20041007 In Hot Pursuit of Terrorist Funds

Now to return to the question of trying to trace the funds: it is true that sometimes we may know the origin of the funds but as they work their way through the financial system the fact that they move without suspicion renders it next to impossible to track them.

This is made worse by the fact that banks may make reports of suspicious transactions to an FIU but may not discuss the position with other banks. So a transfer from Bank A to Bank B may not be suspicious but taking where it came from before Bank A and where it goes after Bank B it may become so. If one bank were to discuss the transaction with the other first it would risk being accused of tipping off and secondly it would not be protected against adverse consequences as a result of that discussion. Moreover, in many countries, such a discussion would be a criminal offence.

The fact that banks often cannot exchange intelligence greatly handicaps their ability to engage in the attempt to stem the flow of funds to future crime.

In the recent US Senate hearings into the debacle at Riggs Bank, US Regulators needed to divert attention from the fact that their supervision of the bank had been at best dismal. American regulators like to use – perhaps we should say misuse – the word “oversight” when they mean supervision.

In this case, their misuse of the word appears to be correct. They simply overlooked many signs that Riggs was rotten.

But that’s not too surprising if some of the rumours that Riggs was a CIA / FBI / any agency you can think of front. In the Senate Hearings, there has been a clear attempt to blame someone – anyone – except Riggs and its various regulators for the mess that eventually caused its implosion. And the target has been two large foreign banks which the US wants to slow down in their US growth – HSBC and Banco Santander. Riggs sought confirmation from each of the banks relating to the beneficial ownership of accounts held by those banks and, in accordance with the law in the country where the accounts were held HSBC and BS had to decline to answer the request. 7

So it is governments themselves that are, in this respect, preventing the development of information exchange between financial institutions. Several governments have, I should note, taken steps to encourage information exchange.