terrorist funding

The Funding of Terrorism (Part IV) – A Trust Deficit is Undermining the Investigation of Terrorist Financing across MENA

August 9, 2019 by Jack Watling

by Jack Watling

Grand Ayatollah Seyyed Ali Khamenei (Image credit: Ayatollah.ir/Wikimedia)

The Kingdom of Bahrain sentenced 139 people to prison in April 2019, alleging they were part of a terrorist cell, which the authorities refer to as ‘Bahraini Hezbollah’. The charges in the mass trial ranged from plotting to conduct attacks and the smuggling of arms, to terrorist financing. Specifics however were not revealed, and point to a damaging trend: the use of ‘terrorism’ as a politically acceptable charge with which to implement repression. The consequences of this policy are not just unjust, but in pushing communities to avoid cooperation with the authorities sustains avenues for actual terrorists to finance and carry out their operations.

There are armed groups active in Bahrain, just as there are non-state armed actors, many of which have carried out terrorist attacks, in Iraq, Syria, the Palestinian Territories and Lebanon. Many of these groups are directly supported by Iran in these activities. While sanctions on Iran can be effective in reducing the country’s available resources for financing clandestine activities, limited progress has been made in restricting the routes by which money reaches armed groups. To understand why, it is necessary to appreciate how the Shia community manages its tithes. Although a minority of Shia Muslims are followers of Ayatollah Khamenei, Iran’s religious leadership has ties across the Shia community, and the Iranian government is consequently able to leverage these networks.

Each Twelver Shia Muslim selects an Ayatollah – or religious jurist – as their spiritual guide. They are obligated to follow the scholar who they believe to be most theologically knowledgeable. A follower must pay a fifth of their profits each year to their Ayatollah. The khums is supposed to support the Ayatollah in his research, and to provide subsistence for the Howza: the seminary he oversees. Many Shia give more than the required khums and, in discussion with the cleric or their representatives, make additional donations for him to spend in support of an agreed cause.

The Shia financial system was developed in small communities. Between the collapse of distance brought about by international finance, and a rapidly expanding global population, it now sees donations made by a community of around 220 million people. The volume of money is therefore vast, and far exceeds the immediate needs of the Ayatollahs and the Howza. A far higher proportion of the money is therefore used to support charitable ventures, and to help Shia communities.

What constitutes ‘help’ is contextual. It may mean educational scholarships to students in Mali, or aid to flood victims in Pakistan. It could also mean supporting military activity. When Islamic State seized Mosul in 2014 Grand Ayatollah Sistani declared the fight to defend Iraq a ‘sacred defense’ and large amounts of money from the Marjaiy’ah – the Shia clerical authority – went to the Popular Mobilization Forces, and their families, to support the war effort. The use of religious funds to support the war effort was understandable. It also highlighted how the Shia financial system can support a wide range of political causes, and military efforts.

The capacity for Shia clerics to inject political and financial capital into causes was lamented by the British in the early twentieth century.[1] It has been viewed with hostility by Arab governments since, especially in the wake of the Iranian revolution of 1979. Following the Arab Spring uprisings of 2011 for instance Grand Ayatollah Sistani decided that Bahraini Shia should use their khums locally.[2] Done for humanitarian reasons, this act gave the protest movement both a large amount of money, and the infrastructure for managing it.

Much of that infrastructure is entirely opaque, with local religious representatives receiving cash, and conveying or dispersing it as a matter of trust. The Shia community has a good reason for keeping their finances away from the banking system. In 1991 for instance Saddam Hussein looted the Shrines of Karbala, and actively attempted to seize khums revenues. The fear that opening the process to scrutiny will see predatory seizures by hostile governments is both persistent within the Marjai’yah, and understandable.

From the point of view of Arab governments like Bahrain or Saudi Arabia however this architecture provides a highly suspicious and invisible flow of funds that goes to both legitimate charity, and to subversive political activities. It is exploited by Iran. The problem is that because it is opaque, finding the evidence trail of the small amount of terrorist financing in the large flow of legitimate funding is hard, especially when those conducting legitimate charity have no incentive to cooperate with the authorities.

