correspondent relationships.
Some have argued that the enforcement of anti-money laundering laws would drive
depositors away from financial institutions. However, the most recent data from
several of the key central banks in Asia prove otherwise.' 3
2.4 International Legal Framework for Combating Money Laundering
The United Nations was the first international organization to initiate and then
coordinate global action to combat money laundering. Arising from the growing
concern with increased drug trafficking which resulted in the entry of vast sums of
dirty money into the banking system, the United Nations Drug Control Program
author has relied on and acknowledges the above-cited paper prepared by his colleague, Mr
Bartlett, Economist, Dewey Ballantine LLP.
13 Bartlett, above at n 12.
(UNDCP) 14 based in Vienna took the lead to obtain international agreement to combat
the drug trade and the related laundering of the proceeds of such crime. This
culminated in the adoption of the United Nations Convention Against Illicit Traffic in
Narcotic Drugs and Psychotropic Substances (the Vienna Convention) in 1988.15
This is the first international treaty to call on states to criminalize money laundering.
It has been signed by 165 states, ratified by 15716 and came into force on 11
November 1990.
In the Preamble to the Vienna Convention, the states parties record their awareness
...that illicit [drug] traffic generates, large financial profits and wealth enabling transnational
criminal organizations to penetrate, contaminate and corrupt the structures of government,
legitimate commercial and financial business, and society at all its levels,
and, therefore, express their determination
... to deprive persons engaged in illicit traffic of the proceeds of their criminal activities and
thereby eliminate their main incentive for so doing...
The provisions of the Vienna Convention deal primarily with measures to combat
drug trafficking and related law enforcement issues. However, there is one provision
that deals directly with the laundering of the proceeds derived from drug trafficking.
Article 3, Section 1 (Offences and Sanctions) of the Vienna Convention sets out a
number of provisions calling on states parties to adopt such measures as may be
necessary to establish certain acts as criminal offences under their domestic laws.
Article 3, Section 1(b) defines the crime of money laundering as follows:
(i) The conversion or transfer of property, knowing that such property is derived from any
offence or offences established in accordance with subparagraph (a) of this paragraph, or from
an act of participation in such offence or offences, for the purpose of concealing or disguising
the illicit origin of the property or of assisting any person who is involved in the commission
of such an offence or offences to evade the legal consequences of his actions;
(ii) The concealment or disguise of the true nature, source, location, disposition, movement,
rights with respect to, or ownership of property, knowing that such property is derived from an
offence or offences established in accordance with subparagraph (a) of this paragraph or from
an act of participation in such an offence or offences;
Section 4 of the Vienna Convention then requires states parties to establish sanctions
for the offences set out in Section 1 taking into account "the grave nature of these
offences." Accordingly, punishment through "imprisonment or other forms of
deprivation of liberty, pecuniary sanctions and confiscation," were stipulated as the
appropriate sanctions. The other provisions of the Vienna Convention deal with 20
7 8 9
jurisdiction over the offences,' confiscation,' extradition, mutual legal assistance,
14 In 1997, UNDCP was renamed as the Office of Drug Control and Crime Prevention (ODCCP),
with a broader mandate of crime prevention.
15 1691 UNTS 449.
16 As of 7 June 2002.
17 Id, at Article 4.
and other measures for international cooperation. 2 1 As noted above, the focus of the
Vienna Convention is on the laundering of the proceeds from drug trafficking. While
drug trafficking is a major source of money laundering activities, there are today
several other sources of money laundering as discussed earlier.
The key instrument in the United Nations' efforts to combat money laundering is its
Global Program against Money Laundering (GPML), administered by its Office of
Drug Control and Crime Prevention (ODCCP). Through the GPML, the United
Nations assists member countries with policy development, legislation, technical
assistance, problem solving, and training in combating money laundering.
Further work on extending international efforts to combat money laundering for all
serious crimes was assumed by the Financial Action Task Force (FATF), an
intergovernmental group established by the Group of Seven (G-7) 22 in Paris in 1989.
The FATF consists of 29 member jurisdictions and two international organizations,
the European Commission and the Gulf Cooperation Council. 23 The work of the
FATF is coordinated by a small secretariat based in the OECD's offices in Paris.
In 1996, the FATF published the Forty Recommendations on Money Laundering

(Forty Recommendations) to provide detailed guidelines and recommendations to
member and non-member countries and financial institutions on how to formulate and
implement measures to combat money laundering (See Appendix 1 for a summary of
the key recommendations). The Forty Recommendations call on countries to
criminalize money laundering, punish both corporations and individuals for the
commission of this crime, amend or waive bank secrecy laws to permit financial
institutions and their officials to report suspicious transactions to the authorities,
exempt financial institutions and their officials from civil and criminal liability for
such reporting, freeze, seize and confiscate criminal proceeds, and exercise firm
regulatory supervision over all financial institutions. Similarly, financial institutions
are called upon to implement strict customer identification procedures (popularly
referred to as Know Your Customer rules), to report suspicious transactions to the
authorities, and to maintain transaction records for at least five years. 24 The Forty
Recommendations are currently under review and are expected to be revised soon to
reflect experience and recent developments.
Based on the Forty Recommendations, the FATF requests countries to carry out
annual Self-Assessments and also periodically conducts its own Mutual Evaluations to
determine the extent to which such countries are observing the Forty
Recommendations, through the promulgation of anti-money laundering laws or
21 Id, at Article 8-20.
22 The Group of Seven or G-7 consists of the following seven industrialized countries: Canada,
France, Germany, Italy, Japan, the United Kingdom, and the United States.
23 The 29 member jurisdictions of the FATF are: Argentina, Australia, Austria, Belgium, Brazil,
Canada, Denmark, Finland, Germany, Greece, Hong Kong, China, Iceland, Ireland, Italy,
Japan, Luxembourg, Mexico, the Netherlands, New. Zealand, Norway, Portugal, Singapore,
Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.
24 For further details of the FATF's work and the text of, and commentary on, the Forty
Recommendations, see the OECD website at http://www.oecd.org/fatf.
regulations, the establishment and operation of regulatory and law enforcement

