Panel 3: Security, Terrorism, and Justice Issues in a Changing World Tuesday November 15 (1:00- 2:15)

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Panel 3 Security, Terrorism, and Justice
Issues in a Changing World Tuesday November 15
(100- 215)
12th Symposium on Development and Social
Transformation
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12th Symposium on Development and Social
Transformation
Panel 3 Security, Terrorism, and Justice Issues
in a Changing World
The United Nations Security Councils Post
September 11 Response to TerrorismVeronica
Reeves
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Resolution 1373

• passed September 28, 2001
• binding for all member-states
• focused on freezing terrorist assets
• created the Counter-terrorism Committee

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The Counter-terrorism Committee
(CTC)

• first-of-its kind group
• made up Security Council members
• monitors implementation of Resolution 1373

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CTC Successes

• received reports from all 192 states within one
  year
• has provided assistance to states
• energized IOs like the EU and IMF

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Future Challenges

• declining momentum as time passes
• tension between CTC and UN Secretariat
• lack of enthusiasm from United States

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Recommendations

• continue working with states to identify sources
  of terrorist financing
• develop measures requiring states to close-off
  porous borders
• explore terrorism-drug link more thoroughly
• continue working on definition of terrorism (UN
  as a whole)

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12th Symposium on Development and Social
Transformation
Panel 3 Security, Terrorism, and Justice Issues
in a Changing World
Money Laundering An Indian Perspective
vis-à-vis the USASanjiv Srivastava
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Money Laundering Definition

• Any act or attempted act to disguise the source
  of money or assets derived from criminal
  activity United Nations
• Hide Disguise
• True origin of the criminal proceeds.
• To derive the profits on continuing basis from
  criminal activity.
• To delete the trail of criminal origin of money

• Predicate Offences
• Drug trafficking
• Counterfeiting
• Smuggling
• Theft
• Embezzlement
• Racketeering
• Tax evasion
• Kidnapping
• Illegal arms sales
• Bribery
• Illegal trade

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Stages in Money Laundering

• Placement
• Layering
• Integration

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Economic Impacts

• Unpredictable flow in and out of funds from the
  jurisdiction.
• Improper assessment of the present and future
  incomes.
• Negative Co-relation with GDP (IMF study)
• Encourages Tax evasion and Corruption.
• Corrupts and brings disrepute to Banks and
  Financial Institutions.

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Money Laundering Estimates
Global money laundering has been estimated by
the IMF as the equivalent of between 2 and 5 per
cent of world output which could amount to 500
billion a year. Such an estimate applied to the
UK would imply money laundering of 18-45 billion
annually. It would be unwise to place great
reliance on any of these estimates but it is
undeniable that money laundering involves huge
sums of money and that, as long as there are
criminal proceeds there is going to be money
laundering HM Treasury Money Laundering
Strategy Policy Document June 2003
FATF 500b -1.5 trillion
IMF 2-5 World GDP
KPMG 500b- 1 trillion
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International Effort

• The Vienna Conventinon-1988
• Financial Acton Task Force-1989 made 40
  recommendations for counter money laundering
  regime in 1990, these recommendations were
  thoroughly revised in 2003
• Basle Committee Statement of Principles-1988 has
  published best practice base standards for
  customer identification, know your customer (KYC)
  activity, and corporate governance.
• European Union Directive-1991 EU Second Money
  Laundering Directive provides a specific focus
  and sets minimum standards for European Banks.
• Wolfsberg Principles for Private Banking
• IOSCO-1992
• The International Monetary Fund and the World
  Bank have incorporated AML issues into their
  country assessments. They provide technical
  assistance to member countries to develop counter
  money laundering regime.

