The War against the Financing of Terrorism
The global battle against the financing of terrorism is exceedingly complex. This article, originally published in Hebrew in the Israel Democracy Institute's online journal Parliament, highlights concerns about infringed basic rights and other related tensions. The author, Gilad Noam of the Hebrew University in Jerusalem, describes existing protocols for combating the financing of terrorism, explains when it is necessary to create new legal infrastructure, and outlines regulations of relevant international conventions. Noam ends his article with a focus on Israeli efforts to combat the financing of terrorism, comparing and contrasting Israeli legislation to international models.
The sophistication and diversity that characterize the raising of funds for terrorist organizations present practical and legal hurdles for those nations seeking to combat terrorism. Many factors make it difficult to identify the channels used for financing terrorism, including the ease with which monies are transferred internationally and the difficulty in distinguishing between funds for financing terrorism and legitimate funds. This situation has led the U.N. and other international organizations to assume a more dominant role in developing an international legal infrastructure in the battle against financing terrorism.
It is recognized that a certain degree of tension exists between the war on terror and the commitment to democratic values and human rights. At first glance, the war on the financing of terrorism would appear to utilize relatively "clean" methods. Nonetheless, it is specifically the seemingly dispassionate nature of this struggle that prompts concern over the insidious infringement of basic rights, such as the right to property, the right of privacy, freedom of occupation, and even the right to freedom from incarceration or arrest.
Currently, most of the financing for terrorism is initiated by private parties that often enjoy the indirect support of states. The money itself is derived from both illegal and legal sources. When the source is illegal (such as from the drug trade, fraud and extortion), the legal battle against it can be based on an existing legal structure.
However, when the sources of the money are themselves legal, such as non-profit charities, which form a link in the chain to terrorist organizations, or legitimate businesses, which adopt tactics of false reporting of their income in order to designate a portion thereof to terrorist organizations, it is more difficult to identify the flow of funds. In this case, it is necessary to create a special legal infrastructure for combating the financing of terrorism. However, the implementation of effective means of supervising entities which, for the most part, are conducting legal activities, raises the questions of whether the measures taken are proportional to the benefit gained and whether fundamental rights, such as the freedom of association and the freedom of religion, have been unduly compromised.
In 2002, the United Nations' International Convention for the Suppression of the Financing of Terrorism (hereinafter, the "Convention") became effective—and is currently the primary legal tool employed in the fight against the financing of terrorism. The Convention lays obligations upon states to prohibit financial institutions from accepting and transferring monies intended for terrorism and imposes a duty to report any suspicious transactions. Moreover, the signatory states undertake to cooperate on an international level in the war against the financing of terrorism. On the criminal level, the Convention determines that financing terrorism is in itself an offense, and that the use of monies to commit acts of terrorism is not a requirement for determining that a pecuniary offense has been committed. Similar to other treaties concerning terrorism, the United Nations' Convention applies solely in instances where the commission of the offense has an international dimension.
The international legal infrastructure also relies on additional sources, including the resolutions of the U.N. Security Council, as well as activities conducted by other international organizations to prevent money laundering, such as the Financial Action Task Force ("FATF").
Israel adopted the Prohibition of the Financing of Terrorism Law, 5765-2005, after it signed the Convention. Prior to that, the legal structure for fighting terrorism had been based on the 1945 Defense (Emergency) Regulations, as originally enacted during the British Mandatory of Palestine, and the Prevention of Terrorism Ordinance, 5708-1948. The law of 2005 did not revoke these two earlier laws, but rather based some of its legal arrangements on them.
In light of the issues raised with respect to the infringement of fundamental rights, the Defense Regulations have been subject to intense criticism over the years. These regulations enable taking action against the financing of terrorism, primarily by allowing the Minister of Defense to declare an "unauthorized association". They also grant the government the powers of seizure and confiscation of property and funds serving, or designated to serve, the "unauthorized association," without requiring that the party holding the funds be aware of their designation, but only proof of a link between the party and the "unauthorized association". Accordingly, this is an effective tool against entities that finance terrorism while also conducting legal activities.
The Prevention of Terrorism Ordinance was enacted shortly after Israel was established, and it is in effect as long as a state of emergency exists in Israel. It contains procedures for identifying an organization as a terrorist organization and for confiscating its property, as well as for placing its members and supporters on trial. This ordinance also defines a person who "collects funds or objects" for the benefit of the organization as a member of a terrorist organization—an offense punishable by up to five years imprisonment. "Support of a terrorist organization" is considered a lesser offense, which is punishable by up to three years imprisonment, and includes, inter alia, "a person who gives money or the equivalent of money to benefit a terrorist organization". Furthermore, the presumption is that "any property found on the site that serves the terrorist organization or its members [...] as well as any property found in the possession of, or under the control of, a member of a terrorist organization, shall be deemed to be the property of the terrorist organization, unless proven otherwise." In contrast to the Defense Regulations, the power of confiscation in this ordinance does not apply to property intended for the terrorist organization but that is not yet in its possession, and this power becomes effective through a judicial, and not an administrative, procedure.
As noted above, the Prohibition on the Financing of Terrorism Law was principally intended to govern Israel's international obligations under the Convention, and applies to offenses that are justiciable under Israeli law and under the laws of the countries in which the terrorist organization operates. The 2005 law determines that an organization may be deemed a terrorist organization even if it also conducts legitimate activities. An important addition of this law to the previous legal framework, which reflects its international nature, is the granting of authority to a committee of ministers to declare a terrorist organization and terrorist activists as such on the basis of a legal decision made outside Israel. This law also encompasses three criminal offenses of various levels of severity: a transaction made for the benefit of terrorism; an act committed using terrorist property; and a breach of duty to report a suspicious act involving terrorist property. The maximum prison terms for such offenses are ten, seven and one years, respectively. Moreover, the law provides for the confiscation of property—a topic which raises complex questions concerning the balance between human rights, including constitutional rights, such as property rights and the need to conduct an effective war on terror. It is important to note that the Prohibition on the Financing of Terrorism Law did not revoke the previous arrangements with respect to the confiscation of property pursuant to the Defense Regulations, which grant the authorities the broadest powers possible.