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reference made to the rule of law in A and others by Lord Woolf reflects a
rather ‘thin’ version of the concept. This general ‘facilitative approach’ goes
beyond national security and is evident in the other cases examined above. M
does not necessarily signal a major shift in approach, although the comments
about the role of SIAC are significant when viewed in context.
The senior judiciary places considerable weight on the overall management
implications of judicial decision-making and is inclined to defer excessively to
the executive, particularly if national security is raised. Reservations expressed by
politicians about judicial activism appear to have little validity. This is a cause for
concern. Even in areas where a clash with the government is likely, the judges
should insist on following the most persuasive legal argument in the context of
the asylum case before it. Fairness to the individual and equality before the law
should not be abandoned when judges are faced with difficult choices. These
values are more, not less, important when national security concerns are raised
or when a marginalized group is at risk. In this context, each individual relies on
institutions willing to remain consistently focused on the rule of law and the
values which underpin it. The defence of legality is not the exclusive preserve of
the judiciary. Those who are serious about creating a culture of respect for
human rights know that the principles of legal order must be reflected through-
out public administration and the parliamentary system.

IV. Conclusion
In this chapter, I have attempted to place the judicial role in asylum cases within a
wider conception of legal order. ‘Dialogic’ approaches which shift attention away
from institutions and sources of power towards argumentation and justification
are useful for both understanding and evaluating the existing case law. Law is
arguable, but we should concentrate on the legal arguments which deserve
ASYLUM, NATIONAL SECURITY AND THE RULE OF LAW 177

recognition in a democracy committed to human rights, equality and the rule of
law. The focus shifts to the interpretation of legal norms. Laws enacted by
Parliament do not function in a legal void. This approach, however, also puts
considerable stress on promoting a responsive parliamentary process which can
react to and internalize arguments of principle.
The traditional values associated with the rule of law are of particular
significance for refugees and asylum seekers in all cases whether national
security is at issue or not. The protection against arbitrary power and the
basic principles of fairness, which are built into legal order, remain important
to marginalized groups. Judges, and others, have a duty to uphold the rule of
law even when they risk serious public criticism and even when there is a
general political climate of insecurity. The protection from arbitrary power
that the concept should bring is undermined if judges refuse to engage with
contested areas of public policy. Recent attempts by the government to oust
judicial review in the asylum context have shown little recognition of the
potential value of judicial scrutiny of the executive. Asylum policy in the UK
is increasingly marked by measures which limit in practice the ability of
individuals to challenge asylum decisions. While not as blatant as the delib-
erate exclusion of judicial review the practical impact can be similar. The rule
of law may be undermined by a combination of laws and policies which make
it difficult to contest the legality of administrative decision-making.
In my view, there are two problems which have arisen in asylum law when
considering the judicial role. First, the judges are too often influenced by the
broader policy debates on asylum and the problems the government has
experienced in trying to manage the process in an efficient and effective
way. These factors should not be discounted, but if they become the domi-
nant concern there is an increased risk of unfairness in individual cases.
Adjudication in asylum cases should revolve primarily around the interpre-
tation and application of existing norms to individual cases. In a climate of
hostility toward asylum seekers, the heated public policy debates on asylum
should not distract judges from their constitutional role.
Second, there is a willingness to defer to the executive when rigorous
scrutiny of the merits of legal arguments is required. Due deference is
appropriate but more attention should be paid to the reasons offered in
justification. Many arguments advanced in the national security, immigra-
tion and asylum context are simply unpersuasive. Reference to national
security, public order and other such concepts should not be enough to
deter judges from a close assessment of the law and its proper application.88

88
Cf. Abbasi and another v. Secretary of State for Foreign and Commonwealth Affairs and
Secretary of State for the Home Department [2002] EWCA Civ 1598, para 106: ‘It is not an
answer to a claim for judicial review to say that the source of the power of the Foreign
Office is the prerogative. It is the subject matter that is determinative.’
COLIN HARVEY
178

This is precisely when the rule of law is most at risk. When national security
also becomes a factor there is a real risk that deference to executive judgment
will result in weak arguments gaining undue prominence.
Under the substantive concept of legality advanced here, adherence to the
rule of law brings with it a commitment to respect the dignity of the
individual. While its application is associated with the judiciary, this is not
the only institution responsible for ensuring respect for the principle. In my
view, the senior judiciary has on occasions demonstrated an understanding of
the significance of the rule of law in asylum law. But there is no reason why
arguments of principle should be confined to the courtroom. The ‘dialogic’
model can be easily mocked. But it does capture what should be a dynamic
relationship between the courts, the executive and the legislature with the
aim of internalizing arguments of principle in processes of democratic
deliberation.
When national security is raised there is a danger of inadequate scrutiny of
government arguments and excessive deference undermining a thorough
examination of the substantive legal issues. Asylum seekers, in particular,
depend on judges and decision-makers who are prepared to uphold the
values which underpin legal order. These are values which are in danger in
times of fear and insecurity.
9

The financial war on terrorism
KEVIN E. DAVIS




I. Introduction
In the aftermath of 9/11 many facets of counter-terrorism legislation have
come under intensive scrutiny. Provisions granting state officials enhanced
investigative powers, greater authority to withhold information from the
public and broader powers to detain people without trial have all been
hotly debated around the world. In contrast, relatively little attention has
been paid to the provisions aimed at controlling the financing of terrorism.
Yet these provisions have the potential to affect an extremely broad range of
economic activity, both legitimate and illegitimate, and for that reason are
worthy of scrutiny.
This chapter is designed to provide an introduction to the legal instru-
ments designed to counter financing of terrorism and the policy concerns
that they raise. Part I describes three main types of legal provisions designed
to combat the financing of terrorism (prohibitions, provisions authorizing
deprivations of property and monitoring provisions), different approaches
that have been taken to the design of those provisions, and the advantages and
disadvantages of each approach. The central objective of this Part is to discuss
the range of actors and transactions that are likely to be affected by the various
legal initiatives, with particular attention to the degree of proximity to actual
terrorist activity that is required and whether legitimate commercial activity
is likely to be affected. Part II then examines concerns that have been raised
about the manner in which these provisions are likely to be implemented and
enforced. Part III discusses whether, even if reasonably well implemented and
enforced, these provisions are likely to be effective in combating the financing
of terrorism. The chapter concludes with a call for further research in
this area.



I am grateful to GuyLaine Charles, Alan Tan Khee, Victor V. Ramraj, Mary Wong and
participants in the Symposium on Comparative Anti-Terrorism Law & Policy for helpful
comments upon an earlier version and to Michael Kruse and Kevin Lees for excellent
research assistance.

179
KEVIN E. DAVIS
180

II. The scope of legislation concerned with financing of terrorism
A. Background
Much of the recent interest in counter-terrorism legislation in general, and
legislation concerned with financing of terrorism in particular, dates to 9/11.
Even before that date, countries such as the United States and the United
Kingdom had adopted legislation that prohibited the most significant forms
of financing of terrorism. However, prior to September 2001, the inter-
national community as a whole does not appear to have been fully committed
to legislating against financing of terrorism, as evidenced by the fact that the
United Nations Convention for the Suppression of Terrorist Financing
(Financing of Terrorism Convention) was only opened for signature in
January 2000 and prior to 11 September 2001 had been ratified by only
four countries. Strikingly, the Financing of Terrorism Convention now has
132 signatories and has been ratified by 117 countries.1
Since 2001 there has been significantly more international interest in the
development of legal instruments designed to combat the financing of terror-
ism. In the immediate aftermath of the attacks, the United Nations Security
Council passed Resolution 1373 which, among other things, bound all of the
UN’s member states to ‘prevent and suppress the financing of terrorist
acts . . . ’, to implement the Financing of Terrorism Convention and to cooper-
ate with other countries in this regard.2 Resolution 1373 also created
specific obligations for states to criminalize the financing of terrorism and to
freeze the assets of entities implicated in terrorism. This Resolution builds
upon a previous series of Security Council resolutions binding states to freeze
the assets of individuals or entities related to al Qaeda and the Taliban,
including those designated upon a list maintained by the Security Council
Committee established pursuant to Resolution 1267 concerning Al Qaeda, the
Taliban and associated individuals and entities (the ‘1267 Committee’).3
Resolution 1373 was also complemented by the efforts of other influential
international organizations. For example, on 31 October 2001 the Financial
Action Task Force (‘FATF’) released a list of eight recommendations concern-
ing terrorist financing which, in addition to the matters referred to in
Resolution 1373, also discussed monitoring provisions such as reporting of
suspicious transactions.4

1
UN Doc. A/RES/54/109 (1999), 39 I.L.M. 270, entered into force 1 April 2002. See,
http://untreaty.un.org/ENGLISH/Status/Chapter_xviii/treaty11.asp.
2
United Nations S/RES/1373 (2001).
3
See S/RES/1526 (2004), S/RES/1455 (2003), S/RES/1452 (2002), S/RES/1390 (2002),
S/RES/1388 (2002), S/RES/1363 (2001), S/RES/1333 (2000), S/RES/1267 (1999).
4
Financial Action Task Force, Special Recommendations on Terrorist Financing, 31 October
2001.
THE FINANCIAL WAR ON TERRORISM 181

The legislative provisions that have emerged from or coincided with this
wave of international initiatives can be grouped into three categories: prohib-
itions upon various types of dealings with terrorists and their property;
provisions permitting terrorists to be deprived of their property; and mea-
sures designed to make it easier for the government to monitor dealings with
terrorists or their property. The following sections discuss each of these
categories of provisions in turn. The final section briefly discusses the extent
to which recent legislative initiatives extend pre-existing law.


