|
Business
Bunkers and shelters
|
In an extra-ordinary Plenary of Financial Action Task Force (FATF) of the OECD held in Washington, the FATF's mission was expanded beyond money laundering to cover terrorist financing.
|
FINANCE, IT is said, is the lifeblood of commerce. Till recently, it was not admitted that finance is also the lifeblood of terrorism. In good old days when conflicts were sporadic and in distant places, the outlay was small and raised through ransom or by robbing banks a la Robin Hood.
Terrorism, like corporations, has grown global and is need of cross border cash transfers for arms, equipment and expenses. Bank robbery has become highly risky and unrewarding. Worse is the risk of exposure of networks and plans. Bank robbery may be passe; but, if an arrangement could be struck with banks, there would be a bonus. Terrorists may add, to their own secrecy, the cream of bank secrecy. Thus, there developed a symbiosis between bunkers in Afghanistan and shelters in Western Banks for over a decade.
It is strange that not much attention was paid to the magnitude or methods of terrorist financing. It was only after September 11 that journals were awash with gory details of terrorist financing. Neither the annual report of the U.S. State Department (Patterns of Global Terrorism, 1999) nor the report of the National Commission on Terrorism (Countering International Terrorism, July 2000) dealt with it in depth. Mostly, attempt was to link terrorist finances with drug traffic and crime and track international ramifications.
Mr. Sheehan of the State Department, testifying before the House Judicial Committee in December 2000, drew attention to the decline in State sponsorship and cautioned that most groups were not dependent on drug revenues, but had ``diversified portfolios'' of fund raising such as donations from supporters, money siphoned off from legitimate or illegitimate charities, profits generated by legally operating companies and ordinary crimes such as extortion and robbery.
The Financial Action Task Force (FATF) of the OECD dealt with terrorism marginally in its report [FATF-XII Report on Money Laundering Typologies (2000-2001), July 2001]. FATF also noted that, with the decline in State funding of terrorism, terrorists resorted increasingly to criminal activities to raise funds.
Curiously, while FATF experts agreed that terrorism was a serious crime and had to be targeted along with other money laundering crimes, they did not agree on whether anti-money laundering measures could (or should) play a role in fighting terrorism. Some felt that terrorist financing might be dealt with under anti-money laundering measures; others took the view that ``refinement of specific anti-terrorism measures should take place elsewhere''(p.20).
The FATF was not alone in taking such a legalistic view. The Executive Board of the IMF examined the larger issues of laundering abuses of the financial system on April 13, 2001. (Ref. IMF, PIN No. 01/41 of April 29.) Though the directors agreed that international cooperation should be stepped up and the Fund had a role in protecting the integrity of the financial system, ``they emphasised that its role in this area should be strictly confined to its core areas of competence''.
While the directors agreed that law enforcement was essential, they confirmed, ``it would not be appropriate for the Fund to become involved in law enforcement activities''. Even on FATF 40 recommendations, they emphasised that the Fund should be concerned only with those dealing with financial regulation and supervision and the ``responsibility for legal/crime enforcement should be left to others''.
This reluctance to cross the imaginary Rubicon, the border where finance ends and terrorism/crime begins, may be traced to their ideological attachment to financial deregulation and capital convertibility. For instance, though the UN formally adopted the International Convention on the Suppression of the Financing of Terrorism in December 1999 providing for international cooperation, only five nations (Sri Lanka, Botswana, the U.K., Uzbekistan and India) have acceded to it so far. The U.S. signed it on January 10, 2000 and the Senate delayed ratification until the September attacks. The convention itself was rather weak and yet, the western response was one of indifference till recently. It was only after the September 11 that its ratification had been made mandatory for members under the Special Recommendations of FATF.
