Counterterrorism Blog: The Status & Future of Counter-Terrorist Financing Efforts

Counterterrorism Blog: The Status & Future of Counter-Terrorist Financing Efforts
By Andrew Cochran

On October 21, I gave the luncheon address on the third day of the annual Money Laundering Enforcement Conference co-sponsored by the American Bankers Association and the American Bar Association, one of the most widely attended annual banking conferences in the U.S. I discussed the history of this website; some of the Contributing Experts' accomplishments in addressing money laundering and terrorist financing issues; and my personal assessment of the status of counter-terrorist financing efforts. I discussed the merits of the recent proposal by the American Bankers Association for Bank Secrecy Act reform, which I discussed here on October 16. I announced and discussed a parallel effort by several of us here and top officials from major financial institutions to propose counter-terrorist financing measures to the next Administration and Congress. I concluded my remarks with a perspective on shariah finance vehicles. Since October 21, I have added to the suggested list of potential measures for consideration next year. You can download the full text here, and my suggestions for counter-terrorism measures are below. I welcome readers' comments.

I appreciate the opportunity to address the twin ABAs, and I especially thank Rick Small of American Express, whose outstanding work I have admired for years, and John Byrne of Bank of America, one of the most respected experts in the entire field, for extending the invitation.

"What ideas might we try to address in our group? Speaking just for myself, here are several:

 Establish a single point of contact on BSA issues, as is recommended in the ABA proposal. Treasury has access to the SWIFT database, and it might turn out that Treasury remains the best location, unless the BSA functions are folded into some new financial regulatory agency. But we haven’t deliberated on this yet.

 The unclassified factual basis of OCC reports on Patriot Act/BSA issues and the international designations - the details of the transactions - ought to be released to the public, for the benefit of the aggrieved parties, the community as a whole, and terrorism victims. I’m thinking first of the Arab Bank case, in which I have a client interest. That isn’t inconsistent with the bank examination privilege; the examiner’s conclusions can remain confidential.

 Some legislative mandate for Patriot Act regulations on hedge funds, which have never been issued, on SVIs issued by non-financial institutions might be needed, and I recommend a mandate for a PEPs list.

 The Supreme Court decisions this summer on money laundering must be addressed, as they threaten a number of prosecutions. That legislative fix might proceed rapidly through Congress.

 The FBI’s jurisdiction in terrorist financing investigations stems from a 2003 MOU with DHS; that should be authorized in law consistent with the role of the single-contact agency.

 Other recommendations in the ABA proposal to endorse a priority-focused, risk-based approach to BSA regulation; increase the quality of feedback and transparency; and streamline reporting and validate its utility are sound. One hope of mine at the outset was to arrive at a Seasoned Customer Exception Act that law enforcement can live with. But that might not happen, so perhaps we can rationalize the CTR exemption process.

 Treasury and FinCEN are still short on information technology which would enable faster, more reliable information sharing among government agencies and with financial institutions.

 In light of the weaknesses in the UN’s pursuit of terrorist financing, recognize the regional bodies, such as MENA-FATF, which have been more successful in recent years.

 Finally, the Treasury Department’s contribution to counterinsurgency operations should be recognized and expanded through appropriations for additional liaisons to be located around the world."

POSTSCRIPT: Since October 21, FinCEN has ceased any effort at drafting regulations mandated by the Patriot Act for BSA compliance by hedge funds. I predict that the next Administration and Congress will take up the issue.

October 31, 2008 01:07 PM Print


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