Business Must Place the War on a Financial Footing

Article excerpt


he war against terrorism will be fought on military, diplomatic, intelligence and financial fronts. The first three will not be the direct responsibility of business, but the financial front most certainly will be, particularly for banks and other financial institutions - and the professions that support their work. The question that all concerned, from the cabinet down to individual accountants and lawyers, must now ask is: Are our defences and means of attack on this front fully effective?

One of the first lines of defence in the UK is the Terrorism Act 2000, which makes it an offence to receive money or other property for the purpose of terrorism. It is also an offence to give or lend money or other property for this purpose. If a person then uses the money for terrorism, that is also, as you would expect, an offence.

The act contains an offence of laundering terrorist money, and powers to compel the disclosure of information to the police. Cash can be seized and detained for up to three months while investigations are taking place. After conviction, the money can be forfeited.

But this is not the only weapon at the regulators' disposal. It is not always easy to distinguish terrorist fund-raising from other types of criminal activity. Crimes such as drug trafficking, fraud and illegal arms trading can be used to finance terrorists - who need to launder money through banks or other institutions in order to use it without suspicion while they plan their crimes.

It is vital, therefore, that our anti-money laundering systems respond efficiently to the threat. As a leading centre for fund management and currency trading, the City of London is particularly attractive to money launderers.

Money laundering has been an offence since the 1980s. From 1994, the Money Laundering Regulations have compelled banks and other financial institutions to maintain anti-money laundering procedures. They have an obligation to report suspicious transactions to the authorities - and, thanks to a new European directive, this obligation will shortly be extended to include auditors, lawyers, bureaux de change, estate agents and casinos. There will also be a common definition of money laundering in Europe and a harmonised legal framework.

In addition, when the Financial Services and Markets Act takes effect in December, the Financial Services Authority will be able to prosecute for breaches of the Money Laundering Regulations. …