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Copyright 2004 The Financial Times Limited

Financial Times (London, England)

April 7,2004 Wednesday

London Edition 1

SECTION: COMMENT; Pg. 17

LENGTH: 823 words

HEADLINE: Wipe out the treasuries of terror: CLAES NORGREN and JAIME CARUANA:

BYLINE: By JAIME CARUANA and CLAES NORGREN

BODY:
On March 11, the world was again shocked by a terrorist attack that brutally targeted civilians and devastated the
infrastructure of an important city. The impact of the attack on Madrid also shocked the world's financial markets and
prompted a number of new initiatives to halt terrorist financing.
As president of the Financial Action Task Force and chairman of the Basel Committee on Banking Supervision, we
are fully committed to this global action against terror. After the attacks on New York and Washington on September 11
2001, the FATF developed international standards for effective action against terrorist financing. The Basel committee,
for its part, worked to strengthen due diligence standards for banks in monitoring the activities of their customers.
Taken together, these initiatives have been of great importance in combating terrorism. But more needs to be done.
The FATF has now embarked on a new push to drive terrorists out of the financial system by strangling their
funding sources. Its efforts are based on two principal strategies. The first is to improve regulation and supervision of
informal payment mechanisms, such as alternative remittance systems, and of non-profit organisations, notably
charities. We also see the need for governments to review and develop further legislation and standards on terrorist
financing to ensure their continuing relevance - in particular on the issue of cash couriers and their role in financing
terrorism.
The second step follows the call by theGroup of Seven finance ministers in Dubai last September to improve co-
operation and information-sharing - both within individual countries and across national borders, among law
enforcement agencies, supervisory authorities, financial intelligence units and other operational arms. Different agencies
often see a small part of the jigsaw but the pieces need to be joined together to form a coherent pattern.
After the event, it is easy to identify failures in information-sharing efforts. This is why the FATF has developed a
model for a cross-border early warning system that could serve as a framework for information-sharing on alternative
remittance systems among the various agencies and bodies concerned.
There is also an urgent need for the private sector to become more closely involved in efforts to isolate terrorist
networks. Just as more effort is needed to combat money-laundering, countering the financing of terrorism requires
excellent relationships and co-operation with the private sector, especially as far as detection and prevention are
concerned.
The Basel Committee's objective has been to ensure that banks do not accept new customers without verifying then-
identity through robust "know your customer" policies. It is often a challenge to establish the beneficiary behind certain
professional disguises but the effort has to be made if banks are to avoid becoming easy channels for terrorist funding.
In addition, banks have to understand their customers' account profiles in order to identify and report suspicious
transactions to the competent authorities. They also need to be able to respond to inquiries by law enforcement agencies