Combating Financing Terrorism

 

Terrorism is the unlawful exercise of random and ruthless violence against property or individuals, usually innocent civilians, in order to intimidate governments or societies for political or ideological purposes. 

Terrorism financing is the provision of funds or providing financial support to individual terrorists or non-state actors.. Terrorism financing involves the solicitation, collection or provision of funds with the intention that they may be used to support terrorist acts or organizations. Funds may stem from both legal and illicit sources. More precisely, according to the International Convention for the Suppression of the Financing of Terrorism, a person commits the crime of financing of terrorism "if that person by any means, directly or indirectly, unlawfully and willfully, provides or collects funds with the intention that they should be used or in the knowledge that they are to be used, in full or in part, in order to carry out" an offense within the scope of the Convention.

The primary goal of individuals or entities involved in the financing of terrorism is therefore not necessarily to conceal the sources of the money but to conceal both the financing and the nature of the financed activity. The internet is a growing modern form of terrorist finance as it is able to protect the anonymity that it can provide to the donor and recipient. Terrorist organizations use propaganda in order to rally up financial support from those who follow them. They are also able to find funds through criminal activity on the internet such as stealing online banking information from people who are not correlated to these terrorist organizations

Terrorism Financing involves the raising and processing of funds to supply terrorists with resources. While ML and TF differ in many ways, they often exploit the same vulnerabilities in financial systems that allow for an inappropriate level of anonymity and opacity in the execution of financial transactions.

September 11, 2001 USA

The September 11, 2001 hijackers used U.S. and foreign financial institutions to hold, move, and retrieve their money. The hijackers deposited money into U.S. accounts, primarily by wire transfers and deposits of cash or travelers checks brought from overseas. Additionally, several of them kept funds in foreign accounts, which they accessed in the United States through ATM and credit card transactions. The hijackers received funds from facilitators in Germany and the United Arab Emirates or directly from Khalid Sheikh Mohamed (KSM) as they transited Pakistan before coming to the United States. The plot cost al Qaeda somewhere in the range of $400,000–500,000, of which approximately $300,000 passed through the hijackers’ bank accounts in the United States. The hijackers returned approximately $26,000 to a facilitator in the UAE in the days prior to the attack. While in the United States, the hijackers spent money primarily for flight training, travel, and living expenses (such as housing, food, cars, and auto insurance). Extensive investigation has revealed no substantial source of domestic financial support

November 26, 2008 Mumbai, India

On the night of 26 November 2008, ten Kalashnikov-wielding terrorists attacked Mumbai. They stuck simultaneously at five locations, shooting dead 140 Indians and 25 foreign tourists. American and British passport-holders were executed in two luxury hotel complexes.^[1] At a Jewish cultural centre, Israeli nationals were tortured before being killed. A fourth location, a café frequented by Western backpackers, was enfiladed with automatic fire. Only at the city’s main railway station, the site of the largest number of deaths, were all the victims Indian. The gunmen seemed at war not just with India, but with the world

The Pakistani terror gang Lashkar-e-Tayyiba attacked Mumbai, killing more than 160, including six Americans, in the deadliest and most brazen terror attack since 9/11. Then and now, LeT enjoyed the support of Pakistani intelligence and al Qaeda.

The 60-hour siege of Mumbai had begun on 26 November 2008. Attacks on a main railway station, luxury hotels and a Jewish cultural centre claimed 166 lives. Nine gunmen were also killed.

A month away from her 10th birthday, Devika had been shot in the leg by Mohammad Ajmal Amir Qasab, the lone surviving gunman from the attack at the landmark Chhatrapati Shivaji Terminus train station. Around 50 people lost their lives, and another 100 wounded in the gunfire at the station alone

Ajmal Kasab, the only one of the 10 LeT terrorists who survived the attack, was hung for his crimes in India in 2012

He had confessed to joining the organization and to being trained in its camps in Pakistan for the operation. He implicated the senior LeT leadership in the plot. LeT’s founder and leader Hafez Saeed is not only still free and at large in Pakistan, he routinely speaks at large rallies attacking India, America, and Israel. He denounces the drones and demands Pakistan break ties with America. He eulogized Osama bin Laden as a “hero” of Islam after the SEALs delivered justice to al Qaeda’s amir in 2011.