B. Prohibitions
1. Overview and objectives
The legislation most obviously concerned with countering the financing of
terrorism is generally designed to prohibit, upon pain of criminal sanction,
activities that in some way allow resources – both property and services – to
be directed toward terrorism. These provisions appear to be designed both to
punish and prevent dealings with terrorists. The purely punitive objective
reflects the fact that in many cases knowingly financing terrorist activity
seems just as blameworthy as more direct forms of participation. As for the
preventative function, there are two points to consider. The first is that, to the
extent that these provisions discourage various actors from providing
resources to terrorists, they cut off terrorists’ access to resources that they
may need in order to carry out terrorist activities. The second and perhaps
less obvious point stems from the fact that, typically, provisions ostensibly
concerned with the financing of terrorism actually serve to discourage a
broad range of dealings with terrorists. As a result, they affect actors who
have had even relatively innocuous dealings with terrorists and, in many
cases, expose them to risk of criminal liability. This in turn gives law enforce-
ment officials a great deal of leverage over those actors. Officials might be able
to use that leverage to persuade those actors to assist in efforts to apprehend
the actual terrorists.
The extent to which the prohibitions upon financing terrorism achieve
these objectives depends upon the physical and mental elements of the
conduct that they capture. In other words, they depend upon what sorts of
activities are considered to be ‘financing’, what sorts of activities constitute
the ‘terrorism’ whose financing is prohibited, and what mental state must
accompany the physical acts that amount to financing of terrorism in order to
attract liability.

2. What activities are covered?
There appears to be a reasonably strong international consensus on the core
of the definition of ‘financing’ of terrorism. That consensus is embodied in
KEVIN E. DAVIS
182

the Financing of Terrorism Convention. The Convention’s main operative
articles provide that criminal liability should be imposed upon not only indivi-
duals or entities that engage in financing of terrorism but also their accomplices,
leaders and co-conspirators.5 The Convention effectively defines ‘financing’ to
mean providing or collecting funds (defined to mean assets of all kinds) with
the intention or knowledge that they will be used, in whole or in part, to carry
out terrorist activity.6 Terrorist activity is defined both by reference to a list of
specific criminal acts that are commonly committed by terrorists as well as a
broad principled definition. It is worth noting that the term ‘provides’ seems to
capture not only the donation of property for use in connection with terrorism,
but also the sale or lease of property for use in connection with terrorism on
commercially reasonable terms.7
For the purposes of prohibiting financing of terrorism some countries define
terrorist activity both in distinctly local terms as well as those used in the
Financing of Terrorism Convention. For instance, in the United States the
offence of ‘providing material support to terrorists’ is formulated as the pro-
vision of support or resources for use in preparation for, or in carrying out,
violations of specified provisions of the US Code. Meanwhile, the offence of
financing terrorism is defined as providing funds to carry out, essentially, the set
of terrorist activities referred to in the Financing of Terrorism Convention.8
Other jurisdictions do employ general definitions of terrorist activity but have
modified the definition used in the Financing of Terrorism Convention. The
Convention’s definition essentially equates terrorism with politically motivated
violence but it is not uncommon for lawmakers to limit the types of political
motivations that qualify as terrorist motivations or to expand the set of acts that
qualify as terrorist forms of violence.
Many jurisdictions also depart from the terms of the Financing of
Terrorism Convention by employing broader definitions of the concept of
financing. For instance, Canada and the UK explicitly proscribe the solicita-
tion of funds for the purposes of terrorism.9 Furthermore, in Canada and the
UK it is an offence merely to ‘use’ or ‘possess’ property with the intention or
knowledge that it will be used for terrorist purposes.10 This language suggests
that virtually nothing in the way of an overt act need be committed in order to
trigger liability under these provisions, thus raising concerns that people may be
punished simply for having bad thoughts.11 In addition, many countries

5 6
Ibid., Art. 2(5). Financing of Terrorism Convention, Art. 2(1).
7
This point is made explicit in the UK’s Terrorism Act 2000 s. 15(4): ‘In this section a
reference to the provision of money or other property is a reference to its being given, lent
or otherwise made available, whether or not for consideration’ (emphasis added).
8
18 U.S.C., ss. 2339A, 2339C.
9
See Criminal Code, s. 83.03 and Terrorism Act 2000, s. 15(1) (referring to a person who
‘invites a person to provide’ financing).
10
Criminal Code, s. 83.04(b); Terrorism Act 2000, s. 16(2). 11 Ibid.
THE FINANCIAL WAR ON TERRORISM 183

explicitly prohibit the provision of certain services as well as property. For
instance, the US prohibition on providing ‘material support or resources’
expressly proscribes the provision of financial services, lodging, training and
transportation.12
Perhaps the most significant expansion of the prohibitions set out in the
Financing of Terrorism Convention is the fact that many instruments pro-
hibit the financing of terrorists as well as the financing of terrorist activities.
The most prominent examples of this approach involve prohibitions upon
dealings with individuals or organizations that have been placed upon some
sort of official list.13 Targeted entities are sometimes given an opportunity to
challenge their listing – either in a judicial proceeding or some other forum –
and in principle this opportunity can arise either before or after the decision
becomes final. However, as will be discussed below, these lists are often also
used for the purpose of targeting property for freezing and forfeiture. In this
context it is counter-productive to give targeted organizations advance notice
of the state’s intention to place them on an official list because it gives them
an opportunity to transfer funds to safety before they become subject to
official sanctions.14 Perhaps as a consequence, the listing procedures created
by the Security Council’s 1267 Committee and under the domestic legislation
of countries such as the United States, Canada and the UK typically do not
provide targeted individuals or entities with prior notice.15 Also, in the case of
the 1267 Committee’s listing procedure, it is not clear that listing decisions
can be challenged before any sort of judicial body.16 In other jurisdictions,
however, more substantial evidence and/or a judicial finding may be required



12
18 U.S.C. s. 2339A (‘In this section, the term ‘‘material support or resources’’ ‘means
currency or other financial securities, financial services, lodging, training, expert advice or
assistance, safehouses, false documentation or identification, communications equip-
ment, facilities, weapons, lethal substances, explosives, personnel, transportation, and
other physical assets, except medicine or religious materials’). The Canadian legislation
separately proscribes making available ‘financial or other related services’ and ‘participat-
ing in or contributing to an activity of a terrorist group’ (the latter term is defined to
include providing training, skill or an expertise). See Criminal Code, ss. 83.03 and 83.18.
13
18 U.S.C. s. 2339B; Executive Order 13224, s. 1.
14
Executive Order 13224, s. 10.
15
See, for example, 1267 Committee, Guidelines of the Committee for the Conduct of its Work
(adopted November 2002 and amended on 10 April 2003), http://www.un.org/Docs/sc/
committees/1267/1267_guidelines.pdf; 8 U.S.C. s. 1189(a)(2) (procedure for designating
a ‘foreign terrorist organization’) (held unconstitutional in National Council of Resistance
of Iran v. Department of State, 251, F 3d 192 (D. C. Cir. 2001); Criminal Code, s. 83.05
(procedure for designating a ‘listed entity’); Terrorism Act 2000, s. 3.
16
See Jose E. Alvarez, ‘Hegemonic International Law Revisited’ (2003) 97 AJIL 873 at 876–7;
E. Alexandra Dosman, ‘For the Record: Designating ‘‘Listed Entities’’ for the Purposes of
Terrorist Financing Offences at Canadian Law’ (2004) 62(1) U. T. Fac. L. Rev. 1.
KEVIN E. DAVIS
184

before steps will be taken to sanction an allegedly terrorist organization,
particularly when it purports to be a charitable organization.17
Prohibitions upon financing of terrorists are not always limited to prohib-
itions upon dealings with organizations located upon official lists. For
example, under Canadian law it is an offence to finance a ‘terrorist group’,
defined as an entity that has either been placed on an official list or ‘has as one
of its purposes or activities facilitating or carrying out any terrorist activity’.
Significantly, this definition appears to include even an individual who has
expressed an intention to support terrorist activity.18 The UK position is
similar. Although the Terrorism Act 2000 only forbids the financing of
‘proscribed organizations’, regulations promulgated under the United
Nations Act 1946 make it an offence to provide financing to ‘a person who
commits, attempts to commit, facilitates or participates in the commission of
acts of terrorism [or their accomplices]’ without a licence.19
There are several advantages to legislating against terrorists as opposed to
terrorist activities. First, this approach makes it possible to target individuals
who provide ‘blank checks’ to terrorists by providing financing for terrorist
organizations’ general purposes as opposed to specific activities. Second,
dispensing with the need for proof that financing is connected to specific
terrorist activities may, by reducing the burden on law enforcement agencies,
make it easier to secure convictions.20
The principal disadvantage of the organizational approach is the danger of
proscribing legitimate as well as illegitimate dealings with terrorists. This
problem arises in a variety of contexts but perhaps most frequently in con-
nection with charitable organizations with mixed purposes and activities. For
example, it is not uncommon for organizations suspected of sponsoring
terrorist acts to have official purposes that encompass poverty relief and
peaceful political engagement. It may be difficult to establish that either the
purpose or the effect of financing such an organization will be to support
terrorist activity. Alternatively, it may be the case that any funds provided are
likely to support both legitimate charitable activities and terrorist activities.


