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The Financial War Against Terrorism: The Contribution of Islamic Banking

The Financial War Against Terrorism: The Contribution of Islamic Banking

Speech delivered by Bill Rammell, MP, Parliamentary Under-Secretary of State, at the Royal United Services Institute in London on April 7, 2003. Source: FCO, London.

Thank you for inviting me to RUSI today to speak on the subject of ‘The Financial War against Terrorism: The Contribution of Islamic Banking’. I would also like to thank the Institute for Islamic Banking and Insurance for organising this meeting, and the Dubai International Financial Centre for making this meeting possible. I am sure it will be an interesting and productive forum.

It is vitally important that we keep the issue of the financing of terrorism high on the public agenda, both nationally and internationally. Terrorist financing is the lifeblood on which terrorists survive. Without money, terrorists can’t train. They can’t plan. They can’t travel. And they can’t attack. We must therefore take all necessary steps to deny terrorist groups access to the international financial system and incapacitate their financial networks. The costs of not doing so are grave, putting us all at greater risk from terrorist attacks, undermining our security and way of life.

  • The Evils of Modern, International Terrorism

Terrorism has always been a terrible crime, attacking the social, economic and political life of States for years. But the events of 11 September 2001 were a grave, new departure, a wake-up call to the world that the new breed of terrorists was a global threat.

Today’s terrorism differs from the past in its fluidity and global reach. The motivation of international terrorists is more diffuse. They themselves are prepared to die in the pursuit of killing others; they have no interest in negotiation or compromise. Today, terrorists no longer have to congregate to conspire: the revolution in information technology and global communications makes cross-border communication as simple as sending an e-mail or a text message.

Their funding and logistical support may often come from private fund-raising of various kinds, and often from the proceeds of crime. Terrorists can now transfer funds through international financial institutions and otherwise exploit the increasing globalisation of the financial system to fund their murderous activities. The great irony is that these same financial systems are also the target of terrorist groups who are intent on sabotaging the structures that have brought economic development and prosperity.

Terrorism is often described as ‘the poor man’s warfare’. The very nature of terrorist activity means that it is not as expensive as people sometimes think. The figures are surprising. The attacks on 11 September were on the drawing board for a long time. It took two years to plan the attacks, to recruit the hi-jackers, and train the pilots. The nineteen hi-jackers had to pay their travel costs to the US and train as commercial pilots. It was, without doubt, the most carefully planned terrorist attack the world had ever seen, completely changing the world in which we live. But what did it literally cost? Probably between 300,000 to 500,000 US Dollars. Not an awful lot of money.

In 1993, the IRA car bomb at Bishopgate in the heart of the City of London caused over one billion pounds’ worth of damage. How much did that attack cost? Three thousand pounds.

And the Bali bomb last October? That cost around 5,000 dollars. How much damage did it cause? Over two hundred people lost their lives, and the economic and financial damage it caused to Indonesia is likely to run into billions of dollars as a result of the loss of tourism revenue.

  • The Intternational Response

So what has been the international response to international terrorism? Before 11 September, the international community had established a comprehensive legal framework to counter the financing of terrorism.

- The UN Convention for the Suppression of Terrorist Financing was signed in New York in 1999;

- United Nations Security Council Resolution 1267 of October 1999, called upon all States to impose a freeze on the funds owned or controlled by the Taliban in Afghanistan;

- And Security Council Resolution 1333 of December of the same year, called on all States to impose a freeze on the funds of Osama bin Laden and Al Qa’ida;

- And these resolutions were renewed in 2001 – through UN Security Council Resolution 1390 – and again this year through Security Council Resolution 1453.

Following the events of 11 September, the international community has taken action to reinforce the words of these resolutions. In the last 18 months, the international community has frozen terrorist assets worth over 100 million dollars. In the UK we froze 90 million pounds. The bulk of this has now been released to the legitimate government in Kabul. But it is not just bank accounts that we freeze. The UK Government is obliged by the United Nations to freeze economic resources – not just money. In the past 18 months we have ‘frozen’ carpets, property and even a tractor. We are committed to preventing terrorists from exploiting material assets in whatever form they take!

We’re equally committed to encouraging other states to do their bit.

