How is terrorist financing part of financial crime?

Terrorist Financing and Financial Crime. Terrorist financing is the provision of funds or the provision of financial support to individual terrorists or non-state actors. The scholar who defined terrorist financing as such maintained that;

Terrorist Financing and Financial Crime

“Finance is perhaps the most powerful weapon of war. It moves armadas, armies, and squadrons. It finances troops and artillery. It pays for special forces and mercenaries. It brokers ceasefires and buys surrenders. Finance is the weapon that makes all other weapons of war possible.”

It is clear that to end terrorism, or even control it, one must tackle terrorist financing. With this reasoning, several states and international organizations have incorporated terrorist financing as an integral part of their laws against financial crime.

Terrorist Financing in International Law

Terrorist financing essentially has very similar characteristics to the financing of any other international organized crime organization. While terrorism is unique in its visceral political nature, it is still a crime.

In 1990, the UN Convention against Transnational Organized Crime was adopted and formed the basis of the international legal framework regulating financial crimes. The Convention has far-reaching implications and was supplemented by 3 additional protocols;

It was not until 2001, with the adoption of the Convention for the Suppression of the Financing of Terrorism, that financial terrorism was finally enshrined in an international treaty. It was only after the fateful events of 11 September that the full effect of the treaty was brought to the attention of the wider international community.

The Convention provides a broad definition of terrorist financing, including the act of collecting or providing funds for terrorism for the purpose of committing a terrorist act. This is defined very broadly in the law as:

“…any act intended to cause death or serious bodily harm to a civilian, or to any other person not taking an active part in hostilities in a situation of armed conflict, when the purpose of such act, by its nature and context, is to intimidate a population or to compel a Government or an international organization to do or to refrain from doing any act.”

Under the treaty, the initiators of funds, their accomplices and other contributors, regardless of whether they are real persons or legal entities such as companies and associations, can be guilty of terrorist financing.

For an offence of terrorist financing under the Convention, it is not necessary for a terrorist act to take place. It is only necessary to show that the funds were collected to commit a terrorist act.

Treaty States Treaty

The treaty requires signatory states to take steps to:

• Establish effective systems to combat the financing of terrorism;
• Ensure that legal entities, such as companies and associations, can be held liable for the financing of terrorism in their country;
• Take measures to enable the identification, freezing and seizure of funds used for the financing of terrorism; and
• Make seized funds from terrorist financiers available to victims of terrorist attacks.

One of the important features of the Convention is that it sets a standard for the conduct of financial institutions to combat the scourge. In Article 18, the Convention specifically states

“… that financial institutions, where necessary, take measures to verify the legal existence and structure of the customer by obtaining, either from a public register or from the customer, or both, evidence of incorporation, including information on the customer’s name, legal form, address, directors and the provisions governing the authority to bind the entity.”

This is considered by many to be the first financial counter-terrorism provision in international law. As a conclusive statement, the convention issued the following dictation:

States agree to provide ‘the greatest measure of assistance in connection with criminal investigations’.

This convention provided the framework for state parties to make terrorist financing an integral part of the financial crime prevention architecture. With the convention in place, at least in international law, terrorist financing was an integral part of the financial crime dynamics.

What are the main forms of financial crime?

Financial crime generally refers to the following offences:

• fraud
• Theft via internet
• money laundering
• Terrorist financing
• Corruption and bribery
• Market manipulation and insider trading

Final thoughts

Terrorist organizations require financial support to achieve their goals, and a successful terrorist organization, like any criminal organization, is able to build and maintain an effective financial infrastructure. Terrorists often control funds from various sources around the world and use increasingly sophisticated techniques to transfer these funds between jurisdictions. They employ the services of professionals such as bankers, accountants, and lawyers to manage their finances, as well as a variety of financial services products.