Saeed’s patrons include the Pakistani army and its intelligence service, the ISI, which works closely with LeT. Kasab also implicated the ISI directly in the Mumbai operation, saying it assisted with his training and helped select the targets. Two Pakistani emigres, David Headley (an American) and Tahawwur Rana (a Canadian), have also confessed in American courts that they helped LeT plan the massacre in Mumbai and that the ISI was deeply involved in it. Both were found guilty. The ISI helped bankroll their reconnaissance trips to Mumbai to set up the attack.

At just nine years old, Devika Rotawan survived the November 2008 Mumbai terror attacks. Shot in the leg, she later identified the lone surviving gunman in court.

In July 2009, Pakistani authorities confirmed that LeT plotted and financed the attacks from LeT camps in Karachi and Thatta In November 2009, Pakistani authorities charged seven men they had arrested earlier, of planning and executing the assault.

A Pakistani-American jihadist called David Headley (original name: Daood Gilani) was arrested in October 2009 for planning a Mumbai-style terrorist attack in Denmark. While in US custody, he claimed that he had been an informant of the American Drug Enforcement Agency, tasked to infiltrate the criminal underworld in Pakistan. His travels to the latter country had brought him to the attention of the ISI, which had referred him to Lashkar-e-Taiba.

Thereafter, Headley appears to have been tasked as a reconnaissance agent for LeT. He undertook several trips to Mumbai over the course of three years, beginning in 2006 and continuing until after the 26/11 attack. It was due to his reconnaissance videos and photographs that LeT was able to plan and rehearse for a precision-strike.

According to Headley’s testimony in a US court, he had been trained by the ISI in intelligence collection techniques. Of the $29,500 he received from Pakistani sponsors, $28,500 came from a serving ISI officer. This officer, identified as ‘Major Iqbal’ in American court documents, became the first Pakistani intelligence operative to ever be indicted by the US government for terrorism. The remainder of the money came to Headley from a LeT operative called Sajid Majeed (often referred to in international media reports as ‘Sajid Mir’). Majeed was deputy head of LeT’s external operations department and handled jihadists worldwide. By 2008, his name had been linked to terrorist plots in Europe, the US, and Australia. Testimonies from Western jihadists depicted him as a highly influential figure within LeT. Headley stated that the Mumbai operation had been coordinated by Majeed. He also claimed that the ten gunmen who attacked Mumbai had been trained by former members of the Pakistani army special forces, thus corroborating what Pakistani journalisticresearch had uncovered; LeT was being advised by professional soldiers.

Cash from Haj pilgrims was used to finance the 26/11 Mumbai terror attack by Lashkar-e-Toiba, a US embassy cable published by WikiLeaks has revealed. According to the cable, LeT’s annual military operations budget is $5.2 million.

A Sky News report cited the New York Times as detailing a long list of possible methods terrorists might have been using to fund activities. One memo claims militants often used the annual Haj pilgrimage for laundering money and cash from pilgrims. This, the memo says, was also used to finance the Mumbai terror attack, for which LeT was responsible

Other documents have claimed the US believes donors from Saudi Arabia are “the most significant source of funding to Sunni terrorist groups worldwide.” A memo sent by the US Secretary of State Hillary Clinton in December, 2009, referred to the kingdom as a “cash machine” for al-Qaeda. Other countries in the Middle East have also come under fire.

In the leaked cables, the United Arab Emirates is described as having a “strategic gap” that terrorists could exploit, Qatar is seen as “the worst in the region” on counter-terrorism and Kuwait is labelled “a key transit point”.

