Multi-layered approaches to counter terrorist financing: norm development and compliance

For almost five decades, international efforts to counter terrorism have been the subject of various international treaties, including the United Nations (‘UN’) Convention for the Suppression of Unlawful Seizure of Aircraft, the UN International Convention against the Taking of Hostages, the UN Convention for the Suppression of Terrorist Bombings, the UN International Convention for the Suppression of Acts of Nuclear Terrorism, and the UN International Convention for the Suppression of the Financing of Terrorism (otherwise known as the Terrorist Financing Convention). Certain aspects of these treaties have also been taken up by the UN Security Council (‘UNSC’), which has adopted several binding resolutions — for example, SC Resolution 1267 (1999) and SC Resolution 1373 (2001), under Chapter VII of the UN Charter dealing with terrorist financing. More recently, these traditional multilateral approaches have been complemented by non-conventional mechanisms — in particular, when addressing terrorist financing, the Financial Action Task Force (‘FATF’) and its recommendations. These recommendations do not constitute traditional formal sources of international law as recognised, inter alia, by article 38 of the Statute of the International Court of Justice (‘ICJ’), and are considered as non-binding in the technical normative sense. Nonetheless, they have attained normative character and have achieved remarkable levels of implementation by states. Today, the FATF recommendations represent the international standard in countering terrorist financing (‘CTF’). The objective of this thesis is to analyse the processes of norm creation in the field of CTF, and to assess state compliance with these norms in a legal field that was previously regulated by the traditional approach of creating binding norms in international law. Central to this enquiry is the following question: How is it that an organisation that creates non-binding norms represents today’s world standard, with high rates of compliance? This thesis will examine compliance with non-binding norms, focusing on the FATF’s CTF recommendations — so-called ‘soft law’ instruments, but which force legislators to conform. This is an original examination that will fill the gaps existing in today’s literature by looking at the origins and motives of broad CTF legislation in selected states, then detail each of the recommendations and the ways in which they are implemented in those states. This approach differs significantly from other literature in the field, which deals comprehensively with exploring the motives of governments and other actors to give effect to international law, but neglects issues of compliance with non-binding norms. Several scholars have considered the theoretical legal effect of non-binding norms without examining whether in fact such norms are followed, and the few who have dealt with implementation have done so in different areas and have not looked comprehensively at the operation of the CTF global regime. This thesis reveals the effect of non-binding norms in the field of CTF and identifies several possible reasons for the decisive influence of these international non-binding standards. The research methodology adopted for this thesis to meet the above-mentioned objective is both qualitative and quantitative in nature. The qualitative aspect comprises a literature review (of sources including conventions, UNSC resolutions, scholarly works, FATF recommendations, reports and domestic laws). The quantitative aspect measures implementation within all states of the world. It includes an in-depth examination of how these norms are followed in six cases selected for analysis based on factors hypothesised to influence the degree of implementation. These factors are membership in the organisations that produce the norms, examining whether membership in an organisation affects the application of its decisions; a terrorist presence in the state that the state is trying to eliminate, which may logically encourage the state to implement the CTF regime; and the state being a financial centre, as it is possible that states implement the CTF regime to ensure that their developed financial systems are protected from those terror organisations that would attempt to abuse them. The thesis employs a number of terms in specific senses: ‘implementation’, ‘compliance’, ‘effectiveness’, ‘binding’ and ‘non-binding’ ‘norms’, ‘international standards’ and the ‘regime’. These terms are contested in the literature and are often discipline-specific. For the purposes of this thesis, implementation of international norms refers to incorporating them into domestic law through legislation, judicial decisions, executive decrees or other enforceable processes. Compliance involves implementation, but is broader. It is concerned with the factual matching of state behaviour and international norms: “compliance refers to whether countries in fact adhere to the provisions of the accord and to the implementing measures that they have instituted.” Effectiveness refers to whether the goals of the norm are achieved. Binding refers to instruments that, on the international stage, fall within the sources of law as defined in article 38 of the ICJ Statute and UNSC resolutions under Chapter VII of the UN Charter. Non-binding refers to ‘soft law’, which falls outside of those sources. Norms include binding and non-binding instruments, while international standards are the accepted norms to be complied with worldwide. The regime refers to the many norms that represent the standards of CTF. Following this introduction, chapter 1 will explain the need to fight the financing of terrorism. It is true that the CTF regime already exists, and some could argue that there is no need to discuss the reasons for its emergence. However, the context of the norm creation, the relationship between soft law and hard law in that context, and the fact that the nature of the targets with which the non-binding norms deal affects the level of compliance, require a fuller understanding of the nature and scope of CTF. After emphasising the importance of CTF, chapter 2 will focus on the characteristics and creation of binding and non-binding norms within the UNSC, intergovernmental organisations established by treaty, and the FATF, an intergovernmental body established by the Group of Seven (‘G7’). This is necessary both to understanding the complex CTF regime and to analysing the multi-layered approach and the reasons for the high compliance with the regime. Chapter 3 examines implementation in 193 states, with a focus on those norms that pertain to CTF (excluding those that relate also to anti-money laundering (‘AML’)). This analysis is essential to an understanding of the multi-layered approaches adopted by the FATF. The quantitative analysis in this chapter provides an important contribution of the CTF literature by measuring the implementation of the CTF norms in a comprehensive and systematic manner. Chapter 4 then examines compliance with the norms by comparing six states in a unique and sophisticated matrix, borrowing from comparative constitutional law principles of case selection. These case studies are, to the extent possible, identical but for the key permanent criteria. This will help to isolate the effect of these criteria. Since the various possible explanations changed, the permanent criteria are most likely to be the cause of the outcome: all states eventually comply. This examination will assist the judgments as to whether, and to what extent, defined requirements are being achieved in practice. In chapter 5, those features of the regime — including the legal environments in which it operates and the existence of multi-layered norms — that have led to its high compliance rates will be examined. The conclusion closes the thesis with answers to the question posed above and suggestions for future research. This thesis does not put forward a ‘recipe for success’ in ensuring an effective structure for compliance with non-binding norms. Instead, the thesis aims to demonstrate that an understanding of this complex regime can shed light, from a broad perspective, on the departure from regular international lawmaking processes and on the emerging forms of international governance in this era of globalisation. From a practical perspective, looking at the CTF regime and understanding its multi-layered approach (binding and non-binding norms, with some overlapping, enforced by an intergovernmental body), as adopted by the FATF, can inform the field in how, if at all, this regime can be replicated as a tool in the prevention and resolution of conflict and the promotion of international justice