The daunting challenge faced by the national and international institutions at present is tackling terror financing. The dangers and implications involved in terrorist financing have direct bearings on our established legal and financial systems. In the absence of a comprehensive study of terrorist financing, which also suggests ways to counter
The daunting challenge faced by the national and international institutions at present is tackling terror financing. The dangers and implications involved in terrorist financing have direct bearings on our established legal and financial systems. In the absence of a comprehensive study of terrorist financing, which also suggests ways to counter it effectively, it is not possible to uproot terrorism, extremism and militancy that pose a serious threat to the politico-legal systems evolved by humanity over time.
Unlike money laundering, which is always preceded by an unlawful activity, terrorism may be financed from the proceeds of legal activities (humanitarian organisations, various associations, donations etc). This makes detection of terrorist financing very difficult, even more so if we bear in mind the fact that the transaction amounts involved in terrorist financing often tend to be smaller than those that have to be reported to the anti-money laundering office. Since the measures taken to prevent money laundering are not sufficient in the fight against terrorist financing, they have to be supplemented by special measures prescribed by competent international bodies.
Terrorism and money laundering, intrinsically linked, pose considerable threats to global peace and security while also destabilising the political and financial stability of many states. This problem assumed dangerous proportions in the wake of the 9/11 attacks. The international community is struggling hard, without much success, to monitor and eliminate financial support by sympathisers to terrorist outfits.
Besides external resources, enormous funds are generated by terrorist networks through legal as well as illegal means, concealed and laundered using existing legal financial framework or unlawful underground networks. The terrorist networks cannot be destroyed, or even made ineffective, unless concerted efforts are made at both national and international levels to efficaciously block their financial sources.
The United States and its allies have been engaged in what they call the ‘war on terror’ (sic) – pointlessly and unsuccessfully. After 13 years of military warfare, and spending trillions of dollars, they are finally bowing before the forces of ‘terrorism and obscurantism’.
Critics say that the war against Al-Qaeda, Taliban and Daish by the United States and its allies, is tainted with geo-political motives and no serious effort has been made till today to attack their financial lifeline.
In Pakistan many militant networks are minting enormous money in the name of religion and through organised crime. This aspect remains inadequately investigated by domestic and international intelligence agencies. Since terrorist groups have not been uprooted financially, they are wining more and more ‘sympathisers’ all over the world with money power. Strangely, their main targets are not only the US and western countries but also Pakistan, India and Iran – even financially and militarily strong China.
The fundamental questions in the fight against terrorism and its financing are:
• Where do these terrorists get so much money from?
• Why are the governments not serious in cracking down on unlawful transfer of funds?
• If banking channels are used, then why can’t the remitters and recipients be traced?
• If hawala and hundi systems are used for unlawful cross-border transfer of funds, why are persons engaged in these unlawful activities not arrested and punished?
• Who is financing these terrorist networks?
• Who provides these terrorists with sophisticated arms and military training?
Pakistan is one of the worst hit countries as far as terrorism and money laundering are concerned. There is sufficient evidence that militant groups generate huge funds through organised criminal activities and also get huge ‘donations’ from ‘sympathisers’ in and outside Pakistan. Certain laws protect illegal money, for example section 5 and 9 of Protection of Economic Reforms Act, 1992 and section 111(4) of the Income Tax Ordinance, 2001. These laws ensure unlimited flow of ‘remittances’ and dealings in foreign currencies.
In the presence of the so-called ‘protective’ (sic) economic laws cited above, the provisions of the Anti-Money Laundering Act of 2010 have rarely been invoked. In fact, it has become a dormant law. The banks are not reporting any suspicious transactions under section 7 of the Anti-Money Laundering Act, 2010 or section 67 of the Control of Narcotics Substances Act of 1997. This shows the slackness of institutions and agencies responsible for implementing these laws.
Besides the legal weaknesses pointed out above, during the last 30 years NAB, FIA, the Anti-Narcotics Force and FBR have not been able to establish a joint task force to book and prosecute individuals and networks involved in money laundering.
In the presence of numerous departments and law enforcement agencies, on a daily basis terrorist networks get millions through hundis and hawalas in addition to extortion money and proceeds of drugs-and-arms deals. Many are even getting funds through normal banking channels in benami accounts. The inadequate reporting of such transactions by banks to the Financial Monitoring Unit (FMU) established under section 6 of the Anti-Money Laundering Act, 2010 is a serious cause for concern. As a regulator, the State Bank of Pakistan has failed to enforce this law; there should be a monetary limit for banks to report all cash transactions since the expression ‘suspicious transactions’ is vague and subjective.
Determined and practical efforts are needed to destroy the financial supply lines of terrorist networks. The strategy to fight terrorism has ignored this most vital aspect and, therefore, powerful states, with all their military might and economic resources, have failed to win the war started by them in 2001.
Pakistan can eliminate terrorism by cutting the financial links of outlawed networks. This will help improve the economic lot of the poor that are exploited by militants with ‘money power’, which is their main weapon to wage a war against the state.
The writer is an advocate of the Supreme Court and visiting faculty at LUMS.