Even Before 9/11, US and European Views on the Nature and Impact of Terrorism Suffered

Speaking the Same Language? Transatlanticism, Terrorist Financing and the Role of Regional Regimes.

A preliminary research agenda.

Pathways to Legitimacy? The Future of Global and Regional Governance

CSGR/GARNET Conference

Celebrating the 10th Anniversary of CSGR and the 2nd Annual Meeting of GARNET

17 – 19 September 2007

Scarman House, University of Warwick

Michelle Frasher-Rae, Ph.D.

Visiting Assistant Professor

Ohio University

205 Bentley Annex

Athens, Ohio 45701

Even before 9/11, US and European views on the nature and impact of terrorism suffered from incongruity. For Americans, terrorism has traditionally been an issue of national security, which necessitated military action. Generally, on the European side, it has been a question of criminality with a focus on national law enforcement and the judiciary. These diverging viewpoints produced a variety of counter-terrorism (CT) approaches, most of which involved national endeavors and bilateral arrangements in the rare cases when transnational cooperation was deemed necessary. Because of these distinctive approaches, constructing a cohesive transatlantic agenda has been nearly impossible after the events of 9/11 and the emergence of transnational terrorism.

However, there is common ground on the issue of counter-terrorist finance (CTF), stemming from long-held mutual beliefs in tackling anti-money laundering (AML). Transatlantic coordination began with the illicit economy and organized crime, regarding them as threats to financial solvency with some consequences to security. As terrorist groups became more transnational, adapting both illicit and legal methods of fundraising, the US and Europe expanded their definitions to specify these practices as threats to national security. The symmetry of language between finance and terrorism makes it a strong platform for a coordinated anti-terrorism effort. As finance has always been a transnational affair, it is an ideal avenue to confront the rise of terrorist networks.

Terrorism’s transnational scope necessitates an international approach, but a multitude of legal and procedural barriers make a global standard against terrorist group funding unfeasible. While the US uses international organizations and consultative groups like the G8 to set global agendas, regional financial regimes are better suited to implement policies using these global principles as guidelines for their members, enabling international aims to permeate national barriers. Regional regimes, like the EU, are familiar with national weaknesses and strengths and can tailor procedures to their unique circumstances, making them more effective to combat terrorist financing than international organizations.

This preliminary study explores transatlantic efforts to combat the illicit economy and argues that transatlantic CTF overcomes differences between US-EU viewpoints on how to combat terrorism. Then, it briefly considers the EU as an example of how a regional organization can be a viable tool to confront terrorist financing in the transatlantic alliance. Finally, it poses questions for further areas of research and how regimes like the ASEAN+3, and the emerging Islamic banking sector, could develop as networks to detect and curb terrorist resources across the globe.

Language Barriers: Why it matters. Counter Terrorism vs. Anti-Terrorism Finance

Counter-terrorism policies have been shaped by different encounters with terrorism, and it is useful to present a short history of how these experiences created the chasm in US-EU counter-terrorism thinking that has been so evident in the post 9/11 world.

Pre-9/11

The US viewpoint was heavily shaped by Cold War philosophies with a no blackmail, no concessions attitude. The emphasis was on state-sponsored terrorism and to halt the USSR’s influence in the world, especially in the unstable Middle East, as many Arab nations turned to the Soviets for arms and financial support against the US supported states. American presidents made it public that no administration was willing to negotiate with terrorist organizations. Also, the US tried to alienate states that sponsored terrorism from the world through the UN to impose sanctions, or with force. The air attack on Libya in response to Khadafy’s involvement in the Pan Am 103 explosion and America’s refusal to recognize the PLO, were examples of these policies.[1]

While terrorism wore the face of foreign policy in the US – something that happens elsewhere – European leaders did not have that option. Terrorism was a day-to-day issue for governments and populations alike with the IRA in the UK, the Red Army Faction in West Germany, and Algerian separatists in France. While each tackled the problem differently, the general consensus was that these groups utilized violence for political agendas, and this necessitated criminal investigation. Thus, law enforcement and the judiciary held the strongest positions in CT with the military taking a non-existent or a limited role (with the exception of France, which has been more willing to use force). Similarly, because terrorism was a national issue, Europeans approached transatlantic cooperation on a bilateral basis, and only when warranted by particular events. Irish-Americans sympathetic to the IRA with financial contributions were one such occasion.[2]