This reluctance was ingrained in the psyche of the U.S. administration and business circles. The huge cracks in the American banking system were exposed in several reports of the Senate Committees and General Accounting office (GAO). They brought to light how U.S. banks had established correspondent relationships with high-risk foreign banks, which were shell banks with no physical presence in any country or offshore banks of dubious status or banks in weak jurisdictions having no supervision. It was observed that banks exercised no ``due diligence'' or review of suspicious transactions. They were more keen to earn service fees on cheque clearance and wire transfers than to exercise any scrutiny over them. The efforts of the Clinton administration to deal with some of these abuses were thwarted by the Republicans. Likewise, its proposals to deal firmly with tax havens, in cooperation with the FATF, were overturned by the Republican administration when it came to power. (Refer ``Colour does not matter'', The Hindu, August 02, 2001, by the present writer.)
It seems that September 11 marks the end of one history and the beginning of another. There is no longer the reluctance to act or hide behind legalese over `finance' and `enforcement'. The anti-terrorism measures pushed through the Congress are composite in nature and deal with all aspects of terrorist financing. The banks become, so to say, field offices of enforcement agencies.
The legislation gives the Treasury Secretary authority to deem foreign jurisdictions or institutions as a ``primary object of concern'' and stipulates special book keeping requirements. It bars U.S. banks from doing business with offshore banks that have no physical presence in any country. It insists on the U.S. banks to know the identity and source of funds of customers who are non-U.S. citizens. It is a crime to take more than $10,000 in and out of the U.S. without reporting. Banks and financial institutions have to report suspicious financial activities in ``real-time'' to law enforcement agencies through secure web sites. It was also decided to ratify the UN convention on terrorist finance held up in the Senate.
A day after the issue of Presidential directive, the very next day a meeting of G-7 was convened and they pledged to pursue ``a comprehensive strategy to disrupt terrorist funding around the world''. The mood was one of bonhomie with the U.S. though some members anticipated legal obstacles. The OECD also endorsed the U.S. approaches in a special meeting around the same time. The most interesting development is that the U.S., which had spurned FATF early in June, was resuscitating it as the policeman of the world to enforce the new regime.
In an extra-ordinary Plenary of FATF held in Washington DC on October 29-30, the FATF's mission was expanded beyond money laundering to cover terrorist financing. Apparently, by now, FATF did not have any reservations of the type reported in its Report XII! Moreover, the FTAF put forth a set of Special Recommendations on Terrorist Financing all of which are photocopies of the U.S. measures.
The FATF sets a timeframe for compliance with its new proposals. Self-assessment has to be completed by December 31 by all members with a commitment to comply with them by June 2002 along with action plans, if not implemented by then. All countries, including non-members, are required to participate on the same terms as FATF members. Though there is no indication, the intention is that countries not falling in line may face sanctions.
In the meeting of the G-20 countries held in Ottawa on November 19, an attempt was made to push FATF's new agenda on all countries. G-20 is a creation of the Fund/Bank and is not taken seriously. Now the U.S. needed its support. It seems that G-20 was unable or unwilling to go along wholly with the agenda. Hence, the time frame has been expanded and the agenda is said to be voluntary in nature.
What the U.S., in alliance with OECD, attempts is more to subserve its own short-term aims. Global cooperation is being targeted at institutions and parties tracked by `intelligence' agencies like the FBI. There is no coherent attempt to deal with the weaknesses of the banking system or the offshore havens adversely affecting the interests of developing countries. The FATF has already an OECD bias in its deliberations so far. Now, it has to carry an overload of the U.S. bias.
The Senate has inserted a `sun set' clause of four years. Many provisions will survive only on approval by the Senate nearer the deadline fixed. It is a moot question whether the Republicans would cooperate if, in the interregnum, Osama and Al-Queda were decimated in their bunkers.
The facade of agreement between the US, the EU, G-7 and the OECD may not endure long as differences are already simmering or surfacing. Against this background, any attempt to set the FATF as the super cop on non-members would amount to a variant of economic terrorism.
K. Subramanian
Send this article to Friends by
E-Mail
Business
|
