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Following the Paris terrorist attacks last November and December’s UN Security Council Resolution 2253, which expressed concerns about the lack of counter-terror finance (CTF) implementation, politicians across Europe have called for a renewed effort to tackle terrorism and its financing. The European Council, the EU’s highest body, comprising the leaders of the member states, has pledged to set up a new counter-terrorist centre through which member states ‘can increase information sharing and operational cooperation with regard to the monitoring and investigation of … terrorist financing.’ In France, Finance Minister Michel Sapin has sought new legal authority to monitor bank accounts and gain better access to data held by SWIFT, the global financial messaging service. At the November G20 summit in Turkey, Prime Minister David Cameron said that world leaders had agreed to do more to share intelligence and cut off funding for terrorists.
While it is right that cross-border efforts to tackle terrorist financing need to be enhanced urgently, it is also important to assess critically the status of domestic CTF efforts such as those of the UK. While the UK’s efforts are strong in parts, particularly where financial investigation is concerned, they are generally moribund, lacking any obvious strategic direction. As Chancellor George Osborne noted in his remarks to the UN Security Council in December, ‘we must ensure we are using our counter terrorist financing regimes to full effect.’
Since the 9/11 attacks on New York and Washington by Al-Qa’ida, terrorist financing has been a point of focus for the international community. Then-President George W Bush fired the first shot of his War on Terror by announcing a ‘strike’ on the financial foundations of the global terror network. In October 2001, the Financial Action Task Force, the global standard-setter for anti-money laundering, added counter-terror finance to its mandate, publishing nine ‘Special Recommendations’ focused exclusively on terrorist financing. Since then countless CTF-related UN Security Council resolutions have been passed. Banks have also spent billions installing systems and hiring staff to comply with their delegated role on the front line of national and international financial defences.
During this period, the UK government has repeatedly made ambitious statements of intent and commitment to the fight against terrorist financing. In the foreword to a 2002 report on the UK’s CTF efforts, the then Home Secretary David Blunkett and Gordon Brown, then serving as chancellor, argued that the UK’s ‘response to the funding of terrorist acts must be every bit as clear, as unequivocal and as united as [its] response to the terrorist acts themselves.’ More recently, the British government’s CONTEST counter-terrorism strategy has called for the UK to be a ‘hostile environment for terrorist financing’. This objective was underlined by the October 2015 publication of the inaugural UK National Risk Assessment of Money Laundering and Terrorist Financing (NRA), which asserted that ‘Countering terrorist finance forms a key part of the UK’s CONTEST counter-terrorism strategy’. The NRA also stated that ‘The UK’s approach to countering terrorist finance focuses on three main areas: reducing terrorist fundraising in the UK; reducing the movement of terrorist finance into/out of the UK; and reducing the fundraising and movement of terrorist finance overseas.’ Yet, despite these worthy policy statements and objectives, it is far from clear that the UK is implementing a genuinely effective CTF strategy, one that enhances the government’s ability to achieve these goals.
In 2002 and 2007, the governments of the day published assessments of the UK’s action to tackle terrorist financing. Key elements of each report considered the need to co-ordinate CTF efforts across government, the value of co-operation with the private sector (in particular the banking industry) and, perhaps most critically, the importance of developing a clear and coherent CTF strategy that exploits financial intelligence and ensures that CTF contributes fully to CONTEST by opening a new financial front to safeguard UK security.
The foundation of this post-9/11 strategy was the importance of maximising the effectiveness of collective, cross-government action. At first this worked, as the government focused on pooling expertise and experience. For example, when first established after the 9/11 terrorist attacks on the US, the National Criminal Intelligence Service (NCIS) Terrorist Finance Team was staffed by the NCIS, the Metropolitan Police’s Special Branch, the Financial Services Authority (FSA) and the security and intelligence agencies. As such, the government’s approach relied on the significant value derived from the cross-pollination of staff seconded from various departments and agencies.