The same went for CT cooperation among Europeans themselves. Each nation chose its own courses of action, which resulted in a mish-mash of policies within Europe. Even as the European Union integrated further, the membership relied on national methods. Still, there were some efforts to share information and some coordination. In the late 1970s, the TREVI system (Terrorisme, Radicalism, Extremisme, Violence Internationale), PWGOT (Police Working Group on Terrorism) sought to create an independent multilateral forum for members to consult outside the EC’s structure. These measures were binding in spirit rather than law however, and the members were free to conduct their own policies, seeking assistance only when they deemed it necessary. Europeans also tried to set some rudimentary guidelines for the region. The Dublin Agreement 1977 sought to better implement the European Convention for the Suppression of Terrorism (ECST), which broadly summarized the conditions in which individuals might be considered for extradition when involved in, among other things, “an offence involving the use of a bomb, grenade, rocket, automatic firearm or letter or parcel bomb if this use endangers persons.” (Council of Europe 1977) But Doron Zimmermann argued that it was the Community’s border surveillance in the Schengen Agreement that eventually became a database (the Schengen Information System, or SIS) of all “potentially dangerous persons or goods” passing through the EC was of the greatest importance for European pre- 9/11 CT policies. These measures were limited though to national discretion because there were no EC judicial structures to support it.

The Third Pillar of integration was to build upon the consultative efforts of TREVI and SIS with an attempt to construct an EU Judicial and Home Affairs division. Much of Europe’s CT fell under the Third Pillar with an emphasis on law enforcement cooperation and information sharing. Again, the stress was on terrorism as a criminal activity, and the communiqués did not explicitly label it as a matter of national security. But Zimmerman pointed out that it was an issue of internal security, and believed that since Community agreements stipulated that only “apolitical” criminals could be extradited was proof that the membership was guarded against external interference in its domestic counter-terrorism procedures. The Community might have been stonewalling a concerted policy and definition of terrorism because it would infringe on national views of security, and none of these measures created institutions with power, or a cohesive policy, against terrorist activities. Even so, Zimmerman points out that the mere mention of terrorism signaled that the EC believed it was an issue that affected the region as a whole. The notion that combating terrorism in Europe under criminal auspices kept EC structures out of individual members’ CT strategies as well as transatlantic ties at bay. In short, a common CT plan for the EU has not been forthcoming, and so it is not surprising that a common transatlantic view has been difficult.[3]

Post 9/11

The viewpoints were influenced by what each side felt were the causes of terrorist activities too. For the US, terrorism was an external problem, sponsored by other state leaders. Administrations worried how these activities would affect US interests abroad and tip the balance of power towards communism or undercut American influence. Europe dealt with terrorism where their governments were the targets of domestic groups trying to change the political landscape. And the emphasis on criminality and internal security meant that Europeans were more apt to see terrorist motivations as more than political problems. Terrorism was a response to economic and social factors as well.

The propensity to take a multi-faceted approach did not necessarily grant the EU an edge over the US in post 9/11 CT policy. With the exception of France, most European nations continued to see terrorist groups as nationally based, and did not immediately recognize how these groups had expanded their activities and methods across borders. The US might have been able to see the transnational scope of terrorism, but did not and could not act upon it with its mindset of military intervention. Terrorism had developed beyond the control or concern of one state to the international and transnational realm, which made traditional methods of CT ineffective. For transatlantic cooperation to work, the US-EU viewpoints on CT and the nature of terrorism had to be reconciled. Thus, by 9/11, achieving a transatlantic CT policy was already sabotaged by these differences of opinion and experience.