Bahraini officials have repeatedly sought to have US counterterrorism investigators endorse their actions against what they see as Iranian subversion in their country. The problem, as a former senior US Treasury official noted in interview, is that ‘they present us with suspicious unknowns – and the opacity of Shia finance certainly represents a threat vector – but they claim it is evidence of terrorist financing. It is not.’[3]

If Bahrain – and other Gulf monarchies – intend to clamp down on the financing of terrorism they need to avoid mass trials and vague charges. They must conduct diligent investigative work, and present detailed cases. Charging five people with specific, evidenced crimes, would be infinitely more credible. It would require a shift from attempting to rule by law, to supporting the rule of law. But until governments across the region are able to build trust with the Shia community, they can expect Shia finance to remain opaque, and so long as it is opaque, it will remain a vector for the financing of subversion from Iran.

Jack Watling is Research Fellow for Land Warfare in the Department of Military Sciences at RUSI. He holds a PhD in history examining the evolution of UK policy responses to civil war. Jack has worked in Iraq, Mali, Rwanda and further afield and has contributed to the RUSI Journal, RUSI Defence Systems, Reuters, The Atlantic, Foreign Policy, The Guardian, Jane’s Intelligence Review, Haaretz and others. He was shortlisted for the European Press Prize in 2016, and won the Breakaway Award at the International Media Awards in 2017. This report was supported with funding from the Pulitzer Centre.

[1] TNA, FO 800/70: Cecil Spring Rice to Edward Grey, 18 July 1907.

[2] Author interviews with officials from Iraq’s clerical establishment, held in October 2017 in Najaf.

[3] Author interview, a former senior treasury official, Washington DC, April 2019.

Financing Terror, Part III: Kidnapping for ransom in the Philippines

January 26, 2015 by Strife Staff

By Samuel A. Smith:

Abu Sayyaf gunmen displaying their weapons in the jungles of the Philippines in 2000. Photo: AFP

Abstract: The international community has been relatively successful in restricting terrorist financing, so terrorist organisations have turned to alternative means to fund their organisations. The Abu Sayyaf Group (ASG) is currently one of the most prominent terrorist organisations in the Philippines and Southeast Asia and is but one example of a terrorist organisation that engages in kidnapping-for-ransom (KFR) activity. The ASG’s KFR activity is believed to stem from past organisational devolution and finance restrictions. The ASG’s penchant for KFR suggest that the group is more interested in personal wealth and material gain than political ends.

***

Terrorist groups, like any other type of organisation, require funding to maintain their operations. There are numerous methods that allow terrorist groups to generate cash flow. One such method is kidnapping-for-ransom (KFR), which has become increasingly popular amongst terrorist groups around the world.^[1] In a speech made at Chatham House in London, David Cohen, Secretary of the U.S. Treasury Department, described KFR as a ‘serious threat’ and estimated that terrorist organisations have earned approximately $120 million in ransom payments between 2004 and 2012.^[2] KFR is becoming more transnational in character, with one study estimating that there has been a 275% increase in kidnappings of foreign nationals in the decade preceding 2008.^[3]

Kidnapping activity, whether used as a political tool or for economic extortion, is useful in understanding a terrorist organisation’s ideology and modus operandi. The KFR activity by the ASG suggests that economic goals are the preference of its members. This inclination leaves the group bereft of any real drive towards the goal of liberating the Moro Muslim people.

