Assets, Crimes and the State

Innovation in 21st Century Legal Responses

Katie Benson, Colin King, Clive Walker, Katie Benson, Colin King, Clive Walker

• Publisher: Routledge
• Year: 2020
• ISBN:
  9780429677298
• Edition: 1
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

Organised crime, corruption, and terrorism are considered to pose significant and unrelenting threats to the integrity, security, and stability of contemporary societies. Alongside traditional criminal enforcement responses, strategies focused on following the money trail of such crimes have become increasingly prevalent. These strategies include anti-money laundering measures to prevent 'dirty money' from infiltrating the legitimate economy, proceeds of crime powers to target the accumulated assets derived from crime, and counter-terrorist financing measures to prevent 'clean' money from being used for terrorist purposes.

This collection brings together 17 emerging researchers in the fields of anti-money laundering, proceeds of crime, counter-terrorist financing and corruption to offer critical analyses of contemporary anti-assets strategies and state responses to a range of financial crimes. The chapters focus on innovative anti-financial crime measures and assemblages of governance that have become a feature of late modernity and on the ways in which individual nation states have responded to anti-money laundering and counter-terrorist financing requirements in light of their specific social, political, and economic contexts. This collection draws on perspectives from law, criminology, sociology, politics, and other disciplines. It adopts a much-needed international approach, focusing not only on expected jurisdictions, such as the United States and United Kingdom, but also on analysis from countries such as Qatar, Kuwait, Iran, and Nigeria. The authors stand out for their fresh and original research, which places them at the cutting edge of the subject.

This book provides a comprehensive, insightful, and original study of an important and developing field for academics, students, practitioners, and policymakers in multiple jurisdictions.

1
Dirty money and the new responses of the 21st century

Katie Benson, Colin King, and Clive Walker

In 1989, the Financial Action Task Force (FATF) was established by the G7, primarily in response to assets arising from illegal drug production and trafficking. According to the G7 Economic Declaration in July 1989,

Its mandate is to assess the results of cooperation already undertaken in order to prevent the utilization of the banking system and financial institutions for the purpose of money laundering, and to consider additional preventive efforts in this field, including the adaptation of the legal and regulatory systems so as to enhance multilateral judicial assistance.¹

1 G7, Economic Declaration, Paris Summit (July 16, 1989) para. 53 (<http://www.g8.utoronto.ca/summit/1989paris/communique/index.html>).

Their progeny subsequently produced what would become the FATF 40 Recommendations, which were endorsed by the G7 in 1990.² As is evident from its mandate, there was no emphasis on terrorist financing at that time. It took until almost a decade later for international law making to emerge on terrorism financing, not from the aloof FATF but from the United Nations (UN) as delivered in two tranches. First came the UN Security Council Resolution (UNSCR) 1267, dealing with ‘the situation in Afghanistan’, which necessitated the imposition of sanctions against named individuals in the Taliban ‘faction’,³ an idea quickly extended to their allies in Al-Qaida in 1999.⁴ Second, the International Convention for the Suppression of the Financing of Terrorism was agreed in 1999.⁵ Implementation of both aspects was low key before 9/11, with just four ratifications of the convention⁶ and the listing of around a quarter of the totals which would be reached after 9/11.⁷ Following 9/11, a wave of international edicts, including Special Recommendations from the FATF in October 2001, and national legislation rolled out everywhere, firmly placing the focus on terrorist finances front and centre. Whilst there are notable differences between the anti-money laundering (AML) and counter-terrorist financing (CTF) approaches, so too are there significant overlaps and convergence.⁸ Indeed, the current global standards promulgated by the FATF have by now largely fused AML and CTF so that national legislation likewise starts with the same premises and contains broadly the same features across the board. Convergence is ongoing, with the ideas of pre-emption so hallowed in counter-terrorism, now increasingly applied to criminal assets through devices such as unexplained wealth orders (UWOs) and civil recovery.⁹

2 The history is recounted in Sutton, G.W., ‘The new FATF standards’ (2012–2013) 4 George Mason Journal of International and Comparative Law 68; Nance, M.T., ‘The regime that FATF built: An introduction to the Financial Action Task Force’ (2018) 69 Crime, Law and Social Change 109.

3 UNSCR 1267 of 15 October 1999, art.4(b).

4 UNSCR 1333 of 19 December 2000, art.8.

5 UNGA Resolution 54/109 of 9 December 1999.

6 See Bantekas, I., ‘The international law of terrorist financing’ (2003) 97 American Journal of International Law 315.

7 For initial listings under UNSCR, see SC/6844 of 13 April 2000 (<http://www.un.org/press/en/2000/20000413.sc6844.doc.html>); SC/6988 of 25 January 2001 (<http://www.un.org/press/en/2001/afg124.doc.htm>).

8 King, C. and Walker, C., ‘Counter terrorism financing: A redundant fragmentation?’ (2015) 6(3) New Journal of European Criminal Law 372.

9 See the UK Criminal Finances Act 2017.

Initially established with a one-year mandate,¹⁰ the FATF has subsequently developed into the primary driver behind the global AML/CTF regime both in terms of normative production and administrative enforcement. It generally outperforms potential rivals, such as the Egmont Group, the Organisation for Economic Co-operation and Development (OECD), the UN Office on Drugs and Crime (UNODC), and the World Bank, though their collaborative efforts are also duly noted in this book. Its stated objectives are now

to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. The FATF is therefore a ‘policy-making body’ which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.¹¹

11 FATF, ‘Who We Are’ (<http://www.fatf-gafi.org/about/whoweare/>). For a critical assessment, see van Duyne, P. et al., The Critical Handbook of Money Laundering: Policy, Analysis and Myths (Palgrave, 2018) Ch. 5.

