In assessing the efficacy of Australia’s terrorism financing laws, the INSLM has considered the value of gathering financial information and investigating the financial activity of those suspected of involvement in terrorism, including the financing of terrorist acts and terrorist organisations.366 The value of financial information in counter-terrorist investigations (by both
police and security agencies) cannot be overstated:-
Financial information has come to be one of the most powerful investigative and intelligence tools available. As money moves through the financial system, it leaves a verifiable trail that can in many cases indicate illicit activity, identify those responsible, and locate the proceeds of criminality that can then be recovered.367
Financial information has been used as part of the evidential case against all individuals prosecuted for terrorism offences in Australia, even where there was no terrorism
financing offence charged. This is because all acts of terrorism cost money, and all terrorist
365 Arabinda Acharya, Targeting Terrorist Financing: International cooperation and new régimes (2009) pp121-122.
366 See discussion at VI.1 above on the use of financial information in the Breivik case.
organisations, even small informal ones such as those implicated in domestic plots to date, need money to function and exist as an organisation.
As well as its evidentiary value, financial information has a key intelligence rôle. Terrorism financing activity not only forms the basis of terrorism financing investigations but the intelligence gained from financial information assists law enforcement and security agencies to detect plans to commit terrorist acts, including conspirational planning.368 Financial
information is “relatively unambiguous, can be processed easily using technology, and easily accessed with little intrusion on the provider…[e]xploiting the ‘financial footprint’ left behind by terrorists often gives investigators details of how, when and where terrorist attacks were conceived, planned, and executed”. 369
Financial information provides police and security agencies with an understanding of a) the infrastructure of terrorist organisations (how they raise, receive, disburse and spend their funds) and b) the warning signs of terrorist activity in preparation. Financial information also enables police and security agencies to a) identify those involved in conspiracies to commit terrorist acts and b) identify and freeze terrorist funds and recover terrorist assets (such as chemical precursors for explosive devices or ammunition purchased for planned terrorist attacks).
In order to understand and evaluate the threats from activities being investigated in relation to politically motivated violence, including terrorism, ASIO attempts to understand the intent and capability of individuals and groups. A strong intent to conduct an act of terrorism, and an existing or readily obtained capability, represents a significant threat. ASIO prioritizes matters with a funding element when there is a nexus to terrorist attacks, attack planning, capability development or facilitation. As ASIO submitted to the INSLM:-
Terrorism financing is one element of our investigative activity in determining whether an individual or group pose a threat to security. In some cases, the provision of funds to a terrorist group, or the gathering of funds by suspected terrorists in Australia could assist ASIO in determining whether those individuals or groups have the capacity to
368 The United States Government has acknowledged the rôle of intelligence in proving terrorism financing activity
in prosecutions for offences against the US material support laws (which make it a criminal offence to knowingly provide, or attempt to provide, “material support or resources” to terrorist organisations). The United States reported to the UN Security Council that “these cases have relied on foreign intelligence and counterintelligence developed by the U.S. intelligence community [and shared with law enforcement for the purposes of investigation and prosecution]”. Report of the Government of the United States called for under Security Council resolution 1455 (2003), 17 April 2003 (S/AC/.37/2003/(1455)/26) p5
pose a threat. In other instances, an individual providing or gathering funds might be an indicator that the individual has a more general terrorist intent. It is the potential for this intent to result in violent acts that would be the critical focus for ASIO.370
The 9/11 Commission report recognized the difficulty of establishing a comprehensive asset freezing régime to counter terrorism, and of prosecuting individuals for financing terrorism. The 9/11 Commission reported that experience had shown:-
Even if the intelligence community might “link” someone to a terrorist group through acquaintances or communications, the task of tracing the money from that individual to the terrorist group, or otherwise showing complicity, was far more difficult. It was harder still to do so without disclosing secrets.371
The 9/11 Commission Report recognized that these difficulties meant that little money is actually frozen, and where money is frozen “worldwide asset freezes have not been adequately enforced and have been easily circumvented, often within weeks, by simple methods”.372 While
the Commission described trying to starve the terrorists of money as being “like trying to catch one kind of fish by draining the ocean”, the Committee recommended that:-
Vigorous efforts to track terrorist financing remain front and center in U.S. counterterrorism efforts. The Government has recognized that information about terrorist money helps us to understand their networks, search them out, and disrupt their operations.373
Investigations of those suspected of involvement in terrorism, including the finances of those individuals and groups, is rightly a high priority for Australia’s law enforcement and security
370 ASIO Submission to the INSLM’s Review of Terrorism Financing Legislation
371 Final Report of the National Commission on Terrorist Attacks upon the United States, National Commission
on Terrorist Attacks upon the United States, p382. The difficulty of protecting national security information has been raised by States in reporting to the UN Security Council on their compliance with the terrorist asset freezing requirements of 1267. The UK Government reported to the UN Security Council that the UK will only submit names of persons and entities associated with Al-Qaida or the Taliban who are not already included on the 1267 List “when able to do so without compromising ongoing investigations or prosecutions”. The UK also reported that it would only provide additional information on those persons already on the list if “able to do so”. The difficulties faced by the UK in proposing names for inclusion on the 1267 List are even more acute in relation to the UK’s domestic terrorist asset freezing regime implementing 1373 (TAFA 2010). Report of the United Kingdom pursuant to paragraphs 6 and 12 of
resolution 1455 (2003) (April 17, 2003), paras 5-7 (S/AC.37/2003/(1455)/19)
372 Final Report of the National Commission on Terrorist Attacks upon the United States, National Commission on
Terrorist Attacks upon the United States, p382. While global awareness and implementation of counter terrorism financing measures by States has increased since the writing of this Report, there is nothing to suggest any of these difficulties have been (or could be) overcome.