In August, 2009, America had also shared other details of fund-raising of various outfits of LeT with Pakistan at the direction of Secretary of State Hillary Clinton. The document says that Hafiz Saeed continues to lead both LeT and its front organisation Jamaat-ud-Dawa and that some of the funds collected in the name of charitable activities have also been used for planning terror attacks

The fund is raised through a variety of sources mainly from private donations, NGOs, madrassas and business spread throughout south and west Asia and Europe

The non-paper that puts LeT’s annual budget at more than `23 crore, was used by Hillary Clinton to buttress her point and convey to Pakistan her decision to oppose delisting of Jamaat-ud-Dawa and its leader Hafiz Saeed from the al-Qaeda and Taliban Sanctions Committee of the UN Security Council.

The non-paper says that the US intelligence community assesses that Hafiz Muhamad Saeed is leader of LeT and Zaki-ur-Rehman Lakhvi is LeT’s operations commander and they continue to run the organisation despite being detained for their role in the Mumbai attacks
“We also judge that they have planned, directed and executed LeT attacks throughout south Asia and is likely have used some funds collected in the name of JuD’s charitable activities to support multiple terrorist operations, including the November Mumbai attacks,” it said.
“The community assesses that Saeed continues to lead both organisations. However, the community is unable to assess to what extent senior JuD leaders such as Saeed are involved in specific terrorist operations or the level of detail to which they are knowledgeable about specific past and pending attacks,” it said.

Significance of Combating Financing Terrorism

The consequences of money laundering, terrorism financing, and proliferation financing (providing funds or financial services for nuclear, chemical, or biological weapons), as well as related crimes that undermine the financial sector and the broader economy. These crimes can make countries less stable, which in turn, can weaken law and order, governance, regulatory effectiveness, foreign investments, and international capital flows.

Money laundering and terrorism financing activity in one country can have serious adverse effects across borders and even globally. Countries with weak or ineffective controls are especially attractive for money launderers and financiers of terrorism. These criminals seek to conceal their criminal activities by exploiting the complexity of the global financial system, the differences between national laws, and the speed at which money can cross borders.

 Terrorism activities take place in many different forms ranging from isolated acts to planned activities of organised groups. The forms of financing of terrorism therefore vary accordingly. It comprises not only the financing of the terrorist acts as such, but also any support to the criminal network. Terrorist organisations require significant funding, both for the actual undertaking of terrorist acts, but also to other issues : to maintain the functioning of the organisation, to provide for its basic technical necessities, as well as to cover costs related to spreading related ideologies. 

The sources of terrorist funding vary. Firstly, they may originate from illegal activities, ranging from low-scale criminality to organised crime (e.g. trafficking in drugs, weapons or human beings.) The origin of the funds might, however, also be legitimate, being provided for example by the members of the organisation (usually the newcomers) or obtained through the abuse of non-profit organisations. New funding techniques of terrorist organisations were recently identified by the FATF in respect of Da’esh (also known as the “Islamic State”). Given the way of its functioning, Da'esh recurred to new methods of funding which could be considered more inherent for a state, such as levering taxes or exploiting natural resources (such as in this case natural gas and oil).

The funding of terrorist activities often requires funds to be moved within or across jurisdictions. This might be done through official channels of the financial market and money remittances, through unregulated channels or with the use of cash couriers. A clear similarity can be identified between terrorist financing and money laundering, as in both cases efforts are made to hide the funds from the scrutiny of state authorities. The techniques to do so are also often similar. The FATF broadened in 2001 its mandate and expanded the application of its standards also to financing of terrorism. After initial consideration of counter-terrorist financing measures together with the AML measures, the FATF more recently focuses on identifying the differences between the two phenomena, with the with the view of adapting its standards to the particularities of terrorist financing. For example, based on the fact that not all terrorist financing sources are from illicit origin, such as the emphasisset on the abuse of NPOs. 

Financing Terrorism Vs. Money Laundering

Money laundering is the processing of assets from criminal activity to obscure their illegal origins. Terrorism financing raises money to support terrorist activities. While these two activities differ in many ways, they often exploit the same vulnerabilities in financial systems that allow for anonymity and opacity in transactions.

