CATF Reports Sep. 2, 2015, 4:31pm


Spurred by how the explosion in Colombian cocaine traffic had infected the international banking system, the so-called G-7 group of nations established the Financial Action Task Force on Money Laundering (FATF) in Paris in 1989.  In addition to G-7 government executives (now morphed into the G-20) and the President of the European Commission, FATF originally included 8 other nations within active financial sectors - all of whom shared a stake in restoring the integrity of international banking.

FATF was constituted as a multilateral policymaking body which sets accountability standards and advocates for implementation of legal and regulatory measures to combating money laundering. After 9/11, FATF added a focus on terrorist financing as a threat to the integrity of the international financial system.  Over the years, FATF has promulgated sets of recommendations that are considered as the international standard for combating money laundering and the financing of terrorism--as well as nuclear weapons proliferation. So far, 190 countries have adopted the recommendations. First issued in 1990, FATF recommendations have been revised four times to ensure they remain up to date and relevant.  Overall, the standards form the basis of a coordinated response to threats - whether from drug related money laundering or terrorist finance - to the international financial system.   

In response to mounting concern over terrorist finance, FATF identifies national-level vulnerabilities and specific schemes for transferring funds for illegal purposes, and publishes an annual list of “problem jurisdictions”. Particular problems singled out include charitable contributions benefiting violent extremism or portions that are skimmed and secretly diverted from legitimate health and welfare causes to terrorist cells. 

FATF maintains a high profile initiative to identify current money laundering and terrorist finance schemes, focused on the latest evolution of techniques and the imperative that responsible financial institutions must remain vigilant in preventing their use as supportive vehicles. One publication, Terrorist Financing, served as a comprehensive white paper placing all FATF members on alert to recognize the scenarios and banking protocols involved in detection and control. If the question arises of why publish a report that reveals what banks were presumed to know already, the answer may lie in the reality that no institution can any longer claim ignorance of the elements comprising the major schemes, and thus every institution now shares an affirmative responsibility to detect and sanction such activity.

A more recent report, Financing of the Terrorist Organization Islamic State in Iraq and the Levant (ISIL), spotlights the principle fundraising methods used by ISIL (ISIS) - from the sale of oil from seized fields to extortionate "taxes" imposed on commerce in territories they have seized, and the sale of stolen artifacts. Clearly, the capacity of major terrorist organizations like ISIS to raise hundreds of millions of dollars presents enormous and inescapable implications for the electronic transfer of those assets from one country to another.

One implication drawn from the above FATF reports that focus on continually mutating schemes is the absolute terrorist dependence on international banking both to bankroll terrorist campaigns and simply to administer enormous tracts of territory now under its control.  Framing the worldwide problem in terms of the routine daily movement of tens of millions of dollars raises the inescapable question: how will individual nations’ banking and judicial authorities collaborate to reimpose integrity in a system completely reliant on public confidence.  The answer - or as much of a response as there can be - lies in the resilient policy machinery of the Financial Action Task Force.

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