It is necessary to first discuss the nature of KFR and the issues aligned with the statistics documenting its activities. The criminological concept of the ‘dark figure of crime’ refers to criminal offences that are unobserved and/or unreported, consequently leaving the true figure of crime unknown.^[4] KFR does not escape the ‘dark figure of crime’. One study estimates 12,500 to 25,000 incidents occur globally each year, and only 10% of these kidnappings are actually reported.^[5]

Explanations for this vary. Sometimes victims and their families are coerced into silence. Sometimes the payment of the ransom is usually seen as a better option. Some reports approximate that only 11% of kidnapping victims are released without payment. However, when payments are made, around 40% are released unscathed.^[6] KFR is double pronged: terror is instilled during the kidnapping and subsequent negotiations, and any monetary gain made from the hostage taking may be put to further terror-related activities. KFR is also understood to be cyclical, as successful ransom payments create a stronger incentive to conduct further operations.^[7]

There have been a substantial number of reported kidnappings conducted by the Abu Sayyaf Group (ASG) in the Philippines which indicate the behavioural trends of the group, such as the tendency to drift between terrorist and criminal activity.^[8] When the group formed in the early 1990s, it was ideologically driven and sought to liberate the Moro Muslim population in the southern Philippines and ultimately in Southeast Asia.^[9] The ASG initially degenerated into bandit factions after suffering leadership decapitation through the killing of its spiritual leader Abdurajak Abubakar Janjalani in 1998.^[10] Janjalani’s younger brother unsuccessfully attempted to reunite the fragmented organisation from 2002 until his death in 2006.^[11] The ASG lost its ideological drive, and any radical Islamic elements are arguably only at a superficial level and are a legacy of ASG’s previous Islamic nationalist and separatist views.^[12] It is debated whether the ASG still actively seeks to achieve its former ideological goals today – experts claim that there are only a few individuals who are pushing for Islamist goals, and these individuals lack any sort of power or leadership within the organisation.^[13]

After the Philippine government cut off external funding to the group through counterterrorism measures beginning in 2006, the group reoriented themselves toward the pursuit of criminal activity for financing.^[14] The ASG has grown particularly fond of using KFR as their primary source of income, alongside other illegal activities such as the selling of counterfeit goods, narcotics, and serving as bodyguards for local politicians.^[15] The ASG is believed to have earned $35 million in a 16-year period between 1992 and 2008 from kidnapping activity.^[16] In 2010, the ASG received around $704,000 in ransom payments from a mere 11 kidnappings.^[17] During these kidnappings, the ASG did not apply any serious pressure on the Philippine government.^[18] Zac Fellman, a researcher for the Center for Strategic and International Studies, suggests that the execution of hostages appears to only occur when the ASG fails to receive payment in exchange for hostages.^[19]

The ASG has conducted kidnappings since its formation in the early 1990s; however, the frequency of kidnappings grew dramatically after Janjalani’s death in 1998, when a power vacuum saw bandit leaders rise to power.^[20] While there was only one recorded incident of kidnapping for ransom in 1997, ^[21] this number later jumped to 140 people being ransomed in 2000 and 2001.^[22] This dramatic spike can be attributed to the lack of a strong ideological leader to steer efforts towards political and religious objectives.

Kidnapping activity quietened down after 2002, when the younger Janjalani attempted to control the fragmented group.^[23] Since another loss of leadership in 2006, there have been two dramatic increases in KFR activities by the ASG: one increase took place in 2008 and another 2013.^[24] During KFR hostage situations, the ASG failed to apply pressure on the government to change policies or release fellow terrorists from prison, focusing instead on the demand for funds.^[25]

The ASG’s main recruiting pool is from disadvantaged and marginalised youth from impoverished areas of the southern Philippines.^[26] There are some instances of Muslim parents volunteering their sons to fight with the ASG for a monthly payment of rice worth around $200.^[27] This reinforces the theory that ASG membership is determined by economic needs rather than political radicalisation. If material and financial incentives are the main motivator for the ASG to continue functioning, increasing legitimate economic opportunities for the population in the Philippines and Southeast Asia would greatly shrink ASG’s recruitment pool.

The organisational fragmentation and lack of a strong religious leader to provide direction for ASG’s Islamist agenda have led to ASG’s descent into a financially motivated criminal organisation without political goals. This, in combination with further restrictions on other traditional terrorist financing institutions and the informal money transfer system known as hawala coming under inquiry, has led to the surge of KFR activity, which is likely to continue as long as drivers for ASG recruitment continue.

