Financing Terrorism

Case Studies

Michael Freeman, Michael Freeman

• Éditeur: Routledge
• Année: 2016
• ISBN:
  9781317135067
• Édition: 1
• Sujet: Politique et relations internationales
• Sous-sujet: Terrorisme

Without money, terrorists cannot function as organizations and cannot conduct attacks. Yet the questions remain, how vulnerable are terrorists to financial disruptions? Can governments put pressure on their finances in meaningful ways or are they too resilient and adaptive to be affected by state actions? These and other questions about terrorism financing are vigorously debated by scholars and policymakers, particularly since the attacks of September 11th 2001. While there is a growing literature on policy issues, strategies, and countermeasures, states must first understand their enemies before developing strategies to defeat them. So, instead of focusing on the state response, this book asks a more foundational question: How do different terrorist groups actually raise money? What are their budgets? What do their portfolios look like? How have they changed over time? What are the advantages and disadvantages of different sources of financing? The book includes case studies of 11 different terrorist groups or sets of groups within a country. It is clear that each group has a different portfolio tailored to their needs and their environment and this makes countering terrorist financing more challenging for the state. This topical book will be required reading for all students and scholars interested in terrorism financing as well as those working in government agencies tasked with combating terrorist groups and their financial resources.

Part I Introduction

Chapter 1 Introduction to Financing Terrorism: Case Studies

Michael Freeman

DOI: 10.4324/9781315582429-1

After the unsuccessful World Trade Center attack of 1993, one of the conspirators, Ramzi Yousef, claimed that if he had had more money, he would have been able to purchase more explosives. With a bigger bomb, he might have been successful in toppling the tower into other buildings. But because of cash-problems, the attack failed, killing six people and injuring over 1,000.¹ This anecdote highlights the importance of money for terrorism.

1 Statement of Dale Watson, Chief International Terrorism Section, National Security Division, Federal Bureau of Investigation, “Foreign Terrorists in America: Five Years after the World Trade Center,” Senate Judiciary Committee Subcommittee on Technology, Terrorism, and Government Information, United States Senate, Washington, D.C., February 24, 1998, available at: http://cryptome.org/jya/fbi-fta.htm (accessed January 11, 2012).

How each terrorist group spends money varies, but typically organizations need money for recruitment, salaries, retirement pensions, guns, explosives, bribes, communication equipment, transportation, forged documents, and more. Without money, terrorists can neither function as organizations nor conduct attacks. Yet, questions remain: how vulnerable are terrorists to financial disruptions? Can states put pressure on their finances in meaningful ways or are they too resilient and adaptive to be affected by our state actions?

These and other questions about terrorism financing are vigorously debated by scholars and policymakers.² In fact, the subject of terrorism financing has received great interest since the attacks of September 11th. While there is ever-increasing literature on policy issues, strategies, and counter-measures, states must first understand their enemies before developing strategies to defeat them. So, instead of focusing on the state response, this book asks more foundational questions: How do different terrorist groups actually raise money? What are their budgets? What do their portfolios look like? How have they changed over time? What are the advantages and disadvantages of different sources of financing?

2 Jeanne Giraldo and Harold Trinkunas, eds, Terrorist Financing and State Responses: A Comparative Perspective (Stanford, CA: Stanford University Press, 2007); Thomas Bierstecker and Sue Eckert, eds, Countering the Financing of Terrorism (New York: Routledge, 2008); Douglas Farah, Blood From Stones: The Secret Financial Network of Terror (New York: Broadway Books, 2004), R. Thomas Naylor, Wages of Crime: Black Markets, Illegal Finance, and the Underworld Economy (Ithaca, NY: Cornell University Press, 2004), Rachel Ehrenfeld, Funding Evil: How Terrorism is Financed and How to Stop It (Chicago, IL: Bonus Books, 2003); Loretta Napoleoni, Modern Jihad: Tracing the Dollars Behind the Terror Networks (London: Pluto Press, 2003).