17
Second Report of the Monitoring Group established pursuant to Resolution 1363 (2001)
and extended by Resolutions 1390 (2002) and 1455 (2003), on sanctions against al Qaeda,
the Taliban and individuals and entities associated with them, S/2003/1070 (Second Report
of the 1363 Monitoring Group, para. 39).
18
Criminal Code, ss. 83.03, 83.08. The conclusion that a single natural person can qualify as
a terrorist group follows from the fact that the term ‘entity’ as it is used in s 83.01 is defined
to include a ‘person’. By contrast, the US legislation refers to ‘foreign terrorist organiza-
tions’ and the term organization is defined to include ‘a group of persons’, but does not
explicitly include a mere ‘person.’ See 18 U.S.C. s. 2339B and 8 U.S.C. s. 1101.
19
See Terrorism Act 2000, s. 1(5) and Terrorism (United Nations Measures) Order 2001, s. 3.
20
Legislation Against Terrorism: A Consultation Paper, Cm 4178 (Stationery Office, London
1998), chapter 6.
THE FINANCIAL WAR ON TERRORISM 185

Under these circumstances, subjecting either the organization or its suppor-
ters to the harsh sanctions contemplated by counter-terrorism legislation
may be a disproportionate response to the threat they pose.
Prohibitions upon financing of terrorists rather than terrorist activity also
risk capturing transactions that are legitimate in the sense that they enable
terrorists to secure their human rights.21 For example, access to legal services
is guaranteed to some extent under virtually all human rights instruments.
However, an unqualified ban on dealings with terrorists seems to render
lawyers potentially liable for providing services to terrorists. The larger the
number of proscribed types of dealings and the broader the set of terrorists
with whom those dealings are proscribed, the more significant will be this
concern. For example, the language of Security Council Resolution 1373,
which is reflected in the domestic legislation of countries such as Canada,
contains a sweeping ban upon dealings with terrorists. It is difficult to see
how such legislation, if applied to its fullest extent, can be compatible with
human rights norms.22 By comparison, UK law, which covers only the
provision of property and ‘financial or related services’ and in certain cir-
cumstances allows parties to seek a licence to engage in prohibited transac-
tions, is less suspect.23
Prohibitions upon the financing of terrorists can also threaten legitimate
economic activity when individuals or organizations have ambiguous pur-
poses. This sort of ambiguity threatens to create two types of problems. First,
wholly legitimate entities may be shunned by third parties concerned about
violating the prohibitions. Second, some parties may be prosecuted for
unwittingly supporting terrorists. The most obvious way to mitigate these
concerns is by limiting the scope of organizational prohibitions to entities
that have been placed upon an official list and granting entities that have been
or are about to be listed an opportunity to challenge the decision. However,
publicly proscribing the financing of only listed terrorists as opposed to all
terrorists is only an effective tactic when lawmakers have solid prior informa-
tion about both the existence of an individual or group with terrorist


21
The US legislation does, however, exclude the provision of medicine or religious materials.
See 18 U.S.C. s. 2339A.
22
Security Council Resolution 1452 permits the 1267 Committee to create exceptions from
the sanctions overseen by that Committee in respect of funds required to meet targeted
individuals’ ‘basic expenses’, such as expenditures upon food and medical care. However,
as Jose Alvarez has pointed out, the Committee has the discretion to refuse to authorize
member states to use this exception. See Alvarez, above at 877n.
23
The Canadian Criminal Code contains a provision that allows the Solicitor-General to
authorize transactions with a terrorist group. Unfortunately, however, the provision only
seems to permit the Solicitor-General to provide an exemption from liability arising under
one of several provisions that prohibit the financing of terrorists. See Criminal Code
s. 83.09.
KEVIN E. DAVIS
186

purposes or activities and its nom de guerre at any given point in time. This
seems unrealistic.
The most significant concerns about the organizational approach to pro-
hibiting financing of terrorism are probably the concerns about impacts upon
legitimate economic activities. However, a second ground for concern is the
idea that regimes adopting this approach risk violating notions of procedural
fairness. A perfectly fair regime would give suspected terrorists notice and an
entitlement to a judicial hearing, and perhaps even rights of appeal, both
before and after the imposition of any prohibitions upon dealings with them.
In practice, however, many legal regimes provide far fewer procedural pro-
tections to alleged terrorists. To a certain extent these departures from the
procedural ideal can be justified by the need to preserve the element of
surprise for law enforcement agencies and to prevent publication of confi-
dential information. However, the virtually complete absence of procedural
protections from some regimes is difficult to justify.

3. Mental elements
In addition to the physical elements described so far, the criminal laws
concerned with financing of terrorism also include some sort of mental
element, typically either intention or knowledge. Unfortunately, the mean-
ings of these concepts are not wholly self-evident. For instance, does a person
who provides financing to an organization possess the requisite mental
element if he or she is unaware that the organization has been placed upon
some sort of official list and unaware of the organization’s specific terrorist
activities, but are aware in a general way that it engages in terrorist activities?
Suppose the financier lacks even the most general sort of knowledge about the
terrorist activities? Or, what if the financier is aware of some of the terrorist
activities but honestly believes that their resources will be channelled toward
non-terrorist activities?
The legislation in some jurisdictions provides guidance on some of these
issues. For example, the Canadian provision that makes it an offence to
participate in or contribute to the activity of a terrorist group states that
the offence may be committed ‘whether or not . . . the accused knows the
specific nature of any terrorist activity that may be facilitated or carried out
by a terrorist group’.24 In many cases, however, the answers to these questions
are left open by the text of the statutory provisions. So, for example, there has
been litigation in the United States over whether the offence of providing
material support to a foreign terrorist organization includes a requirement
that the defendant be aware of the fact that the organization has been
designated as a foreign terrorist organization or of the activities that led to


24
Criminal Code, s. 83.18(2).
THE FINANCIAL WAR ON TERRORISM 187

the designation. In one particular case, the Ninth Circuit rejected the US
government’s argument that neither form of knowledge was required.25
In many circumstances, the approach taken to defining the mental ele-
ments of financing offences will be at least as important in determining their
practical effects as will the approach taken to defining the physical elements.
This point is particularly important to keep in mind in connection with
discussions of whether legislation can or should capture financing of terrorist
activity or financing of terrorists. Suppose that financing a terrorist group
with knowledge of its general purposes is taken to qualify as proof of an
intention to finance terrorist activity. Now suppose that this determination is
made in the context of a prosecution for conspiring to finance terrorist
activity. This possibility suggests that a broad definition of the concepts of
intention or knowledge can allow legislation that appears to capture only
financing of terrorist activity to effectively capture financing of terrorists.
Of course the reverse is also true. If a person is not considered to have
knowingly financed a terrorist group unless he has specific knowledge of
the activities that support the conclusion that the group is a terrorist one,
provisions that ostensibly take an organizational approach to legislating
against the financing of terrorism will be essentially vitiated.

