20041007 In Hot Pursuit of Terrorist Funds

Now to return to the issue of intelligence.

The history of banking across much of this region is that all aspects of financial services are shrouded in secrecy. This policy permeates into central banks (which are generally the regulators of the banking sector) which have a tendency to take the view that the only people who should know about Bank policy and the regulatory regime are those that are regulated.

I argue that this is both fundamentally lacking in transparency but also that it is counter-productive.

Governments and regulators combine to tell financial institutions that they should search their customer bases for those that are, for some reason, blocked persons or that are, for different reasons, politically connected. Yet the information that governments and regulators provide to those they regulate – and to those that support those regulated entities – is closely held.

So some regulators – and I am specifically not naming anyone and as we work globally no one should assume that I am referring to any regulator in this region – notify banks of those with whom dealings are suspected but do not make that information public.

So lists of blocked persons are available only to regulated persons – one regulator expressly told a researcher for our name checking service that the list was secret; the dates on which counter-money laundering laws will become applicable are announced at short notice and in one case a regulator simply ignored requests from our researcher for a list of which market segments would be subject to the requirement to put in place counter-money laundering and anti-terrorist financing systems.

In relation to money laundering we have the problem of trying to keep up with the money as it moves between institutions, between assets, between jurisdictions and between different legislative regimes.

And in this context we have to remember that the criminals have the advantage of almost total mobility within their schemes. Yet enforcement agencies have the roadblocks that each country puts in place to protect the information of its citizens and customers. This is not of itself something to be criticised but it does mean that cross-border investigations stutter as formal requests are made to obtain information and all the time that the good guys are following the defined path, the bad guys are moving the money and taking steps to disguise it. And if criminal investigators have it tough, you should try doing it when you are a civil litigator.

But in relation to terrorist financing, the biggest problem we face is not the practical tracing of the money. It’s the identification of the money in the first place.

I hope that some of the issues I have addressed today will make those who draft law and regulations think. My concepts are radical but that is what a strategist is for: to raise the radical.