Advertisement

Journal of Banking Regulation

, Volume 10, Issue 4, pp 307–320 | Cite as

‘Islamophobia or an important weapon? An analysis of the US financial war on terrorism’

  • Nicholas RyderEmail author
  • Umut Turksen
Original Article

Abstract

This article considers the impact of the terrorist attacks of September 11, 2001 (9/11) on the legislative and policy response by the United States towards terrorist financing. This article is divided into three parts. Part 1 considers the alleged association between Islamic banking systems and terrorist finance. The second part of the article critically considers the ability of the US authorities to freeze the assets of organisations who are suspected of financing terrorism by virtue of Presidential Executive Order 13 224. The final part of the article considers the reporting requirements imposed by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act 2001 (USA PATRIOT Act 2001). The third part also highlights some provisions and practices that raise the spectre of racial profiling in the United States, and critiques the fairness and success of such measures imposed on particular group of persons. The objective is not to provide a comprehensive analysis of the laws and policies, but to emphasise areas that have not yet been subject to sufficient scrutiny from the perspective of success and equality of the application of the law.

References and Notes

  1. Annex to Resolution 49/60, Measures to eliminate international terrorism, 9 December 1994, 49/60.Google Scholar
  2. Article 1. para. 1 of the Convention, The United Nations (1999).Google Scholar
  3. However, it must be noted that this is not a new concept or strategy. See, for example, Rider, B. (2002) The weapons of war: The use of anti-money laundering laws against terrorist and criminal enterprises – Part I (2002). Journal of International Banking Regulation 4 (1): 13–31, at 14. A reaction to these attacks was the issuing of Executive Order 13 129, which prevented access to property and outlawed dealings with the Taliban. See Exec. Order No. 13224, 3 C.F.R. 786 (2001), reprinted in 50 USC.S. 1701 (2001).CrossRefGoogle Scholar
  4. Bantekas, I. (2003) The international law of terrorist financing. American Journal of International Law 97: 315–333, at 315.CrossRefGoogle Scholar
  5. For a detailed discussion of this issue see Chase, A. (2004) Legal mechanisms of the international community and the United States concerning the state sponsorship of terrorism. Virginia Journal of International Law 45 (1): 137–141.Google Scholar
  6. See US Department of State ‘State sponsors of terrorism’, n/d, http://www.state.gov/s/ct/c14151.htm, accessed 13 March 2009.
  7. This may attributable to the depth of shared international commitment to an effective, sustained and multilateral response to the problem of terrorism since 9/11. Within the United Nations, the Security Council was the first to react and unanimously passed resolutions 1368 (2001), 1373 (2001) and 1566 (2004) in order to prevent and suppress terrorism, while the General Assembly adopted resolution 56/1 (2001) by consensus. Arguably, along with some 19 global and regional treaties pertaining to the subject of international terrorism, there is now a more robust political and legal deterrence to counter-terrorism.Google Scholar
  8. Quenivet, N. (2005) The world after September 11: Has it really changed? The European Journal of International Law 16 (3): 561–575, at 561.CrossRefGoogle Scholar
  9. The 9/11 Commission. (2004) The 9/11 commission report – Final report of the national commission on terrorist attacks upon the United States, London: Norton, p. 170.Google Scholar
  10. The self sufficiency-of terrorist cells was also recognised by the official report on the terrorist attacks on London on the 7 July 2005. See House of Commons. (2005) Report of the official account of the – Bombings in London on 7th July 2005. London: House of Commons, p. 23.Google Scholar
  11. Winer, J. and Roule, T. (2002) Fighting terrorist finance. Survival 44 (3): 87–104, at 89.CrossRefGoogle Scholar
