Studies in Conflict & Terrorism, 35:712–732, 2012 Copyright © Taylor & Francis Group, LLC ISSN: 1057-610X print / 1521-0731 online DOI: 10.1080/1057610X.2012.712032 Private Actors in the Fight Against Terrorist Financing: Efficiency Versus Effectiveness OLDRICH BURES Department of International Relations and European Studies Metropolitan University Prague, Czech Republic In several areas of the post-9/11 efforts to fight terrorism, private rather than public entities have shouldered the bulk of the burden. This has been especially the case in the fight against terrorist financing where private financial institution are legally obliged to monitor the billions of daily financial transactions and report the suspicious ones to public authorities for further investigation. Since private financial institutions are geared toward making profits and where the money has come from has traditionally not been of great interest to them, it is important to investigate how they have coped with these demanding requirements. Terrorists, like everyone else, need money and resources to survive and function. The underlying logic of combating terrorist financing (CTF) is therefore straightforward—if the money can be shut down, so can the terrorist activities that it was meant to finance. Shutting down terrorist finances, however, has proven to be a formidable task. In this article, I argue that to a significant extent, this is due to the lack of appreciation of the role of private financial institutions (FIs) that are legally obliged to carry out public CTF regulations in practice. In particular, there is a cause for concern that private FIs’ (over-)efficiency in reporting large numbers of suspicious financial transactions actually further undermines the already low effectiveness of the global CTF regime. The structure of this article is as follows. The first section introduces two key global international CTF frameworks that have been developed by the United Nations and the Financial Action Task Force. The second section describes the role of private actors in CTF, with a special focus on formal financial institutions. The internal shortcomings of the smart sanctions and anti–money laundering CTF models are analyzed in the third section. The fourth section offers an analysis of the difficulties of private actors when it comes to applying the risk-based model within the publicly regulated CTF framework. The fifth section introduces the profit versus security dilemma that FIs have had to address when responding to the public regulatory CTF requirements. In combination with the difficulties of the risk assessment model, the profit versus security dilemma has led to the phenomenon Received 20 September 2011; accepted 5 February 2012. The author gratefully acknowledges financial support from the Czech Science Foundation under the research grant no. P408/11/0395. Address correspondence to Oldrich Bures, Metropolitan University Prague, Dubecska 900/10, Prague 10, 100 31, Czech Republic. E-mail: obures@alumni.nd.edu 712