Panel 3: Security, Terrorism, and Justice Issues in a Changing World Tuesday November 15 (1:00- 2:15) 12 th Symposium on Development and Social Transformation

Panel 3: Security, Terrorism, and Justice Issues in a Changing World

Tuesday November 15 (1:00- 2:15)

12th Symposium on

Development and Social Transformation

The United Nations Security Council’s Post September 11 Response to Terrorism

Veronica Reeves


12th Symposium on


Resolution 1373

passed September 28, 2001

binding for all member-states

focused on freezing terrorist assets

created the Counter-terrorism Committee

The Counter-terrorism Committee (CTC)

first-of-its kind group

made up Security Council members

monitors implementation of Resolution 1373

CTC Successes

received reports from all 192 states within one year

has provided assistance to states

energized IOs like the EU and IMF

Future Challenges

declining momentum as time passes

tension between CTC and UN Secretariat

lack of enthusiasm from United States

Recommendations

continue working with states to identify sources of terrorist financing

develop measures requiring states to close-off porous borders

explore terrorism-drug link more thoroughly

continue working on definition of ‘terrorism’ (UN as a whole)

Money Laundering: An Indian Perspective vis-à-vis the USA

Sanjiv Srivastava


12th Symposium on


Money Laundering: Definition

“Any act or attempted act to disguise the source of money or assets derived from criminal activity” – United Nations

Hide & DisguiseTrue origin of the criminal

proceeds.To derive the profits on

continuing basis from criminal activity.

To delete the trail of criminal origin of money

Predicate Offences•Drug trafficking•Counterfeiting•Smuggling •Theft•Embezzlement•Racketeering•Tax evasion•Kidnapping•Illegal arms sales •Bribery•Illegal trade

Stages in Money Laundering

Placement

Layering

Integration

Economic Impacts

Unpredictable flow in and out of funds from the jurisdiction.

Improper assessment of the present and future incomes.

Negative Co-relation with GDP (IMF study)

Encourages Tax evasion and Corruption.

Corrupts and brings disrepute to Banks and Financial Institutions.

Money Laundering Estimates

‘…Global money laundering has been estimated by the IMF as the equivalent of between 2 and 5 per cent of world output which could amount to $500 billion a year. Such an estimate applied to the UK would imply money laundering of £18-45 billion annually. It would be unwise to place great reliance on any of these estimates but it is undeniable that money laundering involves huge sums of money and that, as long as there are criminal proceeds there is going to be money laundering…’ HM Treasury Money Laundering Strategy Policy Document June 2003

FATF 500b -1.5 trillion

IMF 2-5% World GDP

KPMG 500b- 1 trillion

International EffortThe Vienna Conventinon-1988

Financial Acton Task Force-1989 made 40 recommendations for counter money laundering regime in 1990, these recommendations were thoroughly revised in 2003

Basle Committee Statement of Principles-1988 has published best practice base standards for customer identification, know your customer (KYC) activity, and corporate governance.

European Union Directive-1991 & EU Second Money Laundering Directive provides a specific focus and sets minimum standards for European Banks.

Wolfsberg Principles for Private Banking

IOSCO-1992

The International Monetary Fund and the World Bank have incorporated AML issues into their country assessments. They provide technical assistance to member countries to develop counter money laundering regime.

Legislation USA

Source: Bureau of Justice Statistics Special Report on Money Laundering Offenders 1994-2001 by Mark Motivans, Ph.D. BJS Statistician

Anti Money laundering Legislation

Criminalization of Laundering as per Vienna Convention.Determining Predicate OffencesEstablishing Of a FIU or other mechanism for exchange of information with other jurisdictionsReporting, Identification, Recording, Verification

of Transactions Etc.Civil &Criminal LiabilitiesCo-ordination Mechanism between various agencies.

Analysis & ExperiencesUS Counter-Money Laundering Legislation "Virtually Dead", 14 September 2000: "I

am glad that the bill appears headed for defeat," Sen. Paul stated. "My office opposed the earlier version of this very dangerous legislation, and we will generate massive public opposition to any further attempts by the federal government to invade private banking records”

US Attorney-General Pitches In On Money-Laundering, 14 August 2001: ‘Efforts to kick-start an anti-money laundering initiative follow embarrassing revelations that US banks have been used to launder billions of dollars from drug trafficking, fraud, and organised crime activities. Senator Levin estimated that over $500 billion was being laundered through US financial institutions each year, and called the existing anti-money laundering laws 'out-of-date and inadequate'.

