Financing Terror

Since 9/11 there has been a concerted effort by several Western nations to coordinate the investigation of terrorist financing sources around the globe. Despite the cooperative efforts of international institutions and the implementation of advanced technologies, finding the origins of terrorist pipelines has proven to be a difficult task. Why has it been so difficult to track the sources of terrorist financing despite coordinated efforts by global institutions?

Perhaps the answer lies in the fact that these organizations utilize the globalized environment to hide in plain sight, using legitimate, pre-existing networks, to fund operations while remaining relatively decentralized themselves. Adding to this complexity, the coalition of nations that are seeking to track the sources of financing for terrorist groups are ultimately pursuing non-state actors who transcend national borders (Kaplan 2006). Contention regarding the proper paradigm to analyze this issue is palpable with realists asserting that violence perpetrated by terrorists “is illegitimate on the basis that states alone have a monopoly on the legitimate use of physical force” (Kiras 2020, 450). Therefore, a nuanced liberal-institutionalist approach will have to be explored as transnational groups have spread terrorism from existing merely as an individual state security problem, into a complex issue that requires multilateral engagement from both state and multinational actors.

Difficulties with international cooperation begin at the most basic level, getting states to agree on a common framework for defining terrorism. While countries seem to agree on the importance of eliminating terrorist activities around the globe, there is a disconnect involving a “legal definition of terrorism” (Acharya 2009, 2-3). In the United States alone, there exists a complex framework with multiple criteria to designate these groups domestically as a threat that requires input from all levels of the Federal government (Phillips 2019). With such difficulties at the national level, it is no wonder that there is a struggle for reaching an agreement on a global scale, and the lack of “a consensus on terrorism undermines the state’s ability to counter the threat” (Acharya 2009, 3). Take the terrorist group Boko Haram, for example. The Nigerian government initially pushed back against the designation of this group in the region, arguing that a “designation could disrupt aid flows” that were desperately needed in the country (Phillips 2019, 319). These fears, and others like them, have led to cooperation problems on a global scale that are far more complex than merely a consistent working definition of the issue.

Moreover, despite nations engaging in multi-lateral agreements, the involvement of several international organizations, and the adoption of technological investigational techniques, the movement of funds that support terrorism remains difficult to track. Meanwhile, the relative low cost of execution, increasing decentralization of terrorist organizations, and use of open and closed sourced technologies, both legal and illicit, has only caused more difficulties for the relevant authorities (Kiras 2020). Even for the most ambitious plots, “costs of individual terrorist operations can be quite low” (Freeman 2011, 462). This means that money passing through the newly decentralized organizations, a result of post-9/11 strategies to avoid detection, can be moved through these funnels with surprising ease (Jacobson 2010).

These groups are, furthermore, becoming more industrious in the means in which they conduct their activities and are “constantly adapting how they raise funds, in an attempt to continue evading detection” (Jacobson 2010, 360). Just as these groups are turning to the internet to globally spread ideology and radicalism, diversified funding pipelines often occur in plain sight, transfering both resources and ideas (Jacobson 2010). For example, according to a UN report, Al Qaeda was associated with 12 websites in 1998, but by 2006, that number had surged to 2600. With governments weary to repress activities on the Internet ––over fears of limiting free speech –– and the exploitation of “technologies associated with globalization” by terrorist groups, it is no wonder that coordinating global security is at risk (Kiras 2020, 450). The fact that these open channels of funding come from multiple sources only exacerbates the matter.

Understanding the nature of how these pipelines are constructed and utilized is paramount to finding effective strategies to deter them. There are four ways in which these activities are typically financed: state sponsorship, illegal activities, legal activities, and popular support (Freeman 2011). Although state sponsorship was historically a primary source of funding, we have seen the gradual demise of this pipeline overtime (Acharya 2009). This decline can be attributed both to increasing pressure from other states to halt these activities and to the ability of these donor states to constrain the activities of the groups they fund (Freeman 2011). The second source of funding is deeply embedded in the conduct of illegal activities such as extortion, kidnapping and ransom, theft, and smuggling, as well as petty crime and piracy. These illicit activities have the advantage of securing a “reliable source of income” while also establishing the groups' legitimacy in the regions in which they operate (Freeman 2011).

However, it is not just nefarious state sponsorship and illegal undertakings that support terrorism around the globe. Terrorist groups also operate legitimate businesses, that are largely “cash-based”, to serve as fronts for illegitimate purposes (Freeman 2011, 469). More strikingly than the aforementioned channels in which these groups move money is the use of Charities and NGOs, which are “susceptible to the abuse by terrorists and their supporters,” to serve as front operations harnessing popular support for their cause (Jacobson 2010, 355-57). Terrorist groups are extremely opportunistic in utilizing legitimate avenues for funding their illegitimate activities. They continue to exploit the freedom of transborder movement, advancing technological communication, and a globally interconnected finance system to uncover holes in the existing legal framework for their purposes. The confluence of the four factors outlined here, as a means of moving finance around the globe to support terrorism, has only contributed to the complexity of addressing the threat and has additionally had ramifications for reaching a collective agreement of how to combat it (Acharya 2009).