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Legislation USA
Source Bureau of Justice Statistics Special
Report on Money Laundering Offenders 1994-2001 by
Mark Motivans, Ph.D. BJS Statistician
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Anti Money laundering Legislation

• Criminalization of Laundering as per Vienna
  Convention.
• Determining Predicate Offences
• Establishing Of a FIU or other mechanism for
  exchange of information with other jurisdictions
• Reporting, Identification, Recording,
  Verification of Transactions Etc.
• Civil Criminal Liabilities
• Co-ordination Mechanism between various
  agencies.

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Analysis Experiences

• US Counter-Money Laundering Legislation
  "Virtually Dead", 14 September 2000 "I am glad
  that the bill appears headed for defeat," Sen.
  Paul stated. "My office opposed the earlier
  version of this very dangerous legislation, and
  we will generate massive public opposition to any
  further attempts by the federal government to
  invade private banking records
• US Attorney-General Pitches In On
  Money-Laundering, 14 August 2001 Efforts to
  kick-start an anti-money laundering initiative
  follow embarrassing revelations that US banks
  have been used to launder billions of dollars
  from drug trafficking, fraud, and organised crime
  activities. Senator Levin estimated that over
  500 billion was being laundered through US
  financial institutions each year, and called the
  existing anti-money laundering laws 'out-of-date
  and inadequate'.
• US Senate Banking Committee Approves Money
  Laundering Law, 08 October 2001 On Friday the
  US Senate Banking Committee unanimously approved
  broad legislation to combat money laundering that
  would require banks and other financial
  institutions to make a serious effort to
  determine the source of deposits from foreign
  countries, and would authorize the Treasury
  Department to take various actions against
  dubious foreign banks, including prohibiting
  American banks from dealing with them. The
  administration had opposed further legislation on
  money-laundering before the Sept. 11 terrorist
  attacks. But the International Money Laundering
  Abatement and Anti-Terrorist Act of 2001, moved
  quickly through the committee after a hard push
  from the chairman.
• Source Taxnews.com

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Continue

• US Banks Escape Strictest Anti-Money Laundering
  Rules, 30 October 2001 Although the Senate
  passed the new anti-money laundering bill placing
  new regulatory restrictions and responsibilities
  on banks based in the United States last
  Thursday, it is becoming increasingly clear that
  as a result of pressure from lobbyists, some of
  the more powerful rules have been watered down or
  amended significantly. The onus will be on
  foreign banks doing business in the US, and on
  non-banking institutions which handle large sums
  of money, and that US banks will not, in fact,
  have to make too many changes. For the time
  being, banks have succeeded in holding off
  complete regulation here.
• Source Taxnews.com

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Continue

• We have developed the international financial
  equivalent of law enforcements most wanted list
  and it puts the financial world on notice. If you
  do business with terrorists, if you support or
  sponsor them, you will not do business with the
  United States, President USA
• In the weeks after Sept. 11, Justice and
  Treasury officials compiled a list of some two
  dozen alleged al-Qaeda operatives and financiers.
  The officials asked that Secretary of State Colin
  Powell pass the list on to the Saudi foreign
  minister with a request that the bank accounts of
  the individuals be frozen.
• A State Department official with knowledge of
  the episode said the list amounted to a bunch of
  nicknames, Arabic versions of mobster handles
  such as "Vinny the Chin. When the State
  Department passed on the list, the Saudis greeted
  the request with laughter. They said the "names"
  were of no help in finding terrorist bank
  accounts, the official said US Today 1st July
  2002

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Some Observations

• "Governments have already lost the war against
  financial economic crime, and theyve left it up
  to financial institutions to solve the problem.
  We have had new regulations after 11 September
  2001. We have to obey them, and only because the
  governments didn't know what to do about
  financial crime...In the Netherlands, we have to
  chart all the names relating to domestic
  payments. All the banks together have rebelled.
  It's impossible to do and theres no point. These
  stupid laws get us nowhere..."