C. Deprivation of property
1. Overview and objectives
Lawmakers concerned with financing of terrorism have not limited them-
selves to pursuing the individuals who participate in channelling resources to
terrorists or terrorist activity. They have also crafted laws that, where physi-
cally possible, permit resources connected to terrorists or terrorist activity to
be removed from the control of terrorists, whether by freezing, seizing or
confiscating the property through forfeiture proceedings.
When a government freezes property, it prohibits transfer, conversion,
disposition or movement of assets, although other legal rights over the
property remain intact. The effects of seizure of property are similar to a
freeze, but in addition the government typically takes control of the property.
Freezes and seizures of property are often designed to be temporary mea-
sures.26 By contrast, forfeiture or confiscation permanently transfers legal

25
Humanitarian Law Project v. United States DOJ, 352 F 3d 382 (9th Cir. 2003).
26
In the UK, assets can be seized for just 48 hours: Terrorism Act 2000, s. 25(4). However,
authorities can obtain an order for further detention for no more than three months from
the time of the initial seizure: ss. 26(1) and 26(2). It is possible to have more than one
order, but the assets cannot be seized for more than two years from the time of the first
order: s. 26(4). In Canada, a report is required within seven days identifying the property
seized and the location of the property: Criminal Code, s. 462.32(4). Property may be
KEVIN E. DAVIS
188

rights over the property to the government and extinguishes the rights of
some or all other parties. Regardless of the nature of the deprivation con-
templated, however, legislation providing for deprivation of property asso-
ciated with terrorism typically has two main components: a definition of the
types of property that can be targeted, and a description of the procedural
steps that must be followed in order to accomplish various forms of
deprivation.
To a certain extent, these provisions are designed to complement the
prohibitions upon financing of terrorism discussed in the previous section
by ensuring that significant economic consequences flow from violating
those prohibitions. This is consistent with a global trend towards ensuring
that legal mechanisms exist to deprive offenders of property that represents
the instruments or proceeds of crime.27 However, as will be shown below, not
all of the provisions that permit deprivation of property are triggered by
violations of the prohibitions upon financing of terrorism. Consequently, the
deprivation provisions can be used in circumstances where it is inconvenient
or impossible to link assets that are discovered to be under the control of
terrorists to transactions with specific actors. This may be particularly helpful
in combating terrorist organizations that rely heavily upon resources gener-
ated by business enterprises – either legitimate or illegitimate – operated by
full-blown members of the organization.

2. Which property?
Perhaps the most interesting conceptual issue that arises in defining the types
of property that can be removed from the control of terrorists is whether it is
appropriate to include only property associated with terrorist activity, or
whether it is important to include any and all property associated with
terrorists.28 As far as freezing property is concerned, the issue is resolved by
Resolution 1373. That resolution calls upon states to freeze the property of
‘persons who commit, or attempt to commit, terrorist acts or participate in or

detained for up to six months: s. 462.35(1). Property can be detained even longer if
forfeiture proceedings have been instituted: s. 462.35(2). The period can be extended from
six months upon a judge’s satisfaction: s. 462.35(3). In the United States, however, the
broad language of the International Emergency Economic Powers Act (IEEPA) appears to
permit assets to be seized or blocked so long as the unusual and extraordinary threat exists
or the US remains in armed hostilities.
27
See generally, Guy Stessens, Money Laundering: A New International Law Enforcement
Model (New York, Cambridge University Press, 2000), at 4–5; R. T. Naylor, ‘Washout:
A Critique of Follow-the-Money Methods in Crime Control Policy’ (1999) 32 Crime, L. &
Soc. Change 1.
28
Another important issue is to what extent should the interests of third parties be affected
by measures designed to deprive terrorists of property? For a general discussion of the
issue of the effects of forfeiture on third parties, see Kevin E. Davis, ‘The Effects of
Forfeiture on Third Parties’ (2003) 48 McGill L. J. 183.
THE FINANCIAL WAR ON TERRORISM 189

facilitate the commission of terrorist acts; of entities owned or controlled
directly or indirectly by such persons; and of persons and entities acting on
behalf of, or at the direction of such persons and entities . . . ’29
Resolution 1373 is silent on the question of what sort of property ought
to be subject to forfeiture as opposed to a freeze. Here the Financing of
Terrorism Convention adopts the narrow approach, instructing states to take
appropriate measures for the forfeiture of only those funds ‘used or allo-
cated for the purposes of committing terrorist offenses and the proceeds
derived from such offences’.30 However, the trend seems to be for states to
adopt a broader approach in their domestic legislation. For example,
Canadian law allows the Attorney General to apply for an order of forfeiture
not only for property that ‘has been or will be used, in whole or in part, to
facilitate or carry out a terrorist activity’,31 but also for ‘property owned or
controlled by or on behalf of a terrorist group’.32 Likewise, British law allows
for forfeiture of cash intended to be used for terrorism; proceeds of terrorism;
and cash that forms the whole or part of the resources of a proscribed
organization.33 Meanwhile, some post-September 11 American legislation
goes even further. The Patriot Act extends the possibility of forfeiture not
just to all instruments and proceeds and all property belonging to terrorist
groups or entities, but to all assets affording any person a ‘source of influence’
over terrorist entities.34 Furthermore, additional Patriot Act provisions amend-
ing the International Emergency Economic Powers Act (IEEPA) allow for con-
fiscation of any property of any foreign person, foreign organization or foreign
country that the President or his officials have determined has ‘planned, author-
ized, aided, or engaged’ in an attack on the United States.35
The advantages and disadvantages of targeting property of terrorists as
opposed to simply property associated with specific terrorist acts parallel the
advantages and disadvantages of targeting actors who are linked to specific
terrorist activities as opposed to terrorist groups. On the one hand, the organiza-
tional approach makes it possible to deprive terrorists of property that has not
been allocated to specific activities but is nonetheless available for its general
purposes. This approach also relieves law enforcement agents of the burden of
linking property to specific terrorist activities. On the other hand, depriving actors
of property that is not linked to any particular terrorist activity may be inap-
propriate in cases involving organizations with ambiguous or mixed purposes.



29
Resolution 1373, Art. 1(c). 30 Financing of Terrorism Convention, Art. 8(2).
31
Criminal Code, s. 83.14(1). 32 Ibid. 33 Terrorism Act 2000, s. 25(1).
34
18 U.S.C. s. 981 (a)(1)(G) (as amended by the Patriot Act, s. 806). This language is derived
from the Racketeer Influenced Corrupt Organizations (RICO) implying that the drafts-
person of the Patriot Act equated terrorist groups with ‘criminal enterprises’.
35
50 U.S.C. 1702(a)(1)(C) (as amended by the Patriot Act, s. 106).
KEVIN E. DAVIS
190

3. Procedure for effecting deprivations
As we saw above, the mental elements of the relevant offences place important
practical limits upon the range of activity likely to be captured by criminal
prohibitions upon financing of terrorism. Another highly significant point is
that the effective range of those prohibitions is also determined by the
procedural rules that govern investigations and prosecutions of such
offences. Similarly, in the case of provisions directly concerned with freezing,
seizing and confiscating property associated with terrorism, the practical
effect of the provisions can only be assessed after taking into account a
range of other legal provisions. The effective scope of the provisions that
focus upon property linked to terrorist organizations is heavily determined
by the substantive and procedural rules mentioned above that govern the
identification of terrorist organizations. The procedure that must be followed
prior to depriving a person or organization of property also places important
practical safeguards upon the property likely to be affected.
In functional terms, the two most critical features of the procedural
regimes at issue here are first, whether any sort of judicial hearing is required
before depriving a person of his property and second, the evidentiary burden
that the government must meet. Under both British and Canadian law, the
pattern is that increasingly onerous procedural requirements must be satis-
fied in order to freeze, seize and confiscate property. Specifically, in both
jurisdictions, assets can be frozen by the merely administrative act of desig-
nating an organization as a terrorist organization, whereas seizure requires
satisfying a judge that there are ‘reasonable grounds’ for suspicion that the
property is related to terrorist activities,36 and forfeiture requires satisfying a
judge on a ‘balance of probabilities’.37 This is all broadly consistent with the
approach typically taken in American federal forfeiture law. For the most part
the Patriot Act simply expanded that existing body of law to include terror-
ism offences. However, the Patriot Act also expanded executive powers
through the IEEPA, giving the Department of Treasury almost carte blanche
to confiscate a group’s assets without the evidentiary and due process protec-
tions normally afforded through federal forfeiture law. As already mentioned,
the trigger is an attack upon the United States by foreign nationals and the
President’s determination that the group or entity planned, authorized, aided
or engaged in the attacks.38 Consequently, to the extent that there is a
significant difference between freezing and confiscating a person’s property,
the American provisions aimed at depriving terrorists of their property are
that much more potent than their Commonwealth counterparts.

36
Criminal Code, s. 83.13(1); Terrorism Act 2000, s. 26(3).
37
Criminal Code, s. 83.14(5); Terrorism Act 2000, s. 28(2).
38
50 U.S.C. s. 1702 (as amended by the Patriot Act, s. 106).
THE FINANCIAL WAR ON TERRORISM 191


D. Monitoring provisions
1. Overview and objectives
The prohibitions upon financing of terrorism may be the most visible compo-
nents of the financial war against terrorism. Less visible but equally important are
a raft of initiatives designed to make it difficult for terrorists and their affiliates to
hold or transfer property anonymously and thereby facilitate detection of
terrorists’ activities.39 Naturally, these provisions can also aid in enforcing
prohibitions upon dealings with terrorists and in depriving terrorists of their
property.

