Before examining the legal tools adopted to counter terrorist financing, it is essential to understand, from a factual perspective, the nature and characteristics of terrorist financing as a transnational phenomenon. First, the process of terrorist financing will be examined in regard to the funding requirements of terrorists and terrorist groups, the sources of funds, and the methods and tools that terrorists use to raise, move, and store their funds. The last part will address terrorism typologies on the basis of the strategies that terrorists apply to finance their activities. This chapter will not discuss the legal definition of terrorist financing, terrorism, terrorist acts, or terrorist groups.
The discussions provided in this chapter will help to examine, in the following chapters, the credibility and reliability of the idea that underpins the approach and legal measures taken to address terrorist financing—the approach which does not require a link to the preparation or commission of specific acts of terrorism. As will be pointed out in chapter 2, a distinctive effort has been made by the international community to push this idea, although it is the submission of the book that it is fundamentally flawed partly because of ignorance of basic facts about the nature and characteristics of terrorist financing.1
The Financial Needs of Terrorists and Terrorist Groups
The first step in identifying the flow of funds to what is regarded as terrorists is to understand the funding requirements of terrorists.2 Terrorists’ requirements can be explained with regard to their activities or the nature of their needs.
In terms of terrorist activities, terrorists’ financial needs can be divided into two categories. Terrorists need “operational resources” associated with conducting specific terrorist attacks; these include the costs of attacks, the salaries of individual operatives, communications, training, travel, and logistics. Terrorists, in the case of a large group, also require resources for their “broad organizational requirements” to create, maintain, and develop a terrorism infrastructure.3 Evidence shows that while the current operational costs of terrorist attacks are often very low relative to the damage they cause,4 organizational costs are significantly higher.
Regarding the nature of funding requirements, terrorists’ resources are classified into three categories: money and financial instruments, tangible and intangible resources.5 “Money” and other negotiable and financial instruments are the most important resources required by terrorists.6 Terrorists need money “to buy weapons, bribe local officials, pay operatives, write propaganda, provide a social network that builds a popular base and otherwise fill a myriad of purposes.”7 It is also a convenient means of storing wealth.
Tangible resources are also needed by terrorists. At the very least, terrorists need four types of tangible goods to carry out their operations.8 “Life’s necessities” including food, accommodation, clothing, travel cost, and so on are the basic needs of members of terrorist organizations. Terrorist groups also need human resources: members and “personnel” to carry out their activities. In addition, terrorists need to have an effective communication system such as access to media, internet, cell phones, and so on to communicate with each other, disseminate their information, justify and advertise their ideology, and send their messages to their victims.9 Tangible goods also include “operational resources,” which are required to commit violence.10 They range from simple knives to very high-tech weapons, depending on the complexity of the terrorist operations and groups.
Terrorists also require “intangible instruments.”11 “Operational space” or sanctuary is the time and space needed to plan, train for, and execute terrorist attacks.12 A sanctuary can be a small house at the center of a big city or a big camp or farm far from any prying eyes. “Operational security” resources are also needed to enable terrorists to keep security forces from discovering their location, plans, and the people involved in terrorist activities.13 Furthermore, terrorists need “intelligence” to plan how, where, and when they execute their terrorist activities. How much information is needed depends on the scope and complexity of operations.14 Terrorist groups also need “publicity” to promote their ideology, to justify their violent actions, and to encourage people to join them.15 Without effective “leadership,” all of the resources might be useless; so, “command and control” mechanisms are needed to help terrorists to plan, coordinate, and execute their attacks.16 In essence then, it is obvious that terrorists do require different forms of support to carry out terrorist acts.
The Sources of Terrorist Financing
Terrorists meet their funding needs in different ways, depending on the type and purposes of groups, the inherent capabilities of groups, the “opportunities at hand,” and the types of resources needed.17 Also, terrorists can be self-financing or sponsored by states or private actors, individuals, companies, and organizations. In either situation, funds can be derived from legal or illegal sources, or both.
Illegal Sources
It is believed that because of the dramatic decrease of state-sponsored terrorism, terrorists have turned to alternative sources of funding, including criminal activities such as arms trafficking, extortion, credit card fraud, smuggling, robbery, cheque fraud, racketeering, kidnap-for-ransom, and most importantly, drug trafficking or the sale of oil and gas.18
Drug trafficking is the most important and attractive source of funds for large terrorist groups.19 This phenomenon, called “narcoterrorism,” involves terrorist groups cultivating, refining, and distributing narcotics across the world.20 This trend has been apparent since the 1990s. It usually takes place in countries where such groups control territories.21 Evidence shows that, for example, the Revolutionary Armed Forces of Colombia, the Peruvian Shining Path, Taliban, Al-Qaida, and Islamic Movement of Uzbekistan all used drug trafficking as an important source of terrorist funding.22 The United Nations Al-Qaeda and Taliban Sanctions Monitoring Team’s assessments reported that, out of the total 2011–2012 budget of the Taliban of US$400 million, “one third was raised from the poppy trade.”23 Also, a 2007 United Nations report declared that the total value of the export of drugs from Afghanistan stood at around US$4 billion divided up among insurgents, warlords, and drug traffickers.24 Opium production in Afghanistan has been rising in the last few years.25 It is not clear how much these groups, such as Taliban—a designated terrorist group, “profit from the drug trade, but whether they do isn’t up for serious debate.”26
Legal Sources
Terrorism may be financed with considerable support and funding from and through legal sources, including donations and investment in legitimate businesses.
Donations and the Role of Nonprofit Organizations
Donations, which may come from individual donors or from charitable organizations, are a common means of terrorist funding.27 An individual donor can be a wealthy person who directly donates huge sums of money to a terrorist group. A very famous example of a wealthy donor is Osama Bin Laden who spent his estimated US$20 to 30 million inheritance on funding Al-Qaeda. Also, it is claimed that Shad Sunders, a rich Tamil living in California, donated US$4 million to the Tamil Tigers.28
Donations can be also solicited
