THE Senate finance committee was told by a State Bank delegation led by the governor that only 34 cases of suspicious transactions were proceeded against in the past five years, while 5,775 Suspicious Transaction Reports, or STRs, were filed in the same period.
This is an abysmally low figure and underscores the strong need to strengthen efforts to intercept terror financing.
A new bill is being debated in the Senate to amend the Anti Money Laundering Act 2010 which dilates significantly on the definition of funds considered suspicious in connection with militancy.
This is a good start, but in order for efforts aimed at intercepting terror financing to bear fruit, much more will need to be done to boost the detection of these funds in the first place. Without stronger detection, there is little point in strengthening the powers of investigation and prosecution, which is where the bulk of the bill’s emphasis lies.
Banks must play an important role in detecting funds connected with terrorist activity, but banks cannot undertake the challenge on their own. Banks need to know what they are looking for when told to track fund flows and look for telltale signs of connections to terrorist activity.
To do this, they need some idea of the geography of fund flows and a database of names and entities that are on a watch list, no matter how long the latter may be. Both these elements need to be updated in real time.
Currently, the regulations to AMLA 2010 contain guidelines only for detecting money laundering, but very little for the detection of fund flows linked to terrorist activity. In light of the extremely poor track record of the Financial Monitoring Unit to facilitate the detection of funds connected to terrorist financing, there is clearly a need to update these guidelines and include more specific information on the form that fund flows connected with terrorism might take.
This is a big task that cannot be left to the FMU and the banks to perform by themselves. The intelligence agencies and other law-enforcement bodies need to play a role in developing these guidelines. Once detection has been strengthened, the next question to address is the speed with which suspicious funds can be frozen.
Currently, AMLA 2010 stipulates a seven-day limit within which suspicious activity must be reported, though in reality STRs can take years before landing on the desk of an investigating officer. With strong guidelines, and stronger compliance requirements for banks, freezing of the funds can come much earlier than it does at the moment.
These are the first steps involved in apprehending terrorist facilitators who, contrary to popular belief, actually do use formal banking channels on many occasions. Terrorism cannot be defeated if its facilitators cannot be apprehended, and that cannot happen if the state cannot see them.
Published in Dawn, January 17th, 2015