2. Reporting obligations
The least remarkable sorts of monitoring provisions are those that impose
obligations upon financial institutions to report to the authorities when they
have information about dealings with or the property of terrorists.40 FATF
has recommended the imposition of such reporting obligations and they can
be found in all of the jurisdictions that have been mentioned so far in this
chapter.41 Canada and the United Kingdom also require individuals to report
suspicious activity.42 Future debates surrounding these provisions are likely
to revolve around which actors are subject to the disclosure obligation, what
circumstances should trigger a duty to report, and the extent to which those
who file reports are entitled to indemnification for or exemption from any
resulting liability. An important policy concern raised by these provisions is
the extent to which they might deter productive but necessarily confidential
dealings with terrorists. For example, Helen Fenwick and Gavin Phillipson
have argued that the UK versions of these provisions might discourage
investigative journalists from making contact with known terrorists.43

3. Other monitoring provisions
Other monitoring provisions are more remarkable because they impose new
obligations upon actors dealing with the general population in the ordinary
course of business rather than just those dealing with suspected terrorists or

39
´
For an in-depth analysis of the relevant US provisions see Mariano-Florentino Cuellar,
‘The Tenuous Relationship Between the Fight Against Money Laundering and the
Disruption of Criminal Finance’ (2003) 92 J. of Criminal L. & Crim. 311.
40
These provisions sometimes also encourage sharing of information between financial
institutions. See, for example, Patriot Act, s. 314(b).
41
Terrorism Act 2000, s. 19; Criminal Code, ss. 83.1, 83.11; 31 CFR 103; Financing of
Terrorism Convention, Art. 18(1)(b).
42
Criminal Code, s. 83.1; Terrorism Act 2000, s. 19; Proceeds of Crime Act 2002, ss. 330–2
(in the UK); Proceeds of Crime (Money Laundering) and Terrorist Financing Act,
ss. 5–11 (in Canada).
43
Chapter 21, in this volume.
KEVIN E. DAVIS
192

involved in inherently suspicious transactions. For example, the USA Patriot
Act includes a provision requiring financial institutions to verify the identity
of any person opening an account and to maintain records of the information
used to verify the person’s identity with a view to enabling a determination of
whether the person appears on any list of known or suspected terrorists or
terrorist organizations.44 The costs of these ‘know-your-customer’ obliga-
tions are likely to be substantial. Although this kind of regulation can also be
justified as a response to money laundering, and has in fact been justified this way
in the United Kingdom,45 it seems reasonably clear that the United States
would not have taken this step without the impetus provided by the terrorist
attacks.46
In a similar vein, FATF has recommended that the international commu-
nity strive to ensure that information about both originators and recipients of
wire transfers be included in the wire transfers and remain with it throughout
the payment chain.47 The United States has already largely implemented this
recommendation and the EU is in the process of doing so.48 Again, given the
volume of transactions that will be affected, the costs of implementing this
initiative seem likely to be substantial and so it is not clear that it would have
been pursued in the absence of an enhanced terrorist threat.
The impact of the proposals concerning wire transfers is augmented by a
separate FATF recommendation that urges all persons or entities who engage
in the transmission of money or value be subjected to licensing and registra-
tion requirements and required to comply with FATF’s recommended anti-
money laundering obligations.49 The United States has taken a leading role in
implementing this recommendation and in encouraging other countries to
follow suit.50 This initiative is directed at so-called alternative remittance
systems such as hawala. It is widely believed that al Qaeda and its associated
groups place great reliance upon such systems to transfer money.51 However,

44
31 U.S.C. s. 5318, (as amended by Patriot Act, s. 326).
45
See Financial Services Authority (UK), Money Laundering Sourcebook, section 3.1, and
‘Why Do I Need to Prove My Identity?’ online information sheet available at
www.fsa.gov.uk.
46
See Federal Register, Vol. 64, No. 59, 14845–6, 29 March 1999 (Department of Treasury
and Federal Deposit Insurance Corporation jointly withdrawing proposed regulation to
institute a ‘know-your-customer’ obligation; the FDIC withdrawal noted that of 254, 394
submitted comments, only 105 were in support of the obligation).
47
FATF, Special Recommendations on Terrorist Financing, above, Recommendation VII.
48
Patriot Act, s. 328 and 31 CFR 103.33(f); Communication concerning a New Legal
Framework for Payments in the Internal Market, COM (2003) final, 12 Feb. 2003.
49
FATF Special Recommendations on Terrorist Financing, above, Recommendation VI.
50
31 U.S.C. 5330; Tim Golden, ‘5 Months After Sanctions Against Somali Company, Scant
Proof of Qaeda Tie’ New York Times, 13 April 2002, A10 (reporting that after the Sept. 11
attacks, the United States rapidly shut down al Barakat, Somalia’s main hawala network).
51
See, for example, Second Report of the 1363 Monitoring Group, para. 85
THE FINANCIAL WAR ON TERRORISM 193

alternative remittance systems are also important – and less costly – methods
of transferring funds for legitimate purposes, particularly for migrants or
refugees attempting to remit money to family members in rural areas not
served by banks. Hawala is particularly popular in Muslim countries.52
It is worth noting that monitoring provisions need not be targeted either at
highly suspicious transactions or at the entire universe of ordinary business
transactions. Between those polar alternatives it is possible to design inter-
mediate measures that target only a narrow range of transactions that are
unusually amenable to the purposes of terrorists. For example, it is now
widely recognized that charities have played a significant role in channelling
funds to al Qaeda and associated individuals and organizations, especially in
Southeast Asia.53 In an effort to facilitate the monitoring of charities’ finan-
cial activities it has been proposed that charities should be required to route
their transactions through established banking systems.54 Although this
measure would affect a significant volume of economic activity, it obviously
would not have the same impact as a blanket requirement that all actors
transact business through established banking systems.


E. Comparison to pre-existing law
One possible criticism of the newly enacted prohibitions is that they are
redundant because much of the conduct at issue could be prosecuted under
existing legislation imposing liability upon those who aid, abet or conspire
in the commission of activities such as murder, arson, hijacking or bombing.
Of course this critique is not particularly damning if the new legislation
merely serves to increase legal certainty.55 In any event, it is not clear that
pre-existing legislation permitted the targeting of activities based simply on
their relationship to terrorists as opposed to terrorist activities. Also,
although this goes somewhat beyond the scope of the matters discussed to
this point in this chapter, it is not clear that the pre-existing framework
granted law enforcement agencies equally effective investigative powers and
procedural flexibility, or contemplated the imposition of penalties as severe
as those contained in the recently enacted legislation.



52
Ibid., para. 86. 53 Second Report of the 1363 Monitoring Group, ibid., paras. 57–8.
54
Ibid., paras. 61–2.
55
Redundant legislation that is not carefully integrated with pre-existing legislation can
increase the complexity of a legal regime and thereby reduce legal certainty. This concern
probably applies in some of the jurisdictions discussed in this paper (e.g., the various tools
that US law enforcement agents have at their disposal to disrupt the financing of terrorism
are scattered among pre-existing federal law, Patriot Act provisions, and IEEPA which all
contain varying – and unclear – degrees of due process protections).
KEVIN E. DAVIS
194

III. Implementation and enforcement
Legislation can also be overly broad in the sense that it gives law enforcement
officials broad discretion to determine which types of activities are to be
punished under circumstances in which that discretion is likely to be abused.
´
Mariano-Florentino Cuellar has recently advanced a sophisticated argument
in support of the idea that law enforcement officials cannot be expected to
exercise their discretion to enforce prohibitions upon financing of terrorism
wisely.56 He adopts a model of law enforcement officials’ behaviour premised
on the idea that law enforcement officials are generally motivated by a desire
to please voters. He then assumes that voters have imperfect information
about the steps that law enforcement agencies have taken to combat the
´
financing of terrorism and their likely efficacy. Cuellar posits that in this
context voters will typically reward officials who take highly visible steps to
prosecute financiers of terrorism, regardless of the actual efficacy of those
steps and even if those officials have failed to take more efficacious but less
visible steps to counter terrorism.
´
Using this model, Cuellar predicts that law enforcement officials typically
will not exercise their discretion in a manner that is designed to minimize the
threat of terrorism. Rather, officials are likely to be biased against such a
strategy in at least three different ways. First, they are likely to be unduly
interested in cases that are relatively easy to detect because investments in
detecting other types of cases are not particularly observable to voters.
Second, officials are likely to prefer to bring cases against actors who are
already stigmatized by voters because it will be relatively easy to persuade
voters that such cases are effective means of countering terrorism. Third,
officials will be inclined to bring cases against actors that they personally
disfavour if voters cannot readily distinguish those actors from others who
pose a greater threat.
´
One shortcoming of Cuellar’s model is that it assumes that voters reward
officials based solely upon their perceptions of the efforts that the officials are
making to counter terrorism. However, it seems equally plausible to assume
that voters judge officials at least in part upon the results of their actions and
accordingly officials who fail to prevent terrorist attacks can expect to be
punished by voters. In countries that are highly likely to be the targets of
attacks this incentive may be sufficient to ensure that officials are properly
´
motivated to minimize the threat of terrorism. On the other hand, Cuellar’s
model may have greater application in countries that are not targets of
terrorism, but face pressure from targeted countries to undertake counter-
terrorism activities. In those countries the government may behave in the