US Senate Banking Committee Approves Money Laundering Law, 08 October 2001: ‘On Friday the US Senate Banking Committee unanimously approved broad legislation to combat money laundering that would require banks and other financial institutions to make a serious effort to determine the source of deposits from foreign countries, and would authorize the Treasury Department to take various actions against dubious foreign banks, including prohibiting American banks from dealing with them. The administration had opposed further legislation on money-laundering before the Sept. 11 terrorist attacks. But the International Money Laundering Abatement and Anti-Terrorist Act of 2001, moved quickly through the committee after a hard push from the chairman.’

Source: Taxnews.com

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US Banks Escape Strictest Anti-Money Laundering Rules, 30 October 2001: Although the Senate passed the new anti-money laundering bill placing new regulatory restrictions and responsibilities on banks based in the United States last Thursday, it is becoming increasingly clear that as a result of pressure from lobbyists, some of the more powerful rules have been watered down or amended significantly. The onus will be on foreign banks doing business in the US, and on non-banking institutions which handle large sums of money, and that US banks will not, in fact, have to make too many changes. For the time being, banks have succeeded in holding off complete regulation here.

Source: Taxnews.com

Continue

“…We have developed the international financial equivalent of law enforcement’s most wanted list and it puts the financial world on notice. If you do business with terrorists, if you support or sponsor them, you will not do business with the United States…”, President USA

“…In the weeks after Sept. 11, Justice and Treasury officials compiled a list of some two dozen alleged al-Qaeda operatives and financiers. The officials asked that Secretary of State Colin Powell pass the list on to the Saudi foreign minister with a request that the bank accounts of the individuals be frozen.

A State Department official with knowledge of the episode said the list amounted to a bunch of nicknames, Arabic versions of mobster handles such as "Vinny the Chin.“ When the State Department passed on the list, the Saudis greeted the request with laughter. They said the "names" were of no help in finding terrorist bank accounts, the official said…” US Today 1st July 2002

Some Observations

"…Governments have already lost the war against financial economic crime, and they’ve left it up to financial institutions to solve the problem. We have had new regulations after 11 September 2001. We have to obey them, and only because the governments didn't know what to do about financial crime...In the Netherlands, we have to chart all the names relating to domestic payments. All the banks together have rebelled. It's impossible to do and there’s no point. These stupid laws get us nowhere..."

AML prior to and after Patriot Act

PriorCurrency Transaction ReportsFunds Transfers and Transmittals reportsSuspicious Activity Reporting-Red Flags

AfterSEC 312 Private Banking AccountSEC 313 Correspondent AccountSEC 314 Financial Institution Cooperation ProvisionSEC 319 Domestic and Foreign Bank Records ProductionSEC 352 Anti Money Laundering ProgramsSEC 356 Suspicious Activity Report by the Securities and futures Industry SEC 256 Customer Identification and Verification

Indian Experience

No Strict Counter Money Laundering Regime.Implemented through various legislations as Income Tax Act, 1961,

Customs Act, 1962, Narcotic Drugs & Psychotropic Substance Act, 1985, Foreign Exchange Management Act 1999, The Criminal Law Amendment Ordinance XXXVIII of 1944 etc.

Reserve Bank of India issued guidelines to bank for implementing KYC.Was not part of any international body recently has joined Asia Pacific

Group on Money Laundering.Prevention of Money Laundering Act, 2002 has been made effective from

1st July 2005.Created an FIU in Ministry of Finance in November 2004, but no work

undertaken by FIU till now.RBI has directed all the Banks in India to become Bessel compliant by

2007.

Suggestion & Recommendations

- India’s FIU should be operationalized immediately & become the Member of EGMONT group.

Know your Customer guidelines issued by RBI should be given legal status and implemented in proper perspective.

PMLA, 2002 should be aligned with US Patriot Act, 2001 and revised FATF recommendations 2003.

Creation of a data bank for suspicious transactions and circulation of indicative list of suspicious activities to assist banks in detecting suspicious patterns of behavior by their customers.

Close scrutiny is required of business transactions with countries that do not conform with international anti money laundering standards.

Effective coordination between regulatory and enforcement authorities and various agencies which are regulating economic entities and where scope exists for money laundering and frauds to take place.

More formal inter-regulatory arrangements also need to be considered to ensure the applicability of FATF recommendations across banks, non banks, other financial institutions and such businesses or professions which are not financial institutions but conduct financial activities as a commercial undertaking

Port Security: Analysis of New Initiatives Taken By U.S. Post 9/11 and Lessons for Gujarat State, India

Rajnish Kumar Rai


12th Symposium on


Aspects of port security

Security of port area, ships/vessels, personnel calling or leaving the port and or physical security of cargo

Prevention of infiltration of unauthorized persons and smuggling and dumping of contrabands

Why Ports are Vulnerable?