institutions (for example, financial intelligence units or anti-money laundering
agencies), and other effective implementation measures. In addition to the Forty
Recommendations, the FATF has also established twenty-five criteria for defining
non-cooperative countries or territories (NCCTs), and undertaken two major reviews
in 2000 and 2001 to identify NCCTs.25 The criteria seek to identify detrimental rules
and practices which impede international cooperation in the fight against money
laundering. These criteria are divided into four broad categories: loopholes in
financial regulations, obstacles raised by other regulatory requirements, obstacles to
international cooperation, and inadequate resources for preventing and detecting
money laundering activities. Once a country or territory is classified as an NCCT, it is
required to take concrete measures to remove these detrimental rules and practices
within a specified time frame. Failure to do so could result in the application of
counter-measures or sanctions against the NCCT by the members of FATF. As noted
in the Introduction, out of the nineteen countries or territories currently classified as
NCCTs worldwide, 26 seven countries or territories or more than one-third are from the
Asian and Pacific Region alone.
In June 1998, the United Nations General Assembly adopted a Political Declaration
and Action Plan Against Money Laundering at its Twentieth Special Session devoted
to "countering the world drug problem together." 27 This United Nations Political
Declarationwas an important development because it was addressed to, and endorsed
by, the more universal membership of the United Nations, whereas the FATF's Forty
Recommendations were primarily addressed to its 31 members. Although this
PoliticalDeclarationwas largely influenced by a determination to counter the world
drug problem, the General Assembly Resolution adopted thereunder urged all states to
implement the provisions of the Vienna Convention and "other relevant international
instruments on money laundering" and then sets out a list of guiding
28
principles for
national action which basically mirrors the Forty Recommendations.
The adoption of the FATF's Forty Recommendations and the United Nations General
Assembly's PoliticalDeclaration raises an interesting issue as to the legal status or
effect of the recommendations contained therein. Unlike the binding legal obligations
established by international treaty or national legislation, these recommendations or
29
standards belong more to the realm of "soft law" rather than "hard law." On the
other hand, it could be argued that since these recommendations amplify or elaborate
on general principles of law or legal obligations already set out in other international
25 See FATF, Report on Non-Cooperative Countries and Territories, 14 February 2000; FATF,
Review to Identify Non-Cooperative Countries or Territories: Increasing the Worldwide
Effectiveness of Anti-Money Laundering Measures, 22 June 2000; and Review to Identify Non-
Cooperative Countries or Territories: IncreasingThe Worldwide Effectiveness of Anti-Money
Laundering Measures, 22 June 2001. See the FATF website at http://www.oecd/fatf.
26 The nineteen NCCTs are: Cook Islands, Dominica, Egypt, Grenada, Guatemala, Hungary,
Indonesia, Israel, Lebanon, Marshall Islands, Myanmar, Nauru, Nigeria, Niue, Philippines,
Russia, St. Kitts and Nevis, St. Vincent and the Grenadines, and Ukraine.
27 Adopted by the United Nations General Assembly on 10 June, 1998.
28 United Nations General Assembly Resolution, Doc. S-20/4D.
29 On this issue, see Herbert V Morais, The Quest for International Standards: Global
Governance vs. Sovereignty, 50 Kansas Law Review 1 (2002).
treaties and numerous national laws, they carry a strong expectation of adherence if
not compliance. To the extent that these recommendations also seek to proscribe
criminal activities, it could also be argued that there should be little or no
disagreement among the community of states as to the achievement of the objectives
of these recommendations, even though there may be some differences of opinion as
to the means to achieve them.
The third important United Nations instrument is the United Nations Convention
Against Transnational Organized Crime which was adopted in Palermo, Italy in
August 2000.30 The United Nations recognized that, in the post-Cold War era, various
forms of transnational organized crime posed a serious threat to security, democracy,
the rule of law, and political and financial stability. Thus, the Convention requires
states parties to outlaw some of the most common offences, such as money
laundering, corruption of public officials, obstruction of justice, and conspiracy.
Recognizing that it was insufficient to approach the problem of sophisticated
transnational organized crime with purely local solutions, the Convention sets out
measures for strengthening international cooperation in such matters as extradition,
mutual legal assistance, transfer of proceedings and joint investigations.3 '
Other international and regional bodies, including particularly the following, have also
been active in combating money laundering through the adoption of conventions and
the issuance of recommendations, directives, guidelines, best practices and model
laws:
The Basel Committee on Banking Supervision (previously called the Basel

Committee on Banking Regulation and Supervisory Practices), established by
the central bank governors of the G-10 countries 32 in 1974, issued a Statement
on Prevention of Criminal Use of the Banking System for the Purpose of
Money Laundering in 1988. 33 This Statement set out some basic policies and
procedures that the managements of banks should implement with a view to
suppressing money laundering through the banking system. In 1997, the Basel
Committee issued the Core Principlesof Banking Supervision. Core Principle
15 states as follows: "Banking supervisors must determine that banks have
adequate policies, practices and procedures in place, including strict 'know-
your-customer' rules, that promote high ethical and professional standards in
the financial sector and prevent the bank being used, intentionally or
unintentionally, by criminal elements." In the area of international banking
supervision, the Basel Committee has also taken steps to issue
recommendations to banking institutions to adot strong internal measures to
prevent financial abuse of the banking system. 3 It is important to note that,
30 Adopted by U.N. General Assembly Resolution, Doc. A/RES/55/25 on 15 November 2000.

31 See the ODCCP website at http://www.undcp.org.
32 The G-10 is a misleading name because the Group's membership has expanded to thirteen
states: Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain,
Sweden, Switzerland, the United Kingdom, and the United States.
33 For the text of this Statement on Prevention of Criminal Use of the Banking System, see the
Basel Committee website at http://www.bis.org/bcbs/.
34 For the text of the Core Principles, see the Basel Committee website at
http://www.bis.org/bcbs.
while the Basel Committee essentially represents the G-10 industrial countries
and its principles and recommendations are advisory in character, its
recommendations are given great weight by national bank supervisory bodies
throughout the world.
* The Council of Europe 35 adopted the Convention on Laundering, Search, 36

Seizure and Confiscation of the Proceedsfrom Crime in 1990 in Strasbourg.
This Convention contains both substantive law provisions to deal with money
laundering, as well as mechanisms for international cooperation and mutual
assistance in criminal matters. An interesting feature of this Convention is that
the Council may invite any non-member state to also accede to the
Convention.
* The Council of the European Communities in 1991 issued Council Directive

91/308/EEC on "Prevention of the Use of the Financial System for the
Purpose of Money Laundering."3' This Directive deals largely with the
prevention of money laundering by the abuse of the financial system. This
Directive is legally binding on member states.
* During 1994-95, governments of the Western Hemisphere through the

Organization of American States (OAS) agreed to take all necessary measures,
including legislative and administrative, to combat money laundering in their
hemisphere in line with the Vienna Convention. This was followed by the
adoption in 1999 of the Model Regulations Concerning Laundering Offences
Connected to Illicit Drug Trafficking and Related Offences by the Inter-
American Drug Abuse Control Commission (CICAD). These CICAD Model
Regulations are intended to serve as a guide to member countries for the
adoption of national laws.
* FATF-style regional bodies such as the Asia/Pacific Group on Money

Laundering (APG),35 the Caribbean Financial Action Task Force (CFATF), 39
The Council of Europe consists of the following 43 member countries: Albania, Andorra,
Armenia, Austria, Azerbaijan, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark,
Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia,
Liechtenstein, Lithuania, Luxembourg, Malta, Moldova, Netherlands, Norway, Poland,
Portugal, Romania, Russian Federation, San Marino, Slovakia, Slovenia, Spain, Sweden,
Switzerland, the former Yugoslav Republic of Macedonia, Turkey, Ukraine, and the United
Kingdom.
36 For the text of the Convention, see the Council of Europe website at http://www.coe.int.
37 For the text of the Council Directive and the Amended Directive 2001/97/EC, see the Council
of the European Union website at http://europa.eu.int.
38 The APG consists of the following 22 member jurisdictions: Australia, Bangladesh, Chinese
Taipei, Cook Islands, Fiji, Hong Kong, China, India, Indonesia, Japan, Macau, China,
Malaysia, New Zealand, Niue, Pakistan, Republic of Korea, Philippines, Samoa, Singapore,
Sri Lanka, Thailand, the United States, and Vanuatu. See the website of the Asia/Pacific
Group on Money Laundering at http://www.apgml.org.
The CFATF consists of the following 25 member jurisdictions: Anguilla, Antigua & Barbuda,
Aruba, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Costa
Rica, Dominican Republic, Dominica, Grenada, Jamaica, Montserrat, Netherland Antilles,
Nicaragua, Panama, St. Kitts & Nevis, St. Lucia, St. Vincent & the Grenadines, Suriname,
CICAD, the Financial Action Task Force for South America (GAFISUD) 4° ,
and the Eastern and Southern Africa Anti-Money Laundering Group
(ESAAMLG) 41 have also been actively supporting the FATF's efforts in their
respective regions to strengthen legal, policy and institutional frameworks to
combat money laundering. In the Asian and Pacific Region, the APG, whose
secretariat is based in Sydney, Australia, has been effectively assisting and
coordinating the activities of its member jurisdictions with a view to seeking
their closer adherence to the FATF's Forty Recommendations. The APG has
also been coordinating technical assistance from various donors to support
anti-money laundering activities and programs in the region.
* The Egmont Group of Financial Intelligence Units, established in 1995, serves