During the initial phases of the post-9/11 diplomatic frenzy, transatlantic utterances were well-meaning and united. NATO’s Article 5 was enacted for the first time in its history and pledges of solidarity and mutual support against the scourges of terrorism were everywhere. For a short time, the EU feel into line with US thinking on terrorism as a national security issue, most notably endorsing and participating in military action in Afghanistan against the Taliban government. But the experiences of the past soon shaped the perceptions of the present threat and transatlantic consensus was not so easily attainable. The US invasion of Iraq proved to be the most damaging to relations and counter-terrorism cooperation. Most Europeans, most notably France and Germany, vehemently rejected the Bush Administration linking Iraq to the war on terror, and the subsequent invasion alienated much of the EU. [4] Meanwhile differences within the EU have made a common policy largely ineffectual too. Despite the “EU Plan of Action on Combating Terrorism” in 2001, later revised in 2004, squabbles over intelligence sharing, border control, and weak powers for the EU CT coordinator, Eurojust and Europol.[5]

Finance: Why it’s different.

Finance is one area where the language and actions have been progressing at the same pace on both sides of the Atlantic. This is due to four conditions that set the financial system apart, and make it accommodating to both US and EU positions. First, finance is by its nature global and transnational. The interdependence of banking, investment, and economic policy in an increasingly globalized world dictate thinking that transcends state borders, which leads to an international conception of money and the policies that govern it. Economic, monetary, and trade policy-making involves actors and factors including and beyond national interests, and those involved understand that decisions have repercussions for others and the system on the whole. Leaders have been forced to confront the realities of the interconnected economy and its implications on state policy, most notably since the 1960s and 1970s when capital flows began to infringe on all aspects of economic and monetary affairs. (Frasher-Rae forthcoming) For this reason, finance is one area where its participants cannot afford to cling to a state-centric view because national and systemic success depends on cooperation and compromise.

Second, the illicit economy, whether it has been drug cartels, organized crime, human trafficking, money-laundering, or any number of other black market ventures, has developed alongside legal enterprises, exploiting the weaknesses and strengths of the system. Just as an understanding of how the international, regional and national systems operate vis-à-vis each other has been essential to the legitimate economy, it is essential to understand how criminal organizations use it to fund their operations, and learn how to counter them.

States and international organizations recognized that abuses were a detriment to the credibility of the entire system and were a threat to economies and individual wealth long before 9/11. For these reasons, the financial community acknowledged that concerted efforts were needed to counter the illicit economy for economic prosperity and security.

The connection between economics and security was important because in the era of globalized financial crime, finance has already acknowledged and acted upon a connection that CT policies have not. As Moisés NaÍm observed, “International terrorism as we are now coming to understand it follows in the footsteps of illicit trade, employing the same tools and conveniences of the new global economy…” Terrorism had adapted the means of the illicit economy and like organized crime, will use this in combination with new technologies such as ATMs and e-banking as needed. Their ability to make money and move it effectively in their operations lends them the capability to carry out their goals. Thus, finance is unavoidably linked to issues of national security, and can be a valuable tool to garner information about individuals and groups who engage in terrorist activities. [6]

Third, the financial community has a well established set of norms and consultative bodies at the international and regional levels in order to manage legitimate monetary, economic, and trade transactions. GATT, the WTO, the IMF, and the World Bank work at the global scale and in concert with (or at the direction of) groups like the G7/8, OSCE, and the EU. And significantly, since 1989, the transatlantic community has built upon these existing frameworks and groups to target anti-money laundering (AML) and other abuses to the system through the FATF. Since terrorist groups had adopted and adapted the illicit economy to their operations, the financial community has been able to expand its mandate to include this threat. Therefore, the foundations to support a global effort on anti-terrorist group funding already exist.

Lastly, policy-making in finance is an intimate circle of players at all levels of the international system. There is a small club of officials who conduct the business of finance and they are familiar and connected with the system and its national institutions. Frequently, those in government and private sector consulting positions will cross over to international financial offices and then back to the private investment sectors. Also, groups of experts participate in the meetings of other institutions and organizations, facilitating even more communication across borders and regimes. Members of the FATF, EU, UN, OECD, World Bank and IMF commonly attend each other’s summits and meetings. The familiarity with their colleagues and operations offers an opportunity for better coordination and understanding.