373 Final Report of the National Commission on Terrorist Attacks upon the United States, National Commission on
agencies. Terrorism financing information provides valuable intelligence, for both law enforcement and security agencies, on how terrorists and terrorist organisations raise, move and spend their money. This information assists in identifying preparations for terrorist acts, enabling prevention and where possible, prosecution.
The Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Cth) (“AML/CTF Act”) sets out Australia’s anti-money laundering and counter-terrorism financing framework and is aimed at protecting Australia’s financial system from criminal exploitation, with mandatory reporting obligations enabling the collection of financial intelligence on terrorism financing.374
The AML/CTF Act requires reporting entities375 to provide AUSTRAC with Suspicious
Matter Reports. These require financial institutions to report matters identified by them as suspicious for terrorism financing purposes. Reporting entities must also provide AUSTRAC with Threshold Transaction Reports where a transaction involves the transfer of AUD$10,000 or more in currency. Reporting entities must also provide AUSTRAC with International Funds Transfer Instruction reports where the entity sends or receives an instruction to or from a foreign country for a transfer of money or property - either electronically or under a remittance arrangement.376
While the AML/CTF Act represents a commendable effort to trace the movement of funds and assets for counter-terrorism financing purposes, the lack of identifiable models for terrorism financing activity presents a major challenge for AUSTRAC in producing financial intelligence on terrorism financing and for those conducting security or police investigations into terrorism financing. It also presents a major challenge for financial institutions exercising due diligence to identify activity that is suspicious for terrorism financing reasons. As ASIO submitted to the INSLM:-
In examples of attack planning in Australia and worldwide, ASIO has seen funds raised through a range of legitimate and illegitimate means. There is no set model for this activity and the reasons for choosing a particular method may be simply familiarity
374 The Criminal Code contains offences for money laundering (dealing with proceeds of crime)
375 A “reporting entity” is an individual, company or other entity that provides a “designated service” as defined
in the AML/CTF Act. Reporting entities include banks, non-bank financial services, remittance (money transfer) services.
376 Reporting entities are required to report such transfers regardless of whether they are part of the established
banking system and send or receive instructions electronically, or they are remitting money or property under a “designated remittance arrangement”.
with that method of transfer, or be entirely dependent on what is available to them in the country to where the money is being sent.377
As noted above at VI.8, there was nothing about the financial activity of any members of the group responsible for the 7th July bombing of the London transport system that would have led
to the suspicion that they were involved in financing terrorism. The same can be said of those involved in Australia’s foiled terrorist plots. It is unlikely that terrorist plots will be uncovered by financial reporting/finances alone. It will be a combination of the investigation of persons of interest along with their finances that will provide police and intelligence agencies with the information they need to both prevent the plot and prosecute those involved.
While finances, and more specifically purchases, may provide vital information or in some cases evidence of terrorist activity, it is unlikely that financial reporting alone, or anything about a person’s finances without further information, will raise a suspicion of terrorist financing. This is particularly so in relation to self-funded plots (which is the method by which terrorists have financed their domestic plots in Australia and in relation to the London bombing). In these cases, there was nothing about the finances alone that showed any link to possible terrorist activities.