Samuel graduated with a Masters of Government and a specialisation in Counterterrorism and Homeland Security from the Lauder School of Government, Diplomacy and Strategy at the Interdisciplinary Center in Herzliya, Israel. He holds a Bachelor of Social Science with a double major in Criminology and Peace and Development Studies from the University of Western Sydney in Australia.

This article is the penultimate part of a four-part Strife series on terrorist financing. Next Monday Drew Alyeshmerni will end the series by shedding light on the use of charities as a cover for terrorist financing and the implication that defining certain organisations as ‘terror groups’ may have upon the eradication of this source of financing.

NOTES:

^[1] M. O’Brien, ‘Fluctuations between crime and terror: the case of Abu Sayyaf’s kidnapping activities’, in Terrorism and Political Violence. Vol 24, issue 2, 2010, p. 320.

^[2] D. Cohen, ‘Remarks by Treasury Under Secretary Cohen: “Kidnapping for ransom: the growing terrorist financing challenge”’, in Primary Sources, Council of Foreign Relations, Oct. 2012.

^[3] M.K.N. Mohamed, ‘Kidnap for ransom in South East Asia: the case for a regional recording standard’, in Asian Criminology, vol. 3. 2008, p. 62.

^[4] P. White & S. Perrone, Crime, criminality and criminal justice, Oxford University Press, 2010, p. 27.

^[5] F. Zuccarello, ‘Kidnapping for ransom: a fateful international growth industry’, in Insurance Journal West. June, 2011.

^[6] Ibid.

^[7] Cohen.

^[8] O’Brien, p. 327-329.

^[9] O’Brien, p. 322.

^[10]Ibid, p. 328.

^[11] Ibid, p. 329.

^[12] R.C. Banlaoi, ‘The sources of the Abu Sayyaf’s resilience in the Southern Philippines’, in CTC Sentinel, vol. 3, issue 5, 2010, p. 17-19.

^[13] Ibid, p. 19

^[14] Z. Fellman, ‘Abu Sayyaf Group’, in Homeland Security & counterterrorism program transnational threats project, case study number 5, Center for Strategic & International Studies, 2011, p. 2.

^[15] Banlaoi, p. 19.

^[16] O’Brien, p. 321.

^[17i] Fellman, p. 6.

^[18] Ibid, p. 6.

^[19] Fellman, p. 6.

^[20] O’Brien, p. 321, p. 328.

^[21] Ibid, p.321.

^[22] Fellman, p. 3.

^[23] Obrien, p. 328.

^[24] National Consortium for the Study of Terrorism and Responses to Terrorism, START, Global Terrorism Database, 2014, accessed 13/12/14 <http://www.start.umd.edu/gtd>

^[25] O’Brien, p. 321.

^[26i] O’Brien, p.330.

^[27] Ibid, p. 330.

^[28] START

Financing Terror: A Strife 4-part series

January 7, 2015 by Strife Staff

By: Maya Ehrmann:

Al Qaeda, ISIS, and the Taliban are household names these days. Yet, in the climate of the ‘War on Terror’, how do organisations like these survive and even thrive? It takes more than just strong leadership and organizational skills to uphold the proper functioning of terrorist groups – it takes money. Terrorism is the culmination of costly planning. It includes the dissemination of ideology, maintenance of logistics, recruitment and training of operatives, and perpetration of the terrorist act itself. Financial activity related to terrorism accounts for an estimated 5% of the annual global output, or about $1.5 trillion USD. 1

The events of September 11^th 2001 thrust the issue of terrorist funding into the limelight of the global arena. Globalisation of communication, the internet, and banking systems have enabled terrorist organizations to expand their activities and financial mechanisms needed to finance these activities. While state-sponsoring was previously a primary source of funding for terrorist activity, international cooperation through UN resolutions and economic sanctions has dissuaded state actors from sponsoring terrorist activities, thereby leading to the substantial decrease of this method of funding. Terrorist organizations have, as a result, increasingly turned to diverse and alternative sources of revenue, such as criminal activities – including drug trafficking, credit card fraud, and kidnapping for ransom – as well as private sources of funding through charities and individuals.

