Committee: Security Council
Topic B: Money laundering and financing terrorism
American comedian W.C. Fields once said, “Anything worth having is a thing worth cheating.” Never do these words seem truer than in the twenty-first century, when cheating and illegal activities of all kinds are rampant. As government agencies and intergovernmental organizations are attempting to find a solution to these problems, criminal organizations, such as terrorist cells, are finding new way to practice what is known as money laundering, where an organization attempts to disguise the sources of illegally-obtained money. To fully understand the issue, the Security Council must also deal with the evolving aspects of terrorism, such as its definition and new, emerging terrorist organizations. Finding proper way to combat money laundering promises to be a challenging issue for the Security Council that will require not only negotiations, but a great deal of innovation.
In order to combat the practice of money laundering to terrorist organizations, or when the origin of finances is disguised in order for said origin to appear legitimate, one cannot argue that a definition of terrorism is necessary. Although there have been attempts at establishing a definition for terrorism, many of these attempts have resulted in definitions too narrow in scope or, in some cases, complete disagreement between parties. The most recognized definition of terrorism for combating money laundering is that established by both the Financial Action Task Force (FATF) and the 1999 Convention for the Suppression of the Financing of Terrorism. These organizations define terrorist financing as “any person (who)…unlawfully and willfully, provides and collects funds…intended to cause death or serious bodily injury to a civilian…” (Pieth) The problem exists in the definition of “lawful” and what exactly constitutes “injury” to other persons. In an age of advancing technology, terrorist organizations are operating in ways that governmental and intergovernmental agencies would have never predicted even twenty years ago. Whenever these agencies and organizations attempt to update their methods in the fight against money laundering, it seems that terrorist groups are always one step ahead. It is your duty as the Security Council to decide upon a comprehensive definition for terrorism and terrorist financing that can be adapted by regional organizations so that a cohesive effort to stop money laundering exists. Even though we aree trying to determine how to best deal with the issue, the United Nations is still at a loss for a solution. (Pieth)
As the methods of terrorism become more complex, so do the number of terrorist organizations and their relationship with one another. Many people in the world only think of terrorism as “al-Qaeda” or the “Taliban,” and some even believe these two terms are interchangeable. In reality, each terrorist organization has it own history, methodologies, beliefs, and membership bases. As the definition of terrorism is very inclusive, many consider terrorism to include Jacobins during the French Revolution to the Irish Republican Army to have terrorist characteristics. However, for all intents and purposes, the committee will mostly be addressing the most prevalent terrorist organizations, al-Qaeda and its associates, as well as the Taliban and its different branches. The origin of both of these organizations can be traced back to the 1979 Soviet-Afghan War, where an organization of “freedom fighters,” known as the Mujahideen (partially backed by the United States government) rose up to defend Afghanistan from the Soviet invasion. As the Soviet Union left the country in ruins, the Taliban was created from the Mujahideen in order to control the already prevalent opium trade and other illegal markets. Throughout the 1980s, the Taliban was based almost solely in Afghanistan and recruited from the native Pashtun tribe. Later, a wealthy, anti-American, Saudi named Osama bin-Laden believed that the Taliban should expand into western Asia and focus on anti-Western movements. (Bajoria)
Eventually, bin-Laden was exiled from Saudi Arabia, severed from any support from the Taliban, and started al-Qaeda (translated into English as “the base”) to create a network of terrorist organizations. Al-Qaeda now encompasses subsidiaries in Yemen, Iraq, Pakistan, Algeria, Malaysia, Uzbekistan, and Indonesia, known as Jemaah Islamiya, the organization responsible for the bombing of a Bali nightclub in 2002. After the 9/11 terrorist attacks and the U.S. invasion of Afghanistan, the Taliban began to spread its influence to Pakistan and the surrounding region. However, the number one operation of the Taliban is still the opium trade, which is nowhere near extinguished from Afghanistan. Although these two organizations have found it a necessity to overlap, there are still distinct differences. (Bajoria) While the Taliban uses “front companies” and the opium trade to finance itself. Al-Qaeda primarily relies upon charity donations. As the United States and European Union have been very proactive in monitoring any organization that gives money to a Muslim charity, the resources of al-Qaeda have become sparse. When trying to determine a solution to the problem, it will be crucial to keep these ideas in mind.
