Risk Management and Collateral Damage in International Governance: the Case of Anti-Terrorism Financing

This paper brings to light the rise and the negative consequences of a risk-management approach in global governance using the case of international anti-terrorism financing measures adopted by the Financial Action Task Force (FATF) as an illustration.

Risk management as a governance modus operandi is the tendency to preemptively tackle problems not just by responding to concrete threats but also by eliminating vulnerability altogether. This approach to global governance currently finds an illuminating manifestation in the area of counter-terrorism, and security in general. In this area, a risk management approach puts society in a footing of permanent insecurity thus allowing for the taking of drastic measures in the name of greater security. There is an increasing tendency at international bodies such as FATF to adopt legal measures that enable governments and private actors to take severe security measures on an ordinary and continual basis, and not just in response to specific incidents or threats. The example at hand, i.e. terrorism financing, which hitherto has been treated as a crime to be punished, is now also treated as a risk to be managed.

This approach also introduces flexibility to the technique of legal governance. Instead of well-defined and fixed rules, international legal regimes would be constituted of broad principles, standards, and metrics operating in constant iteration with localized implementation measures. Local enforcers, whether governmental departments or private companies, are given wider discretion to assess risk and take measures within the parameters defined at the international level.

The key objective of a risk management approach is to respond to potential security threats. In this sense, the aim of risk analysis is to identify not specific suspects but a broad class of persons and activities that are deemed too exposed to the threat, in this case terrorism financing. Hence, persons and activities are categorized in bulk as ‘high risk’ and blanket de-risking measures are taken against them. In the world of anti-terrorism financing, such de-risking measures translate into denial of financial services. The problem with such exercise is not just that it inevitably leads to the victimization of an unusually wider circle of innocent actors, but also that the brunt of such collateral damage happens to consistently fall upon the global poor, raising issues of global justice.