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p. 5 of 19 BACK | NEXT I. Executive Summary II. The Policy Context A. The Impetus for an Anti-Money Laundering/Combating the Financing of Terrorism Policy B. Money Laundering C. Financing of Terrorism D. Negative Effects of Money Laundering III. International Efforts to Combat Money Laundering and the Financing of Terrorism IV. The Policy V. Implementing the Policy VI. Recommendation

Enhancing the Asian Development Bank's Role in Combating Money Laundering and the Financing of Terrorism : II. The Policy Context

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C. Financing of Terrorism

10. In the aftermath of the September 11 attacks, the key issue for finance ministers and financial regulatory authorities worldwide is the criminal use of the banking system and informal financial networks to channel funds to finance terrorism.⁴ There has always been some suspicion that secret and fictitious bank accounts were being used to fund terrorist activities, but investigations since September 11 have revealed the existence of a pervasive financial foundation for terrorists that uses business enterprises, charities, religious groups, trusts, educational and research institutes, political groups, and individuals.

11. In examining FT, it is important to distinguish two types: FT through ML and FT through the use of legitimate funds. If the criminal proceeds of a predicate offense were used to finance FT, this would constitute both ML and FT, and would be caught by the provisions of most national AML laws.

12. The second type of FT involves the use or abuse of legitimate funds to finance terrorism. The ability to monitor and prevent such types of financial abuse has been hampered by lack of effective legal systems that impose strict rules of transparency, accounting, and auditing.

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