as a forum to promote exchange of financial intelligence on money laundering
among its member jurisdictions, including assisting countries with the
establishment or strengthening of financial intelligence units. 42
* The Commonwealth Secretariat has prepared a Model Law on the Prohibition

of Money Laundering and also published A Model of Best Practice for
Combating Money Laundering in the Financial Sector.43
* The Bureau des Fonds Provenant d'Activities Criminelles (FOPAC), a branch

of the International Criminal Police Organization (INTERPOL) cooperates
with national police departments and other agencies in gathering and sharing
information on the movement and laundering of the proceeds of crime, and has
also worked to develop model legislation to facilitate the obtaining of evidence
needed in criminal
44
investigations and proceedings arrived at confiscation of
illegal goods.
* The International Organization of Securities Commissions (IOSCO), whose

members are national securities commissions, stock exchanges and regional
and international organizations, adopted a Resolution on Money Laundering in
1992 setting out anti-money laundering guidelines for its members. In 1998, it
issued the JOSCO Objectives and Principles, which outlines key measures for
securities supervisors to counter fraud and money laundering.45
Trinidad & Tobago, Turks & Caicos Islands, and Venezuela. See the CFATF website at
http://www.cfatf.org.
,40 See the GAFISUD website at www.gafisud.org.
41 The ESAAMLG consists of the following 9 member jurisdictions: Kenya, Malawi, Mauritius,
Mozambique, Namibia, Seychelles, Swaziland, Tanzania, and Uganda. See information about
the ESAAMLG under "members and observers" at the FATF website
(http://www.oecd.org/fatf).
42 The Egmont Group has operational units in 58 countries. See information about the Egmont
Group of Financial Intelligence Units under "other initiatives" at the FATF website
(http://www.oecd.org/fatf).
43 See the Commonwealth Secretariat website at www.thecommonwealth.org.
" See the INTERPOL website at www.interpol.int.
45 See the IOSCO website at www.iosco.org.
a Similarly, the International Association of Insurance Supervisors (IAIS), an

association of national insurance supervisors established in 1994, issued the
Insurance Core Principles in 2000 to guide insurance supervisors in
countering fraud and money laundering. In 2002, the IAIS issued a
comprehensive Anti-Money Laundering
46 Guidance Note for Insurance
Supervisors and InsuranceEntities.
* At the private sector level, eleven major international private banks in

cooperation with Transparency International (the Wolfsberg Group) adopted
the Global Anti-Money Laundering Guidelinesfor PrivateBanking (Wolfsberg
AML Principles) in October 2000. In January 2002, the Wolfsberg Group
issued a Statement on the Suppression of the Financingof Terrorism, setting
out a number of guidelines for financial institutions
47 to take to prevent the flow
of terrorist funds through the financial system.
* The International Federation of Accountants (IFAC), established in 1977, has

issued guidance on the role of auditors in detecting fraud and errors in
financial statements, in particular ISA 240.
2.5 National Laws against Money Laundering
Many of the countries and territories in the Asian and Pacific region have enacted
anti-money laundering laws, regulations or prevention guidelines, both with respect to
narcotic offences and all or most serious offences. In 2001, Malaysia and the
Philippines promulgated anti-money laundering laws and, in April 2002, Indonesia
adopted an anti-money laundering law. A number of other countries have draft anti-
money laundering laws under consideration.
3 Terrorism
By way of background to the discussion of the financing of terrorism,48

it would be
useful to have a general understanding of what constitutes terrorism.
3.1 What is Terrorism?
The terms "terrorism" and "terrorist" are highly controversial and carry legal, political
and even religious overtones. 49 While there is broad agreement that acts of violence
committed against innocent civilians such as on September 11, the bombing of Pan
Am 103 or the embassy bombings in Africa constitute acts of terrorism, there are
differences of view as to what constitutes "terrorism". International conventions and
national legislation have adopted different definitions in dealing with various types of
terrorism. History, politics and culture have also shaped the public's understanding
46 See the IAIS website at www.iaisweb.org.

47 See the website of the Wolfsberg Principlesat http://www.wolfsberg-principles.com.
48 For a discussion of the subject of terrorism, see Walter Laquer, Terrorism (1977). A more
recent interesting analysis of terrorism is Caleb Carr, The Lessons of Terror: A History of
WarfareAgainst Civilians: Why It Has Always Failedand Why It Will Fail Again (2001).
49 For an excellent analysis of this problem, see Edward H Said, The Politics of Dispossession
341-9 (1994); and Eqbal Ahmad, Terrorism: Theirs and Ours (2001).
and judgments as to what constitutes terrorism, who should properly be classified as

terrorists, and which entities should be classified as terrorist organizations. To cite
one example, Article 2(a) of the Convention of the Organization of the Islamic
Conference on Combating International Terrorism includes the following exception
to its general condemnation and criminalization of terrorism:
Peoples' struggles including armed struggle against foreign occupation, aggression,

colonialism, and hegemony, aimed at liberation and self-determination in accordance with the
principles of international law shall not be considered a terrorist crime.
Similarly, there are differences of opinion (at the political level depending on which
side of the political spectrum one is on) as to whether the Irish Republican Army, the
Palestinian Liberation Organization, the African National Congress in South Africa
(during the apartheid era) or the Tamil Tigers in Sri Lanka are or were terrorist
organizations, mainly because they advocated the use of or actually used violence to
advance their political agenda.
Most unfortunately, some terrorists who are Muslim have improperly used their
Islamic religion to justify their acts of terrorism, calling this a holy war (jihad) against
the infidels. This, too, has caused further confusion, apart from casting a slur on one 50
of the great religions of the world and on the vast majority of law-abiding Muslims.
However, for the purposes of this article, terrorism is defined as the unlawful use or
threat of violence against persons or property, or which endangers a person's life or
creates a serious risk to the health or safety of the public, or which is designed to
intimidate or coerce a government or public, in furtherance of political, religious or
social objectives. The recent instances of the use of mail to surreptitiously distribute
anthrax highlight the advent of a new form of bio-terrorism.
3.2 TerroristAttacks before September 11 - Some Examples
Even before September 11, 2001, international terrorist attacks have been carried out
for many years, albeit on a smaller scale, in several parts of the world. The following
are a few recent examples of some major terrorist attacks:
* Attack on the U.S.S. Cole in Aden, Yemen, in October 2000, which killed 17
American sailors and wounded more than twice that number.
* Bombings of the United States embassies in Nairobi, Kenya and Dar-es-Salam,

Tanzania, in August 1998, which killed more than 200 people and injured
several thousand.
50 For recent studies of Jihad,see for example, Ahmad Rashid, Jihad: The Rise of Militant Islam
in CentralAsia (2002), especially the Introduction; John L Esposito, Unholy War: Terror in
the Name of Islam (2002); and Gilles Kepel, Jihad. The Trail of Political Islam (2002). See
also Peter L Bergen, Holy War, Inc: Inside the Secret World of Osama bin Laden (2001); and
Karen Armstrong, Holy Wars 40-42 (2d ed, 2001). Armstrong's book is mainly about the
Crusades, which serves as a grim reminder that Christians had also engaged in holy wars in an
earlier era.
* Attack on the Khobar Towers air base in Saudi Arabia in June 1996, which
resulted in the deaths of 19 Americans, the hospitalization of 64 others, and the
treatment of about 200.
* Tokyo subway nerve gas attack in March 1995, which resulted in the
hospitalization of more than 600 subway passengers and 12 deaths.
* Pan Am 103 explosion and crash in Lockerbie, Scotland in December 1988,