Yet this no longer happens in any meaningful way. First, a strategy built on shared expertise and linkage via secondment of personnel has atrophied and ‘Balkanised’, leaving the UK vulnerable and exposed. Second, co-ordination of CTF efforts across government now appears limited, with the quarterly meeting of the Terrorist Finance Board – originally conceived to be the facilitator of cross-Whitehall communication and strategic initiative – now characterised as little more than an ‘update forum’. Finally, despite nascent efforts to improve intelligence sharing and collaboration between finance and law enforcement via the newly created Joint Money Laundering Intelligence Taskforce, the failure to fully exploit financial intelligence – the gathering and melding of information held by banks and government agencies – continues to represent a missed opportunity, since it under-exploits the capabilities of the financial sector.
This final failing represents possibly the greatest weakness. Financial intelligence has a proven ability to contribute significantly to the impressive ability of law enforcement to undertake post-event forensic analysis: to ascertain what has happened; who are the culprits; and what are the ramifications of any terrorist attack. But financial intelligence also has the ability to provide significant insight into the activities of subjects of interest, their connections, and support and facilitation networks. Recognising this potential, in a 2006 speech at Chatham House the then Chancellor Gordon Brown called for the creation of a modern Bletchley Park – the famed centre of Britain’s codebreakers during the Second World War – observing that ‘What the use of fingerprints was to the nineteenth century, and DNA analysis was to the twentieth century, so financial information and forensic accounting has come to be one of today’s most powerful investigative and intelligence tools available in the fight against crime and terrorism.’
In the years since 9/11, financial institutions have amassed vast troves of data as they process millions of daily transactions. They have developed advanced ‘big data’ systems for exploiting and interrogating these data as they seek to protect their clients and themselves from fraud, and endeavour to identify suspicious activity to report to the authorities. They have hired personnel extensively from law enforcement and the security and intelligence services, bringing in experience in intelligence and analysis that can be used to exploit the data they hold. Yet in the realm of terrorist funding, banks lack the experience and insight that allow them to contribute fully to the CTF effort. As acknowledged in the Monograph on Terrorist Financing, written by the US commission which investigated the 9/11 attacks: ‘Although financial institutions lack information that can enable them to identify terrorists, they have information that can be absolutely vital in finding terrorists.’ In other words, as underlined by Richard Barrett, the British official who acted as the co-ordinator of the UN-established Al-Qaida and Taliban Monitoring Team, ‘States cannot expect the private sector to have a better idea of what terrorist financing looks like than the states themselves.’
At a time when tackling and disrupting terrorist financing has risen rapidly back to the top of the security agenda, even a cursory glance at the UK’s CTF strategy reveals that, far from advancing in line with repeated government assessments and commitments, the implementation of the strategy has regressed. Staff cuts, and a lack of focus and strategic thinking have reversed the progress that was made in the years immediately following 9/11.
To reverse this decline, three key steps should be taken. Firstly, the government needs to establish an effective cross-department and cross-agency body that co-ordinates CTF strategy in the UK and sets a clear and directed approach. Secondly, the government should ensure that financial-intelligence capabilities are a key component of the new counter-terrorism operation centre, announced in the recently published Strategic Defence and Security Review. Thirdly, this effort should be supported at the tactical level by two further changes: the reinstatement of a dedicated secondment programme that revives the benefits of the cross-pollination of skills between departments and agencies, and the establishment of a research and analysis capability that exploits financial intelligence for use by the security authorities as well as by the private sector in its front-line CTF role.
In 2007, the government wrote that ‘The litmus test for success, and the goal to which the Government’s counterterrorist finance community sets itself, will be whether year on year, the financial aspects of the terrorist threat are better understood and whether financial tools are deployed increasingly effectively in tackling them.’ As things stand, the British government is failing to meet these tests and failing to harness the full potential that financial intelligence has to offer, necessitating an urgent and honest reassessment of how precisely terrorist finance should be most effectively tackled.
Director, Centre for Financial Crime and Security Studies, RUSI.