These factors have led to difficulties in synchronizing policies and enforcement for those wishing to deter this movement of resources (Acharya 2009). The nature of the threat necessitates a great deal of inter-state coordination across multiple jurisdictions that requires intelligence sharing and the involvement of private actors, such as Financial Institutions (FI). Ultimately, as with reaching a consensus on a working definition of terrorism, domestic and international laws are having difficulty meeting technological change (Jacobson 2010). States are further reaching a bottleneck in coordinating an effective response to the crisis.

Moreover, increasingly itinerant terrorists also move from one jurisdiction to another –– obtaining financing in one region only to have operations carried out in another (Cameron 2012). This freedom of movement demands the communication of sensitive information amongst actors and “despite the benefits of international counterterrorism cooperation, there are impediments of cooperation, such as mistrust, in the case of intelligence sharing” (Phillips 2019, 338). Furthermore, for reasons of ideological differentiation, states might not be inclined to cooperate in the first place (Phillips 2019). Not only are states, international organizations, and non-governmental organizations increasingly pursuing terrorists, private actors like FI’s are being relied on to shoulder the burden (Bures 2012). This factor inherently possesses some ethical issues as there exists a profit versus security dilemma wherein FI’s must absorb the extra costs associated with tracking these transactions, costs that ultimately get passed onto consumers (Bures 2012). As with states regulating the usage of the internet, private actors pose a risk to constraining “liberty, human rights, and justice” through their collaboration to contest terrorist funding around the globe (Bures 2012, 727).

Thus, not only is it difficult to ascertain a working definition of the issue, but there are also problems in tracking the decentralized networks that are utilizing the internet to convert funding from multiple sources. The involvement of charities, NGOs, and other non-state actors only further perverts the situation, making the coordination of multiple jurisdictions more difficult. One thing is certain, however: “fighting terrorism is far more effective when countries cooperate” (Philips 2019, 337). This global security concern engenders complications over sovereignty, self-determination, and collective action that needs a cohesive and international response to reach the common goal of denying the ability to fund and conduct terrorism operations worldwide. The recent development of decentralized blockchain technologies have been ever more difficult to track, which has made the need for multilateral coordination more important than ever.

References

Acharya, Arabinda. 2009. Targeting terrorist financing: international cooperation and new regimes. London; New York: Routledge.

Baylis, John, Steve Smith, and Patricia Owens, eds. 2017. The Globalization of World Politics: An Introduction to International Relations. Seventh edition. Oxford, United Kingdom; New York: Oxford University Press.

Bures, Oldrich. 2012. “Private Actors in the Fight Against Terrorist Financing: Efficiency Versus Effectiveness.” Studies in Conflict & Terrorism 35(10): 712–32.

Cameron, Iain. 2006. “Terrorist Financing and International Law,” In International and European Financial Criminal Law, ed. Ilias Bantekas. London: Butterworth/Lexis Nexis.

Freeman, Michael. 2011. “The Sources of Terrorist Financing: Theory and Typology.” Studies in Conflict & Terrorism 34(6): 461–75.

Jacobson, Michael. 2010. “Terrorist Financing and the Internet.” Studies in Conflict & Terrorism 33(4): 353–63.

Kiras, James. 2020. “Terrorism and Globalization,” In The Globalization of World Politics: An Introduction to International Relations, ed. John Baylis, Steve Smith, and Patricia Owens Oxford, United Kingdom; New York: Oxford University Press.

Kaplan, Eben. 2006. “Tracking Down Terrorist Financing.” Kapan (2006) "Tracking Down Terrorist Financing," Council on Foreign Relations

Phillips, Brian J. 2019. “Foreign Terrorist Organization Designation, International Cooperation, and Terrorism.” International Interactions 45(2): 316–43.

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Charlie Thompson in a Canadian Armed Forces veteran who is pursuing a Specialization in Peace, Conflict, and Justice as well as a Certificate in the Psychology of Economics and Management at the University of Toronto. Charlie served with the 1st Battalion, Princess Patricia’s Canadian Light Infantry and deployed to Afghanistan with the unit in 2006 on Operation Archer (TF-Orion). After specializing as a Close Protection Operator, he deployed

once again to Afghanistan as a member of the Close Protection Team to Kandahar in 2008 (Operation Athena) and Kabul in 2012-13 (Operation Attention). Prior to returning to his studies, he worked in both the private and public sector most notably helping to plan, organize, and implement the security plan for the 2015 Pan Am Games held in Toronto.