  12. See Ryder, N. (2007) A false sense of security? An analysis of legislative approaches to the prevention of terrorist finance in the United States of America and the United Kingdom. Journal of Business Law November, 821–850.Google Scholar
  13. Alexander, K. (2001) The international anti-money laundering regime: The role of the financial action task force. Journal of Money Laundering Control 4 (3): 231–248, at 231.CrossRefGoogle Scholar
  14. For a more detailed discussion of this see Ping, H. (2004) New trends in money laundering – From the real world to cyberspace. Journal of Money Laundering Control 8 (1): 48–55.CrossRefGoogle Scholar
  15. See, for example, Linn, C. (2005) How terrorist exploit gaps in US anti-money laundering laws to secrete plunder. Journal of Money Laundering Control 8 (3): 200–214.CrossRefGoogle Scholar
  16. Baldwin Jr., F. (2002) Money laundering countermeasures with primary focus upon terrorism and the USA patriot act 2001. Journal of Money Laundering Control 6 (2): 105–136, at 112.CrossRefGoogle Scholar
  17. For a more in depth discussion of the operation of underground banking systems see Trehan, J. (2002) Underground and parallel banking systems. Journal of Financial Crime 10 (1): 76–84.CrossRefGoogle Scholar
  18. Rider, above n 3, at p. 28.Google Scholar
  19. This system has also been referred to as the ‘hundi’ or ‘fei ch’ien banking system. See, for example, Pathak, R. (2004) The obstacles to regulating the hawala: A cultural norm or a terrorist hotbed? Fordham International Law Journal 27 (6): 2007–2061.Google Scholar
  20. Razavy, M. (2005) Hawala: An underground haven for terrorists or social phenomenon? Crime, Law and Social Change 44 (3): 277–299.CrossRefGoogle Scholar
  21. Schramm, M. and Taube, M. (2003) Evolution and institutional foundation of the Hawala financial system. International Review of Financial Analysis 12 (4): 405–420, at 407.CrossRefGoogle Scholar
  22. Pathak, above n 19, at p. 2008.Google Scholar
  23. See, for example, Waszak, D. (2004) The obstacles to suppressing radical Islamic terrorist financing case western reserve. Journal of International Law 35 (2–3): 673–710.Google Scholar
  24. For a detailed explanation of the practical workings of the hawala system see Daudi, A. (2005) The invisible bank: Regulating the hawala system in India, Pakistan and the United Arab emirates. Indiana International and Comparative Law Review 15 (3): 619–654.Google Scholar
  25. Razavy, above n 20, at p. 287.Google Scholar
  26. Ryder, above n 13, at p. 829.Google Scholar
  27. See Wheatley, J. (2005) Ancient banking, modern crimes: How Hawala secretly transfers the finances of criminals and thwarts existing laws university of Pennsylvania. Journal of International Economic Law 26 (2): 347–374.Google Scholar
  28. M. Schramm and M. Taube, above n 21, at p. 409.Google Scholar
  29. Jamwal, N. (2000) Hawala – The invisible financing system of terrorism. Strategic Analysis 26 (2): 181–198, at 182.CrossRefGoogle Scholar
  30. Jost, P. and Sandhu, K. (2000) The Hawala Remittance System and its Role in Money Laundering. Lyon, France: Interpol.Google Scholar
  31. See, for example, Wheatley, above n 29, at p. 347.Google Scholar
  32. The 9/11 Commission conclude that the funds used for these attacks were directly transferred into the bank accounts of the terrorists through the formal US banking system, not through the hawala system. See 9/11 Commission, above n 10, at pp. 170–171.Google Scholar
  33. Navias, M. (2002) Financial warfare as a response to international terrorism. The Political Quarterly 73 (1): 57–79, at 61.CrossRefGoogle Scholar
  34. Rider, above n 3, at p. 25.Google Scholar
  35. For a more detailed discussion of this see Ryder, N. (2008) The financial services authority, the reduction of financial crime and the money launderer – A game of cat and mouse. Cambridge Law Journal 67 (3): 635–653.CrossRefGoogle Scholar
  36. Winer and Roule, above n 12, at p. 88.Google Scholar
  37. S.C. Res, 1373, U.N. SCOR, 56th Sess., 4385th Mtg. Article 1(a).Google Scholar
  38. S.C. Res, 1373, U.N. SCOR, 56th Sess., 4385th Mtg. Article 1(b).Google Scholar
  39. S.C. Res, 1373, U.N. SCOR, 56th Sess., 4385th Mtg. Article 1(c).Google Scholar
  40. S.C. Res, 1373, U.N. SCOR, 56th Sess., 4385th Mtg. Article 1(5).Google Scholar