Chapter 2, “Sources of Terrorist Financing,” addresses these questions from a conceptual vantage point. Freeman divides the sources of terrorist financing into four broad categories: state sponsorship, illegal activities, legal activities, and popular support. Each of these funding mechanisms has different advantages and disadvantages for the terrorist group as well as different opportunities for disruption. This chapter is intended to be an overview of the sources of funding, while the subsequent chapters, and the focus of the book, will look at individual case studies

The following chapters will look at 11 different cases of terrorist financing, divided into four regions: the Middle East (Iraq and Hezbollah), Asia (PKK, LeT, Taliban, Tamil Tigers, and the Philippines), Europe (Loyalists in Northern Ireland and Albania), and the Americas (FARC and ELN, both in Colombia). These cases cover a wide range of terrorist groups or countries facing terrorist threats. The motivations of the various groups include examples of religious, nationalist, and Marxist ideologies. Some groups are relatively small, while others enjoyed more popular support and were more insurgents than terrorists (with consequences for how they raised money). Similarly, there is variation between areas where groups have not yet even formed (Albania) to groups that are still active (Hezbollah, LeT, FARC, and others), to groups that have mostly been defeated (LTTE, Loyalists in Northern Ireland). Each case has different lessons for those interested in counterterrorism strategies.

Chapter 3, “Insurgent and Terrorist Finances in Iraq,” by Freeman, L’Heureux, Furleigh, and Pope examines how various insurgent groups in Iraq—including nationalist, Sunni, and Shia groups—raise, move, and spend money for their causes. This chapter also identifies several challenges to addressing insurgent financing and recommends new policies and different priorities in counter-terrorist financing. Chapter 4, by Doug Philippone, addresses what many observers consider to be one the most challenging of all terrorist groups—Hezbollah. They are a group responsible for much violence, but also a group that is socially embedded within the Shia population of Lebanon and politically active in the legitimate governance of Lebanon. They are large and well organized and receive support from Iran and Syria as well as from diaspora communities in Africa and South America.

In Chapter 5, Moyara Ruehsen analyzes the multitude of methods used by the PKK to raise funds. As she argues, the PKK has done well to maintain its income as the larger fortunes of the organization have risen and fallen over time. The PKK has also exploited its geographic context by utilizing neighboring countries for safe havens and by taking advantage of the drug smuggling routes that go from central Asia into Europe through Turkey. Chapter 6, by Geoffrey Kambere, Puay Hock Goh, Pranav Kumar, and Fulgence Msafiri, examines the LeT’s finances. Their reliance on sponsorship from Pakistan as well as charitable donations has enabled them to conduct some of the most noted recent terrorist attacks, including the 2008 coordinated and simultaneous attacks in Mumbai.

Justin Y. Reese examines the case of the Taliban in Chapter 7. The focus is mostly on the Taliban post-2001 when it became an insurgent group in Afghanistan and Pakistan and was no longer governing Afghanistan. As the chapter shows, the opium and black market economies of the region provide much of the funding for the Taliban. In Chapter 8, Christopher Corley discusses the methods by which the Tamil Tigers (LTTE) of Sri Lanka raised and moved funds. The LTTE had been a long-running ethnic separatist group that supported terrorist units, as well as militia-type conventional forces, as well as a nascent sea and air capabilities. Their revenues are diversified, coming from diaspora communities, illegal activities, and elsewhere. In the Philippines, several insurgent and terrorist groups have emerged, ranging from Marxist groups to Islamic separatist groups, and even criminal gangs. Chapter 9 by Germann, Hartunian, Polen, and Mortela’s describes the background of the various violent opposition groups in the Philippines and recounts the various methods used by the different groups to raise funds.

Turning to Europe, Stein-Fr Kynoe in Chapter 10 addresses the methods used by the Loyalist groups in Northern Ireland. While the Provisional IRA and other Catholic/Republican groups dominate the discussions of terrorism in Northern Ireland, the Protestant-led Loyalist groups fighting to remain part of the United Kingdom are also worthy of analysis, in part because they relied on different sources of funding than the PIRA. Eduart Bala, in the chapter on Albania (11), offers a slightly different perspective on terrorist financing. Albania has not seen any active terrorist groups, yet it has seen an increase in the number of fundamentalist Muslim charities operating in the country trying to establish an ideological foothold there. Bala’s chapter examines many of these charitable organizations and how the Albanian government has countered their increasing presence.