The methods and resources used to fund terrorism vary from region to region, and from group to group. Limiting the financial resources available to terrorist organisations is a crucial step in the fight against terrorism, and both national governments and international bodies have taken steps to address this.

The attacks of September 11^th had highlighted the shortcomings of UNSC Resolution 1267, which called upon UN member states to identify, seize, and freeze financial resources of the Taliban, Al Qaeda and their affiliates, but which lacked any means of enforcing its provisions. In response to these shortcomings, the UN adopted UNSC Resolution 1373 in 2001, which required all UN member states to criminalize direct or indirect support for terrorism, including terrorism funding.

As one of the leaders in the ‘War on Terror’, the US government issued the USA Patriot Act which created strict legal measures to counter terrorist financing. Also, the Financial Task Force (FATF), an inter-governmental body created in 1989 by the G-7 in order to combat money laundering and terrorist financing, issued a revised series of recommendations on how to combat money laundering and terrorist financing. The World Bank and the IMF have since developed assistance programs for countries to ensure compliance with the FATF’s recommendations.

Current international efforts to combat this phenomenon have been largely focused on commitments by UN member states. This is problematic, as it does not provide a framework or incentive for non-UN member states or entities to effectively combat terrorist financing. Furthermore, current international legislation on terrorist financing is very general and does not take into consideration the unique situation of each state. Whereas the United States may easily implement some of the legislation on a national level, it is very difficult for a state such as Syria, which is currently in the midst of a civil war and is a hotbed of terrorist activity and chaos, to properly implement international legislation on terrorist financing. Ironically, it is precisely states such as Syria, Afghanistan, and Iraq which may benefit the most from a crackdown on terrorist financing.

On a strategic level, despite a growing international focus on combating terrorist funding, increasingly sophisticated methods of financing terrorism have meant terrorists are often able to stay one step ahead of authorities. The illegal activities used by terrorist groups to finance their activities often do not leave a cash trail, making them difficult to track. Thus, terrorist financing continues to remain a major stumbling block to curtailing terrorist activity.

Over the next few weeks Strife will feature a four-part series on terrorist financing. Each author will examine a different method of terrorist financing, using modern and varied case studies, offering a new look at who and what is funding today’s terror activities. Arne Holverscheid will discuss the role of private Kuwaiti donors in financing rebel groups in Syria affiliated with terror organisations and blurring the lines between good and bad, friend and foe. Claire Mennessier will examine the involvement of Pakistan in financing terror groups, and the motivations and challenges presented by this involvement. Samuel Smith will address the frightening trend of kidnapping for ransom as a source of finance for terror groups through a case study of the Abu Sayyaf Group in the Philippines and Southeast Asia. Finally, Drew Alyeshmerni will shed light upon the use of charities as a cover for terrorist financing and the implication that defining certain organisations as terror groups may have upon the eradication of this source of financing.

The financing of terrorism continues to be a global challenge and an increasingly important aspect of counterterrorism efforts. We hope this series will pique your interest in the subject and lead to a more detailed understanding of the sophisticated and varied ways of financing terror.

Maya Ehrmann is a Guest Editor for Strife. She is currently reading for an MA in Intelligence and International Security at King’s College London and holds a BA in Government and Diplomacy from the Interdisciplinary Centre, Israel. Her primary areas of research interest include counterterrorism, international security, and Middle Eastern affairs. References: 1 Jennifer L. Hesterman, The Terrorist-Criminal Nexus: An Alliance of International Drug Cartels, Organized Crime, and Terror Groups, (Boca Raton: CRC Press, 2013), p. 167.

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