Studies of terrorist attacks in Europe between 1994 and 2013 found about 75% of the attacks were funded for less than $10,000. However, following the collapse of Daesh in 2017, the fear is that this type of threat (small-dollar terrorism) is growing, and the flow of funds ever is more difficult to detect. More critically, a number of countries on the Financial Action Task Force (FATF) watch list, including Morocco, lack a comprehensive framework to deal with it.
CRIMINALIZATION OF TERRORISM
Under the 1999 International Convention for the Suppression of the Financing of Terrorism, as well as under a number of UN Security Council resolutions, all states are obliged to criminalize terrorism financing, irrespective of the amount, in addition to averting and suppressing terrorist financing, freezing terrorist funds and their financiers and stopping people or entities from providing financial support to those who seek to commit acts of terror.
In September 2020, the Moroccan Justice Minister announced that new laws would be introduced as part of the national efforts in the fight against money laundering, in particular as it applies to the financing of terrorism (CTF). In February 2021, Morocco also made a high-level commitment to work with FATF to strengthen its AML/CTF legal regime and to bring it in line with international standards. As part of that commitment, the government agreed to ‘prioritizing the identification, investigation and prosecution of all types of ML in accordance with the country’s risks.
At the heart of the government’s strategy and implementation efforts is to use legal professionals – lawyers, notaries and religious notaries. The assumption is that legal professionals, as successful communicators, once fully informed, will be able to raise greater awareness of the problem of money laundering and CTF and prevent them from taking place. This raises two inter-related questions.
First Question:
What is the proper scope of the laws and what to do about SDT? Should the laws be prescriptive and specifically target the threat (e.g., SDT)? Or should they be based merely on suspicion, in which strict legal criteria are relaxed to provide law enforcement agencies and their private sector proxies a large margin of appreciation to decide what to investigate and what to ignore?
Second Question:
The Moroccan approach raises the question: should the implementation of AML and CTF legislation rely more on legal professionals or upon financial institutions themselves, their detection software and forensic accountants?
PROBLEMS AND OBSTACLES
There are problems and obstacles with both approaches. With a prescription approach, it means that legislation must be constantly adapted to new money laundering and CTF techniques and that the law as originally drafted will not meet its intended target. Further, in relation to SDT, how would you draft such a law? Australia and many other countries have mandatory reporting requirements on all financial transactions over $10,000 (or its equivalent). But many cases of SDT involve amounts that are much less. Where do we draw the line? The danger is that it would cover too many transactions, be very expensive to enforce or potentially affect many innocents.
As for the suspicion-based approach, this relies on the expertise of the financial institutions and the reporting of suspicious activity. The problem here is that persons may be blacklisted and placed on a watchlist on the basis of no more than an algorithm or the decision of an unsupervised financial analyst.
Reliance on the former appears more in line with respect for the rule of law and legal accountability. Yet it is questionable whether legal professionals would have the skill, expertise and the time to sift through thousands of financial transactions. On the other hand, while reliance on financial institutions defers to financial expertise and is more likely to detect financial irregularities, this may not correspond to actual criminality which legal professionals would be in a better position to assess. How, then, have other countries handled this and what might be regarded as the best practice?
By general consensus, the most comprehensive and effective AML/CTF legal regime globally operates out of the UK which has a long history of dealing with terrorism, both before 9/11 and after. In 2018, the UK achieved the best rating of any country assessed so far in the FATF’s round of evaluations. This applies a non-prescriptive, suspicion-based approach, in which investigating functions are devolved to financial institutions who have reporting obligations. The term ‘suspicion’ is not self-defining, but generally refers to ‘a possibility, which is more than fanciful, that the relevant facts exist. A vague unease would not suffice.’
CRACKING THE CODE
The UK does not have any dedicated legislation, nor does it have any clauses within existing legislation that focus on SDT. Under sections 15-18 of the Terrorism Act 2000, it is an offence to:
- Raise, receive or provide funds for the purpose of terrorism;
- Hold or use funds for the purpose of terrorism;
- Become involved in an arrangement to make funds available for the purposes of terrorism; and to
- Facilitate the laundering of terrorist money.