The last case study chapters (12 and 13), by Saul Hiram Bandala and Celso Andrade-Garzon, discuss the financing of two groups in Colombia—the FARC and ELN, respectively. Colombia has been racked by insurgent and terrorist violence for decades and these two groups, both Marxist, have been responsible for much of it. Both groups are heavily involved in drug (cocaine) trafficking, but also engage in other criminal activities, like kidnapping and ransom and extortion, to raise funds. Like with the Taliban’s connection to the opium trade in Afghanistan, the ties between the FARC and ELN and the cocaine trade pose similar challenges for the government of Colombia. These challenges and opportunities for better countermeasures are addressed by both Bandala and Andrade-Garzon.

The final chapter (14), by Michael Freeman, summarizes many of the key points and themes brought up by the earlier case studies. More importantly it challenges our understanding of how to think about countering terrorist financing. Freeman asks, how much of a priority should this be? What strategies are most likely to achieve success? How should states organize to fight terrorist financing? How do we measure effectiveness and success?

Overall, this book seeks to provide detailed case studies on many of the most prominent and important terrorist/insurgent groups. While much has been written debating the relevancy and priority of counter-terrorism efforts and much has been written about the overall profiles of these groups, this book offers a focused set of case studies on just the financing of different terrorist groups. As readers will see, terrorist groups tend to be fairly adaptive, flexible, and resilient in acquiring funds. Each group has a different portfolio tailored to their needs and their environment. All of this makes countering terrorist financing more challenging for the state. Yet understanding these challenges is necessary if states are to do better at curtailing terrorist financing.

Chapter 2 Sources of Terrorist Financing: Theory and Typology

Michael Freeman

DOI: 10.4324/9781315582429-2

Terrorism costs money. In fact, some experts have described money as “the lifeblood” of terrorist organizations.¹ Without money, these groups could neither conduct their operations nor exist as organizations. But how do they raise money? What are the possible sources of terrorist financing? The sheer variety of sources is impressive, ranging from state sponsorship to petty theft, from the international smuggling of drugs to the extortion of local businesses, and from dispersed diaspora communities giving charitable donations to wealthy private individuals using their personal wealth to fund the organization. These, among many others, are just a few of the ways that terrorist groups acquire funds. But why would terrorist groups use one of these sources and not others, or why a particular combination of sources? Understanding this variation requires a theory that explores and explains the relative advantages and disadvantages of each source of terrorist financing. In other words, from the terrorist organizations’ perspectives, what are their goals when it comes to financing and how do they maximize these goals by picking the right combination of sources?²

1 Dipak Gupta, “Exploring Roots of Terrorism,” in Root Causes of Terrorism: Myths, Reality and Ways Forward, edited by Tore Bjorgo (New York: Routledge, 2005), 28. 2 For the purposes of theory building, I assume terrorist organizations maximize their utility. In practice, however, they frequently make mistakes and miss opportunities.

While much has been written about terrorism financing, most of this literature addresses specific case studies of terrorist groups or addresses potential counter-measures that could be implemented to disrupt terrorist financing by targeting the movement of funding through charities, hawalas, or the official banking sector (by applying anti-money laundering regimes).³ These studies are clearly valuable but do not offer explanations that theorize why terrorist portfolios vary as much as they do.

3 For example, see Jeanne Giraldo and Harold Trinkunas, eds, Terrorist Financing and State Responses: A Comparative Perspective (Stanford, CA: Stanford University Press, 2007); Thomas Biersteker and Sue Eckert, eds, Countering the Financing of Terrorism (New York: Routledge, 2008); Sean Costigan and David Gold, eds, Terrornomics (Aldershot: Ashgate, 2007).

To construct a theory of terrorist financing, this chapter proceeds in several steps. The first (brief) section addresses why terrorists need money and how much money they actually need. The second section develops a theory of terrorist financing that identifies six key criteria by which we can evaluate the advantages and disadvantages of different sources of financing. These criteria are: quantity, legitimacy, security, reliability, control, and simplicity. The third section offers a typology of terrorist financing sources that identifies four broad sources: state sponsorship, illegal activities, legal activities, and popular support. This chapter will analyze the advantages and disadvantages of each type according to the criteria set out in the theory section. Finally, the fourth section will address the counterterrorism financing implications of understanding the rationale behind different sources of financing.

It should be noted however, that this chapter does not address the movement of money into, within, or out of a terrorist organization. Just as there are many pos...