Financial Controls and Counter-Proliferation of Weapons of Mass Destruction

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This paper focuses on financial controls and vigilance against the proliferation of Weapons of Mass Destruction (WMD). It refers to the new Financial Action task Force (FATF) Recommendations on this subject and outlines relevant provisions of the U.N. Security Council Resolutions (UNSCRs) and the considerable challenges facing the international community in their implementation. While it suggests that there is a good deal of work underway towards consistent and effective implementation, it points to some concrete measures and areas where counter-proliferation finance efforts could focus, particularly in the area of commerce and trade.



Neither the use of financial sanctions as a tool to apply pressure on governments nor controversies and diverse interpretations of their effects are new. An early example from classical Greece is the Megarian Decree, under which Athens introduced a trade embargo on Megara merchants during the Pericles era. (1) Aristophanes, (2) Thucydides (3) and others (4) offered very different views: some suggested that it was effective, while Thucydides regarded it as a pretext for the war that followed.

The U.N. first introduced sanctions in the 1920s, but it employed them seldom in the years that followed. It was the 1990s that witnessed a significant growth in the use of such coercive measures. (5) Aimed at global security threats in ways that could be effective but less radical than the use of force, (6) their scope has widened, ranging from aggression and conflict to international terrorism and proliferation of weapons of mass destruction (WMD). (7) Multilateral sanctions have been considered and applied due to proliferation concerns in several countries, (8) but the most recent ones focus on non-state actors, the Islamic Republic of Iran, and the Democratic People's Republic of Korea (DPRK). (9) Originally, counter-proliferation measures revolved chiefly around export controls, but these are now supplemented by financial control requirements for both governmental and private sector actors.

At the same time, "follow-the-money" approaches to crime control have been applied at both the national and international levels. (10) Financial controls have been increasingly employed to address serious crime and security problems ranging from organized criminal group activities to corruption and the support of terrorism. These can be used for investigative and intelligence-gathering objectives--they assist in identifying co-conspirators, facilitators, and supporters--as well as for deterrence, disruption, punishment and confiscation purposes. The most recent addition to the list of unlawful practices targeted with this approach is the financing of WMD proliferation. In February 2012, the Financial Action Task Force (FATF), a body setting international standards on money laundering and terrorism finance, revised its Recommendations and incorporated the issue of proliferation finance. (11) New Recommendation 7 is entitled "Targeted financial sanctions related to proliferation" and states that:

   Countries should implement targeted financial sanctions to comply
   with United Nations Security Council resolutions relating to the
   prevention, suppression and disruption of proliferation of weapons
   of mass destruction and its financing. These resolutions require
   countries to freeze without delay the funds or other assets of, and
   to ensure that no funds and other assets are made available,
   directly or indirectly, to or for the benefit of, any person or
   entity designated by, or under the authority of, the United Nations
   Security Council under Chapter VII of the Charter of the United
   Nations. (12)

There is no legal and universally adopted definition of "proliferation finance. …