which killed 270 passengers, mostly Americans.
In addition to the above major terrorist attacks, there have been several others of a
smaller magnitude. In the Israeli-Palestinian conflict, and also in the theatre of ethnic
conflict in Sri Lanka, there have been numerous instances of suicide bombers
committing acts of terrorism to kill both political leaders (such as Indian Prime
Minister Rajiv Gandhi and Sri Lankan Prime Minister Premadasa) and innocent
civilians. Two of the author's close friends, Lalith Athulathmudali (a senior
Government Minister) and Neelan Tiruchelvam (a Member of Parliament) were also
assassinated in Sri Lanka.
In all or most of the above incidents of terrorism, those who claimed responsibility for
these attacks justified them based on their political or social agenda, as a means of
attracting international attention to their cause and/or to intimidate the governments
concerned to change their policies or make concessions.
3.3 The September 11 Terrorist Attacks - The Immediate Response
The September 11, 2001 terrorist attacks in the United States have certainly gripped
the attention not only of the United States but of the entire international community.
The enormity of the damage to life and property caused by this latest attack was
unprecedented. The combined total loss of life in New York City and Washington,
D.C. is estimated at approximately 3000, and the property damage is estimated at
several billion United States dollars.
The day after the terrorist attacks, the United Nations Security Council moved swiftly
to adopt resolutions strongly condemning this act of terrorism as a "threat to
international peace and security." In a subsequent resolution, Resolution 1373 of 28
September 2001, the Security Council reaffirmed its call to all states to sign, ratify and
implement the relevant international conventions criminalizing terrorism and the
financing of terrorism, and also stipulated
5
various other legal and financial measures
for urgent implementation by states. 1
On 23 September 2001, President George Bush issued Executive Order 13224 to

freeze assets and block transactions in the United States of any person or institution
associated with terrorists or terrorist organizations designated in the Order. The
objective was "to starve the terrorists of their support funds." Eleven terrorist
organizations are listed in the Order including AI-Qaeda, as well as a dozen
individuals including Osama bin Laden, three charitable organizations and one
51 United Nations Security Council Resolution, S/RES/1373 (2001).
corporate entity. The Order expands the Treasury Department's powers to target the
financial support structure of terrorist organizations. Foreign banks that refuse to
cooperate, share information or freeze terrorist assets will be denied access to U.S.
markets and will have to "face the consequences. 52
On 26 October 2001, the President signed into law the USA PatriotAct of 2001. 53
This law will significantly expand and strengthen the powers of United States law
enforcement agencies in investigating and prosecuting a variety of crimes related to
terrorism, including acts of terrorism, money laundering, and the financing of terrorist
organizations and their activities. The law provides a wider arsenal of weapons to
effectively combat terrorism, including wire tapping, electronic surveillance,
enhanced anti-money laundering provisions, stronger arrest and detention powers,
seizure and forfeiture powers and enhanced immigration provisions and border
controls.
Less than two weeks later, on 7 November 2001, President Bush announced that,
"acting on solid and credible evidence", the Treasury Department had blocked the
assets in the United States of sixty-two individuals and organizations connected with
two terror-supporting financial networks - the Al Taqua and the Al Barakat - shutting
down their offices in four states. These two networks stand 54 accused of providing
extensive financial and communications services to Al-Qaeda.
The United Nations Security Council has also compiled and issued its own
consolidated list of terrorists and terrorist organizations pursuant to Security Council
Resolutions 1267 (1999), 1333 (2000) and 1390 (2002), as have a number of other
European states and the European Union.
The FATF held an Extraordinary Plenary meeting in Washington, D.C. on 29 and 30

October 2001. At the meeting, the FATF adopted an international action plan
consisting of eight Special Recommendations that call on all states to take urgent
action under
55
international treaties and their national laws to counter the financing of
terrorism.
3.4 International Law against Terrorism
At the international level, the United Nations has been in the forefront of efforts over
many years to combat terrorism and the financing of terrorism. There is already a
substantial body of international treaty law on the subject, consisting primarily of 12
separate multilateral conventions aimed at criminalizing and thereby suppressing
different aspects of terrorist activity. These conventions 56 are:
52 Executive Order 13224. Additional organizations and individuals have been included
subsequently.
53 Public Law 107-56.
54 Executive Order 13224. Several more terrorists and terrorist organizations have been added to
this list since then. See the United States Department of the Treasury Office of Foreign Assets
Control website at http:// www.treas.gov/ofac for a full listing. A similar listing is also
available on the United States State Department website at http://www.state.gov.
55 See Section III.D below.
56 For a summary description and the texts of these Conventions, see http://untreaty.unorg.
1 Convention on the Prevention and Punishment of Crimes against

InternationallyProtected Persons, including Diplomatic Agents, New
York, 14 December 197357
2 International Convention against the Taking of Hostages, New York,

17 December 197958
3 International Convention for the Suppression of Terrorist Bombings,

New York, 15 December 1 9 9 7 59
4 International Convention for the Suppression of the Financing of

Terrorism, New York, 9 December 199960
5 Convention on Offences and Certain Other Acts Committed on Board

Aircraft, Tokyo, 14 September 196361
6 Convention for the Suppression of Unlawful Seizure of Aircraft, The

Hague, 16 December 197062
7 Convention for the Suppression of Unlawful Acts against the Safety of

Civil Aviation, Montreal, 23 September 197,63
8 Convention on the Physical Protection of Nuclear Material, Vienna, 3

March 198064
9 Protocol on the Suppression of Unlawful Acts of Violence at Airports

Serving InternationalCivil Aviation, supplementary to the Convention for
the Suppression of Unlawful Acts against the Safety of Civil Aviation,
Montreal, 24 February198865
10 Convention for the Suppression of Unlawful Acts against the Safety of

Maritime Navigation, Rome, 10 March 198866
11 Protocolfor the Suppression of Unlawful Acts against the Safety of Fixed

Platforms located on the ContinentalShelf Rome, 10 March 19886
7 1035 U.N.T.S. 167.

58 1316 U.N.T.S. 205.
59 Adopted by U.N. General Assembly Resolution, Doc. A/RES52/164, 15 December 1997.
60 39 ILM 270 (2000).
61 704 U.N.T.S. 219.
62 860 U.N.T.S. 177.
63 974 U.N.T.S. 177.
A TIAS No. 11080.
65 974 U.N.T.S. 178.
66 27 I.L.M. 672.
67 27 I.L.M. 672, 685.
12 Convention on the Marking of Plastic Explosives for the Purpose of

Detection, Montreal, 1 March 199168
It is interesting to note from the above list that, while there are four separate
Conventions dealing with unlawful acts committed on board aircraft, seizure of
aircraft, safety of civil aviation, and unlawful acts of violence at airports, and two deal
with the taking of hostages and terrorist bombings, none of them deals explicitly with
the crime that was committed on September 11, namely the deadly use of aircraft as
missiles in suicide bombings to damage property and kill civilians. This development,
coupled with the new threat of bio-terrorism created by the distribution of anthrax by
mail in the United States, is likely to accelerate calls for a review of the existing
Conventions on terrorism or the preparation by the United Nations of a new general
Convention on terrorism which will capture all conceivable acts of terrorism,
including cyber terrorism.
At the regional level, several other international and regional organizations have also
adopted conventions to combat terrorism. These organizations include the Council of
Europe, the Organization of American States, the Organization of African Unity, the
South Asian Association for Regional Cooperation, the League of Arab States, the
Organization of the Islamic Conference, and the Commonwealth of Independent
States. 69 These conventions generally seek to strengthen legal measures for mutual
assistance and cooperation among member states in criminal investigations and
proceedings related to terrorism offences. These Conventions may also need to be
reviewed and amended to reflect the realities of new forms of terrorism.
3.5 National Laws against Terrorism
Under its ongoing study, Measures to eliminate internationalterrorism, begun in

1987, the United Nations General Assembly has compiled a series of reports
submitted by member states summarizing the legal provisions under their national
laws dealing with combating terrorism. This study reveals that only a few states have
promulgated specific anti-terrorism laws. Examples include Australia, Egypt,
Georgia, Turkey, Ireland and the United Kingdom. The United Kingdom, in
particular, has had strong anti-terrorism laws on its books for many years to deal with
the problem in Northern Ireland. Most other states pointed to their general criminal
laws or penal codes which include among punishable crimes the acts of murder,
causing or threatening to cause bodily injury or harm, kidnapping, arson or damage to
property, and unlawful use of arms or explosives. Some of these states, such as
France and Tunisia, pointed to the inclusion of the crime of terrorism in their general
criminal laws or penal codes.
Since September 11, a number of States have moved swiftly to adopt new anti-
terrorism laws or amend existing laws to strengthen their capability to combat
terrorists, terrorist organizations and terrorist activities. Among those that have
68 Treaty Doc. No. 103-8.

