Money and terror

Whether military courts will be able to deny terror groups their source of funding, only future will tell

Launching terrorist attacks requires money. More often than not however, the sums involved are vastly exaggerated. Illegal or unregulated activities like drugs trade, the informal sector of the economy and hawala transactions are routinely mentioned as sources of terror financing. Kidnappings for ransom, attacking banks and bhattas are perhaps, more important. The size of contribution is a matter of considerable debate. By most accounts, the 9/11 attack did not cost more than half a million dollars. What is worse from the viewpoint of law enforcement, some of the players legally declared their dollar possessions at entry points. Anti-money laundering laws aim to prevent or control the laundering or whitening of illegal or black money. But terrorism is also financed by perfectly legitimate sources. Well-meaning individuals may be parting with their hard-earned, tax-paid earnings for charities that have ideas other than the stated objectives. A number of analysts include even zakat and Islamic banking among the sources of financing terror. Again, looking for causes of terrorism in abject poverty is not a lot of help. Many wealthy individuals, legally earning and working away home, fund causes back home which they keep closest to their hearts. This is what economist Allan Kruger concludes in a widely-quoted article. Finally, there are foreign governments funding terrorist operations in direct as well as indirect ways. In Pakistan, a neighbour and at least two Islamic countries, are known to be supporting their respective favourites. On the day the 21^st Amendment Bill was moved, the interior minister admitted as much in a written reply to a question asked by a PPP member of the National Assembly. He quickly added, though, that these transactions are difficult to trace.

These considerations weigh in heavily on the efficacy of the legislation enacted to turn off the monetary tap for terrorists. The constitutionally mandated amendments to the Pakistan Army Act of 1952 include, among others, sub-clause (e) which states that providing or receiving funding from any foreign or local source for illegal activities defined as acts of terror is itself an act of terror. The pre-existing regime of anti-money laundering and control of financing terrorism consists of the requirements of the NAB Ordinance,1999 binding financial institutions to report suspicious transactions to NAB and a similar requirement of Control of Narcotics Substance Act of 1997 for transactions suspected to be related to drug business and, most important, the Anti-Money Laundering (AML) Act of 2010. The main burden of detecting suspicious transactions is on the State Bank of Pakistan (SBP). A Financial Monitoring Unit (FMU) has existed within the SBP to implement the provisions of this Act. Not much information is available on the implementation of the AML and the functioning of FMU. The SBP’s Annual Performance Review 2013-2014 talks about strengthening of regulations to “ensure the integrity of the banking system against Money Laundering and Terrorist Financing”. These include preventive measures like customer due diligence, correspondent banking, wire transfers requirements for sending and receiving funds, reporting of suspicious transactions, keeping records of banking transactions for 10 years, risk-based approach as per internal risk assessments and other requirements on internal controls, policies, compliance, audit and training. However, the report says nothing about the number of cases detected, investigated and successfully prosecuted.

Whether military courts will be able to deny terrorist groups what General Colin Powell had described as their oxygen (i.e., money), only future will tell. In the past, these courts focused mainly on ‘corrupt’ politicians. 

Published in The Express Tribune, January 9^th,  2015.

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