Curbing funding of global terrorism: The role of the financial sector

Being text of a paper presented by Godwin Emiefele Governor, Central Bank of Nigeria, at a 4-day International Seminar on “Asymmetry Security Challenges in the 21st Century”, at the Nigerian Army Resource Centre, Abuja, on October 16, 2017.
Introduction
It is my pleasure to be invited to present the paper on “Curbing the Funding of Global Terrorism: The Role of the Financial Sector”organized by the Nigerian Army Resource Center (NARC).
May I start by acknowledging the efforts of the NARC in organizing this international seminar, which among other objectives is to build capacity towards a better understanding and managing asymmetric security challenges amongst the participants. It is my belief that the seminar would provide the participants from sixteen different countries and diverse background, a unique opportunity to interact and exchange ideas on a number of issues that are of common concern.
The Central Bank of Nigeria is appreciative of the role and gallantry of the officers and men of the Nigerian Armed Forces in combating terrorism in the country.
Conflicts and threats continue to be a dynamic challenge facing every nation state, hence the existence of security apparatus to contain and prevent them from spiraling out of control. The cold-war era was characterized by the threat symmetrical military super-powers posed to world peace and stability. However, this has since changed with the end of the cold-war and the emergence of asymmetric threats by extremist and dissident groups. This development has elevated terrorism as a vehicle for settling ideological and political differences.
Terrorism is a global phenomenon that has far reaching implications to the security of every nation. Terrorism intentionally and indiscriminately creates violence by instilling fear in order to achieve a political, religious or ideological aim. It is violence against peacetime targets or in war, against non-combatants.
For terrorists and terrorist organisations to carry out their activities and achieve their goals, they require funding. Invariably, finance is the heartbeat of terrorism and a key strategy to curbing terrorism is to obstruct the flow of funds to terrorists and create an enabling environment for law enforcement agencies to trail the flow of funds.
It was in deep concern of the worldwide escalation of acts of terrorism in all its forms and manifestations that the United Nations designed the Terrorist Financing Convention (formally, the International Convention for the Suppression of the Financing of Terrorism) 1999, which became effective in April 2002. The UN Terrorist financing Convention is designed to criminalize acts of financing terrorism.
To elucidate the concept of terrorism financing, the United Nations Counter Terrorism Implementation Task Force, clarified that terrorism financing incorporates the distinct activities of fund-raising, storing and concealing funds, using funds to sustain terrorist organizations and infrastructure, and transferring funds to support or carry out specific terrorist attacks. Funds used to support terrorism may be generated through legal or illegal means. Accordingly, legitimate humanitarian or business organizations may be used unwittingly or knowingly as a channel for financial or other logistical support to terrorism.
It was implicit therefore, that money laundering, beyond conferring legitimacy on illicit sources of funds, was a thriving vehicle in promoting global terrorism.
The role financial sector plays in curbing the funding of global terrorism is better understood when global efforts at curbing the funding of terrorism are put in perspective.

 

2.1 Global efforts
The United Nations General Assembly, as part of its efforts towards combating terrorism and terrorist financing, adopted the Global Counter-Terrorism Strategy on 8 September 2006. The strategy is a unique global instrument to enhance national, regional and international efforts to counter terrorism and it is reviewed every 2 years by the UN Secretary-General. The Counter Terrorism Implementation Task Force (CTITF) is mandated to strengthen coordination of counter terrorism efforts of the UN system and ensures that the UN is attuned to the needs of Member States.
The Financial Action Task Force (FATF) is the global standard-setter for measures at combating money laundering, terrorist financing, and (most recently) the financing of proliferation of weapons of mass destruction. The FATF was established by the G7 Nations in 1989 to develop policies to combat money laundering. The Task Force developed 40 Recommendations as minimum standards in combating money laundering.
Following the September 2001 terrorist attacks in the United States of America, the purpose of the FATF was expanded to cover terrorism financing thus the FATF, in October 2001, issued 8 Special Recommendations (SR I – VIII) to address terrorist financing and 1 Special Recommendation targeted specifically at nonprofit organizations. The 40+9 FATF Recommendations, imperatively, became the minimum standards that countries were required to implement in combating money laundering and terrorist financing (ML/TF). The FATF monitors countries’ progress in implementing its Recommendations through peer review mechanism referred to as “Mutual Evaluation Process”.
The FATF mandates are carried out at regional levels by FATF-Styled Regional bodies (FSRB) such as the Inter-governmental Action Group against Money laundering in West Africa (GIABA). The core functions of GIABA include the conduct and follow-up of Mutual Evaluation of ECOWAS member countries; typologies and research studies and provision of technical assistance to member countries. Some of the typology studies undertaken by GIABA include Terrorist Financing in West Africa (2014) and Terrorist financing in West and Central Africa (2016).
In the typology study conducted by the GIABA and Task Force in Money Laundering in Central Africa (GABAC) in 2016, it was revealed that the main sources of funds for terrorists organizations in West and Central Africa includes extortion of local communities (protection fees); sale of gold coins and jewelries; cattle rustling; bank robberies; looting and donations through Not-for-Profit organizations. Other sources of funding terrorism include drug trafficking; trafficking in persons; trafficking of other goods; migrant smuggling; piracy and cybercrime fraud. The report also revealed that the contextual factors that impact the financing of terrorism are reliance on cash and use of Money Value Transfer Services (MVTS); use of foreign currencies; porous borders; corruption and ease of bank transfers.
The typology further concluded that while financial system plays a key role in the transfer of funds, most of the funds do not necessarily pass through the banking system.
Furthermore, it would not be out of place to review the national efforts at curbing the funding of terrorism in Nigeria.

 

2.2 National efforts
Prior to the bombing at the Eagle Square, Abuja in October 2010, there was very minimal literature on the financing of terrorism in Nigeria. The Terrorism Prevention Act was promulgated in 2011 to criminalise terrorism, the financing of terrorism and related matters. Other laws and regulations enacted to enhance the nation’s efforts in combating the financing of terrorism are:
• Economic and Financial Crimes Commission (Establishment) Act 2004 which empowered the EFCC to prevent, investigate, prosecute and penalise economic and financial crimes;
• Terrorism Prevention (Freezing of International Terrorist Funds and Other Related Measures) Regulations, 2013; which was issued and gazette by the Attorney-General of the Federation; and
• Regulations issued by financial sector regulators:
• CBN AML/CFT Regulation, 2013;
• SEC AML/CFT Regulation 2013; and
• NAICOM AML/CFT Regulation, 2013.

• The National Counter-Terrorism Strategy (NACTEST) was first published in 2014 and provides an overview of the various approaches in the nation’s strategy in identifying, forestalling and implementing counter terrorism measures. It also clearly delineates responsibilities to key stakeholders based on their identified roles.
• The following six bills at various stages of the process of being passed into law at the Nigeria National Assembly, would give traction in curbing the funding of terrorism in Nigeria:
• Mutual Assistance in Criminal Matters Bill, 2015;
• Proceed of Crime Bill, 2015;
• Witness Protection Bill, 2015; and
• Nigerian Financial Intelligence Centre (Establishment) Bill, 2015;
• Money Laundering Prohibition and Protection Bill, 2015.
• Terrorism Prohibition and Prevention Bill, 2015;

To be continued next week

 

 

Leave a Reply