Combating Terrorism a Policy

Policy Recommendation in Combating Terrorism Policy Project Part 1: Project outline In the aftermath of the September 11 terrorist attacks, the U.S. government and the international community reviewed typologies for the financing of transnational terrorism and examined ways to combat such financing. Unfortunately, evidence indicates that al Qaeda and other terrorist groups apparently affiliated with or inspired by al Qaeda have worked quite economically, using low-budget methods to operate.

After reviewing two typologies, this part of the paper discusses applicable legal mechanisms for preventing and prosecuting the financing of transnational terrorist networks and considers proposals for improving the effectiveness of efforts to combat foreign-affinity terrorist financing (Reuter & Truman, 2004; Carter, 2008). Typologies The evolving effects of globalization and the transnational nature of terrorism have combined to create almost limitless possibilities for terrorists looking to finance operations (Sheppard, 2008). One problem with combating terrorist financing is that many forms of terrorism -- such as suicide bombings (Cesari, 2009) require minimal financial resources.

Terrorists often self-finance such attacks by working and/or borrowing from their immediate families. In addition, the bulk of the money may come from legitimate or quasi-legitimate sources. Anti-money-laundering laws have a negligible chance of detecting terrorist financing activities under a regulatory framework built for different purposes (Neal, 2008). Hence, the first typology describes a legal income source, a relief organization in the Middle East. In the second typology, foreign-affinity terrorist groups perpetrate crimes in order to generate money (Weisman, 2015).

Enforcement authorities working to deny potential terrorists access to financial resources must contend with the problem of "fresh faces," especially ones without criminal records or with legitimate academic credentials. Intelligence agencies often have no information linking these "fresh faces" (Gupta, 2011). to terrorist organizations or other criminal connections. Considering the dynamic efforts surrounding terrorist groups, the number of new and unknown faces may be very large (Viles, 2011).

The absence of knowledge about potential new terrorists, the extremely small amount of resources they use, and the self-generation of funds, including legitimate funds to conduct their activities, impose severe limitations on potential legal means to deny such groups or individuals financing (Negroponte, 2010; Cesari, 2009). 3. Legal Income Typology -- Relief Organization in the Middle East According to a state department report, the Financial Crimes Center (FinCEN) of the U.S. Department of Treasury identified 649 suspicious activity reports (SARs) that seven U.S. depository institutions filed during a three and-a-half-year period (Sheppard, 2008).

These reports involved transactions worth $9 million involving structured cash deposits and deposits of business, payroll, and Social Security benefit checks. Within one or two days of deposits, the funds were transmitted to a company in the Middle East. Thirty-seven individuals were involved in the deposit and wire transfer activity, conducting transactions through 44 accounts on behalf of four businesses (Reuter & Truman, 2004). Two of the businesses were wire remittance companies. One was described as a relief organization at the same location as one of the wire remittance businesses.

The fourth undescribed business, located in the Middle East, was the beneficiary of the wire transfer activity. The majority of the wire transfers went to two accounts in the Middle East. Other wire transfers were made to accounts at three different banks in foreign locations (Andreas, 2013; Alexander & Musch, 2012). The majority of the transactions (83%) were structured; that is, they were arranged to fall below the $10,000 threshold that triggers reporting requirements. The deposit amounts ranged from $350 to $636,790. Most deposits were between $2,000 and $8,000 (Viles, 2011; Cole, 2015). 3.

Illegal Income Typology -- Cigarette Smuggling Individuals or groups often engage in common criminal activities, using the proceeds to fund terrorist groups. In May 2002, two men were convicted in Charlotte, North Carolina, of providing, and conspiring to provide, material support to the Palestinian group Hezbollah, a designated foreign terrorist organization (Sheppard, 2008). The criminal group engineered an interstate cigarette tax evasion scheme whereby inexpensive cigarettes from North Carolina were transported to and then sold in Michigan to avoid the latter state's higher taxes. Profits from the operation were sent to Hezbollah.

International law enforcement authorities have discovered that cigarette smuggling networks can produce enormous profits. Additionally, cigarette trafficking is often the precursor to other types of contraband smuggling, including weapons and narcotics smuggling (Weinberg, et al. 2015). The investigation started when a deputy sheriff working part-time at a large tobacco wholesaler in North Carolina noticed the same individuals buying large quantities of cigarettes (Andreas, 2013). These individuals drove vehicles with out-of-state license plates. Federal, state, and local authorities began a joint investigation.