Port facilities Size and accessibility Surrounded by metropolitan areas having

infrastructure of urban life Amount of flow of goods Legitimate pathways can be exploited

Ships, oil tankers can be target Container shipments Maritime crimes

Pre 9/11 Port Security Scenario

Different attitudes towards seaport security-Belief in the sanctity of US shores

Different perceived threats Cargo theft Drug Smuggling Stowaways and alien smuggling Export Crime

Threat of terrorism discussed in the Graham Commission report

FBI considered the threat to US Seaports as low Recognized the vulnerability to be high Potential damage high Lack of information provided to local entities was

significant

Post 9/11 initiatives Identifying and reducing vulnerabilities of

the facilities, infrastructure and vessels security audit of ports & vessels, TWIC, etc.

Securing the cargo ATS. CSI, OSC, C-TPAT, etc.

Developing greater maritime domain awareness AIS, analysis of information and intelligence,

dissemination of information and intelligence, etc.

Does US has a policy?

Pushing the borders outwards Hardening the border Making the border more accessible for

legitimate trade and travel Strengthening the border through more

effective use of intelligence Multiplying intelligence through the

engagement of other actors

Challenges in making initiatives successful

Balancing security and commerce Funding issues

Funding port security Sources of funds Allocating resources

Standard vs. Site specific measures Defining roles and responsibilities Program design and implementation Threat of terrorist nuclear attack using oil

tankers

Problem faced in Implementation

Security related issues Vessel Identification System Port Security Assessment Vessel Security Plans Transportation Worker’s Security Cards

Operational and efficiency issues Duplication of Maritime Intelligence System

Weakness in the policy response Agencies acting without sufficient information

regarding the impact on the private sector Significant financial burden on industry Security regimes created without consideration

for practical implementation Creating future operational problems Airport security analogies

Hasty implementation Lack of equipments – lack of personnel

Airport delays impact passengers – Cargo delays will stop commerce

How to make the initiatives more effective? Setting performance goals and measures and

assessing risk Enhancing security measures against potential

nuclear attack using oil tankers Enhance international cooperation Enhance maritime security capability

Maximize domain awareness Embed security into commercial practices to reduce

vulnerabilities and facilitate commerce Deploy layered security Ensure coordination of the marine transportation

system Enhance maritime security capabilities of key

nations

Lessons for Gujarat Creation of a department on the pattern of

DHS Desired policy framework – layered security

Discovery and interdiction of terrorist action emanating from abroad

Interdiction at the border and in the transportation sector

Defending against catastrophic terrorism inside Gujarat State and India

Protection of critical infrastructure and populations

Emergency preparedness and response

Challenges Lack of adequate resources Lack of experienced personnel Lack of technological advancement Shared responsibility hinder effective

communication and coordination Implementing uniform security standard

Leaders and Laggards: How beliefs help us understand the formation of the ICC.

Braden Smith


12th Symposium on


The International Criminal Court

Treaty creating the ICC signed in 1998, ratified 2002.

Developed to prosecute crimes against humanity, genocide, and war crimes.

First 18 judges sworn in on March 11, 2003. Still many states who have either failed to

ratify or refused to sign.

Do beliefs influence participation?

States develop intersubjective beliefs about the international system and other states.

These beliefs influence the likelihood that states will participate in cooperative behavior.

If this is true, states with different beliefs should exhibit different patterns of behavior during the process of regime formation.

How do we measure beliefs?

Type A – Follower Type C – Leader

Type DEF -- Laggard Type B -- Oppose

Control over events

.00 .25 .50 .75 1.00

Natu

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ation

al System

1.00

.50

0.0

-.50

-1.00

Measuring levels of particiation

Country Friends Sign Ratify Sign Ad. Support

Canada Yes 1998 Yes Yes Yes

China No No No No Res.

France No 1998 Yes Yes Yes

Germany Yes 1998 Yes Yes Yes

India No No No No No

Israel No 2000 No No Res.

Russia No 2000 No No Res.

U.K. No 1998 Yes Yes Yes

U.S. No 2000 No No Res.

Tentative Conclusions

There does appear to be a link between a state’s belief structure and their participation in the ICC.

However, a more complicated process of persuasion and strategic calculation is occurring during the negotiations.

Does it matter who is leading? Who is following? How powerful both groups are?


Tuesday, November 15 (1:00- 2:15)

Veronica Reeves The UN Security Council and 9/11

Sanjiv Srivastava Money Laundering: US and India

Rajnish Kumar Rai Port Security: Analysis

Braden Smith Leaders and Laggards: the ICC

12th Symposium on


Documents

Panel 3: Security, Terrorism, and Justice Issues in a Changing World Tuesday November 15 (1:00- 2:15) 12 th Symposium on Development and Social Transformation