69 For a summary description and the texts of these regional conventions, see the United Nations
Treaty Collection (Conventions on Terrorism) website at http://www.untreaty.un.org.
enacted or are considering such legislative measures are the United States, the United
Kingdom, Australia, Canada, India, Israel, Japan and Pakistan.
4 The Financing of Terrorism
In light of the September 11 terrorist attacks, international attention and action is now
heavily focussed on destroying the pervasive financial network that represents the
financial foundation for terrorist activities. It would be useful, therefore, to examine
some of the legal issues associated with such financing.
4.1 The Financing of Terrorism: Generally
The key issue that has attracted the urgent attention of finance ministers and financial
regulatory authorities worldwide in the aftermath of the September 11 attacks is the
criminal use of the banking system and informal financial networks to channel funds
to finance terrorist activities. While there have always been some suspicions that
secret and fictitious bank accounts were being used to fund terrorist activities,
investigations since that tragedy have revealed the existence of a pervasive financial
foundation for terrorists. This foundation manifests itself in numerous accounts
opened and operated using the fronts of business enterprises (such as honey centres
and sweet bakeries), charities, religious groups, hospitals, orphanages, trusts,
educational and research institutes, political groups, students' organizations and
individuals. Most of these accounts are held in banks in the Middle East, Europe and
the United States, but also in less conspicuous financial institutions including offshore
financial centres elsewhere. 70 In examining this financial foundation, it is important to
distinguish between two separate and distinct types of terrorist financing - financing
through money laundering and financing through the use of legitimate funds.
4.2 Financing Terrorism through Money Laundering
Earlier in this article, the laundering of the proceeds of crime has been discussed in
general. Various published reports have suggested that a significant part of the
financing for the terrorists operating in Afghanistan came from plying the drug trade.
In 2000, Afghanistan was the largest producer of opium poppy in the world with an
estimated production of about 3,600 metric tons, although production decreased
significantly in 2001 due to a ban on such production imposed by the Taliban
regime.7 ' If the proceeds of the drug trade were used to finance the activities of
terrorists, such financing of terrorism using criminal proceeds would be caught by the
provisions of most national anti-money laundering laws.
The financing of terrorism using the proceeds of crime is already covered by the Forty
Recommendations governing money laundering. Notable among these
recommendations, which are particularly relevant to the issue of terrorism, are those
calling on financial institutions to implement strict internal procedures for customer
identification (Know Your Customer rules), the abolition of accounts in fictitious
70 For a good discussion of the sources and techniques of financing terrorism, see James Adams,
The Financingof Terror(1986).
71 See the United States State Department website at http://www.state.gov.
names, and the exercise of due diligence in respect of shell corporations, international
business corporations and trusts to mask the identity of the true owners. The other key
recommendation - usually also a key provision of national anti-money laundering
laws is the one requiring financial institutions to report suspicious transactions to the
authorities on a confidential basis, where a financial institution has reason to believe
or suspect that the proceeds derive from criminal or other unlawful activities. To
allow for such reporting, the Forty Recommendations also call for waiver of strict
bank secrecy laws and the provision of safe harbour rules to protect reporting financial
institutions and their officials from criminal or civil liability.
4.3 Financing Terrorism with Legitimate Funds
The use of legitimate funds to finance crimes such as terrorism appears to be a

phenomenon of more recent vintage. This type of financing involves the use or abuse
of seemingly legitimate bank accounts to finance criminal activities such as terrorism,
with or without the knowledge of the donors or contributors of such funds. The most
obvious example of this is the use of non-profit organizations such as charities. The
issue has been highlighted most starkly by the September 11 terrorist attacks. The
problem posed here is that the use of legitimate funds to finance crime does not fall
within the purview of national anti-money laundering laws or, until very recently, the
mandate of the FATF. The original Forty Recommendations of the FATF do not
address this use of funds as it does not constitute money laundering, that is, the funds
do not derive from criminal activity or predicate offences.
With the gradual decline, at least officially, of support from certain rogue states for
terrorist activities, it has become increasingly clear that public or private financing is a
most important lifeline of support for terrorism. It is widely believed that much of the
funding for terrorist activities has come from donations made by wealthy individuals
and organizations in the Persian Gulf States to various Islamic causes or projects. But
pinning down the culprits of terrorist financing is most problematical when viewed in
the context of Middle East culture and Islamic values, for at least two reasons. First,
the Koran imposes an obligation on all Muslims to contribute a portion of their wealth
(called zakat) to religious charities. Second, there is growing support for Islamic
movements *that promote political, social and cultural causes. The poor and those
clamouring for political reforms in Middle East countries are among those who seek
salvation through support for Islamic causes.
While many wealthy individuals and organizations in the Persian Gulf States have
contributed generously to various non-profit organizations including charities, it has
been argued on their behalf that there was no way for them to know or ensure that
such funds were in fact actually used for the stated charitable purposes, let alone know
that they were diverted to finance terrorism. A principal reason for this problem is
obviously the lack of effective legal systems that impose strict rules of transparency,
accounting and auditing requirements, including periodic statutory reporting on the
actual use of such funds. Weak prudential or corporate supervisory regimes in some
Middle East countries have also contributed to the problem. As far as Afghanistan is
concerned, there was no formal financial system to speak of, let alone prudential
regulation.
4.4 International Legal Framework for Combating the Financing of Terrorism
Of the twelve Conventions on terrorism referred to earlier, the convention that has
attracted the most recent attention is the InternationalConventionfor the Suppression
of the Financing of Terrorism, adopted in 1999. This is because, as noted earlier,
evidence is mounting that there is a significant international financing network that is
actively supporting terrorist activities. So far, 132 states have signed the Convention
but only 34 have ratified it.72 The Convention came into force on 10 April 2002. This
Convention requires states to take steps to criminalize the financing of terrorists,
terrorist organizations, and terrorist acts. To this end, it would be an offence if any
person, by any means, directly or indirectly, unlawfully and wilfully, provides or
collects funds with the intention that they should be used or in the knowledge that they
are to be used to carry out acts of terrorism as defined in nine specified Conventions
on terrorism. States also undertook to apply criminal, civil, or administrative
sanctions against those persons held liable for such acts.
As this Convention has still not been ratified by the majority of signatory states,
United Nations Security Council Resolution 1373 provides the primary legal basis for
requiring all member countries of the United Nations to take concrete steps
immediately to suppress terrorism and terrorist financing in particular. This is because
a Security Council Resolution taken in response to a threat to international peace and
security, pursuant to Chapter VII of the United Nations Charter, is a decision that is
legally binding on all members. The Security Council decided that all states must
prevent and suppress the financing of terrorist acts, and criminalize the willful
provision or collection of funds by their nationals to finance terrorist acts. They must
also freeze without delay funds and assets of persons or entities involved with terrorist
acts; prohibit nationals and other persons and entities from making funds, financial
assets and economic resources available to those engaged in terrorist activities; deny
safe haven to terrorists; and cooperate closely with other countries in criminal
investigations and proceedings related to such crimes. The Security Council also
established a Counter Terrorism Committee to closely monitor implementation by
member states of the decisions under Resolution 1373. The FATF, which has a very
limited membership and can only make recommendations to its members and invite
non-members to also adhere to them, has relied explicitly on Resolution 1373 as the
legal basis for its action plan.
At the FATF Emergency Plenary meeting on 29-30 October 2001, an international