The emphasis on following the money with a view to both suppression and investigation is now firmly established as part of the state response to organised crime, corruption, and terrorism. As Nance notes, ‘Regardless of whether FATF’s net impact is positive or negative, it is indisputable that the fight against illicit money has bled into nearly every corner of government activity’.¹² Even so, fundamental aspects of the regime remain controversial. These aspects represent in many ways an agenda for action and debate in the 21st century for AML and CTF and, therefore, form key subjects for this book. In brief, they revolve around four controversies: purpose, legitimacy, ambit, and effectiveness.

10 In April 2019, it was announced that the FATF was given a permanent mandate: FATF, Mandate (FATF, 2019).

12 Nance, M.T., ‘The regime that FATF built: An introduction to the Financial Action Task Force’ (2018) 69 Crime, Law & Social Change 109, 110.

As for purpose, the FATF in its early guise assumed the form of financial, accounting, policing, and legal technocrats. Organised crime and money laundering were important scourges, especially for countries such as Italy and the USA.¹³ But the risk was by no means predominant, even as a crime problem, for most other countries. However, after a decade had passed, change was afoot.

13 These jurisdictions were early adopters of specialist legislation: See (Italy) Codice delle leggi antimafia e delle misure di prevenzione, L. 646/1982 within L. 575/1965 (now d.lgs.159/2011); (USA) Racketeer Influenced and Corrupt Organizations Act 1970, 18 USC s.1961.

For the CTF field, according to former vice-president Dick Cheney,

in a sense, 9/11 changed everything for us. 9/11 forced us to think in new ways about threats to the United States, about our vulnerabilities, about who our enemies were, about what kind of military strategy we needed in order to defend ourselves.¹⁴

14 Quoted in Dunmire, P.L., ‘“9/11 changed everything”: An intertextual analysis of the Bush Doctrine’ (2009) 20 Discourse & Society 195.

So, after 9/11, it became accepted wisdom that the hitherto hesitant steps taken in the application of sanctions and international convention were inadequate and that finance was to become a key battleground in CTF. The crucial change in outlook involved, of course, the acceptance that national security is now under threat. Consequently, a much wider range of conceivable options to deal with national security threats were placed on the table and were seen as priorities in a way that the threats from crime, even organised crime, had failed to engender.

A more gradual evolution has occurred with criminal financing, but the position has eventually been adopted, step-by-step, that the subversion of financial processes for criminal processes also triggers national security responses. In the United Kingdom, an early indicator of change was the decision in 1996 to task the Security Service with ‘support of the activities of police forces and other law enforcement agencies in the prevention and detection of serious crimes’.¹⁵ By 2019, one can be sure that the transformation is complete, so UK strategic statements now confirm that organised crime and money laundering awake strong national security responses¹⁶ alongside any policing reactions.¹⁷ In short, ‘money held in the UK by those linked to organised crime and/or corruption also has the potential to represent a threat to the UK’s national security’.¹⁸

15 Security Service Act 1996, s.1.

16 HM Government, National Security Strategy and Strategic Defence and Security Review 2015: Third Annual Report (2019) paras. 1.16, 2.63–86.

17 The lead policing response is taken by the National Crime Agency: http://www.nationalcrimeagency.gov.uk/.

18 HM Government, Economic Crime Plan 2019–22 (2019) para. 8.4. A more circumspect view is offered by the House of Commons Treasury Committee, Economic Crime: Anti-Money Laundering Supervision and Sanctions Implementation (2017–19 HC 2010).

It follows that AML and CTF serve two purposes. One is the integrity of the financial sectors and assuring money flows are sound, the protection of which serves the interests of the financial institutions and their customers. In this purpose, the state should act as a facilitator but should not add burdens or fundamentally compromise the ethos of the relationships of trust which are essential both to the financial objectives of customers and the financial profits of the institutions. Clearly, those ideals are no longer predominant, with added costs for all and even summary ejections by sanctions or de-banking now imposed. The second purpose is the upholding of national security, and here the intervention of intelligence agencies will be associated with state dominance and secretive processes. These purposes and methods can easily be antithetical to the stated private-dominated purposes. How these purposes are to coexist is one of the key new problems of the 21st century.

The second controversy relates to legitimacy. The role of the FATF has been emphasised up to this point, as if there is no question about this international instrument of choice. But by what authority has the FATF assumed this position of power? The answer lies in the power of its backers – the top table is filled by 37 member state jurisdictions plus two regional bodies (the European Commission and the Gulf Cooperation Council) which comprise predominantly western powers and their allies (though China and Russia cannot be disregarded).¹⁹ This private club of the rich seems to care little for international dialogue or even international law values, as evidenced by the admission of Saudi Arabia as a full member²⁰ just two days after the eviscerating report of the special rapporteur on extrajudicial, summary, or arbitrary executions about the killing of Jamal Khashoggi placed responsibility on that regime.²¹ In response, the position of the UN appears meek. Rather than raising objections about more legitimate modes of international discourse and law making being circumvented,²² it has instead adopted the surprising stance of treating the FATF as if it were commissioned as a branch of the UN. Thus, by UNSCR 2462, the Security Council

[stresses] the essential role of the Financial Action Task Force (FATF) in setting global standards for preventing and combatting money laundering, terrorist financing and proliferation financing and its Global Network of FATF-style regional bodies (FSRBs) and taking note with appreciation of the ‘FATF Consolidated Strategy on Combating Terrorist Financing’ and its operational plan [and] …

strongly urges all States to implement the comprehensive international standards embodied in the r...