  41. Myers, J. (2003) Disrupting terrorist networks: The new US and international regime for halting terrorist finance. Law and Policy in International Business 34 (1): 17–23, at 21.Google Scholar
  42. Levitt, above n 9, at p. 6.Google Scholar
  43. For a more detailed discussion on this law see Pogue, A. (2005) If it weren’t for the flip side – Can the USA Patriot Act help the US pursue drug dealers and terrorists overseas, without overstepping constitutional boundaries at home. Cornell Journal of Law and Public Policy 14: 486–493.Google Scholar
  44. See Myers, above n 49, at p. 17.Google Scholar
  45. For a critical review of these powers see McCulloch, J. and Pickering, S. (2005) Suppressing the financing of terrorism – Proliferating state crime, eroding centure and extending no-colonialism. British Journal of Criminology 45 (4): 470–486, at 470.CrossRefGoogle Scholar
  46. Seldon, R. (2003) The executive protection: Freezing the financial assets of alleged terrorists, the constitution, and foreign participation in US financial markets. Fordham Journal of Corporate and Financial Law 8 (3): 491–552.Google Scholar
  47. OFAC enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries, terrorists and those engaged in proliferation of weapons of mass destruction.Google Scholar
  48. For a more detailed discussion of the US government's ability to classify groups as specially designated terrorist group or a foreign terrorist organisation see Crimm, N.J. (2004) High alert: The Government's war on the financing of terrorism and its implications for donors, domestic charitable organisations and global philanthropy. William and Mary Law Review 45: 1341–1449, at 1369.Google Scholar
  49. US Treasury Department. (2006) Office of Terrorism and Financial Intelligence – US Department of Treasury Fact Sheet. Washington: US Department of Treasury, p. 5.Google Scholar
  50. Waszak, above n 23, at p. 673.Google Scholar
  51. Winer and Roule, above n 12, at p. 88.Google Scholar
  52. See Navias, above n 37, at p. 59.Google Scholar
  53. Seldon, above n 56, at p. 502.Google Scholar
  54. Ibid., at 503.Google Scholar
  55. See, for example, Hardister, A. (2003) Can we buy peace on earth?: The price of freezing terrorist assets in a post-September 11 world North Carolina. Journal of International and Commercial Regulation 28: 605–661.Google Scholar
  56. Baron, B. (2005) The Treasury guidelines have had little impact overall on US international philanthropy, but they have had a chilling impact on US based Muslim charities. Pace Law Review 25: 309–317, at 315.Google Scholar
  57. Ibid., at p. 317.Google Scholar
  58. On 25 November 2008, five of the organisers of the Holy Land Foundation were convicted of providing over $12 million to Hamas. See Trahan, J. and Eiserer, T. (2008) Holy land foundation defendants guilty on all counts. Dallas Morning News, 25 November 2008, www.dallasnews.com.
  59. For an excellent discussion of this case see Nicols, G. (2008) Repercussions and recourse for specially designated terrorist organisations acquitted of materially supporting terrorism. Review of Litigation 28: 263–293.Google Scholar
  60. Ruff, K. (2006) Scared to donate: An examination of the effects of designating Muslim charities as terrorist organisations on the first amendment rights of Muslim donors New York University. Journal of Legislation and Public Policy 9: 447–502, at 449.Google Scholar
  61. Ibid., p. 465.Google Scholar
  62. Engel, M. (2004) Donating ‘blood money’: Fundraising for international terrorism by United States charities and the government's efforts to constrict the flow Cardozo. Journal of International and Comparative Law 12: 251–296, at 283.Google Scholar
  63. Ruff, above n 69, at pp. 464–471.Google Scholar
  64. The 9/11 Commission called the US approach towards Muslim charities as ‘aggressive’ and that it did have concerns about certain civil liberties. See 9/11 Commission, above n 10.Google Scholar
  65. United States Treasury Department. (2002) Contributions by the Department of the Treasury to the Financial War on Terrorism. Washington: US Treasury Department, pp. 10–11.Google Scholar
