David Aufhauser, the General Counsel of the U.S. Treasury Department from 2001 to 2004, opined that “[t]error traffics in three forms of currency: hate, counterfeit religion and money.” Since September 11, 2001 (9/11), the United States has led an international regime to counter global terrorism. One of the primary objectives of this regime has been to disrupt the cash flow of foreign terrorist organizations. Efforts to combat the financing of terrorism have borrowed heavily from anti-money laundering (AML) legislation used to combat drug cartels and enterprise crime in the late twentieth century. These efforts, however, fundamentally misunderstand terrorist finance and the evolving nature of the global terrorist threat, which has increasingly relied on “lone wolf” attacks. This brand of terror differs from organized crime in that it does not require a steady cash flow to achieve its objectives. Furthermore, AML strategies fare poorly against the tactics that terrorists now use to make and move money, from self-financing to the hawala system.
Unfortunately, this failed approach has been imposed by the high-income countries on the rest of the world through the Financial Action Task Force (FATF), an intergovernmental organization that sets standards and promotes policies designed to combat money laundering and terrorist financing. The result has been particularly burdensome for developing countries, which cannot spare the resources to implement AML but also cannot afford not to for fear of being blacklisted by the FATF. It is time for the world’s high-income countries, specifically the FATF’s member jurisdictions, to acknowledge AML’s inability to counter terrorist finance and stop imposing a failed model on the world’s least developed countries, which have far more pressing concerns.
