Assessing Terrorist Finance: A Regional Approach

At the 'unprecedented' gathering of global finance ministers at the UN Security Council in December 2015 following the previous month’s terrorist attacks in Paris, participants made repeated commitments to tackle terrorist financing. Yet Resolution 2253, passed on 17 December last year, expressed increasing concern about the lack of implementation of the Security Council’s previous terrorist financing resolutions. Underlining this concern in November last year at the G20 leaders’ gathering in Turkey, the Financial Action Task Force (FATF), the global standard-setter for anti-money laundering and counter-terror finance (otherwise known as AML/CTF), reported that it had conducted an urgent counter-terrorist finance-related review of 194 jurisdictions. Focused on the existence of legal provisions and frameworks, the report revealed little about nations’ awareness of terrorist financing risks and the effectiveness of these legal frameworks and provisions.

Put simply, it would appear that the ability of global institutions to deliver greater CTF effectiveness has run its course. Fifteen years of CTF-related talk and review may have driven up legal standards, but have been less successful at developing a precise understanding of the risks entailed. This has resulted in limited practical and effective action against terrorist financing. Laws have been passed, conventions adopted and recommendations promulgated with which countries have to comply with little consideration for the true nuances and practicalities of terrorist financing. Furthermore, too often, terrorist financing is treated as a conjoined partner of money laundering, with ‘AML/CTF’ solutions proposed in which tackling AML dominates thinking. AML/CTF is presented as if this were a single six-letter risk rather than two challenges sharing some similarities but a great many differences. The work undertaken by the informal international Egmont Group of Financial Intelligence Units to analyse the financing of foreign terrorist fighters is a notable exception. It is this conflation of risks and lack of CTF-specific strategies that have certainly led to the concern expressed by the UN in Resolution 2253, a concern which must be addressed if the CTF narrative is to remain both theoretically and practically relevant.

Yet perhaps this state of affairs is about to change, not because of activities led by FATF, the UN or any other global body, but by regional collaboration at an operational level. In early August this year and under the leadership of the Australian (AUSTRAC) and Indonesian (PPATK) financial intelligence units, a regional risk assessment (RRA) on terrorist financing was unveiled. The result of seven months of work and based on the input of six countries across the region, the assessment seeks ‘to develop a deeper, shared understanding of the drivers behind terrorism financing in the region’. The assessment focuses on identifying those terrorist financing methods that currently present the highest regional risk, along with those that are forecast to pose an increased risk over the next three to five years, spanning not just individual domestic risks but those that connect countries or are intra-regional.  The assessment also identifies priorities for which regional cooperation is required to strengthen the overall response. Lastly, in contrast to many of the CTF-related initiatives that are centrally directed by the UN or FATF, this assessment seeks to inform and refine global policy by contributing genuine analysis focused on terrorist finance to ensure that the top-down policies reflect the reality on the ground.

While this initiative in South East Asia is to be welcomed, there are other regions with far greater vulnerability to terrorist financing weaknesses that need to be addressed urgently in a similarly focused effort. The Middle East and both East and West Africa would benefit from replicating the Australian- and Indonesian-led model. Countries such as the UK and France, with historic ties and significant security resources already established in those regions, are well placed to provide the leadership and support that Australia has displayed in producing the new RRA.

Fifteen years since 9/11,  the financing of terrorism remains central to the efforts of the international community to identify and disrupt these groups and their activities. Yet the effectiveness of this top-down, global strategy appears underwhelming and the lack of consistent and effective commitment by nations to implement CTF-related policies is, as the UN Security Council has observed, concerning. Policymakers, particularly those with less advanced CTF capabilities, are proficient at paying lip-service to the mantra of terrorist financing prescribed by bodies such as FATF, and demonstrating technical compliance. However, genuine understanding of risks and the delivery of related responses remains poor. Bodies such as FATF and the UN need to encourage greater focus on implementing policies with the help of countries such as Australia, the UK and France. They have a vested interest in strengthening the understanding and capacity of ‘upstream’ countries where effectiveness and implementation remain low. The Regional Risk Assessment on Terrorism Financing for Southeast Asia and Australia provides a model of collaboration and analysis that others would be well advised to follow.