  66. Title III is also known as the International Money Laundering Abatement and Anti-terrorist Financing Act 2001.Google Scholar
  67. USA PATRIOT Act 2001, Sections 311–330.Google Scholar
  68. For a more detailed assessment and commentary about the SARs regime, see FinCEN. (1998) 1st Review of the Suspicious Activity Reporting Systems. Washington: FinCEN.Google Scholar
  69. See, generally, Adams, T. (2000) Tacking on money laundering charges to white collar crimes: What did congress intend, and what are the courts doing? Georgia State University Law Review 17 (2): 531–573.Google Scholar
  70. Baldwin Jnr, above n 17, at p. 118.Google Scholar
  71. FinCEN. (2008) The SAR Activity Review – By the Numbers. Washington: FinCEN, p. 5.Google Scholar
  72. Roberts, M. (2004) Big brother isn’t just watching you, he's also wasting your tax payer dollars: An analysis of the anti-money laundering provisions of the USA Patriot Act Rutgers. Law Review 56: 573–602, at 584.Google Scholar
  73. The US Treasury Department reported that there in 2001, there were 12.6 million currency transaction reports were filed (these are required for transactions over $10 000) and 182 000 suspicious activity reports were filed with the Treasury Department. See US Treasury Department, above n 74, at 6.Google Scholar
  74. See above n 74, at p. 82.Google Scholar
  75. Bumiller, E. and Myers, S.L. (2001) Senior administration official defend military tribunals for terrorist suspects. New York Times, 15 November, citing Vice President Dick Cheney, 14 November, www.nytimes.com.
  76. Harris, D. (2002) Racial profiling revisited: ‘Just common sense’ in the fight against terror. Criminal Justice 17 (2): 36–41.Google Scholar
  77. A number of international legal instruments (for example Article 1 of the Universal Declaration of Human Rights 1948 and Article 2(1) and 26 of the International Covenant on Civil and Political Rights 1966) and the US Constitution prohibit discrimination and require equality before the law.Google Scholar
  78. Lee, C. (2006) Constitutional cash: Are banks guilty of racial profiling in implementing the United States patriot act? Michigan Journal of Race and Law 11 (Spring): 557–604, at 562.Google Scholar
  79. Lee, above n 87, at p. 558. Similar trends can be observed in the United Kingdom. For example, in 2003/2004 Asian people were about 2.9 times more likely and black people about 3.3 times more likely, to be stopped and searched under anti-terrorism legislation than white people. After the London bombings of July 2005 this ratio increased 12-fold for Asian people. See Home Office. (2006) Statistics on Race and the Criminal Justice System – 2005. London: Home Office, p. 31.Google Scholar
  80. Lee, above n 87, at p. 564.Google Scholar
  81. See, for example, Shaw v. Reno, 509 US 630, 643–644 (1993); Edmonson v. Leesville Concrete Co., 500 US 614, 630–631 (1991).Google Scholar
  82. See Lee, above n 87, at p. 564.Google Scholar
  83. See FinCEN. (2002) The SAR Review and Activity Tips and Trends Issue 4. Washington: FinCEN.Google Scholar
  84. There were 1016 SARs that recorded $0 as the violation amount.Google Scholar
  85. Ramirez defines racial profiling as ‘the inappropriate use of race, ethnicity or national origin, rather than behaviour or individualised suspicion, to focus on an individual for additional investigation. See Ramirez, D. Hoopes, J. and Quinlan, T. (2003) Defining racial profiling in a post-September 11. World American Criminal Law Review 40: 1195–1233, at 1202–1207.Google Scholar
  86. Gross, S. and Livingston, D. (2002) Essay, racial profiling under attack. Columbia Law Review 102: 1413–1438, at 1415. The US jurisprudence also confirms this view that a prohibition of racial profiling would not obligate law enforcement agencies from investigating only members of a particular race or origin if they are seeking a specific perpetrator who has been identified as a member of that race. See, Brown v. State, 592 So. 2d 1237 (Fla. Dist. Ct. App. 1992); Commonwealth v. Mercado, 663 N.E.2d 243 (Mass. 1996) and Commonwealth v. McDonald, 740 A.2d 267 (Pa. Super. Ct. 1999).CrossRefGoogle Scholar
  87. US v. Kim, 25 F.3d 1426, 1431 n.3 (9th Cir. 1994).Google Scholar