56
‘The Mismatch Between State Capacity and State Power in the Global Attack on Criminal
Finance’ (2003) 22 Berkeley J. Int’l L. 15.
THE FINANCIAL WAR ON TERRORISM 195

´
ways that Cuellar suggests in order to please imperfectly informed foreign
actors (rather than imperfectly informed voters).57
´
Even if we leave aside Cuellar’s concerns about voters’ imperfect informa-
tion and assume that officials are motivated to minimize the threat of
terrorism, there remain grounds for concern about the manner in which
they are likely to go about this task. In an ideal world officials would arguably
strive not only to minimize the costs of terrorism, but also to minimize the
costs that counter-terrorist initiatives impose upon innocent actors.
´
However, as Cuellar observes, public officials may not be equally sensitive
to the interests of all actors. For instance, they may not be particularly
sensitive to the interests of small minority groups who cannot attract the
sympathies of members of more powerful groups. Similarly, the officials in
any given jurisdiction will often be relatively insensitive to the interests of
inhabitants of foreign jurisdictions. Consequently, it seems reasonable to fear
that public officials will systematically tend to impose undue costs upon
members of certain minority groups and inhabitants of foreign jurisdictions
in the course of their counter-terrorism activities. This intuition seems to
underlie minority groups’ complaints about racial or ethnic profiling. It also
implies that countries that are targets of terrorism will favour global adoption
of monitoring provisions that are likely to be viewed as excessively costly
from the perspective of countries that are not targets of terrorism.
An important challenge for the future will be to devise legal tactics capable
of responding to concerns about the exercise of discretion. One approach is
to challenge the constitutionality of the relevant prohibitions on the grounds
of overbreadth or vagueness. This approach has been attempted with some
success in the United States where a California federal court recently held that
the material support provisions were ‘impermissibly vague’ (but not over-
broad), and specifically ruled that the prohibition against ‘expert advice or
assistance’ was not sufficiently clear.58 An alternative approach would be to
use laws designed to prevent discrimination against racial or ethnic minor-
ities to control abuses directed at disempowered local groups. There may
even be creative ways to use principles of international economic law, such as
the national treatment and most favoured nation obligations contained in the
GATT, to limit abuses directed at foreigners.




57
For anecdotal evidence supporting this conjecture, see Salman Masood, ‘Path Out Of
Poverty Is Cut Short By Antiterror Snare’ New York Times, 10 May 2004 (quoting a
Macedonian government official claiming that a previous administration had killed seven
economic migrants as part of an attempt to ‘present themselves as participants in the war
against terrorism and demonstrate Macedonia’s commitment to the war on terrorism’).
58
Humanitarian Law Project v. Ashcroft 309 F. Supp. 2d 1185 (C. D.Cal. 2004).
KEVIN E. DAVIS
196

IV. Potential effectiveness
Even if it is applied rationally and in good faith there are reasons to doubt that
the recently upgraded legislative scheme will help law enforcement officials
make any meaningful progress towards punishing or preventing terrorism.59
First, terrorists’ economic activities are often inherently difficult to detect
because they involve property of relatively little value. It has been estimated
that the 9/11 attacks could have been carried out on a budget of a little over
$300,000, spread over several transactions.60 Even if it is able to monitor a
significant proportion of the enormous number of transactions involving such
small amounts of money, it will be difficult for any law enforcement agency to
use the resulting data effectively to identify illegitimate transactions.
A second ground for concern about the effectiveness of recent initiatives is
the possibility of substitution between various forms of terrorist financing.
Even if recent legal reforms have enhanced law enforcement authorities’
ability to detect and punish certain types of dealings with terrorists, they
almost certainly have not allowed them to disrupt all of the alternative
channels through which terrorists may obtain resources. For example, it is
now believed that al Qaeda finances itself through a combination of external
funding from state actors, external funding from private individuals or
organizations such as Islamic charities, funds generated internally through
illicit activity such as drug trafficking and fraud, and funds generated inter-
nally through legitimate business activities such as trading in honey and
tanzanite, and ownership of shipping.61 Recent legislative initiatives and
diplomatic pressure aim to deprive terrorist organizations of certain forms
of external funding. But even if those efforts are completely successful, they
may simply encourage organizations like al Qaeda to substitute internal
funding for external funding. (In fact, this trend may already be underway;
it is believed that the funding for the Madrid attacks was all obtained
internally.)62
Alternatively, law enforcement activities may cut off access to certain
forms of external funding in certain jurisdictions while allowing terrorists

59
See generally, Eric J. Gouvin, ‘Bringing Out the Big Guns: The USA Patriot Act, Money
Laundering and The War on Terrorism’ (2003) 55 Baylor L. Rev. 955.
60
Paul Beckett, ‘Sept. 11 Attacks Cost $ 303,672, But Few Details of Plot Surface’ Wall Street
Journal, 15 May 2002, at B4.
61
Second Report of the 1363 Monitoring Group, para. 31; Judith Miller and Jeff Girth, ‘Honey
Trade Said to Provide Funds and Cover to bin Laden’ New York Times, A1, 11 Oct. 2001;
Robert Block and Daniel Pearl, ‘Underground Trade: Much-Smuggled Gem Called
Tanzanite Helps Bin Laden Supporters’ Wall Street Journal, A1, 16 Nov. 2001; ‘Peril on
the sea’ The Economist, 4 Oct. 2003.
62
Elaine Sciolino, ‘Complex Web of Madrid Plot Still Entangled’ New York Times, A1,
12 April 2004.
THE FINANCIAL WAR ON TERRORISM 197

to use alternative channels and/or jurisdictions. For example, even if autho-
rities make it prohibitively risky for terrorists to transfer funds from Egypt to
the United States by way of wire transfer, they may not be able to prevent
them from transferring funds through a hawaladar from Egypt to an accom-
plice in Malaysia and then by ordinary wire transfer to the United States via
Singapore.
Legislation designed to counter the financing of terrorism threatens to
impose significant costs upon legitimate economic activities. The potential
ineffectiveness of the legislation suggests that the offsetting benefits may be
small. Concerns about this possible imbalance ought to be taken into account
in assessing the merits of proposals to retain or amend this legislation.63


V. Conclusion
This chapter has attempted to outline the legislative provisions that provide
the legal underpinnings of the financial war against terrorism as well as some
of the concerns that they have generated. Some of the most substantial
concerns have revolved around the question of whether the new legislation
captures an overly broad range of conduct. Many have suggested that the
legislation permits costs – financial or otherwise – to be imposed upon actors
engaged in wholly legitimate activities. For example, prohibitions upon
donating funds to charities with ambiguous or mixed purposes may serve
to discourage donations to a broad range of charitable organizations that find
it too costly to generate detailed documentation of their activities.64
Ultimately, the costs of such regulations may be borne by the prospective
beneficiaries of the charities. Similarly, the new procedures governing the
opening of bank accounts and sending wire transfers have imposed enormous
costs upon financial institutions and their customers, including both the
financial costs of compliance and the less tangible but arguably just as
significant costs represented by loss of privacy. Imposing costs upon innocent
actors in this way not only seems unjust but also may serve to deter socially
valuable activities and foster dangerous levels of resentment in affected
communities.
A second and related concern about the new regime is that it will be
enforced irrationally or arbitrarily. At the domestic level, the new regime
may be used against some of the most vulnerable members of society such as
members of racial or ethnic minorities. At the international level, there are

63
A complicating factor in such an analysis will be that many of the costs associated with the
legislation may already have been incurred and so should not be taken into account when
assessing the costs of retaining the legislation.
64
Stephanie Strom, ‘Small Charities Abroad Feel Pinch of U.S. War on Terror’ New York
Times, 5 August 2003, A8. See also Humanitarian Law Project v. United States DOJ.
KEVIN E. DAVIS
198

analogous grounds for concern that enforcement of the new regime may
cause the weakest members of the international community to bear dispro-
portionate costs. In addition, in both contexts some reason exists to believe
that law enforcement agents might focus upon only the most easily detected
threats and ignore targets that pose threats that are just as serious, if not more.
A third and final concern is that the financial war against terrorism is
doomed to failure in light of the inherent difficulty of combating some
methods of terrorist financing. The chain of domestic and international
legal provisions that has been forged to combat financing of terrorism may
turn out to be only as strong as its weakest link. Under these circumstances it
may be difficult to justify the tremendous costs that have been incurred to
create the regime.
For the time being, much of the foregoing analysis is highly speculative.
Ultimately, the scope and effects of the legislative provisions concerned with
financing of terrorism will depend upon how the applicable legislation is
interpreted and enforced. Future research – including doctrinal studies of
legislative amendments and relevant judicial decisions, empirical studies of
trends in the enforcement of the legislation and its impact on targeted
activities, and theoretical studies designed to identify potential improve-
ments to existing provisions and their likely effects – will play an important
role in assessing the impact of the legal framework and identifying potential
improvements.
10

