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Money-laundering controls look all washed up

After two years' frantic activity and expenditure banks are still struggling to understand, let alone control, terrorist financing. Governments have failed to support the financial community with resources, skills and systems. The implications for global security are alarming.

THE IMPORTANCE OF the banks' role in the fight against terrorism was spelt out bluntly by George W Bush shortly after September 11 2001. "We're putting banks and financial institutions around the world on notice. We will work with their governments and ask them to freeze or block the terrorist ability to access funds," he said.

Two years later, a balance sheet of the financial community's success in its corner of the fight against terror can be drawn up.

On the positive side, banks have become much more aware of the need to report suspicious transactions to police agencies. The number of reports being filed around the world has rocketed. Bank computer systems and training have been enhanced to deal with legal requirements to collect proofs of identity from new clients.

On the negative side, though, those reports have largely failed to help police arrest terrorists engaged in money laundering or seize their funds. There are two possible explanations. The terrorist money was never in the system, or the money was in the system but the controls were not up to the job of spotting and seizing it.

Strong evidence published after the September 11 outrage suggested that al-Qaeda used couriers rather than bank wire transfers to move cash.

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