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AML prior to and after Patriot Act

• Prior
• Currency Transaction Reports
• Funds Transfers and Transmittals reports
• Suspicious Activity Reporting-Red Flags

• After
• SEC 312 Private Banking Account
• SEC 313 Correspondent Account
• SEC 314 Financial Institution Cooperation
  Provision
• SEC 319 Domestic and Foreign Bank Records
  Production
• SEC 352 Anti Money Laundering Programs
• SEC 356 Suspicious Activity Report by the
  Securities and futures Industry
• SEC 256 Customer Identification and Verification

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Indian Experience

• No Strict Counter Money Laundering Regime.
• Implemented through various legislations as
  Income Tax Act, 1961, Customs Act, 1962, Narcotic
  Drugs Psychotropic Substance Act, 1985, Foreign
  Exchange Management Act 1999, The Criminal Law
  Amendment Ordinance XXXVIII of 1944 etc.
• Reserve Bank of India issued guidelines to bank
  for implementing KYC.
• Was not part of any international body recently
  has joined Asia Pacific Group on Money
  Laundering.
• Prevention of Money Laundering Act, 2002 has been
  made effective from 1st July 2005.
• Created an FIU in Ministry of Finance in November
  2004, but no work undertaken by FIU till now.
• RBI has directed all the Banks in India to become
  Bessel compliant by 2007.

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Suggestion Recommendations

• - Indias FIU should be operationalized
  immediately become the Member of EGMONT group.
• Know your Customer guidelines issued by RBI
  should be given legal status and implemented in
  proper perspective.
• PMLA, 2002 should be aligned with US Patriot Act,
  2001 and revised FATF recommendations 2003.
• Creation of a data bank for suspicious
  transactions and circulation of indicative list
  of suspicious activities to assist banks in
  detecting suspicious patterns of behavior by
  their customers.
• Close scrutiny is required of business
  transactions with countries that do not conform
  with international anti money laundering
  standards.
• Effective coordination between regulatory and
  enforcement authorities and various agencies
  which are regulating economic entities and where
  scope exists for money laundering and frauds to
  take place.
• More formal inter-regulatory arrangements also
  need to be considered to ensure the applicability
  of FATF recommendations across banks, non banks,
  other financial institutions and such businesses
  or professions which are not financial
  institutions but conduct financial activities as
  a commercial undertaking

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12th Symposium on Development and Social
Transformation
Panel 3 Security, Terrorism, and Justice Issues
in a Changing World
Port Security Analysis of New Initiatives Taken
By U.S. Post 9/11 and Lessons for Gujarat State,
IndiaRajnish Kumar Rai
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Aspects of port security

• Security of port area, ships/vessels, personnel
  calling or leaving the port and or physical
  security of cargo
• Prevention of infiltration of unauthorized
  persons and smuggling and dumping of contrabands

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Why Ports are Vulnerable?

• Port facilities
• Size and accessibility
• Surrounded by metropolitan areas having
  infrastructure of urban life
• Amount of flow of goods
• Legitimate pathways can be exploited
• Ships, oil tankers can be target
• Container shipments
• Maritime crimes

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Pre 9/11 Port Security Scenario

• Different attitudes towards seaport
  security-Belief in the sanctity of US shores
• Different perceived threats
• Cargo theft
• Drug Smuggling
• Stowaways and alien smuggling
• Export Crime
• Threat of terrorism discussed in the Graham
  Commission report
• FBI considered the threat to US Seaports as low
• Recognized the vulnerability to be high
• Potential damage high
• Lack of information provided to local entities
  was significant

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Post 9/11 initiatives

• Identifying and reducing vulnerabilities of the
  facilities, infrastructure and vessels
• security audit of ports vessels, TWIC, etc.
• Securing the cargo
• ATS. CSI, OSC, C-TPAT, etc.
• Developing greater maritime domain awareness
• AIS, analysis of information and intelligence,
  dissemination of information and intelligence,
  etc.

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Does US has a policy?