SL No	Particulars	Financing of Terrorism	Money Laundering
1	Intention	Intimidate through violence	Disguise the origin of the resources
2	Funding	Unlawful means Extortion Kidnapping Drug trafficking Smuggling Fraud Theft Legal Resources Donations Government sponsorship Controlled Companies	Unlawful means Extortion Kidnapping Drug trafficking Smuggling Fraud Theft
3	Life Cycle	Linear	Circular
4	Methods	Placement,  Integration & Concealment	Placement , Integration and Concealment
5	Motivation	Ideological purposes	Profit-making

Emerging Terrorist Financing Risks - FATF

The FATF report on Emerging TerroristFinancing Risks was published in October 2015 to raise awareness among FATF members and the private sector on the underlying issues that need to be addressed by policy and operational responses The report has succinctly put forth its findings as follows:

 

To understand the emerging TF risks, FATF explored the threats and vulnerabilities posed by:

 

1. Foreign terrorist fighters (FTFs),

2. Fundraising through social media,

3. New payment products and services, and

4. The exploitation of natural resources.

 

The FTF phenomenon is not new, but the recent scaling up of individuals travelling to Iraq and Syria has been a challenge for many FATF members. FTFs are predominantly using traditional methods, particularly self-funding, to raise the funds they require to travel to the conflict areas. However, the novel aspect for jurisdictions is the challenge in identifying these individuals because of the relatively low amounts of funding they require and the speed with which they can acquire it. The report reveals that financial intelligence can assist in identifying FTFs in a number of ways. Close cooperation between authorities domestically and internationally and close partnerships between authorities and the private sector can assist to better identify FTFs and their facilitation networks. The report also shows that further work is required to shed light on blind spots in information about FTFs, including returnees.

 

The role of social media in breeding violent extremism has been well reported but less is known about how it used to raise funds for terrorists and terrorist groups. The report finds that there are significant vulnerabilities associated with social media, including anonymity, access to a wider range and number of potential sponsors or sympathisers and the relative ease with which it integrates electronic payment mechanisms. It is also apparent that donors are often unaware of the end-use of funds supported by social media, including crowdfunding, which presents a risk that terrorist organisations can exploit.

 

The  electronic, on-line and new payment methods pose an emerging terrorism financing vulnerability which may increase over the short term as the overall use and popularity of these systems grows. Many of these systems can be accessed globally and used to transfer funds quickly. While transactions may be traceable, it proves difficult to identify the actual end-user or beneficiary. This report presents a number of interesting cases, but the actual prevalence and level of exploitation of these technologies by terrorist groups and their supporters is not clear at this time and remains an ongoing information gap to be explored.

 

The exploitation of natural resources for TF was raised as a substantial concern in the context of the Islamic State of Iraq and the Levant (ISIL) but this report has confirmed that it is also relevant for other terrorist organisations and regions. The ability to reap high rewards from the natural resources sector, coupled with the weak institutional capability, particular in or near areas of conflict, creates a significant vulnerability for terrorist organisations to capitalise on. This report finds that this issue is linked with criminal activity including extortion, smuggling, theft, illegal mining, kidnapping for ransom, corruption and other environmental crimes.

 

This report builds on the findings of the Financing of the Terrorist Organisation of the Islamic State in Iraq and the Levant report (the ‘FATF ISIL report’, 2015) and takes into account the activities of a broader range of terrorist organisations. The project benefited from the involvement of national experts from FATF’s entire global network, including law enforcement, intelligence agencies and Financial Intelligence Units (FIUs). This report also takes into account recent initiatives by the United Nations, the Egmont Group of FIUs and the Members of the Counter-ISIL Coalition, specifically Counter ISIL Financing Group (CIFG). The project involved private sector feedback via their involvement in the FATF/ Financial Action Task Force of Latin America (GAFILAT) Joint Experts’ Meeting on Terrorism Financing. This engagement with the private sector to identify TF risks has also laid the groundwork for future initiatives to develop risk indicators which will be helpful to both private and public sectors.

 

Happy Reading,

Those who read this, also read:

1. Combating Financing Terrorism & United Nations

2. India's CFT: Programme Implimentation

3. Money Laundering Techniques

4. Financial Intelligence Unit (FIU-Ind)

5.India's CFT and UNSCRs