  88. See, for example, US v. Waldon, 206 F.3d 597, 604 (6th Cir. 2000).Google Scholar
  89. The Equal Protection Clause of the Fourteenth Amendment to the US Constitution provides that ‘no State shall … deny to any person within its jurisdiction the equal protection of the laws.’ The Supreme Court in Yick Wo v. Hopkins 118 US 356, 369 (1886) has recognised that the Equal Protection Clause is applicable ‘to all persons within the territorial jurisdiction, without regard to any differences of race, of color, or of nationality’.Google Scholar
  90. See Cole, D. (2000) No Equal Justice. New York: New Press.Google Scholar
  91. Taylor, S. (2004) The skies won’t be safe until we use commonsense profiling. In: K. Darmer et al (eds.) Civil Liberties vs National Security: In a Post 9/11 World. New York: Prometheus Books.Google Scholar
  92. Harris, D. (2004) Racial profiling revisited: Just common sense in the fight against terror?. In: K. Darmer et al (eds) Civil Liberties vs National Security: In a Post 9/11 World. New York: Prometheus Books.Google Scholar
  93. See Bahdi, R. (2003) No exit: Racial profiling and Canada's war against terrorism. Osgoode Hall Law Journal 41: 231–293.Google Scholar
  94. Loving v. Virginia 388 US 1, 11 (1967).Google Scholar
  95. McLaughlin v. Florida 389 US 184, 196 (1964); Adarand Constructors, Inc v. Pena 515 US 200, 227 (1995). Similarly, in the United Kingdom, the House of Lords held that ‘unless good reason exists’, differential treatment based on race ‘are properly stigmatised as discriminatory’. See, Ghaidan v. Godin-Mendoza 2004 UKHL 30, para 9.Google Scholar
  96. Rudovsky, D. and Banks, R. (2007) Racial profiling on the war on terror. University of Pennsylvania Law Review 155: 173–184.Google Scholar
  97. Human Rights Committee, general comment no. 18: Non-discrimination (1989), para. 13; Human Rights Committee, Broeks v. The Netherlands, communication No. 172/1984 (CCPR/C/OP/2), para. 13 (1990); Belgian Linguistics Case (No. 2) (1968) 1 EHRR (European Human Rights Reports) 252, para. 10; Proposed Amendments to the Naturalization Provisions of the Constitution of Costa Rica, Advisory Opinion OC-4/84, Inter-American Court of Human Rights (Ser. A) No. 4 (19 January 1984), para. 57.Google Scholar
  98. For detailed discussion on this issue see Moeckli, D. (2008) Human Rights and Non-discrimination in the ‘War on Terror. Oxford: Oxford University Press.CrossRefGoogle Scholar
  99. Leiken, R. and Brooke, S. (2006) The quantitative analysis of terrorism and immigration: An initial exploration. Terrorism and Political Violence 18 (4): 503–521.CrossRefGoogle Scholar
  100. On the topic of construction of race before and after September 11, see Joo, T. (2002) Presumed disloyal: Executive power, judicial deference and the construction of race before and after September 11. Columbia Human Rights Law Review 34: 1–47.Google Scholar
  101. Banks, R. (2004) Racial profiling and antiterrorism efforts. Cornell Law Review 89: 1201–1217, at 1206.Google Scholar
  102. According to the lists provided by Treasury Department, the State Department, the Department of Justice, the Federal Bureau of Investigations, the UN and other allied countries there are nearly 400 000 names from 239 countries.Google Scholar
  103. Department of Justice. (2003) New terrorist screening center established: Federal government consolidates terrorist screening into single comprehensive anti-terrorist watchlist. 16 September, www.fbi.gov/pressrel/pressrel03/tscpr091603.htm, accessed 16 April 2009.
  104. FinCEN. (nd) Suspicious activity reporting guidance, http://www.fincen.gov/news_room/rp/sar_guidance.html, accessed 20 February 2009.
  105. It is difficult to determine whether race might constitute the only factor subjecting a person to SAR or whether it constitutes only one factor among a group of factors. This is because the financial institution can usually find some basis, independent of race, which might raise suspicion. For example, acting too nervous or amount of the money transfer may be used as a criterion.Google Scholar