action plan was adopted to crack down immediately on terrorist financing. This action
plan took the form of eight Special Recommendations (See appendix 2 for a summary
of the key recommendations).73
Essentially, the action plan has three parts. The first part is an urgent call on all
countries to sign and/or ratify the InternationalConvention on the Suppression of the
Financing of Terrorism, and also to implement the relevant United Nations
Resolutions relating to the prevention and suppression of the financing of terrorism,
particularly Security Council Resolution 1373.
72 As of 19 June 2002.
73 For the full text of the action plan, see the FATF website at http://www.oecd.org/fatf.
The second part of the action plan is simply to extend the application of the Forty
Recommendations (to the extent relevant or appropriate) to also cover the financing of
terrorism. These recommendations include:
* criminalizing the financing of terrorism, terrorist acts and terrorist

organizations, and designating such offences as predicate offences for money
laundering;
* strengthening customer identification procedures for wire transfers;
* reporting of suspicious transactions related to terrorism;
* freezing and confiscation of terrorist assets; and
* providing the widest possible assistance to other countries' regulatory and law
enforcement authorities in investigations of terrorist financing, terrorist acts
and terrorist organizations.
The third part of the action plan calls for measures to:
* review the adequacy of laws and regulations that relate to non-profit

organizations, particularly charities, to ensure that they are not misused to
finance terrorism; and
* require alternative remittance systems such as hawala to be licensed or
registered as financial institutions and subject to all the FATF's Forty
Recommendations applying to banks and non-bank financial institutions.
Another key recommendation requires countries to enact legal measures to ensure that
persons or legal entities that provide a service for the informal transmission of money
or value are licensed and registered such as banks and non-bank financial institutions.
This recommendation is intended to bring alternative remittance systems such as
hawala under financial regulatory oversight.
With a view to ensuring the swift and effective implementation of this action plan, the
FATF has established a timetable for making assessments of the level of adherence by
countries to the special recommendations. A deadline of June 2002 has been set for
securing such adherence, following which counter-measures may be considered
against countries that have not taken concrete steps to counter terrorist financing.
FATF members stand ready to extend technical assistance to non-members to assist
them in adhering to the special recommendations.
4.5 National Laws against the Financing of Terrorism
It is still too early to provide a full description of the state of national laws in the
Asian and Pacific region covering the criminalization of terrorism and the financing of
terrorism. There is probably little national law in the specific area of terrorism or the
financing of terrorism. As the United Nations study referred to earlier indicated,
terrorism is frequently included as a crime under the general criminal law or penal
code. Both the United Nations Security Council (through its Counter Terrorism
Committee) and FATF have requested states to report to them on the state of their
national laws and on the measures that they have taken or propose to take to
criminalize terrorism, terrorist organizations, and the financing of terrorism; and to

freeze terrorist assets.
5 Role of the International Financial Institutions in Combating

Money Laundering and the Financing of Terrorism
The International Monetary Fund (IMF), the World Bank and the regional
development banks have also assumed a major role in supporting the efforts of the
FATF and the Untied Nations to combat money laundering and the financing of
terrorism, based on the belief that strengthened supervisory systems and robust legal
and institutional frameworks for financial institutions can help to prevent financial
crime including money laundering and the financing of terrorism. Following is a
summary of their contributions to date.
5.1 The InternationalMonetary Fund
A central element of the IMF's mandate to promote macro-economic stability is to

address financial sector issues, including particularly those pertaining to bank
supervision. Anti-money laundering issues related to financial supervision and
regulation (particularly those relating to the Basel Committee's Core Principles and
the IOSCO and 1AIS Principles)are covered under the annual Article IV consultations
(also known as surveillance) with member countries. The IMF's work helps member
countries strengthen their financial supervisory and regulatory systems, and promotes
the integrity, safety and soundness of financial systems, thereby limiting the
opportunities for the commission of financial crimes such as money laundering and
the financing of terrorism. In recent years, IMF staff have, in the context of Article IV
consultations 74 and the use of Fund resources looked increasingly at financial system
abuse issues (for example, money laundering, pyramid schemes, fraudulent sale of
financial instruments, tax evasion, and corruption) and also at bank secrecy and
offshore financial activity when these issues have significant macro-economic
relevance.
In May 1999, the IMF along with the World Bank introduced the Financial Sector
Assessment Program to assess members' adherence to international financial
standards. The FSAP program now includes assessments of adherence to anti-money
laundering and anti-terrorism financing prudential supervisory standards. In
September 2000, the IMF introduced its Offshore Financial Centres' assessment
program. This is a voluntary program to assess the adherence by OFCs with
international financial standards. The OFC program now assesses OFCs' adherence to
standards for combating money laundering and the financing of terrorism in the same
74 An Article IV "consultation" (that is, surveillance) involves making an assessment as to

whether the member country has complied with its obligations under article IV, Section I of
the IMF's Articles of Agreement. The Executive Directors have not determined whether the
work on standards assessment should be an integral part of the surveillance function. The
main issue here is whether the observance of international standards falls within the category
of legal obligations enumerated in Article IV, Section 1; and, in this regard, standards falling
outside the scope of the IMF's core mandate would present an additional issue. At the present
time, therefore, standards assessment is being undertaken in the context of, and not as an
integral part of, the Article IV consultation.
way as under the FSAP assessments. Finally, the IMF has over the years extended
technical assistance to many member countries on the design of prudential regulations,
banking laws and banking supervision schemes. More recently, the IMF has extended
technical assistance to several countries in putting in place anti-money laundering
laws, regulations and institutional frameworks. The IMF is currently extending
technical assistance to several Pacific islands in the establishment and strengthening
of financial intelligence units.
5.2 The World Bank
The World Bank has substantially expanded its programs in the areas of anti-
corruption, governance and public financial management. It has also assisted
countries in carrying out financial sector reforms focusing on legal regulatory and
supervisory issues, particularly in the aftermath of the Asian financial crisis, almost
doubling its financial sector lending and implementing several technical assistance
projects; and supported programs to strengthen legal and judicial reforms and 75
institutions, corporate governance, accounting and auditing and market transparency.
Also, the World Bank is fully engaged with the Financial Stability Forum, FATF, and
the OECD Forum on Harmful Tax Competition in their efforts to combat money
laundering and the financing of terrorism, by focusing on financial abuse in its
economic and sector work and policy dialogue, and by extending technical assistance
to countries to strengthen their anti-money laundering programs. Further, it has taken
various measures to tighten its fiduciary safeguards to ensure that its own lending is
used for the purposes intended and not be subject to financial abuse. It has also
conducted careful financial accountability and procurement assessments of
implementing agencies before investment projects are approved.
In January 2002, the Executive Board of the World Bank approved an action plan to
combat money laundering and the financing of terrorism. The measures included in
this action plan consist of upgrading and expanding staff capacity to respond to client
requests for assistance in meeting international anti-money laundering and anti-
terrorist financing standards.
5.3 Joint IMF and World Bank Initiatives
The joint IMF/World Bank FSAP seeks to identify vulnerabilities in national financial
systems that could make them susceptible to financial crimes. The IMF and the
World Bank are currently working closely with FATF and other international
standard-setting agencies to develop a methodology document that would provide a
framework for assessments of member countries' adherence to international anti-
money laundering and anti-terrorism financing standards in the context of their FSAP
programs. The methodology assesses the adequacy of laws and regulations in force,
including duties of financial service providers, "fit and proper" tests, and criminal
laws. The IMF and World Bank methodology document does not include an
assessment of the effectiveness of implementation of criminal laws. A working group
75 For example, the Bank has established the Global CorporateGovernance Forum with OECD
and participates in the International Forum on Accounting Developments, a broad-based
public-private partnership.
of the FATF is preparing a separate criminal law implementation section for the
methodology.
The assessments undertaken by the IMF and the World Bank for the FSAP, using the
new methodology document, is expected to identify development needs that could be
addressed in follow-up technical assistance to help countries meet international
standards. The new methodology document will hopefully achieve convergence
among international standard-setting agencies in assessing countries' adherence to
international standards. Finally, the IMF and the World Bank have also been
collaborating closely in assessing progress of their member countries in implementing
selected international standards through their Reports on the Observance of Standards
and Codes, focusing on financial sector standards.
5.4 Regional Development Banks
Among the regional development banks, the Asian Development Bank (ADB), the
European Bank for Reconstruction and Development (EBRD) and the Inter-American
Development Bank (IADB) have contributed significantly to international efforts to
combat money laundering and the financing of terrorism.
The ADB is one of the first international financial institutions to embark on major
technical assistance projects to combat money laundering. In 2001, the ADB
launched a large regional technical assistance project to counter money laundering in
the Asian and Pacific Region, in an amount equivalent to $650,000. This project
seeks to strengthen anti-money laundering regimes in nine developing countries:
Indonesia, the Philippines, Thailand (in South East Asia) and Cook Islands, Fiji
Islands, Marshall Islands, Nauru, Samoa, and Vanuatu (in the Pacific). In particular,
the project will identify institutional and regulatory reforms needed in each of the nine
countries to bring them in line with established international standards (notably
including the Forty Recommendations). The other components are developing a
comprehensive anti-money laundering manual to serve as a guide to member
countries; establishing a comprehensive new website for the APG, with links to other
relevant websites; provision of training; and preparing an economic research report on
the negative effects of money laundering on economic development.
In April 2002, the ADB approved a technical assistance grant to the Government of
Indonesia in an amount equivalent to $1.5 million for the development of an Anti-
Money Laundering Regime. 77 This technical assistance, which will be financed by the
Asian Currency Crisis Support Facility of the Government of Japan, will build upon
the country-specific legal analysis provided by the regional technical assistance
project. This project will supsport the next phase of implementing the country's new
anti-money laundering law, 8 covering the issuance of implementing regulations,
establishment of new institutions mandated by the law, development of monitoring
and database systems especially for reporting of suspicious transactions, increasing
the skills base and institutional capacity necessary for an effective anti-money
76 TA No. 5967-REG: Countering Money Laundering in the Asian and Pacific Region.
77 TA No. 35498-INO: Development of an Anti-Money Laundering Regime.
78 Adopted in April 2002.
laundering regime, and promoting public awareness and understanding of money