Security Council Resolution 1373, which was passed on 28 September 2001, for the first time imposed an obligation on all states to take a broad range of measures to suppress terrorism and block terrorist finances. And States – all States – are being monitored by the Counter-Terrorism Committee of the Security Council (a committee chaired by the UK’s Ambassador to the UN) to ensure that they implement these obligations.

In what other ways is the international community working to tackle terrorist financing? Most of you, as bankers, will already be familiar with the Financial Action Task Force – the FATF – and its 8 Special Recommendations on Terrorist Financing. I won’t go into the details of them here. I am confident that you know them better than I do anyway! But I would like to highlight a couple of aspects to show the breadth and depth of the international community’s action against terrorist financing.

Special Recommendation 8 requires all FATF members and non-members to introduce a regulatory system for charities and non-profit organizations. Stopping the flow of terrorist funding from charitable and non-profit organisations is difficult, particularly since terrorist organizations actively conceal their illegitimate activities under legitimately funded causes. Clamping down on the misuse of charities and charitable-giving is therefore one of the main objectives of the international community. The UK is using the powers of its Charity Commission to undertake investigations into UK registered charities. The Commission works to ensure that funds are not being used improperly – that they are not financing political objectives. That they are not being used for crime. And that they are not financing terrorism.

The Charity Commission is also at the centre of our Counter-Terrorism Assistance Programme. Last week, the Charity Commission, on behalf of the Foreign and Commonwealth Office, ran a seminar on Charity Regulation for countries in South and South East Asia. The seminar discussed the legislative framework required to establish an effective charity regulation mechanism – to meet the international obligations of UNSCR 1373 and the FATF’s Special Recommendation. We will be holding more of these seminars, and are hoping to organise an event in partnership with the Gulf Co-operation Council later in the year.

The UK and other members of the international community, are also offering other forms of assistance to help countries meet their international obligations to prevent and suppress the financing of terrorism. We have many years’ experience of fighting the financing of terrorism because of our problems with Irish terrorism. We are keen to help others by sharing our knowledge. This year we have sent members of our police force – from the National Terrorist Financial Investigation Unit based in Scotland Yard – to South East Asia and the Americas to pass on some of our experience of investigating terrorist financing.

  • Impact if Initiatives

But the question we really have to ask ourselves is what impact have all of these initiatives had on combating terrorist financing?

I’ve already given some figures on the assets which the international community has frozen world-wide since 11 September. What is more challenging to assess is the disruptive impact of our efforts against terrorist financing. It is difficult to tell if a terrorist attack might have been aborted because of problems accessing funding – it is inherently difficult to prove a negative. But we do know that because of our increased monitoring of the international banking system, terrorists are increasingly being forced to use couriers to move money around the world: some have been arrested, and with concerted international action more arrests will undoubtedly follow. Clamping down on the space in which terrorists can operate, even at the lowest levels of their organisation, helps to degrade their ability to plan and carry out attacks.

We also know that the annual income of organisations such as Al Qa’ida has dropped significantly since 11 September. Al Qa’ida’s income is around 10 per cent of what it used to be. But any money that flows into the hands of terrorists is too much money. As I said earlier, terrorists do not always need a lot of money to mount these attacks. We therefore need to work harder to block the money when it moves, and to identify and freeze it when it is in the banking system. Combating terrorist financing is not a short-term policy with short-term goals. It is a policy for the long-term. We must all be committed to pursuing it.

  • Conclusion

Let me conclude with one final remark. At the heart of Islamic banking is the commitment to ethical banking, with the values of honesty, trust and integrity given great respect. The international community has created a framework to halt terrorist financing, but I hope that today’s meeting will address how we can learn from your experiences in Islamic banking in how you tackle the financing of terrorism. Please use this opportunity to tell us how you think the UK Government could be doing better in this regard, and where we now need to focus our work.

By working together, Muslim and non-Muslim in partnership, we can tackle a threat which confronts peoples of all faiths. Let us join forces to thwart the activities of the terrorist groups which seek to destroy the safety and prosperity of all communities in the UK.

 

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Directeur de la publication : Joël-François Dumont
Comité de rédaction : Jacques de Lestapis, Hugues Dumont, François de Vries (Bruxelles), Hans-Ulrich Helfer (Suisse), Michael Hellerforth (Allemagne).
Comité militaire : VAE Guy Labouérie (†), GAA François Mermet (2S), CF Patrice Théry (Asie).

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