Terrorism and technology: policy challenges and
current responses
MARY W. S. WONG


I. Introduction
The direct, immediate legislative and policy response of many governments
to the September 11 terrorist attacks on the United States highlighted an
increasing reliance by governments on surveillance technology. Many of these
post-9/11 laws and policies have attracted controversy and public attention
for their impact on privacy protections, particularly in the US, where civil
liberties advocates have accused the US government of favouring security
over liberty. Given the US government’s continuing lead role in the fight
against terrorism, its actions and the public reaction to them may provide
useful lessons for other governments and lawmakers as they too seek to find
an appropriate, justifiable and legitimate approach to deal with similar
threats. In addition, because the US is popularly perceived by many non-
Americans to be a fully-fledged democracy and a leading defender of civil
liberties, the current view of many privacy advocates and watchdog groups –
that post-9/11 the US government has adopted rules and mechanisms that
threaten free speech and increase government secrecy – deserves closer
attention. The picture that emerges from this chapter is a sobering one for
governments seeking to model their policies after those of the US govern-
ment. Even where a responsible and democratic government is taken to be
acting in what it believes to be in the best national interest, it can nonetheless
be perceived as unnecessarily secretive and possibly untrustworthy. Where
broad law enforcement powers are coupled with unchecked government use
of surveillance technology, it is important that a government practises, as far
as that is reasonable and practicable, open dialogue and transparency with its
citizenry and their advocates.
It should be noted from the outset that some major changes to US law and
practice, which also carry implications for privacy (e.g., immigration con-
trols, detentions and treatment of prisoners) are beyond the scope of this


I am grateful to Kent Roach and Victor V. Ramraj for their helpful comments on a draft of
this chapter. The laws, policies and programmes described in this chapter are those as of
August 2004.

199
MARY W. S. WONG
200

chapter, which will focus largely on privacy issues raised by the increasing use
of surveillance technology.1 Specifically, post-9/11 changes to US law and
policy that affect the protection of personal information and public access to
information will be examined. As a point of comparison, similar legal changes
in the United Kingdom, the major ally of the US in the current military
campaign in Iraq, will also be examined.


II. Background
A. Post 9/11 anti-terrorism law and policy developments in the US
1. The Patriot Act
The enactment of the USA PATRIOT Act2 in October 2001 (barely six weeks
after the terrorist attacks of 9/11) and its attendant controversies highlighted
several characteristics of the US government’s previous counter-terrorism
activities. These included the traditional distinction between the govern-
ment’s ‘intelligence’ and ‘law enforcement’ activities; the differences in prac-
tice and process between domestic surveillance and foreign surveillance; and
the increasing difficulties arising from the existence of distinct, specific and
technically complex pieces of legislation concerning potentially overlapping
activities (e.g., wiretapping and computer hacking). The constitutional right
to freedom of speech and freedom from unreasonable search and seizure
would by their very nature come under potential threat from any proposed
increase in government surveillance of its citizens and other persons, includ-
ing any easing of process rules for the authorization of any surveillance
activity. The changes to US surveillance, government access and investigatory
powers wrought by the Patriot Act highlighted these tensions, and continuing
attempts by the current US government to tweak the Act have met with
challenges from civil liberties groups and privacy advocates.3
Essentially, the Patriot Act made a number of changes to US surveillance
laws, including the wiretap statute, the pen/trap statute, the Foreign
Intelligence Surveillance Act (FISA) and the Computer Fraud and Abuse

1
For a more detailed analysis of other changes to US law and policy, see William C. Banks,
Chapter 22, in this volume.
2
The United and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act 2001 (Patriot Act), Pub. L. No. 107–56, 115 Stat.
272 (2001).
3
For a fuller discussion of the provisions of and changes wrought by the Patriot Act,
see Charles Doyle, ‘The Patriot Act: A Legal Analysis’ (RL 31377, 15 April 2002, a
Congressional Research Service Report for Congress, http://www.fas.org/irp/crs/
RL31377.pdf); Nathan C. Henderson, ‘The PATRIOT Act’s Impact on the Government’s
Ability to Conduct Electronic Surveillance of Ongoing Domestic Communications’ 52
Duke L. J. 179; and Mary W. S. Wong, ‘Electronic Privacy in the United States After
September 11th 2001’ (2002) Sing. J.L.S. 214.
TERRORISM AND TECHNOLOGY 201

Act (CFAA). These changes tended to increase overall the US government’s
ability and powers of surveillance by, for example: (1) increasing the number
and type of crimes falling within the interception provisions of the wiretap
statute; (2) allowing ‘sneak and peek’ searches (i.e., without requiring the
giving of contemporaneous notice to the search subject); (3) providing for
nationwide application of warrants and surveillance orders; (4) allowing
roving wiretaps; (5) increasing the scope of subpoenas for the obtaining of
electronic communications records; (6) lowering the standard required for
FISA surveillance; and (7) removing restrictions on pen registers and trap and
trace devices for telephone communications.4 The Patriot Act did, however,
preserve some judicial oversight and Congressional safeguards, particularly
as regards procedures to be followed when obtaining search orders, and some
of its more expansive provisions were subject to ‘sunset’ provisions.5

2. Subsequent developments
Subsequent legislative and regulatory changes could also have an impact on
privacy and liberty. Unlike the Patriot Act, these changes did not all come in
an omnibus package, but were more piecemeal and at least initially less
obvious. These include: (1) the introduction of reforms to the Federal
Bureau of Investigations (FBI) aimed primarily to transform it ‘from a largely
reactive law enforcement agency focused on criminal investigations into a
more mobile, agile, flexible, intelligence-driven agency that can prevent acts
of terrorism’;6 (2) the establishment of a new Department of Homeland
Security in November 2002 (the legislative basis for which included
additional government exemptions from the Freedom of Information
Act); (3) the launch of the Total (later renamed Terrorist) Information
Awareness (TIA) Program in 2002; (4) the development of a new air passenger
screening system (CAPPS II); and (5) the issuing of various government agency
guidelines dealing with surveillance, investigations and intelligence work. These
guidelines include the Department of Justice’s memorandum issued soon
after the Patriot Act on Field Guidance on New Authorities Enacted in the


4
Ibid; see also the Electronic Privacy Information Center’s summary of the Patriot Act:
http://www.epic.org/privacy/terrorism/usapatriot/.
5
Additionally, a bipartisan bill, The Security and Freedom Ensured Act of 2003 (SAFE),
H.R. 3352 and S. 1709, was introduced in Congress in late 2003, seeking to limit some of the
Patriot Act’s broader surveillance provisions.
6
These were instituted in large part as a reaction and response to the report of the
Congressional Joint Inquiry Into the Terrorist Attacks of 11 September 2001, which
specifically noted that the FBI had been ‘seriously deficient’ in identifying, reporting on
and sharing information regarding the threat of terrorist attacks in the US: see, e.g., Alfred
Cumming and Todd Masse, ‘FBI Intelligence Reform Since 11th September 2001: Issues
and Options for Congress’ (RL 32336, 4 August 2004, a report published by the
Congressional Research Service: http://www.fas.org/irp/crs/RL32336.pdf).
MARY W. S. WONG
202

2001 Anti-Terrorism Legislation, and the release in November 2003 of the new
Attorney-General Guidelines for FBI National Security Investigations and
Foreign Intelligence Collection.7
In addition to these changes, the US government had also apparently
intended to introduce new legislation that was quickly dubbed ‘Patriot II’
for further increasing government investigatory and surveillance powers
beyond those already provided for in the original Patriot Act.8 The draft of
Patriot II (or more accurately, the Domestic Security Enhancement Act) was
not prepared by Congress, and its existence was made public only through a
leak from the Justice Department in January 2003, a fact that contributed to
the growing public perception of government secrecy above legislative parti-
cipation and public debate.9 This perception was probably enhanced by the
fact that the leak of Patriot II occurred around the same time that President
Bush, in his State of the Union address in January 2003, called on Congress to
‘renew’ the Patriot Act even though its ‘sunset’ provisions are not due to be
reviewed until 2005.
Although Patriot II as drafted was quickly shelved, in part due to a storm of
criticism, elements of it found their way into subsequent, specific legislation.
This included a provision in the Intelligence Authorization Act for Fiscal Year
200410 which was passed in December 2003. As a piece of legislation required
annually to allocate funding for US intelligence agencies, such Acts are
usually passed without much Congressional debate.11 The 2004 Act
authorizes the FBI to obtain financial records from a broad range of ‘financial
institutions’ without the need for judicial scrutiny,12 a power that had been