Surveillance of the suspects revealed a large-scale cigarette smuggling ring involving the use of tobacco storefront operations in North Carolina to justify the large purchases and bulk sale of cigarettes. Based on the surveillance, authorities obtained search warrants for the subjects' businesses and residences (Negroponte, 2010). Utilizing the warrants, law enforcement officials seized photos of the subjects counting large amounts of cash, a Hezbollah banner, a Hezbollah propaganda video of suicide bombers, and materials showing the involvement of some of the suspects with military training and/or operations.

During the searches, law enforcement found a receipt from a Hezbollah leader for money received from the smuggling ring (Cole, 2015). The search turned up a number of false identification documents for the subjects. Additional evidence showed that the criminal group intended to buy a variety of items for Hezbollah, including night vision devices, radios and receivers, and metal detection devices (Alexander & Musch, 2012).

In the end, 25 individuals were charged with various offenses, including material support to a terrorist organization, money laundering, conspiracy, bank fraud, credit card fraud, and visa entry fraud. The Bureau of Alcohol, Tobacco, and Firearms played a large role during the initial stages of the investigation. The FBI contributed during the later stages by helping to develop the link to a terrorist organization (Weinberg, et al. 2015).

Executive Order 13224 Bush issued Executive Order 13224 under the IEEPA, section 5 of the UN Participation Act of 1945, as amended, (Federal Bureau of Investigation, 2003) and section 301 of title 3, U.S. Code. Bush also cited as legal bases UN Security Council Resolution (UNSCR) 1214 of December 8, 1998, UNSCR 1267 of October 15, 1999, UNSCR 1333 of December 19, 2000, and multilateral sanctions contained therein, and UNSCR 1363 of July 30, 2001, establishing a mechanism to monitor the implementation of UNSCR 1333 (Zagaris, December 2002; Carter, 2008).

Because many of the groups and individuals operate primarily overseas and have little money in the United States, the United States has been notifying foreign governments that do not freeze or block terrorists' ability to access funds in foreign accounts and share information that the U.S. government has the authority to freeze their bank's assets and transactions in the United States (Zagaris, December 2002).

Legally the executive order authorizes this action by empowering "persons determined by the Secretary of the Treasury, in consultation with the Secretary of State and the Attorney General," and "after such consultation, if any, with foreign authorities as the Secretary of State, in consultation with the Secretary of the Treasury and the Attorney General, deems appropriate, in the exercise of his discretion" (Reuter & Truman, 2004). The following persons are subject to the blocking order: 1.

foreign persons determined by the Secretary of State to have committed, or to pose a significant risk of committing, acts of terrorism that threaten the security of U.S. nationals or the national security, foreign policy, or economy of the United States; 2. persons determined by the Secretary of Treasury to be owned or controlled by, or to act for or on behalf of any persons listed under the Order or any other persons determined to be subject to it (Andreas, 2013; Alexander & Musch, 2012); 3.

persons determined by the Secretary of Treasury to assist in, sponsor, or provide financial, material, or technological support for, or financial or other services to or in support of, such acts of terrorism or those persons listed under the Order or determined to be subject to it (Zagaris, December 2002); 4. persons determined by the Secretary of Treasury to be otherwise associated with those persons listed under the Order or determined to be subject to it. (Negroponte, 2010) The executive order's other principal prohibitions include 1. no transaction or dealing by U.S.

persons (including their overseas branches, but not their foreign subsidiaries) or within the United States in blocked property (Federal Bureau of Investigation, 2013); 2. prohibition against U.S. persons or persons in the United States from evading or avoiding, or attempting to evade or avoid any of the Order's prohibitions (Negroponte, 2010); 3. prohibition against any conspiracy to violate any of the Order's prohibitions; 4. prohibition against donations intended to relieve human suffering to persons listed under the Order or determined to be subject to it (Viles, 2011; Cole, 2015).

