Sakshi Sharma is a Senior KYC Specialist at AML RightSource. We encourage our team members
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Terrorist financing encompasses the means and methods used by terrorist organizations to finance their activities, as explained by the United Nations Office on Drugs and Crime (UNODC). But how does this work? How are funds generated, money moved, and reach the fighters? Let’s find out, Shall we?
A decade ago, it was a novel to see Osama Bin Laden watching himself on a DVD. With the advancement of technology, today terrorists are posting and uploading messages to the Internet. They also used their Facebook pages, websites, and other channels to raise funds for their activities, recruit fighters, communicate, and spread propaganda. “One who equips a fighter, it’s as if he himself is in the battle’’ said a post on a Telegram channel. ‘’If you want to equip a jihadi with AK47 donate 400$ and if you want to equip him with a missile, donate 600$’’ said another. It’s like one man’s terrorist is another man’s freedom fighter.
Telegram is a popular communication tool for terrorists selling mayhem, chaos, and death. These channels are used to buy and sell goods and distribute tutorials. These tutorials cover many topics, including bomb building, cleaning, and reassembling an AK-47 and making IEDs. The channels include links to products ranging from grenades, guns, and bullets to bulletproof vests and drugs. These shopping websites accept Bitcoin for payment to keep the money from being tracked and to maintain the anonymity of the buyers and sellers.
Terrorist organizations also use the Internet for recruitment. They mimic video games for propaganda with subtitles like, ‘’your games, we do the same in real battlefields.’’ They also use hip-hop music to lure young fighters, and model-looking agents to promote their cause. The videos include promises of housing, safety, food, and a salary. The messages use language that resonates with their youthful target market. The production quality of the videos is comparable to a Hollywood movie.
Charities - Campaigns by charities are conducted in the name of slain terrorists to raise money for the widows and children of these jihadist fighters. However, these organizations are often fronts for funding terrorist activities, not humanitarian support. Donors are often unaware of the end-use of funds. For instance, Lashkar-e-Toiba, a Pakistan-based Islamic and militant organization, used the cash it received in the name of helping Haj pilgrimage to finance the November 2008 Mumbai terror attack. Its front organization Jamaat-ud-Dawa, known to provide disaster relief and humanitarian aid, was blacklisted by the UN after they were found to have used this money in other terrorist activities.
Drug Trafficking -- Terrorist organizations have also formed ‘’business’’ alliances with drug cartels to generate income, using the diaspora of people worldwide as channels to distribute drugs. In its most recent World Drug Report, UNODC noted that counterfeit Captagon production in the Middle East was centered primarily on Syria and Lebanon, where it's manufactured illicitly for domestic use and export. Captagon is a highly addictive amphetamine-based drug that is banned in many countries. It is informally called the “Jihadist’’ drug, a popular drug among terrorist organizations. It is a hallucinogenic pill that will make the user go to battle, not caring if they live or die. The user can stay awake for days at a time. It suppresses the sense of pain, making one feel invincible. Captagon is in high demand, is inexpensive to produce, and generates a good profit margin, especially in Persian Gulf states.
Weapon Sales -- Another funding source is the sale of weapons. Inventories of weapons for illegal deals are often acquired in conflict zones when there is a change in power dynamics or through organized smuggling operations. When governments fall, or other control changes occur, caches of weapons can be acquired during the ensuing chaos. Terrorists often erase or try to erase the marking showing the source of manufacture on these weapons so they can’t be traced.
Counterfeit Consumer Goods -- Funds are also acquired from selling counterfeit consumer products. The sale of fake handbags can fund terrorist activities. Here is an example of how this works. Beginning in 2011, two brothers, Saied and Sharif Qureshi, were on the terror watchlist for alleged links to Al-Qaeda. In June 2014, something changed, and the authorities stopped monitoring them. Why? The authorities thought they were no longer into extremism but just petty crimes because the brothers were selling fake designer shoes from China. Some months later, the brothers walked into the offices of Charlie Hebdo and killed 12 people and wounded several with the guns brought from the proceeds of the fake shoes.
Oil Sales -- Oil refineries have been one of the most lucrative ways for terrorist organizations to gain funding, especially in the Persian Gulf Region. ISIS controlled one of Syria’s most significant oil fields in 2014, with daily production worth $1.2 million in the underground market. It made ISIS one of the wealthiest terrorist organizations in the world.
Artifacts and Antiquities – In 2015, ISIS destroyed the Mosul Museum and the archeological site of Nimrud in Iraq, laying waste to thousands of antiquities. They also sold many artifacts, coins, and paintings on the black market.
After terrorist organizations raise funds for their activities, they must figure out how to move the funds and who will use them. ‘’How ‘’ is done through the financial system using dummy companies, charities, trusts, or human couriers. Another channel to move funds is through Hawalas. According to FATF, Hawalas “…arrange for transfer and receipt of funds or equivalent value and settle through trade, cash, and net settlement over a long period. Their use of non-bank settlement methods makes them distinct from other money transmitters. This typology seeks to provide a facts-based review of the extent of their vulnerability to money laundering and terrorist financing.”
Let’s look at the example of Boko Haram, an Islamist militant organization based in northeastern Nigeria. The group’s approach includes using hard-to-track human couriers to move cash, relying on local funding, and engaging in limited financial relationships with other extremist and terror outfits. Fighters are recruited based on ideological and political beliefs or just for excitement or money. In 2015, ISIS had 30,000 fighters from at least 85 countries. Most of them were from Western countries with high levels of economic development and were paid between $400 and $1,200 a month, plus a $50 stipend for wives and $25 per child.
The many ways terrorist financing is raised and distributed present challenges to civil society. Through strict regulations, diligent efforts by the financial and law enforcement sectors, and increased general awareness, we can continue to progress in reducing the funding of terrorist organizations.