Following the Money Trail to Fight Terrorism, Crime and Corruption

April 18th, 2013

Crossed post from the International Network for Economics and Conflict, U.S. Institute for Peace

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Globalization has provided citizens across the globe with unprecedented access to goods, services, capital and information – better, faster, and cheaper.  Greater efficiency in international financial markets has driven global economic development during the past 30 years.  Despite all the benefits derived from a more interconnected global community, the dark side of globalization simultaneously has empowered terrorism, crime, and corruption around the world.  While the Internet promotes connectivity and anonymity, protecting the identity of illicit actors, traditional investigative tools like “following the money trail” can help us better understand, detect, disrupt and dismantle these illicit networks.  Let us see how examining financial flows can fight terrorism, crime, and corruption, safeguard global financial systems, and promote peace and stability around the world.

Since the tragic attacks of September 11, 2001, the U.S. and other governments have incorporated the financial instrument of national power in their efforts to combat terrorism and crime.  Enhanced anti-money laundering and counterterrorism finance measures have significantly damaged these illicit networks.  During the past decade, Al Qaeda operatives and affiliates from Iraq to Afghanistan complained about increased difficulty in funding terrorist operations and supporting their networks.  Similarly, transnational criminal organizations in the Western Hemisphere realized that greater oversight of international bank transactions and offshore accounts since September 11 complicated their ability to launder profits through the formal banking sector.  Following the money trail and surveillance of facilitators, like the bankers and lawyers moving and sheltering money for terrorist and criminal groups, produced critical financial intelligence that has led to the weakening of illicit actors such as Al Qaeda and the drug cartels.

Once the tighter measures to fight money laundering and terrorist financing were put into practice, they had an unexpected side effect – rooting out corruption.  After the 2002 Bali bombings by Jemaah Islamiyah, Indonesia developed a robust counterterrorism strategy that included efforts to detect terrorist financing.  In December 2004, Indonesia was the country hardest hit by the historic tsunami that killed some 170,000 Indonesians, and millions in international aid flowed to Indonesia to assist with the relief efforts.  As a result of increased scrutiny of international financial flows, Indonesian authorities discovered and acknowledged that some post-tsunami assistance funds were being diverted by graft and corruption.  Indonesian Corruption Watch, an independent non-governmental organization, released a 2006 report alleging irregularities, corruption and collusion in at least five major government managed projects valued at a total of $2.6 million, including the publication of reports, the appointment of staff and the procurement of office equipment. Following the money trail in the case of tsunami relief funds contributed to anti-corruption efforts in Indonesia.

More recently, strengthened anti-money laundering measures to track Mexican cartel money led to the February 26, 2013 arrest of the most prominent teacher union leader, Edna Esther Gordillo on corruption and embezzlement charges.  According to Mexican Attorney General Jesus Murillo Karam, investigators from Mexico’s treasury found that more than $200 million had been routed from union funds into private bank accounts abroad (including some managed by Gordillo) between 2008 and 2012.  Mexico’s Financial Intelligence Unit determined union funds were used to pay for $3 million of Neiman Marcus charges on Gordillo’s account and more than $17,000 for bills to plastic surgery clinics and hospitals in California.  It was discovered that Gordillo was living large with significant real estate holdings in Mexico City as well as two luxury properties in Coronado, California. The Gordillo case is yet another example of how financial forensics, intended to pursue terrorists and drug traffickers, are yielding promising corollary results in the fight against corruption.

Money serves as the oxygen for any activity, licit or illicit.  In a globalized world, we have grown to appreciate how “following the money trail” can enhance our efforts to root out terrorism, crime, and corruption around the world.  Safeguarding global financial systems with these measures is intended to protect shareholders, stakeholders, and average citizens.  Promoting transparency and building confidence in economies to attract foreign direct investment and promote legitimate economic development contributes to peace and stability around the world.

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Written by Celina Realuyo

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