laundering and of the impact of the new law.
In the same month, the ADB also approved a technical assistance grant to the
Government of the Philippines in an amount equivalent to $1.0 million for
strengthening the anti-money laundering regime.7 9 The technical assistance, also
financed by the Asian Currency Crisis Support Facility, will build upon the work of
the regional technical assistance project, will support the establishment of
implementation arrangements for the new anti-money laundering law, including a
system for reporting suspicious transactions, and specialized training for a wide range
of key institutions and their officials.
The EBRD has enhanced its anti-money laundering measures by increasing staff
awareness through training, appointing a Money Laundering Reporting Officer,
designating an anti-money laundering coordinator in its Financial Institutions
Business Group, strengthening representations, warranties and conditions in its
standard legal documentation, and reviewing its internal anti-money laundering
policies and procedures with a view to bringing them in line with best banking
industry practices. The EBRD is also encouraging member governments and
domestic institutions to adopt anti-money laundering policies and procedures in line
with international standards, and reviews a country's commitment to anti-money
laundering measures as part of the review of its legal and regulatory framework.
The IADB has supported anti-money laundering efforts through a number of different
measures, including regional programs for anti-money laundering training of banking
supervisors and employees of regulated financial institutions in seven countries, and
another for training of prosecutors and judges in criminal law enforcement. It is also
examining the possibility of embarking on loan programs, particularly financial sector
reform loans, as another vehicle to support national anti-money laundering efforts.
6 The Challenges Ahead
The international legal framework to combat money laundering is now fairly well-
established, although a good part of it, apart from the relevant international
conventions, still belongs to the realm of "soft" law. A large number of states have
taken steps to implement the provisions of the relevant international conventions and
the FATF's Forty Recommendations into their domestic laws. With the passage of
time and the persistent efforts of the United Nations, ODCCP, FATF and the FATF-
style regional bodies such as APG, it is fair to say that the majority of states have been
sensitized to the importance of this war against money laundering.
The tragic events of September 11 have added a new dimension and a new sense of
urgency to the war against financial crime and the abuse of financial institutions. As a
result, the world is now witnessing a growing convergence of the international and
national legal frameworks to combat money laundering, terrorism and the financing of
terrorism. Since September 11, many more states have moved rapidly to sign and/or
ratify the relevant United Nations Conventions on terrorism. In particular, the number
79 TA No. 36003-PHI: Strengthening the Anti-Money Laundering Regime.

of signatures and ratifications of the InternationalConvention for the Suppression of

the Financingof Terrorism has risen dramatically since September 11 so that it was
able to enter into force on 10 April 2002.
It is likely that states will need more time to implement the various legal, financial
and institutional measures stipulated by the Security Council and FATF. This is
because the wheels of the national legislative and political processes will invariably
grind more slowly in light of the political debates that are likely to ensue.
One of the more formidable challenges that lies in the way of full adherence by states
with the United Nations and FATE action plans is the difficulty of achieving a
political consensus on the strategy and means to end terrorism and terrorist financing.
While the vast majority of states are agreed that terrorism must be stopped, there are
differences of opinion as to the methods that must be used to address the problem.
Several Islamic states and states with large Muslim populations view the action plans
as being directed primarily against Islamic states and Muslim citizens and
organizations. The daunting challenge for these governments is how to walk the fine
line between adherence to the international action plans without at the same time
offending their Muslim citizens.
Another challenge will be in defining the enemy. Who is a terrorist and what is a
terrorist organization or terrorist activity? Are Islamic movements seeking political
reforms like democracy and human rights or liberation movements in Middle East
countries engaged in terrorist activity? The Convention on Terrorism of the
Organization of the Islamic Conference, in fact, recognized such an exception to the
definition of terrorism. While the United States and the United Nations have moved
quickly to identify a long list of organizations and individuals as terrorists, it is not at
all certain that several of the Islamic states will be prepared to adopt an identical or
similar list, given that many of these organizations are religious groups, educational
trusts and charities, and several of the individuals are citizens in good standing in their
states. As a result, states are likely to define the enemy in different terms, thereby
raising the question whether there is truly a cohesive international front or strategy to
combat terrorists, terrorism and terrorist financing. If there are differences of view on
the strategy and means to end terrorism, and a lack of consensus in defining the
enemy, this is going to create political problems in law enforcement. Like money
laundering, terrorism and the financing of terrorism are transnational crimes and they
cannot be prevented or eradicated without full international cooperation in law
enforcement among countries.
Yet another challenge that is likely to dog legislators, as they consider proposed anti-
terrorism laws and regulations, is to answer those who protest that some of the
measures to crack down on terrorism seriously threaten civil liberties such as free
speech, privacy, freedom of religion, and due process. The most recent US
Presidential Order of 13 November providing for the trial by military tribunals of
certain non-citizens accused of terrorism crimes has attracted such protests.
Understandably, stronger powers for wiretapping and electronic surveillance, arrest
and detention without trial, and seizure and confiscation of assets raise legitimate
concerns that would need to be addressed in some way, possibly by the inclusion in
the laws of sunset provisions for such powers and some form of judicial review. In
the final analysis, the general public probably accepts that in these new circumstances
law enforcement authorities must closely and rapidly monitor the movements,
communications and finances of terrorists, to prevent a recurrence of the September
11 tragedy.
The promulgation of laws and the establishment of new regulatory or law enforcement
institutions are not sufficient. They must be supported by strong political will on the
part of governments, and real and meaningful implementation of the laws through
investigations, prosecutions and convictions to give credibility to such laws. In this
regard, international cooperation and mutual assistance in investigations and law
enforcement are critically necessary in view of the transnational features of money
laundering and the financing of terrorism.
Finally, while so much of the international action is focussed on what governments

