chapter  3
28 Pages

The Financial Action Task Force

Designed to explore further the intertwined themes of risk, global governance and security outlined previously, the first empirical case study in the ‘other’ war on terror that we wish to address is the Financial Action Task Force (FATF). This particular choice, we recognise, needs some justification. Speaking of global governance arrangements, it must be said, it is the UN, and not the FATF, that first pops into the minds of most people. The world body has after all provided an indispensable legal and legitimate global platform for various counter-terrorism efforts, through its Counter-Terrorism Committee, adoption of the 2006 Global Counter-terrorism Strategy and not forgetting the global scale of financial surveillance practices embodied in powerful counter-terrorism resolutions such as UNSC1373 and UNSC1540.1 However, our predominant understanding of global governance, as stated earlier, is not one that particularly centres on the role of the UN, ‘formal’ interstate organisations or even states. Instead, we take a less formalised but broader conception of global governance to encompass the whole range of governance-related activities that might be undertaken by various actors, of which the UN is one part. It is perhaps also useful to stress here that in using the term ‘global governance’, we are not necessarily claiming that there is ‘universal’ participation or agreement. Sometimes it is simply like-minded actors getting together to confront collective shared problems, a bit like ‘coalitions of the willing’ except in the non-military sense of the word. In particular, this case study is designed to highlight two key strategic aims identified by the 2006 US National Strategy for Combating Terrorism: (1) the development of uniform counter-terrorism standards and best practices and (2) partnership with a myriad array of state and non-state actors to build capacity. We will show how the development of these two goals in the key area of terrorist financing can be understood to some extent using concepts and ideas that we have earlier operationalised from global governance literature and Beck’s thoughts on ‘cosmopolitan’ cooperation. With these strategic goals of standardssetting and capacity-building in mind, we opted for the FATF for various reasons. Not only is it a relatively informal multilevel cooperative arrangement

that carries no formal sanction under international law, it is also the premier international body dedicated to the establishment of legal and regulatory standards and policies to combat terrorist financing. It can with some justification be labelled the global counter-terrorism counterpart to the private non-governmental International Organisation for Standardisation (ISO), when it comes to standardsetting. Like the FATF, ISO standards too are voluntary and it has no legal authority to enforce implementation or legislate. Further, reflecting the multilevel nature of governance today, the FATF, as we shall see, also has overlapping partnerships with actors from the UN and regional organisations, to global banks and NGOs on the issues of capacity-building and standard-setting. With regard to standards-setting, the new global counter-terrorist financing standards developed by the FATF deploy risk-based models as a shared regulatory platform for discussion. Just as internationally recognised ISO standards are based on international consensus among the experts in the field, the FATF standards too, on the surface, seem to be providing a new consensus for governance that global governance theory suggests is crucial: there is a whiff here of Beck’s ‘risk-cosmopolitanism’ and enforced integration to avert shared risks. As for the second strategic aim of broad-based partnership and capacitybuilding, the increasing roles played by NGOs, global businesses to ordinary citizens, seem to suggest that a form of ‘institutionalised cosmopolitanism’ might possibly be developing in opening up the international system to more actors, at least when it comes to terrorist financing. Such increased activity of non-state actors has after all been a key theme of recent developments in global governance literature. Additionally, as will be shown, Beck would probably recognise the ‘cosmopolitan realism’ of transnational cooperative states working in their ‘enlightened self-interest’ as they drive the evolution and adaptation of the FATF from its anti-money laundering (AML) origins to counter-terrorist finance (CTF). However, on deeper critical reflection, several issues emerge that undercut the supposed ‘cosmopolitan-ness’ (in Beck’s narrow sense of the word) of global governance arrangements in the case of the FATF. Beck’s conceptualisation is insufficient to capture adequately the continuing realities of different risk perceptions and power differentials that shape the ‘other’ war on terror, incidentally just as it does the conventional war on terror. The ‘constructivist’ nature of the terrorist financing risk highlights how the governance practices of this ‘other’ war on terror not only seek to manage risks but in many ways themselves shape the kinds of risks that are believed to be out there, in turn creating the very categories of riskiness that then feed back into the global risk governance system. There is no way one can escape the fundamentally subjective constructed nature of risk. This is compounded by underlying power relationships that influence the creation, propagation and acceptance of risk-based global regulations against terrorist financing: it would be naive to assume that acceptance of ‘risk-cosmopolitanism’ is either uniform, automatic, voluntary or without cost. Instead, it is deeply political. Many so-called ‘partners’ do not even agree the risk exists or share the same concern with terrorist financing risks, and yet

feel compelled to go along for reasons we shall discuss: most of which are unrelated to the supposed ‘cosmopolitan’ integrative aspect of risk. If that is the case, it raises real questions about whether it is ‘cosmopolitanism’ or ‘power’ that brings agreement. The implementation of these global norms in practice also has the ability to affect not just state legislation but also individual day-to-day activities as well. It highlights several implications for surveillance, privacy, human rights and civil liberties, not least the degree of decision-making power granted to democratically unaccountable mid-level bureaucrats routinely charged with assessing risk profiles. Finally, we assess the practical implications of how the emerging global structure of cooperation might manage risk. The FATF standards work, for instance, by reducing vulnerabilities within the global financial infrastructure, increasing the barriers to success and reshaping terrorists’ operating environments in the process. However, terrorists have proven extremely adaptable and agile in tweaking their financial activities in response to regulatory attempts. Very clearly, the terrorist financing risk constantly evolves, just like all risks: the ‘boomerang effect’ simply means any risk management attempt must bear in mind how it might generate new risks or influence the morphing of that original risk it set out to regulate in the first place. This chapter therefore first clarifies the relationship between terrorist financing, global governance, risk and security. It then examines the rationale and justifications derived from a risk-based approach that underpins various FATF initiatives to stem global terrorist financing, before turning to a more critical evaluation of whether these can truly be seen as ‘cosmopolitan’ in nature. It then concludes with a discussion of the ways in which these global cooperative attempts can curtail terrorist financing risks in practice, and the problems that have arisen and in turn have to be managed.