Abstract

In the aftermath of September 11, numerous western democracies enhanced their legal arsenal in the war against international terrorism. One of the major “battlegrounds“ is the area of finance law since liberalized capital markets bear the risk of being abused for terrorist financing. Even though the amounts which terrorists have required in the past to fund their attacks have been rather marginal, most states concentrate their efforts in this field. The reasons for tightening the regulatory regime are twofold. First, there is the hope that the strict supervision of financial markets will contribute to finding at least some traces that lead back to the terrorists themselves. Second, it is hoped that such tightening will deter potential supporters from abusing the markets, which in turn will cut terrorists off from their vital sources of support for further attacks. In this respect, measures to prevent money laundering, which are identical to the ones aimed at terrorist financing, play a major role. Thus, banks and other financial institutions are directly integrated in the efforts to prevent illegal funds from flowing into the free markets. Supervisory authorities employ a combination of traditional and new regulatory measures. Traditional measures include authorization procedures for financial institutions and the instruments of the on-going supervisory process. Generally, these measure are in the own interest of banks as they are a means of protecting their reputation and reduce the risk that funds under their control will contribute to terrorist financing. New measures include the automatic and anonymous downloading of bank account data by the authorities and the freezing of bank accounts. Various legal problems have surfaced in using these powers. One is that many measures were agreed on the international or European level but still have to be implemented by national authorities. There also remains some controversy as to how to define international terrorism for the purposes of criminal law and public law. The strict requirements of the principle of legal certainty create a considerable conflict between regulatory effectiveness and the rule of law. Additionally, national law is confronted with the complexity and uncertainty surrounding the question of which level of risk will trigger relevant preventive measures by the authorities.