Practically speaking, the new terrorist sanctions largely overlap existing U.S. terrorist sanctions administered by OFAC, i.e., the Terrorism Sanctions Regulations (31 CFR Part 595) and the Foreign Terrorist Organizations Regulations (31 CFR Part 597) (Federal Bureau of Investigation, 2003). Under the Terrorism Sanctions Regulations, OFAC has blocked the property of persons posing a significant risk of disrupting the Middle East peace process. Under the Foreign Terrorist Organizations Regulations, U.S. financial institutions must block all funds in which foreign terrorist organizations have an interest.

Most of the persons listed in President Bush's September 23, 2001, executive order are already listed as specially designated terrorists under Part 595 or as Foreign Terrorist Organizations under Part 597. (Zagaris, December 2002) 2. Policy Project Part 2: Evaluation and research findings Much of U.S. counterterrorism financial enforcement (CTFE) is based on U.S. financial or economic sanctions.

Under the Trading with the Enemy Act, (Neal, 2008) the International Emergency Economic Powers Act (IEEPA), (Neal, 2008) and certain other statutes, the Treasury's Office of Foreign Assets Control (OFAC) administers sanctions programs that target specific countries, including Cuba, Iran, and Sudan. In addition, the Treasury administers programs targeting designated persons including international terrorists, as well as persons acting on behalf of the governments of sanctioned countries. Such persons are identified on the ever-expanding list of Specially Designated Nationals (SDN list) maintained by the Treasury (Weinberg, et al. 2015; Alexander & Musch, 2012).

The increased resort to sanctions, both unilaterally and multilaterally through the United Nations, has prompted extensive debate about their efficacy and operation (Cole, 2015). Such sanctions have long been used to fight terrorism. U.S. economic sanctions and export controls are blunt instruments with a long history that the U.S. private sector carefully follows due to the harsh sanctions for violating them (Weisman, 2015). Compliance with export controls and economic sanctions requires that the private sectors have a comprehensive awareness and due diligence in place.

While this subject is beyond the scope of this paper, the complexity and cost of these programs should be considered (Negroponte, 2010). Lawyers and bar associations have played a leading role in helping educate and counsel the private sector on compliance. The U.S. executive branch imposes sanctions against countries and individuals associated with terrorism (Viles, 2011). United States Initiates Sanctions against Osama bin Laden and Associates On September 23, 2001, President George W. Bush issued Executive Order 13224, immediately freezing U.S. financial assets of, and prohibiting U.S.

transactions with, 27 different entities (Alexander & Musch, 2012). The entities include terrorist organizations, individual terrorist leaders, a corporation that serves as a front for terrorism, and several nonprofit organizations (Weinberg, et al. 2015). This section discusses the legal framework and aspects of the order and the responses and implications for foreign governments and financial institutions (Reuter & Truman, 2004). Another trend to monitor will be whether the U.S. government's reorganization efforts will have any impact internationally (Federal Bureau of Investigation, 2003).

Already in the last five years, the international community has tried to digest the formation on a national level of FIUs and their networking through the Egmont Group. With the technical and financial assistance of international financial institutions, many countries are still trying to adopt legislation and establish, train, and practically empower FIUs to investigate financial crimes, especially with respect to political corruption, transnational organized crime, and other offenses, including terrorist financing (Zagaris, December 2002).

Indeed the national governments and the international community are challenged to be able to design, establish, and equip new institutions and mechanisms as fast as criminals who operate in a borderless world and use modern technology to act (Weinberg, et al. 2015). Developing proper infrastructure to undertake counterterrorism financing enforcement requires law enforcement officials equipped with experience in financial enforcement and knowledgeable about terrorism (National Science Foundation, 2013). Excellent links with counterpart foreign law enforcement officials are also useful.

Successful counterterrorist financial action requires excellent relationships and cooperation with the private sector (Andreas, 2013). Most countries have an FIU for conducting anti-money-laundering investigations and prosecutions. In most countries, CTFE will be linked to FIUs (Weisman, 2015). The designation lists of persons and entities suspected to be associated with terrorism, which the U.S. government and various international organizations maintain, are very burdensome and costly for both governments and the private sector to implement, especially because they change daily (Zagaris, December 2002; National Science Foundation, 2013).

Among the problems are that the information is often vague, sometimes inaccurate or out of date, and includes so many names that are common or sound like names of additional persons that the lists' enforcement and effectiveness are weakened. This process often slows everything down and does not seem to have produced any noteworthy counterterrorism assistance (Weisman, 2015; Carter, 2008).

