Tuesday, March 25, 2008

Disrupting Terrorist Funding

One of the most productive ways to harm any organization is to drain its funding. Terrorist organizations are no different; they require significant funding to accomplish their aims. And the more ambitious their goals, the greater their need for money.

The Financial Action Task Force (FATF) published a recent study examining how terrorist organizations raise, use, and move money through financial systems, in both legal and illegal ways. There isn't much new information here, but some that bears repeating:

The literature on terrorist finance developed since 2001 has emphasised the great adaptability and opportunism that terrorists deploy in meeting their funding requirements. Indeed, the breadth of cases ... suggests that the answer to the question: “How do terrorists raise and move funds?” is:”Any way they can.”

Terrorists have shown adaptability and opportunism in meeting their funding requirements. Terrorist organisations raise funding from legitimate sources, including the abuse of charitable entities or legitimate businesses or self-financing by the terrorists themselves. Terrorists also derive funding from a variety of criminal activities ranging in scale and sophistication from low-level crime to organised fraud or narcotics smuggling, or from state sponsors and activities in failed states and other safe havens.

Terrorists use a wide variety of methods to move money within and between organisations, including the financial sector, the physical movement of cash by couriers, and the movement of goods through the trade system. Charities and alternative remittance systems have also been used to disguise terrorist movement of funds. The adaptability and opportunism shown by terrorist organisations suggests that all the methods that exist to move money around the globe are to some extent at risk.
What Terrorists Need Money For

When thinking about disrupting terrorist financing - regardless of the size or complexity of the organization - it is useful to examine the reasons why terrorists need money.

Terrorist financing requirements fall into two general areas: (1) funding specific terrorist operations, such as direct costs associated with specific operations and (2) broader organisational costs to develop and maintain an infrastructure of organisational support and to promote the ideology of a terrorist organisation.

The amount of money required to pull off a terrorist attack - even a fairly large-scale one - is relatively small. FATF examines the funds required to pull off some high-profile attacks of recent years. Amounts are in U.S. dollars:
$10,000: Madrid train bombings (2004)
$10,000: USS Cole attack (2000)
London transport system (2005)
$30,000: Jakarta JW Marriot Hotel bombing (2003)
$40,000: Istanbul truck bomb attacks (2003)
$50,000: Bali bombings (2002)
$50,000: East Africa embassy bombings (1998)
Terrorists' greater financial need is typically for more mundane operating expenses:
Financially maintaining a terrorist network – or a specific cell – to provide for recruitment, planning and procurement between attacks represents the most significant drain on resources.
The take-away here is that when you're looking to disrupt terrorist financing, it's foolish to focus only on activities that are directly associated with an attack. The real money is needed for other activities, and those activities can also leave a trail.

Terrorists' Fundraising Means

FATF outlines the well-documented means that terrorists raise funds, including legitimate sources, charities, and crime.

Charities are an especially profitable fundraising mechanism for terrorists:
In developing the key financial standards to combat terrorism, the FATF has found that “the misuse of non-profit organisations for the financing of terrorism is coming to be recognised as a crucial weak point in the global struggle to stop such funding at its source”.
A greater vulnerability for terrorist groups - but also a greater opportunity - is in finding common cause with drug traffickers. Connections have grown:
The degree of reliance on drug trafficking as a source of terrorist funding has grown with the decline in state sponsorship of terror groups. This trend has increasingly blurred the distinction between terrorist and drug trafficking organisations.

Investigations and intelligence have revealed direct links between various terrorist and drug trafficking organisations that frequently work together out of necessity or convenience and mutual benefit.
Local law enforcement should also be aware of other illicit means of fundraising, such as credit card theft and extortion:
A North African terrorist funding group accumulated details of nearly 200 stolen cards and raised more than [$400,000] to fund the al-Qaeda terrorist network through international credit card fraud. Twenty to thirty 'runners' collected the names and credit card details of almost 200 different bank accounts from contacts working in service industries such as restaurants.

Supporters of terrorist and paramilitary groups exploit their presence within expatriate or diaspora communities to raise funds through extortion. A terrorist organisation would make use of its contacts to tax the diaspora on their earnings and savings. The extortion is generally targeted against their own communities where there is a high level of fear of retribution should anyone report anything to the authorities. They may also threaten harm to the relatives – located in the country of origin – of the victim, further frustrating any law enforcement action.
Moving Terrorist Funds

With the proliferation of global trade and finance, it is becoming harder to detect movement of terrorist funds. They are likely to use a variety of mechanisms to move money - ranging from sophisticated electronic transfers to human cash couriers.
There are three main methods by which to move money or transfer value:
  • The financial system
  • The physical movement of money (for example, through the use of cash couriers)
  • The international trade system
The multiplicity of organisational structures employed by terror networks, the continuing evolution of techniques in response to international measures and the opportunistic nature of terrorist financing all make it difficult to identify a favoured or most common method of transmission.

Cases highlight how in many situations, the raising, moving and using of funds for terrorism can be especially challenging and almost indistinguishable from the financial activity associated with everyday life. The identification and the disruption of terrorist finance are naturally harder when authorities are confronted by “informal” support networks that do not operate as part of well structured organisations with clear roles and lines of accountability. In such circumstances, the links between financial activity and terrorist activity become more opaque and the targets for disruption harder to identify.
Disrupting Terrorist Finances

And yet, there are options for disrupting these practices. As indicated earlier, it is probably ineffective to focus on searching for sources of funding for attacks, which are relatively low-cost and may involve few or no activities that would set off financial triggers:
The disruption of specific attacks through the interdiction of specific transactions appears highly challenging. Recent attacks demonstrate that they can be orchestrated at low cost using legitimate funds and often without suspicious financial behaviour.
A better strategy is to focus on complicating the environment in which terrorists are forced to operate.
In large measure, terrorists require funds to create an enabling environment necessary to sustain their activities – not simply to stage specific attacks. Disrupting terrorist-linked funds creates a hostile environment for terrorism. Even the best efforts of authorities may fail to prevent specific attacks.

Nevertheless, when funds available to terrorists are constrained, their overall capabilities decline, limiting their reach and effect.
The key is for public and private financial entities to collaborate and share information:

National authorities can assist the financial sector in its efforts to identify and prevent terrorist financing by sharing intelligence. Financial information alone may not be sufficient to identify terrorist financing activity. However, when combined with counter-terrorist intelligence drawn from surveillance of the range of terrorist activities and networks, financial information can be leveraged to provide financial institutions with a concrete indication of possible terrorist activity, whether these use legitimate or criminal sources of funds.

Financial information is now used as part of the evidential case to hold criminals and terrorists to account. It also has a key intelligence role – for example by allowing law enforcement to:
  • Look backwards, by piecing together how a criminal or terrorist conspiracy was developed and the timelines involved.
  • Look sideways, by identifying or confirming associations between individuals and activities linked to conspiracies, even if overseas – often opening up new avenues for enquiry.
  • Look forward, by identifying the warning signs of criminal or terrorist activity in preparation.
The creation of a hostile atmosphere can be effective in curtailing terrorist activity, because it undermines the group's sense of operational security. Even the suspicion that certain activities are not secure can serve as a deterrent.

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