A person, charity or organisation is guilty of this offence if they ‘know’, ‘intend’ or ‘have reasonable cause to suspect’ that the money, no matter how small the amount, is being channelled to terrorists. Moreover, under the Proceeds of Crime Act 2002, it is an offence to use, acquire or have possession of ‘criminal property’, which can be regarded as any sum of money raised or held towards an illegal activity, including an act of terrorism.
While the terms ‘know’, ‘intend’, and ‘reasonable cause to suspect’ seem to imply a high threshold of personal culpability to successfully prosecute, it should be remembered that the UK’s CTF framework is based on suspicion. The authorities may freeze accounts and inform stakeholders without having established the facts as a risk prevention device. It aims more to disrupt the activities of terrorism financiers than to prosecute or convict.
The key to the success of the UK legislation is its enforcement apparatus. The main implementing body is the Joint Money Laundering Intelligence Taskforce (JMLIT) which comprises and integrates the work of: 40 financial institutions; the Financial Conduct Authority (regulates the conduct of 60000 businesses in the UK and sets prudential standards); CIFAS (a fraud prevention service that represents organizations across the public, private and voluntary sectors and shares information on fraudsters or suspected fraudsters with its members); the National Crimes Authority (the main crime-fighting law enforcement agency focused on serious and organized crime); HM Revenue and Customs; the Serious Fraud Office; the City of London Police, and the Metropolitan Police Service.
This is a forum which allows its members to share information and new patterns, expose vulnerabilities and provide tactical intelligence. At the heart of this operation are Accredited Financial Investigators (AFIs) (accredited civilian accountants attached to the police) with the experience and necessary expertise to identify suspicious activities in complex financial transactions. Under the Criminal Finance Act 2017, they are given the same investigative powers as police officers under the terrorism legislation.
The JMLIT seems to have been a success if one examines the arrests and detection rates. Between 2016-2017, for example, it secured 63 arrests and identified over 2000 suspicious accounts that had previously gone undetected. This fits with the overall strategy of CTF of seeking to disrupt terrorism financing operations. On the other hand, the number of arrests and identification of suspicious accounts is not matched by the number of prosecutions and convictions as the offences are hard to prove in a court of law.
DIRECTIVE LAW
The US and Australia have followed a similar approach to the UK. In January 2021, the US Congress passed the National Defence Authorization Act 2020 providing sweeping reforms of the US anti-money laundering legislation and counter-terrorism financing. The Act modernizes the existing AML/CFT regime to account for emerging finance markets and patterns, as well as expanding the resources and tools to counter threats. This includes ‘inter-agency information sharing’ and increased cooperation between corporations. Under the Anti-Money Laundering Act 2020, there is also a pilot program (to be trialled for three years) to increase the sharing of information among financial institutions’ foreign branches, subsidiaries and affiliates. There is no mention or specific targeting of SDT.
Similarly, in Australia, extensive amendments were introduced in 2020 to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and allied legislation, with the main aims of increasing collaboration among government agencies, creating more stringent obligations for banks and financial institutions, as well as enabling greater information sharing between the public and private sector to enhance investigation capabilities. But again, the issue of SDT was not specifically addressed.
Notwithstanding the absence of dedicated legislation on SDT in the countries with the most advanced AML /CTF legal frameworks, this does not necessarily mean Morocco should follow suit. It does beg the question, however, why a prescriptive law would be necessary and what additional benefits it would bring. A better solution, perhaps, is to strengthen financial intelligence units and terrorism task forces to ensure that the private sector, financial institutions and regulators have sufficient access to all necessary information and that cooperation between intelligence units is fast-tracked. This would bring Morocco in line with the UK and other economically developed nations. Ultimately, however, the question is one of balance and whether the additional costs of enforcing the legislation match the perceived threats and whether they are measures which the country can financially afford.