State and institutional capacity in combating money laundering and terrorism financing in armed conflict. The Central Bank of Syria

Publication Date02 January 2020
Date02 January 2020
AuthorEbrahim M.R. Lababidi
SubjectAccounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime
State and institutional capacity in
combating money laundering and
terrorism nancing in
armed conict
The Central Bank of Syria
Ebrahim M.R. Lababidi
Munk School of Global Affairs and Public Policy, University of Toronto,
Toronto, Canada
Purpose The purpose of this paper is to explore the relationship and implications of institutional
autonomy and capacity throughthe Central Bank of Syria in its ability to implement an effective anti-money
laundering (AML) and counter-terrorism nancing (CTF) framework during a period of intense armed
Design/methodology/approach Due to the lack of reliable data currently available on Syria, this
paper focuses on Syrias AML/CTF legislation through passed laws and regulations; annual reports on
the Central Bank of Syria and the AML and terrorism nancing authority; the academic literature on
money laundering, terrorist nancing and institutional capacity. This paper will address the theoretical
framework of Coleman and Skogstads characteristics that dene the degree of autonomy and capacity
of an institution. Though their characteristics are applied toward the Canadian state, for the purpose of
this paper, they have been adopted in the absence of their use verbatim in the case of the Central Bank of
Findings The Central Bank of Syria has experienced diminishing independence due to conict-
induced stress in Syriasnancial sector. This loss of autonomy is attributed to the prioritization of
government-led emergency policies to secure and stabilize Syrias economy. Despite this loss, the
Central Bank of Syria has maintained considerable and effective improvements in SyriasAML/CTF
framework, aligning it closer to that of international standards promoted by the Financial Action Task
Force (FATF). Institutional gaps, however, still exist. These gaps imply that the Central Bank of Syria
still lags in a number of areas that affect its capability in implementing a more effective AML/CTF
Research limitations/implications The conict in Syria is still a very new topic that lacks a
considerable amount of reliable data. As such, many research limitations were encountered despite the
volume of informationreviewed for this paper in both Arabic and English. Nevertheless,this paper provides a
clearer understanding of how state capacity is reected in its institutions through certain policies and
approaches takenby a central monetary authoritywith implications and results in a country rattled by years
of intenseconict.
Practical implications Despite the research limitationsand implications, this paper provides a clearer
understanding of how state capacity is reected in its institutionsthrough certain policies and approaches
taken by a central monetary authoritywith implications and results in a country rattled by years of intense
conict. This can be useful for institutional policymakers, as well as academics exploring the relationship
between the stateand its institutions in times of hardship.
Originality/value Though there is AML/CTF literature on Middle Eastern countries such as Egypt,
Jordan and Saudi Arabia, very little is written on Syria. There is also very little written on the broader
subject of state and institutional capacity through the lens of an effective AML and CTF framework
during a period of intense armed conict. By looking at an ongoing conict, this paper explores a
The Central
Bank of Syria
Journalof Money Laundering
Vol.23 No. 1, 2020
pp. 155-172
© Emerald Publishing Limited
DOI 10.1108/JMLC-04-2019-0033
The current issue and full text archive of this journal is available on Emerald Insight at:
subject with as much detail as needed to provide an illustration of the relationship and implications of
institutional autonomy and capacity in relation to the state through an effective AML/CTF framework
Keywords Syria, Central Bank of Syria, Central bank, Money laundering, Anti-money laundering,
Counter-terrorist nancing, AML/CTF, Autonomy, Capacity, State, Autonomy
Paper type Case study
Money laundering is a transnational issue that requires international cooperation
(Keesoony, 2016, p. 136). In response to this characteristic, committees, frameworks and
institutions such as the Basel Committee on Banking Supervision (BCBS), the International
Convention for the Suppression of the Financing of Terrorism and the Financial Action
Task Force (FATF) were createdto better coordinate cross-border regulatory efforts. Within
these efforts, central banks play a crucial role as the core authority of a countrysnancial
institutions. This responsibility is derived from the integration of commercial banks in an
economy that make them highly vulnerable to money laundering(Simwayi and Guohua,
2011, p. 328). In many countries,the central bank acts as a liaison between the state and the
nancial sector. This relationship changes the way we think about state capacity through
the direct and indirect roles centralbanks play in addressing money laundering.
To date, the literature on money laundering in the Middle East has focused largely on
countries such as Jordan, Turkey, Egypt and Saudi Arabia through comparisons and case
studies (Abu Olaim and Rahman, 2016;Khan, 2013;Türksen et al., 2011,Truby, 2016;
Mouawad, 2009;Ridley and Alexander,2011). There has been scant attention on Syria. This
is unfortunate, as Syria has always played a central role in the Middle East through its
strategic position (Kazemi and Jegarlouii, 2017, p. 64). Even during the conict, the
embattled country remains a key player in regional affairs. There are two reasons to focus
on Syria: First, the potential failure of Syriasnancial institutions in addressing money
laundering have regional and international implications (Abu Olaim and Rahman, 2016,
p. 74). These implications are a result of terror groups and other individuals taking
advantage of the conict throughSyrias institutions to launder money (Solomon and Mhidi,
2017). The anti-money laundering and counter-terrorist nancing (AML/CTF) efforts of
neighboring countries are not enough to contain the illicit nancial activity caused by
regional instability. Second, the literature has not directly focused on the relationship
between money laundering and conict. AML policies are effective with a stable nancial
system, but what happens when that system breaks down as a result of armed conict?
Although attempts were made to step up AML efforts, limited resources, capacity and
regulatory authority contribute to an inadequate response. This points to the transnational
nature of money laundering noted earlier,which demonstrates that proper AML/CTF policy
relies on individual statesto perform a certain role, and if they fail to do that, this role cannot
be lled by another and can affect internationalefforts.
The Syrian government is well aware of the threat of money laundering and terrorist
nancing; this is mirrored in its legislative efforts on combating illicit nancial activities
within the country, especially duringthe conict. The real indicator, however, is reected in
the autonomy and capacity of the Central Bank of Syria as the countrys primary nancial
regulatory authority (Ghandour,2017, p. 19). Using Coleman and Skogstads characteristics
(Coleman and Skogstad, 1990, p. 15, 16) thatdene the degree of autonomy and capacity of
an institution, this paper will analyze two critical aspects of the Central Bank of Syria that
inuence its ability to combat money laundering and terrorist nancing. First, it is

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