must do, it must not be forgotten that a heavy burden rests on financial institutions to
implement enhanced scrutiny and due diligence procedures to prevent, detect and
report suspicious financial transactions to the law enforcement authorities. The
history of money laundering is littered with numerous instances of failure by many
financial institutions, including some leading international banks, to crack down on
suspicious financial transactions or movements of funds. With the addition now of
measures to combat terrorism and the financing of terrorism, a heavier responsibility
now rests on financial institutions to play a more effective role in assisting
governments to fight and win the war against financial crime and terrorism.
Appendix I [see page 8, above]
FATF's Forty Recommendations
The following is a summary of some of the key recommendations relevant to money

laundering and the financing of terrorism:
Countries should:
" Promulgate laws criminalizing money laundering, with all or most serious offences
designated as predicate offences.
" Ensure that laws subject corporations, and not just their employees, to criminal liability.
" Amend bank secrecy laws to allow financial institutions to report suspicious transactions,
and to protect officials of financial institutions from criminal or civil liability for such
reporting.
" Provide for freezing, seizure, and confiscation of criminal proceeds or equivalent assets.
" Pay special attention to and counter threats inherent in new or developing technologies that
provide anonymity.
" Exercise stronger regulatory supervision over financial institutions, and provide guidelines
for detecting and reporting suspicious transactions.
" Ensure that recommendations apply not just to banks, but also to non-bank financial
institutions (for example, bureaux de change).
Financial institutions should:
" Implement strict customer identification (Know Your Customer) procedures through
official picture identification, passports and driver's licenses.
" Exercise due diligence by verifying the incorporation documents and nature of the
business of corporate customers.
" Pay special attention to all complex, unusually large transactions, or unusual patterns
of transactions which have no apparent or visible lawful purpose.
" Report to the regulatory or law enforcement authorities any suspicious transactions,
where there is a suspicion that the funds stem from a criminal activity.
* Maintain transaction records in financial institutions for at least five years so as to
provide evidence for prosecution of criminal behaviour.
Appendix 2 [See n 73 and related text]

FATF Action Plan To Suppress Terrorist Financing
At an Extraordinary Plenary Meeting on the Financing of Terrorism held in

Washington, D.C. on 29-30 October 2001, the Financial Action Task Force (FATF)
agreed to a set of 8 Special Recommendations to suppress terrorist financing. This
action plan commits its members, and also invites all other countries (that is, non-
members of FATF), to:
I. Take immediate steps to ratify and implement the 1999 United Nations
InternationalConventionfor the Suppression of the Financing of Terrorism,
and to implement the United Nations Resolutions calling on members to take
specific measures to prevent and suppress the financing of terrorism,
particularly Security CouncilResolution 1373.
2. Criminalize the financing of terrorism, terrorist acts and terrorist
organizations, and also designate such offences as predicate offices under
their anti-money laundering laws.
3. Freeze immediately the funds or other assets of terrorists and those who
finance terrorists and terrorist organizations in accordance with the United
Nations Resolutions, and legally empower their competent authorities to also
seize and confiscate such funds or assets.
4. Require financial institutions, or other businesses or entities subject to anti-
money laundering obligations, to report promptly to the competent
authorities any suspicious transactions related to terrorism.
5. Require financial institutions to obtain accurate and meaningful originator
information (name, address and account number) for fund wire transfers, and
closely scrutinize and monitor suspicious fund transfers that lack such
information.
6. Regulate alternative remittance systems by requiring the licensing and
registration of persons or legal entities including agents that provide a service
for the transmission of money or value.
7. Review the adequacy of laws, regulations and monitoring mechanisms for
entities that can be abused for the financing of terrorism, especially non-
profit organizations (for example, charities).
8. Extend the fullest possible assistance to other countries' law enforcement and
regulatory authorities in investigations, inquiries and proceedings relating to
terrorist financing.

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Bluebook 20th ed.

ALWD 6th ed.

APA 7th ed.

Chicago 7th ed.

McGill Guide 9th ed.

MLA 8th ed.

OSCOLA 4th ed.

THE WAR AGAINST MONEY LAUNDERING, TERRORISM, AND

It is best to begin with a discussion of money laundering because it provides part of

2.1 What is Money Laundering?

Money laundering is the processing of the proceeds of crime so as to disguise their

* Layering. This second stage involves a series of transactions to convert or

Because of the clandestine nature of money laundering, it is very difficult to determine

Robinson, supra n 5, at 4-6.

2.2 Emerging Trends in Money Laundering

without leaving a paper trail. There is no opening of accounts and no maintenance of

A second alternative remittance system originating in Asia is known as the Chinese or

2.3 Negative Economic Effects ofMoney Laundering

There is no question that money laundering can have a devastating impact on a

2.4 International Legal Framework for Combating Money Laundering

and, therefore, express their determination

In 1996, the FATF published the Forty Recommendations on Money Laundering

regulations, the establishment and operation of regulatory and law enforcement

The Basel Committee on Banking Supervision (previously called the Basel

30 Adopted by U.N. General Assembly Resolution, Doc. A/RES/55/25 on 15 November 2000.

* The Council of Europe 35 adopted the Convention on Laundering, Search, 36

* The Council of the European Communities in 1991 issued Council Directive

* During 1994-95, governments of the Western Hemisphere through the

* FATF-style regional bodies such as the Asia/Pacific Group on Money

* The Egmont Group of Financial Intelligence Units, established in 1995, serves

* The Commonwealth Secretariat has prepared a Model Law on the Prohibition

* The Bureau des Fonds Provenant d'Activities Criminelles (FOPAC), a branch

* The International Organization of Securities Commissions (IOSCO), whose

a Similarly, the International Association of Insurance Supervisors (IAIS), an

* At the private sector level, eleven major international private banks in

* The International Federation of Accountants (IFAC), established in 1977, has

2.5 National Laws against Money Laundering

By way of background to the discussion of the financing of terrorism,48

3.1 What is Terrorism?

46 See the IAIS website at www.iaisweb.org.

and judgments as to what constitutes terrorism, who should properly be classified as

Peoples' struggles including armed struggle against foreign occupation, aggression,

3.2 TerroristAttacks before September 11 - Some Examples

* Bombings of the United States embassies in Nairobi, Kenya and Dar-es-Salam,

* Pan Am 103 explosion and crash in Lockerbie, Scotland in December 1988,

3.3 The September 11 Terrorist Attacks - The Immediate Response

On 23 September 2001, President George Bush issued Executive Order 13224 to

The FATF held an Extraordinary Plenary meeting in Washington, D.C. on 29 and 30

3.4 International Law against Terrorism

1 Convention on the Prevention and Punishment of Crimes against

2 International Convention against the Taking of Hostages, New York,

3 International Convention for the Suppression of Terrorist Bombings,

4 International Convention for the Suppression of the Financing of

5 Convention on Offences and Certain Other Acts Committed on Board

6 Convention for the Suppression of Unlawful Seizure of Aircraft, The

7 Convention for the Suppression of Unlawful Acts against the Safety of

8 Convention on the Physical Protection of Nuclear Material, Vienna, 3

9 Protocol on the Suppression of Unlawful Acts of Violence at Airports

10 Convention for the Suppression of Unlawful Acts against the Safety of

11 Protocolfor the Suppression of Unlawful Acts against the Safety of Fixed

7 1035 U.N.T.S. 167.