One thing these organizations have in common is how they are funded. There are three key areas through which terrorist organizations are financed. The first one is through charities, wealthy individuals and benefactors who secretly donate money to terrorist organizations. Many are willing to donate money to terrorist cells because of a fundamental pillar of Islam known as zakat, which requires members of the Muslim faith to donate a portion of their earnings to charitable organizations that benefit the Muslim community. An example of a seemingly legitimate charity benefitting illegitimate operations is Interpal, a British-based organization that benefitted Palestinian refugees, which was convicted of making generous donations to Hezbollah. The Security Council took a stance against this practice with Security Council Resolution 1904 (2009), which expanded the methods that UN member nations may take to discover the transfer of funds to the Taliban or al-Qaeda. Many Muslim-based charitable organizations are perfectly legitimate, such as KinderUSA. However, the line between the legitimate charities and the illegitimate ones has been blurred to the point where many have criticized the U.S. and European governments for targeting Muslim charities whose illegal acts have not been proven. Therefore, one of the tasks of the Security Council will be to establish methods to have better communication among different governmental and non-governmental agencies in order to better understand which charities are terrorist-affiliated and which one are completely legitimate. (Kaplan)
Another method of financing is through what are known as “front companies.” These are legitimate businesses that secretly designate, or launder, money to terrorist organizations. These range from livestock and fishing industries to construction and manufacturing. In fact, after the 9/11 terrorist attacks, it was reported that Osama bin-Laden owned a string of retail honey shops throughout the Middle East that he would utilize to launder money to al-Qaeda. These “front companies” can also be useful for the transportation of weapons and currency, where these can be shipped under the name of other products. However, many terrorist organizations, especially the Taliban, benefit from illegal businesses, most insidiously the opium trade. It is now estimated the opium trade in Afghanistan accounts for 92% of the world’s opium trade. Some ideas to deal with this issue have been complete crop eradication, alternative crop development, and even turning opium into biodiesel. Although Security Council Resolution 1817 (2008) called for some cooperation on this issue, the United Nations has yet to take a clear stand on which of a multiple of methods should be employed to decrease the opium trade. One of the tasks of the Security Council should be to evaluate the pros and cons of some of these methods in order to establish a comprehensive approach. (Kaplan)
Reports of whether anti-money laundering efforts have been effective are conflicting to say the least. Some believe that anti-money laundering efforts have been successful in decreasing the financial resources of terrorist organizations, such as al-Qaeda. Many of these reports point to how attempts at terrorist attacks have become less sophisticated since the 9/11 attacks. While the 9/11 attacks are estimated to have cost over $500,000, the 2009 Yemeni Christmas Day bomb attack is expected to have only cost $50,000 and the 2010 Times Square bomber attack is estimated to have been a $10,000 operation. In addition, many intelligence analysts believe that the fact that the latter two examples were unsuccessful means that al-Qaeda is losing its ability to recruit and train personnel. (“The ‘urgent’ choking”) In addition, Mark Levitt, a professor at Johns Hopkins University, states that, “In order to finance the Bali bombings, Jemaah Islamiya operatives had to resort to robbing jewelry stores because the al-Qaida core’s contribution was not enough to foot the bill.” Mr. Levitt goes on to explain that several documents found in bin Laden’s hideout in Abbottabod revealed the precarious financial situation of several al-Qaeda affiliates. At the same time, very few doubt that while al-Qaeda’s effectiveness is on the decline, the Taliban’s financial resources are anything but minimal, which is explained by the fact that the Taliban still possess a monopoly on the world’s opium trade. The Bush Administration’s policy of opium eradication proved ineffective, and President Obama’s attempts at alternative crop development are also not seeing much success. (“Chasing Taliban’s Overflowing Coffers”) The Taliban’s strength also comes from the prevalence and improvement of the practice of hawala, where a person called a hawaladar collects money from an individual and instructs an associate in a different region to pay the correct recipient the funds, with the promise of the debt later being repaid. The reason this practice is hard to monitor is that it does not leave any kind of “paper trail.” All exchanges are conducted completely on an “honor system,” making it very difficult for officials to track. (Kaplan)
Another problem associated with anti-money laundering campaigns is the lack of a financial infrastructure in parts of the world. This is especially true in Afghanistan, where it has been reported that the bank has over $1 billion in unresolved debts. Currently, two major banks, Kabul Bank and Azizi Bank, are facing bankruptcy, as well as scrutiny in terms of their clientele. However, some experts say these might just be growing pains. In 2001, Afghanistan was composed of six defunct, state-owned banks. In the fall of 2010, there were seventeen commercial banks operating. With a burgeoning banking sector comes some security issues, leading many to ask whether Afghanistan’s economy is growing too quickly to support its lack of governance and abundance of corruption. A weak financial system means that terrorist organizations have an easier time receiving loans for their “front companies,” when such loan applications receive little to no oversight. (Rondeaux)
The issue of money laundering and financing terrorism is very complex due to the evolving techniques of al-Qaeda and the Taliban. Therefore, if the Security Council wants to find a solution, it will have to remain one step ahead of the game.
Questions
What existing definitions of terrorism will the Security Council adopt as a
standard for fighting money laundering, or will it establish its own
definition?
Is the practice of money laundering caused by a weak financial
infrastructure, or does a weak financial structure lead to a prevalence of
money laundering?
Are current methods proving successful and why or why not?
Works Cited
Bajoria, Jayshree. “al-Qaeda (a.k.a. al-Qaida,
al-Qa’ida).” Council on Foreign
Relations. 2 May 2011. http://www.cfr.org/terrorist-organizations/al-qaeda-k-al-qaida-al-qaida/p9126.
Kaplan, Eben. “Tracking Down Terrorist Financing.”
Council on Foreign Relations. 4 April
2006. http://www.cfr.org/international-crime/tracking-down-terrorist-financing/p10356.
Levitt, Matthew. “Next, Let’s Get Bin Laden’s
Financiers.” Foreign Policy. 12 May
2011. http://www.npr.org/2011/05/12/136234805/foreign-policy-next-lets-get-bin-ladens-financiers.
Pieth, Mark. “Criminalizing the Financing of
Terrorism.” Journal of International
Criminal Justice. 2006. http://jicj.oxfordjournals.org/content/4/5/1074.abstract.
“Resolution 1817 (2008).” UN Security Council Resolutions. The United Nations, 11 June 2008.
“Resolution 1904 (2009).” UN Security Council Resolutions. The United Nations, 17 December
2009.
Rondeaux, Candace. “Cleaning up Afghanistan’s
banking system.” Foreign Policy. 4
April 2011. http://afpak.foreignpolicy.com/posts/2011/04/04/cleaning_up_afghanistan_s_banking_system
“Security Brief: The ‘urgent’ chocking of
al-Qaeda’s money supply.” CNN. 12 May
2010. http://news.blogs.cnn.com/2010/05/12/security-brief-the-urgent-choking-of-al-qaedas-money-supply/.
“Security Brief: Chasing Taliban’s overflowing
coffers, cash couriers.” CNN. 13 May
2010. http://news.blogs.cnn.com/2010/05/12/security-brief-the-urgent-choking-of-al-qaedas-money-supply/.