Countries are overwhelmed and overburdened by such a regulatory overload, which covers not only these and related terrorism standards, but also regional and UN conventions, such as those against transnational organized crime and corruption. Indeed, in the United States alone financial institutions must add to their lists "Narcotic Kingpins" (Federal Bureau of Investigation, 2003; Alexander & Musch, 2012) and soon Internet gaming entities (Reuter & Truman, 2004), even though the World Trade Organization has declared the U.S. laws illegal. As the U.S.

government persuaded FATF to add to terrorism financing WMD financing, this illustrates the continual onslaught of counterterrorism financial regulatory requirements. The implementation of all such rules and, in many instances, the fundamental legal and institutional reforms they may entail, necessitates technical and other assistance from developed countries. Yet, the capacity for quality technical assistance does not exist in actuality, either in developing or developed countries (Federal Bureau of Investigation, 2014). 3.

Policy Project Part 3: Policy recommendation The creation of the Department of Homeland Security has required large-scale reorganization of many of the agencies and sub-agencies (e.g., Treasury, Justice, Alcohol Firearms and Tobacco, Customs Service, Border Patrol, Immigration and Naturalization Service) that are on the frontline of terrorist financing (National Science Foundation, 2013). The initial impact is to create some uncertainty and delay for terrorist financing, especially in the context of uncertainty and delays about U.S. budgetary allocations for these agencies. Indeed, U.S.

budgetary and fiscal deficits put a continuing cloud over future resources (Zagaris, December 2002). Despite all the creation of new groups to undertake terrorist financing, the ability of the different agencies and sub-agencies to effectively communicate and efficiently divide tasks is unknown and will remain so for the short-term (Reuter & Truman, 2004). The creation of the EOTF/FC responds to criticisms and suggestions of outside groups that the U.S.

government's efforts towards terrorist financial enforcement need to be more centralized and at a higher level.95 The new office also responds to fill the void created by the transfer of institutions to the Department of Homeland Security. In that regard, it remains to be seen whether the U.S. government is creating surplus agencies that will be able to effectively cooperate with each other (National Science Foundation, 2013). In particular, in the actual operation of anti-money-laundering, financial crime, and terrorist financing, the U.S.

government sometimes has multiple agencies investigating the same people. The overlapping sometimes shows itself when undercover agents track and lure each other, not knowing that each are undercover agents until sometimes they tragically have a violent encounter (Zagaris, December 2002). Sometimes foreign governments complain that they receive multiple requests for mutual assistance about the same matter from multiple U.S. agencies. A major issue will be the extent to which the allocation of resources and prioritization of combating terrorist financing will diminish other financial crimes, including anti-money-laundering (Cole, 2015).

In this regard, the impact of the new efforts on the private sector will be important to monitor. The U.S.A. PATRIOT Act has expanded significantly the enlisting of the private sector in the efforts to combat terrorist financial and simultaneously anti-money-laundering at a time when the U.S. economy and foreign direct investment have declined (Reuter & Truman, 2004). Another trend to monitor will be whether the U.S. government's reorganization efforts will have any impact internationally.

Already in the last five years, the international community has tried to digest the formation on a national level of FIUs and their networking through the Egmont Group (Carter, 2008).

With the technical and financial assistance of international financial institutions, many countries are still trying to adopt legislation and establish, train, and practically empower FIUs to investigate financial crimes, especially with respect to political corruption, transnational organized crime, and other offenses, including terrorist financing (Zagaris, December 2002; Cole, 2015) Indeed the national governments and the international community are challenged to be able to design, establish, and equip new institutions and mechanisms as fast as criminals who operate in a borderless world and use modern technology to act (National Science Foundation, 2013).

Developing proper infrastructure to undertake counterterrorism financing enforcement requires law enforcement officials equipped with experience in financial enforcement and knowledgeable about terrorism (Andreas, 2013). Excellent links with counterpart foreign law enforcement officials are also useful. Successful counterterrorist financial action requires excellent relationships and cooperation with the private sector. Most countries have an FIU for conducting anti-money-laundering investigations and prosecutions. In most countries, CTFE will be.