PracticeAccounting FirmsLords warning over anti-terrorist powers

Lords warning over anti-terrorist powers

A Lords Committee urges caution over EU moves to give governments real-time access to banks in the search for terrorist funds.

An influential Lords Committee has urged caution over EU moves to give intelligence organisations greater powers to intervene in the operation of financial institutions in order to block terrorists’ access to funds.

Link: Employees pose greater threat than terrorists

It follows an estimate from the Brussels Commission that the terrorist bombings in Madrid, which lead to an election defeat for the Spanish government, cost a mere euro 8,000.

The Lords European Union Committee said transactions to finance terrorist networks generally had such a small monetary value that the detection of financial transactions made for the purpose of terrorist activity was difficult.

In a report on EU counter-terrorist cooperation in the wake of the Madrid bombings, the committee reported that the Commission is arguing for further steps to create a hostile environment for terrorist financing, while trying to ensure nationality or religion does not become a ground for placing a person under suspicion.

It said the Commission wants to improve the exchange of information at national level and move towards real-time tracking of financial transactions, including ‘granting financial intelligence units (FIUs) full access to dedicated databases in financial institutions’.

The FIUs also want enhanced traceability for transactions, more attention to transactions outside the normal financial system, enhancement of the transparency of legal entities and charities that may be used for terrorist finance purposes, and the development of common standards for asset freezing.

The Committee doubted the effectiveness of proposals because of the very small sums of money involved, making efforts to trace them through the financial system cumbersome and ineffective, especially since the money may be legally ‘clean’.

It said the Commission ‘floats the possibility of extending existing controls by calling on member states to grant FIUs direct access to financial databases’, but warned this would ‘raise major issues of privacy and proportionality’.

At present, institutions are already obliged to report suspicions to FIUs, but the Commission seemed to envisage a reversal of the status quo by establishing a ‘pull’ system allowing FIUs to have direct access (maybe in real-time) to financial institutions, the report said.

But the Committee said that while they support efforts to attack terrorists by targeting their finances, ‘we urge caution, on grounds of both effectiveness and proportionality, in adopting measures that would give financial information units direct access to financial databases’.

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