• Pushing the borders outwards
• Hardening the border
• Making the border more accessible for legitimate
  trade and travel
• Strengthening the border through more effective
  use of intelligence
• Multiplying intelligence through the engagement
  of other actors

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Challenges in making initiatives successful

• Balancing security and commerce
• Funding issues
• Funding port security
• Sources of funds
• Allocating resources
• Standard vs. Site specific measures
• Defining roles and responsibilities
• Program design and implementation
• Threat of terrorist nuclear attack using oil
  tankers

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Problem faced in Implementation

• Security related issues
• Vessel Identification System
• Port Security Assessment
• Vessel Security Plans
• Transportation Workers Security Cards
• Operational and efficiency issues
• Duplication of Maritime Intelligence System

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Weakness in the policy response

• Agencies acting without sufficient information
  regarding the impact on the private sector
• Significant financial burden on industry
• Security regimes created without consideration
  for practical implementation
• Creating future operational problems
• Airport security analogies
• Hasty implementation
• Lack of equipments lack of personnel
• Airport delays impact passengers Cargo delays
  will stop commerce

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How to make the initiatives more effective?

• Setting performance goals and measures and
  assessing risk
• Enhancing security measures against potential
  nuclear attack using oil tankers
• Enhance international cooperation
• Enhance maritime security capability
• Maximize domain awareness
• Embed security into commercial practices to
  reduce vulnerabilities and facilitate commerce
• Deploy layered security
• Ensure coordination of the marine transportation
  system
• Enhance maritime security capabilities of key
  nations

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Lessons for Gujarat

• Creation of a department on the pattern of DHS
• Desired policy framework layered security
• Discovery and interdiction of terrorist action
  emanating from abroad
• Interdiction at the border and in the
  transportation sector
• Defending against catastrophic terrorism inside
  Gujarat State and India
• Protection of critical infrastructure and
  populations
• Emergency preparedness and response

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Challenges

• Lack of adequate resources
• Lack of experienced personnel
• Lack of technological advancement
• Shared responsibility hinder effective
  communication and coordination
• Implementing uniform security standard

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12th Symposium on Development and Social
Transformation
Panel 3 Security, Terrorism, and Justice Issues
in a Changing World
Leaders and Laggards How beliefs help us
understand the formation of the ICC.Braden Smith
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The International Criminal Court

• Treaty creating the ICC signed in 1998, ratified
  2002.
• Developed to prosecute crimes against humanity,
  genocide, and war crimes.
• First 18 judges sworn in on March 11, 2003.
• Still many states who have either failed to
  ratify or refused to sign.

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Do beliefs influence participation?

• States develop intersubjective beliefs about the
  international system and other states.
• These beliefs influence the likelihood that
  states will participate in cooperative behavior.
• If this is true, states with different beliefs
  should exhibit different patterns of behavior
  during the process of regime formation.

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How do we measure beliefs?
1.00
Type A Follower Type C Leader
Type DEF -- Laggard Type B -- Oppose
.50
Nature of the International System
0.0
-.50
.00
.25
.50
.75
1.00
-1.00
Control over events
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Measuring levels of particiation
Country Friends Sign Ratify Sign Ad. Support
Canada Yes 1998 Yes Yes Yes
China No No No No Res.
France No 1998 Yes Yes Yes
Germany Yes 1998 Yes Yes Yes
India No No No No No
Israel No 2000 No No Res.
Russia No 2000 No No Res.
U.K. No 1998 Yes Yes Yes
U.S. No 2000 No No Res.
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Tentative Conclusions

• There does appear to be a link between a states
  belief structure and their participation in the
  ICC.
• However, a more complicated process of persuasion
  and strategic calculation is occurring during the
  negotiations.
• Does it matter who is leading? Who is following?
  How powerful both groups are?

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12th Symposium on Development and Social
Transformation
Panel 3 Security, Terrorism, and Justice Issues
in a Changing World Tuesday, November 15 (100-
215)
Veronica Reeves The UN Security Council and 9/11
Sanjiv Srivastava Money Laundering US and India
Rajnish Kumar Rai Port Security Analysis
Braden Smith Leaders and Laggards the ICC