  106. See the decision of the Bundesverfassungsgericht (the Federal Constitutional Court) of Germany in decision BVerfG, 1 BvR 518/02, 4 April 2006, http://www.bverfg.de/entscheidungen/rs20060404_1bvr051802.html, para. 28 (explaining that in the Federal State) of Nordrhein-Westfalen, 5.2 million personal data sets were collected).
  107. See, for example, Hessischer Landtag, Kleine Anfrage des Abg. Hahn (FDP) vom 10.03.2004 betreffend Ergebnisse der Rasterfahndung und Antwort des Ministers des Innern und für Sport, Drucksache 16/2042, 18 May 2004.Google Scholar
  108. Home Office. (2004) Statistics on Race and the Criminal Justice System – 2003. Home Office: London, p. 28 and Home Office, above n 89, at p. 35.Google Scholar
  109. See Lawyers Committee for Human Rights. (2003) Assessing the new normal: Liberty and security for the post-September 11 United States. United States of America: Lawyers Committee for Human Rights, p. 39.Google Scholar
  110. Rudovsky, above n 107, at p. 176. It is important to note that not all Arabs or people form the Middle East are Muslims. It is reported that only 20 per cent of Muslims are Arabs. See, Middle East Policy Council. (nd) Arab World Studies Notebook: Muslims Worldwide, www.mepc.org/public_asp/workshops/musworld.asp, accessed 10 January 2009.
  111. For a detailed analysis see Kulczycki, A. and Lobo, A. (2001) Deepening the melting pot: Arab Americans at the close of the century. Middle East Journal 55 (3): 459–473.Google Scholar
  112. Barak-Erez, D. (2007) Terrorism and profiling: Shifting the focus from criteria to effects. Cardozo Law Review 29: 1–8, On the consequence of the use of anti-terror policy solely on Arabs and Muslims see Council on American-Islamic Relations Research Center (2002). The Status of Muslim Civil Rights in the United States: Stereotypes and Civil Liberties, www.cair-net.org/civilrights2002/civilrights2002.pdfm, accessed 15 February 2009.Google Scholar
  113. For full details of el-Masri's ordeal see, Amnesty International, ‘The Rendition of Khaled el-Masri: USA/Macedonia/Germany’, 9 August 2006, AI Index: AMR 51/133/2006.Google Scholar
  114. See, for example, Cole, D. (2003) Enemy Aliens: Double Standards and Constitutional Freedoms in the War on Terrorism. London: New Press.Google Scholar
  115. Hewitt, D. (2003) Understanding Terrorism in America: From the Klan to Al Qaeda. London: Routledge, p. 93.Google Scholar
  116. Shaftoe, H., Turksen, U., Lever, J. and Williams, S. (2007) Dealing with terrorist threats through a crime prevention and community safety approach. International Journal of Crime Prevention and Community Safety 9 (4): 291–307.CrossRefGoogle Scholar
  117. Like security, ‘ethnic affinity’ is also a social construct that can change over time. Australian and Americans, for example, redefined themselves so that Asians are no longer excluded as inassimilable peoples. Similarly, many West Europeans regard East Europeans as fellow-Europeans, more acceptable as migrants than people from North Africa or Middle East. Who is or is not ‘one of us’ and can join the club is historically variable. Too many nineteenth century Americans and British, Africans and Caribbean were not ‘one of us’, and today for many Westerners, Muslims are not ‘one of us’.Google Scholar
  118. Also note that of arrests made under the UK Anti-Terrorism, Crime and Security Act 2001 in 2003, 30 per cent of the detainees are British Citizens. See Privy Counsellor Review Committee. (2003) Anti-Terrorism, Crime and Security Act 2001 Review, Report. London: House of Commons, para. 193.Google Scholar
  119. BBC News. (2007) Investigation into the latest bombings in London identified and convicted five suspects all of whom are British nationals. 1 May, http://news.bbc.co.uk/1/hi/uk/4676861.stm, accessed 21 December 2008.
  120. The UN Human Rights Council, ‘Report of the Special Rapporteur on the promotion and protection of human rights and fundamental freedoms while countering terrorism’, 29 January 2007 – A/HRC/4/26.Google Scholar
  121. US Treasury Department, above n 74, at p. 6.Google Scholar

Copyright information

© Palgrave Macmillan 2009

Authors and Affiliations

  1. 1.Commercial Law Research Unit, Bristol Law School, University of the West of England, Bristol, Frenchay CampusBristolUK

Personalised recommendations