7
These replaced the previous Attorney-General Guidelines for FBI Foreign Intelligence
Collection and Foreign Counter-intelligence Investigations. There had previously also
been revisions to the general guidelines for FBI criminal investigations which were
reissued in May 2002 as part of a broader review.
8
Among other matters, Patriot II would have permitted the collection of genetic informa-
tion, easier access by the government investigators to credit reports, and expanded orders
under FISA; there also appeared to be no ‘sunset’ provisions similar to those in the Patriot
Act. For a draft of Patriot II and a section-by-section analysis of the Act, see http://
www.publicintegrity.org/report.aspx?aid ÂĽ 94&sid ÂĽ 200.
9
See, e.g., the articles collected by the Center for Democracy and Technology on its website
on Patriot II: http://www.cdt.org/security/010911response.shtml.
10
P.L. 108–177, December 2003, 117 Stat. 2599.
11
It appears that such legislation is largely viewed as a ‘must pass’ bill drafted in relative
secrecy; however, this means it could be a vehicle for a quick passage of otherwise
controversial or difficult provisions: see Kim Zetter, ‘Bush Grabs New Power for FBI’
Wired News, 6 January 2004, http://www.wired.com/news/privacy/0,1848,61792,00.html.
12
‘Financial institutions’ is fairly broadly defined (by means, in s. 374, of an amendment to
s. 1114 of the Right to Financial Privacy Act of 1978 (12 U.S.C. 3414)) and would include
businesses such as real estate brokers and car dealerships. In effect, this means that the FBI
need only comply with the requisite statutory requirements regarding requests and
written certification (which may be in the form of so-called ‘National Security Letters’
TERRORISM AND TECHNOLOGY 203

sought under Patriot II and which is accompanied by a non-disclosure
obligation on the part of the financial institution concerned. Bills have also
been introduced in Congress that either echo or contain elements of Patriot II;
for example, in September 2003, the Anti-Terrorism Intelligence Tools
Improvement Act of 2003 was introduced in the House of Representatives.
The Act, if passed, would strengthen the penalties for violating the non-
disclosure provisions of various laws relating to financial privacy, allow the
Attorney-General to seek a court order to compel compliance with records
requests, and amend certain portions of FISA.13
The continuous stream of such changes contributes to a belief that overly
broad executive powers are being sought in the name of national security,
accompanied by a whittling down of accountability (e.g. judicial oversight)
and an increased reliance on secrecy. Among the most controversial federal
proposals is the use of data mining and data harvesting techniques to create
and analyze data from commercial and government databases, to help to
identify potential terrorists, and to facilitate information-sharing among
counter-terrorism agencies.14 The US government has also pushed for bio-
metric identifiers to be included on new US passports issued after 2005 (this
being a requirement for passports issued by countries participating in the US
Visa Waiver Program as of 26 October 2005),15 and there are some advocates
for the adoption of a national ID card, as already exists in some countries.16
In addition, the Federal Communications Commission (FCC) in response to
a petition filed by the FBI and other government agencies recently proposed a
rule that would subject communications over the Internet to the require-
ments of the Communications Assistance for Law Enforcement Act of 1994
(CALEA).17 CALEA requires that telecommunications providers design their
equipment so as to facilitate authorized wiretapping by the FBI.
Many countries outside the US have considered deploying surveillance
technology such as biometrics and data mining for law enforcement and
drafted by its officers of a certain rank) in order to obtain financial records from a wide
range of institutions, and would not need to obtain a court order.
13
H.R. 3179. Hearings were held before the House Judiciary Committee in May 2004, and
the bill is thus currently ‘in process’. There are several other bills pending before Congress
that deal with some of the powers and issues raised in Patriot II; e.g., H.R. 3037, the Anti-
Terrorism Tools Enhancement Act of 2003 and H.R. 2935 and S. 1604, the Terrorist
Penalties Enhancement Act of 2003.
14
The TIA Program and CAPPS II, probably the most well-known initiatives involving data
mining, are analyzed later in this chapter.
15
This was mandated by the Enhanced Border Security and Visa Entry Reform Act of 2002,
under which the original deadline was 26 October 2004. The one-year extension was
approved by Congress and signed by the President in August 2005.
16
E.g., some European countries, Australia, Hong Kong, Malaysia and Singapore.
17
See FCC 04–187, ET Docket No. 04–295 RM-10865, ‘In The Matter of Communications
Assistance for Law Enforcement Act of 1994 and Broadband Access and Services, Notice of
Proposed Rulemaking And Declaratory Ruling’, adopted 4 August 2004.
MARY W. S. WONG
204

anti-terrorist purposes, and in the wake of 9/11 some have enacted legislation
enhancing government surveillance powers.18 As mentioned previously,
some countries already use national identification cards and some regularly
employ video surveillance, though mainly for detecting traffic violations and
crimes such as theft. But except for jurisdictions such as the EU, which has
clear and specific data protection and privacy protection laws, in other
jurisdictions privacy laws are vague or minimal, or contained in a diverse
‘patchwork’ of laws. In the US, the lack of comprehensive privacy, data
protection and database laws may not be entirely alarming. This is because
balance can be provided and public scrutiny ensured through its strong
Constitutional tradition, the number of cases brought to its courts challen-
ging laws and executive authority,19 the existence of a generally strong and
participative Congress and the active monitoring of government initiatives by
privacy and other advocacy groups. But in countries without effective privacy
laws or judicial or other oversight mechanisms to prevent abuse of executive
authority the increasing use of surveillance technology is more disturbing.
Although each new law may in itself constitute a potential threat to
privacy, this plethora of changes may have an overall erosive effect on privacy.
For example, increased access by investigators to personal and communica-
tions data coupled with a data retention regime could mean that more
information is stored, and for a longer period of time, by service providers.
This information would be easily accessible to authorities in the absence of
strict standards as to how and when it is to be turned over. Similarly, having
few legal restrictions on data mining, harvesting and sharing, combined with
an increased investment of resources in law enforcement capabilities and
organizations, would facilitate profiling of persons and wider usage of perso-
nal information generally. When these legal and policy developments are seen
in the light of developments in technology such as data analysis methods,
biometrics and improved surveillance techniques, their potential impact on
privacy appears even greater.


18
In the United Kingdom, the Terrorism Act of 2000, among other things, widened the
scope of police investigatory powers, including the power to detain suspects for up to
seven days. Post-9/11, the Anti-Terrorism, Crime and Security Act 2001 (ATCSA) dealt
with, among other things, the potentially-indefinite detention of foreign nationals sus-
pected to be terrorists. In August 2004, the Court of Appeal rejected the appeals of several
detainees who had challenged their detention under the ATCSA, alleging that the evidence
on which the detentions were based had been obtained through torture of prisoners held
in Guantanamo Bay. Also significant is the Regulation of Investigatory Powers Act 2000
(RIPA), discussed below, which deals with the interception of content over communica-
tions networks and access to communications data.
19
On the privacy and free speech front, these include the Fourth Amendment cases of Katz v.
US, 389 US 347 (1967); Kyllo v. US, 533 US 27 (2001); and Bartnicki v. Vopper, 532 US 514
(2001).
TERRORISM AND TECHNOLOGY 205

B. The many faces and uses of surveillance technology
The term ‘surveillance technology’ is very general and fairly broad, and
encompasses virtually any type of device or means that enables someone to
be watched and monitored. Case law and much of the early media attention
on the Patriot Act focused largely on technology such as key logging devices,
the FBI’s ‘Carnivore’ software and similar ‘sniffer techniques’;20 ‘spycams’
and video surveillance;21 facial recognition software; and more widely used
commercial technology such as ‘cookies’, ‘web bugs’ and other ‘adware’ that
monitored an electronic user’s computer and online activities. Since then,
however, the use of other technology has surfaced including RFID (radio
frequency identification) tags and technology, biometrics and ‘smart ID’
cards, data mining and data harvesting techniques, and the creation of
agencies, databases and other legal mechanisms deploying these and a range
of similar technology ostensibly for counter-terrorism purposes.22 Of these,
the use of data mining and harvesting techniques – largely to aid in data
sharing and analysis across agencies and governments – has been highlighted
by the US government as a highly useful, even necessary, tool for detecting
and preventing terrorism. The US government’s approach in this area, and its
possible international effects, is analyzed in the next section.
Fundamentally, an act of terrorism can be seen as simply another form of
criminal act, whatever the moral justifications and objections. As such, many
forms of surveillance technology have been and are being used by criminals,
from hackers to organized crime, for the same purposes. Similarly, it is
known that terrorists use the same modern technological tools as govern-
ments, such as the Internet, computer and communications technology, to
organize, communicate and perpetrate their activities.23

20
The Scarfo case (Criminal No. 00–404 D.N.J.) was apparently the first case dealing with the
FBI’s use of ‘key logging’ software and technology to obtain evidence from a suspect’s
computer. The government opposed the court-ordered disclosure of the technology, and
eventually was required to release only very limited information. In a December 2001
decision, the District Court found that the disclosure of such unclassified information
provided the defence with as much information as they required. There was no further
appeal as the defendant entered into a plea agreement in February 2002.
21
These have apparently been more commonly used in Europe rather than the US.
According to the Electronic Privacy Information Center (EPIC), ‘in the past decade,

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