NORTHWESTERN UNIVERSITY Follow the Money: Transparency, Risk, and Financial Regulation in the Age of Terror A DISSERTATION SUBMITTED TO THE GRADUATE SCHOOL IN PARTIAL FULFILLMENT OF THE REQUIREMENTS for the degree DOCTOR OF PHILOSOPHY Field of Sociology By Anna Hanson EVANSTON, ILLINOIS June 2017 2 © Copyright by Anna Hanson 2017 All Rights Reserved 3 ABSTRACT After 9/11 there was a shift in the rhetoric surrounding counter-terrorism. Suddenly, the language of risk, security and prevention was being utilized to justify a new set of global financial regulations headed up by international organizations such as the United Nations, The Financial Action Task Force, and the IMF/World Bank. This project sits at the nexus of finance and security, and argues that the fight against terrorism financing has important implications not just within the security realm, but for everyday financial practices and the ways in which global financial flows are understood and governed. In other words, how do regulators and financial actors govern, monitor, and hopefully prevent the financing of terrorism, without hindering the facilitation of global financial flows? From a broader perspective, analyzing the shift to the use of financial data in order to help fight terrorist financing touches upon much broader themes; the relationship between transparency, liberalization and re-regulation of financial markets, the proliferation of privatized power and the relationship between freedom and security. This dissertation adopts the governmentality (Foucault 2007) approach in order to analyze how terrorism financing is governed, or in this case prevented, through the monitoring and eventual determination of whether basic financial activities can be considered ‘normal’ or ‘suspicious’, and what are the unintended consequences of such a system that ultimately comes to view everyone as suspicious? 4 ACKNOWLEDGEMENTS There are several people who provided insight, guidance, support and friendship throughout this dissertation process, and I want to take a moment to thank them. First off, I want to thank Patricia Parker and John Hagan for suggesting all those years ago that I think about pursuing a PhD at Northwestern. Without their belief and support this would not have been possible. I am deeply grateful for the mentorship and support I received over the years. I want to thank my advisor John Hagan for introducing me to the world of criminology and international criminal law, and for always encouraging my idea that transnational anti-terrorism financing regulations were in fact a ‘sociology problem’. John’s work has been a constant source of inspiration, and I am incredibly grateful for the opportunity to not just study under him, but to collaborate with him on numerous publications as well. I want to thank Grégoire Mallard and Ron Levi for their guidance and support. Not only did they take an interest in my work, they were always available to not only offer advice and constructive criticism, but words of encouragement that I was in fact going down the right path as well. Thanks to Bruce Carruthers for agreeing to be a reader for this project and for providing insight and constructive criticism when needed. I would also like to thank my family, because without their love, support, and unwavering belief that I could achieve anything I put my mind to, I would not be where I am today. I also want to thank from the bottom of my heart the members of my cohort, I could not have asked for a better group of people to share this experience with. The friendships that were developed throughout my time at Northwestern were a constant source of inspiration, 5 comfort and enjoyment. They provided the most incredible support system, and I can say without a doubt that this dissertation would not be possible without them. I would especially like to thank Iga Kozlowska, Alka Menon, Hannah Wohl, Kang San-Lee, Marcel Kundsen, David McElhattan, Yuhan Jao, and Anthony Johnson, and Carlo Felizardo. Finally, I would like to acknowledge the support, both institutionally as well as financially, that I received from the Sociology Department, the Buffett Institute, the Graduate School of Northwestern, and the École doctoral of SciencesPo. 6 LIST ACRONYMS AND ABBREVIATIONS ACLU American Civil Liberties Union AIAI Al-Ittihad al-Islamiya AML Anti-Money Laundering AML-CTF Anti-Money Laundering-Counter-Terrorism Financing AQAP Al-Qaida in the Arabian Peninsula BBC British Broadcasting Corporation BIC Bank Identifier Code BSA Bank Secrecy Act CDD Customer Due Diligence CIA Central Intelligence Agency CTF Counter-Terrorism Financing CPA Coalition Provisional Authority CTC Counter-Terrorism Committee DPA Deferred Prosecution Agreement EU European Union FARC Revolutionary Armed Forces of Columbia FATF Financial Action Task Force FBI Federal Bureau of Investigation FIU Financial Intelligence Union 7 FinCen Financial Crimes Enforcement Network FSRB FATF-Style Regional Bodies HLF Holy Land Foundation ICE Immigration and Customers Enforcement IEEPA International Emergency Economic Powers Act IMF International Monetary Fund IVTS Informal Value Transfer Systems KYC Know Your Customer KYCC Know Your Customer’s Customer MSB Money Service Business NCCT Non-Cooperating Countries and Territories NSA National Security Agency OCC Office of the Comptroller of the Currency OFAC Office of Foreign Assets Control PEP Politically Exposed Person PI Privacy International PNR Passenger Name Records ROSCs Reports on the Observance of Standards and Codes STR Suspicious Transaction Reports SWIFT Society for Worldwide Interbank Financial Telecommunication 8 TFTP Terrorism Financing Tracking Program TFTS Terrorism Financing Tracking System TIDE Terrorist Identities Datamart Environment UAE United Arab Emirates UNSCR United Nations Security Council Resolution 9 Table of Contents ABSTRACT .............................................................................................................................. 3 ACKNOWLEDGEMENTS ........................................................................................................... 4 LIST ACRONYMS AND ABBREVIATIONS ................................................................................... 6 Table of Contents ................................................................................................................... 9 List of Figures ........................................................................................................................ 11 INTRODUCTION ..................................................................................................................... 12 Combating Terrorism Financing: The Invisible War ......................................................................... 14 Theoretical Framework: Transparency and Governmentality ......................................................... 19 Methodology: ................................................................................................................................ 24 Documentary Research and TeXtual Analysis: ................................................................................. 25 Expert Interviews: .......................................................................................................................... 30 Chapter Overview: ......................................................................................................................... 34 Chapter One: From Al Capone to Osama Bin Laden: The Historical Narrative of AML/CTF ...... 36 The Genealogical Method: ............................................................................................................. 36 “If You Can TaX It, You Can Regulate It” .......................................................................................... 38 Money Laundering and The Seizing of Assets ................................................................................. 41 The Rise of Neoliberal Economic Policies: ....................................................................................... 45 “A New Penology” .......................................................................................................................... 48 Exporting US Reporting Rules ......................................................................................................... 51 The Sanctions Decade .................................................................................................................... 54 Popular Discourses on Terrorism Financing: ................................................................................... 59 FATF and IMF Involvement in AML/CTF: ......................................................................................... 68 Conclusion: .................................................................................................................................... 73 Chapter Two: Hawala Networks and the Push for Transparency and Legibility ...................... 74 Transparency and the Neoliberal Economy: .................................................................................... 75 Hawala-An Ancient Network: ......................................................................................................... 77 “A Banking System Built for Terrorism” .......................................................................................... 79 Waging ‘Financial Warfare’: ........................................................................................................... 85 The Targeting of Al-Barakaat