Resolution on fighting the funding of terrorism

SANTO DOMINGO COUNCIL - Working for a more secure and fairer world, 26-27 November 2001


Original: Portuguese

Fighting terrorism and the organisations that support it begins primarily by attacking its funding. It is clear that any action to eradicate terrorism will only be effective if it disrupts primarily the means and structures that allow the operation and existence of those organisations.

Fighting the funding of terrorism means an unceasing combat with all forms of financial crime perpetrated by criminal organisations connected with drugs, arms sales or human trafficking. But it also implies a fight against the flow of legal funds that support terrorism.

The arduousness of this task was made very clear to everyone with the dramatic events of 11 September. Therefore, we need to think and act upon two main imbalances in current financial markets:

• the role of tax havens and their way of operation;

• the lack of effective international mechanisms for the regulation of capital flows.


Tax havens and offshore centres

When the so-called offshore centres and tax havens were created their main purpose was to contribute to the economic development of peripheral regions and their need to attract new investments. Today that does not correspond to reality.

Many offshore centres have become platforms that work as a hub for money laundering, for the establishment of covert companies for organised crime, and for the funding of terrorism, as we clearly see from the information released by the United States after the events of 11 September.

Recently the International Monetary Fund, IMF, estimated that the global amount of money connected to money laundering in offshore centres corresponds to 2 to 5 per cent of the global GDP.

Today there are 90 offshore centres identified all over the world and in many of them the financial authorities do not carry out adequate inspections. There are offshore centres where the tax benefits are becoming larger and larger without anybody knowing the source of the money.

Therefore the Socialist International supports all measures that could be taken at international and national levels in order to:

• put an end to tax havens that do not allow total financial transparency, namely providing information on the source of the money and the entities involved;

• change the rules of bank secrecy in the countries that, although not technically considered tax havens, may carry out the same type of functions for the funding of international terrorism.


International financial regulation

It is clear today that the fact that we do not have efficient and global mechanisms to regulate international capital flows is a huge barrier to the fight against the funding of terrorism and terrorism itself. It is not only the problem of money laundering but also the flow of legal funds that support terrorism.

The regulation mechanisms that we have today at a regional level or just at a bilateral level are clearly insufficient to prevent terrorist groups accessing international financial markets.

To create the right tools and policies within a limited geographic area is not enough. We need to create mechanisms to assure global application and coordination.

Therefore it is crucial to ensure the reinforcement of international co-operation in the financial area, with in the United Nations framework. The mechanisms that make possible the regulation of the markets can only be created at this level.

The SI proposed that through international cooperation and within the UN system and the Bretton Woods institutions new mechanisms be established to guarantee the main recommendations of the Financial Action Task Force, namely:

1. the ratification and immediate implementation of the tools already defined by the UN, such as the International Convention for the Suppression of the Financing of Terrorism, approved in 1999 and Security Council Resolution 1373;

2. the criminalisation of the financing of terrorism and associated money laundering;

3. the freezing of terrorist organisations' assets;

4. the obligation to track and monitor transfers of funds, identifying the name, address and account number of each operation, and

5. support for the application of law enforcement and support for regulatory bodies in different countries as well the investigation of terrorist activities.