Financing terrorists and terrorism post 9/11

As the 10^th anniversary approaches of the '9/11' terror attacks on the United States, a review of terrorists activities in the last decade shows the amazing adaptability and opportunism these organisations have in meeting their funding needs.

While the direct costs of mounting individual attacks have been low relative to the damage they can yield, financing is required not just to fund specific terrorist operations, but to meet the broader organisational costs of developing and maintaining a terrorist organisation, and to create an enabling environment – infrastructure - necessary to sustain their goals and activities over time.

The average cost of mounting seven significant terrorist attacks at locations around the world between 1998 and 2005 was approximately US$29 400, within a range of approximately US$8 000 to US$50 000.

Organisational scale and diversity

There are a wide range of terrorist organisations, from large, state-like organisations to small, decentralised and self-directed networks, and their financing requirements reflect this diversity and vary greatly between organisations.

Organisations require significant funds to create and maintain an infrastructure of organisational support, to sustain an ideology of terrorism through propaganda, and to finance the seemingly lawful activities needed to provide a veil of legitimacy for terrorist organisations.

In the past, most terrorist groups derived much of their funding and support from state sponsors of terrorism. With increased international pressure, many of these funding sources have become less reliable and, in some instances, have disappeared altogether.

In addition, newer decentralised, independent cells often do not have the same level of access to foreign funding as traditional terrorist groups.

Financing from above and below

A single terrorist organisation may use a number of different financing methods, and these can be divided into two general types; financing from above, in which large-scale financial support is aggregated centrally by states, companies, charities, or permissive financial institutions; and by financing from below, in which terrorist fundraising is small-scale and dispersed, for example based on self-financing by the terrorists themselves. In many cases this is through employment, savings, and social welfare payments – methods that would not otherwise raise concerns because they appear legitimate.

Fundraising from legitimate sources includes the abuse of charities or businesses, but terrorists are also increasingly turning to alternative sources of financing, including criminal activities that range from low-level fraud to serious organised crime, either through state sponsors and/or activities in failed states and other safe havens.

These criminal activities range in scale and sophistication from low-level crime to arms trafficking, money laundering, kidnap-for-ransom, extortion, racketeering, organised fraud, and drug trafficking.

Moving the money

Terrorists use a wide variety of methods to wipe out the money trail by moving 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, and this adaptability and opportunism suggests that all the methods that exist to move money around the globe are to some extent at risk.

Supporters of terrorist and paramilitary groups exploit their presence within expatriate or diaspora communities to raise funds through extortion, or to 'tax' the diaspora on their earnings and savings, 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 of the victim – located in the country of origin – which further frustrates any law enforcement action.

"Extortion from diaspora communities can be a significant and consistent source of funds.

Law enforcement agencies believe that before 2001 one terrorist group collected up to US$1 million a month from expatriates in Canada, Britain, Switzerland and Australia, making it one of the best-funded terrorist groups in the world. Incidentally, this terrorist group continues to extort money from expatriates today, even though both the conflict and military wing have ceased to exist.

The opportunism of terrorist financiers is particularly illustrated by cases where suspects move fluidly from one kind of crime to another, such as burglary, identity theft, and credit card fraud.

Whether through the absence of effective jurisdictional control, tolerance of terrorist organisations and their activities, or active support to terrorist organisations, safe havens, failed states, and state sponsors such as Somalia, Iraq, and the Pakistan-Afghanistan border, create enabling environments or otherwise provide crucial support to terrorist organisations today.