obligations such as Islamic “Zakat.” Zakat is 2.5 percent of one’s accumulated wealth, which is an example of donation. It might be collected by some Islamic charity organizations that are in contact with terrorism.29 Donations may be raised by diasporas who seek self-determination. Tamil diaspora was a noteworthy example of a diaspora “as a people with common national origins who lives outside a clamed or an independent country.”30 Sri Lankan Tamil diasporas across the world provide and transfer considerable amount of money and materials to the Tamils people in Sri Lanka. It was high likely that while it existed, some part of the funds provided went to the Liberation Tigers of Tamil Eelam group; the group is designated by some states such as the United States, the United Kingdom, and EU as a terrorist group, which fought for Tamil self-determination against the Sri Lankan Government.
Donations are usually collected through nonprofit organizations such as charities. Enjoying public trust, having a global presence that provides a framework to operate internationally and being subject to lighter regulatory requirements than other financial institution are characteristics of these organizations which make them attractive to terrorists.31
Charities can be abused in different ways. Terrorists may take over an entire charity and use it as a front organization. In such a case, called a “sham charity,” terrorists use the charity as a vehicle to perpetrate fraud against donors in order to raise and disguise funds for terrorism.32 Terrorists may also infiltrate an established charity by taking over some branches of a large charity and diverting some portion of the donations collected for humanitarian purposes to terrorists. For instance, in 2003, the chief executive officer of the Benevolence International Foundation, an Illinois-based charity in the United States, was convicted of diverting of US$315,000 of charitable donations to terrorist groups.33
Nongovernmental organizations can also provide facilities for terrorists, such as a “shipping address[es], housing, employment, identity cards, [or] a recognized reason to be at a particular location.”34 For example, Al-Qaeda members confessed that they received identification cards from the Kenya-based Mercy International Relief Organization as they plotted the 1998 U.S. embassy bombings in Nairobi.35
The role of nonprofit organizations, companies, and “sympathetic financial institutions” in transferring funds or logistical resources to terrorists is also considered important. For example, those entities can use their bank accounts to collect funds or to transfer those funds to any destination required.36
Investment in Legitimate Business
Legitimate businesses are a complex and “versatile tool” for the financing of terrorism.37 In its simplest form, terrorists can establish a local business and use its income for their purposes. They can also invest in stocks, bonds, real estate, construction companies, honey shops, tanneries, banks, agricultural commodity growers and brokers, trade businesses, bakeries, restaurants, and bookstores and in any business, local or international, open to such investment. Evidence shows that large terrorist groups like Al-Qaeda have invested in the past in various businesses such as wood and paper industries in Norway, hospital equipment in Sweden, real estate in London, and newspaper ink and honey in Middle East.38
Like nonprofit organizations, such businesses and front companies can provide other facilities such as access to bank accounts and postal addresses. Furthermore, the right sort of business can provide cover for the purchase and acquisition of explosives and chemicals needed for terrorist attacks.39
Terrorism, in some cases, can also be financed by small amounts of funds, involving family or other noncriminal sources.40 The amount of money to launch small attacks can be acquired by individual terrorists or their supporters “using savings, access to credit or the proceeds of businesses under their control.”41 An example of such financing is the July 7, 2005 attacks on the London transport system. The official report in this regard stated that “there is no evidence of external sources of income. Our best estimates are that the overall cost is less than GBP 8000. The bombs were homemade, that the ingredients used were all readily commercially available and not particularly expensive.”42
To sum up, it should be noted that there is no accurate data or evidence as to whether terrorists rely more on one of these sources than another.43 Resort to any of these sources depends on the type, size, and purposes of groups; the opportunities at hand; and the types of resources needed. For example, Al-Qaeda has at least five financial resources: investments and inheritances of Osama Bin Laden, funding from wealthy Arab supporters, contribution through charities, and income from investments in legal businesses and criminal activities.44
Methods and Means of Moving and Storing Terrorist Funds
The literature on terrorist financing highlights the great “adaptability and opportunism” that terrorists or their supporters exploit to move and store their funds.45 In general, there are three main known methods by which terrorist funds are moved: formal and informal financial systems, physical movement of funds and value, and the international trade system.46
Financial System
The formal financial system is an attractive channel for the financing of terrorism because of the provision of services and products by which terrorists can move their funds, and the “speed and ease” with which funds can be transferred “efficiently and effectively between and within jurisdictions.”47 Money and value operations through formal financial systems enable terrorist financers or terrorists to make an amount of money available to terrorists at another financial institution. The 9/11 Commission Report made clear that “wire or bank to bank transfers” were one of the main tools that Al-Qaeda used to fund the hijackers in the United States.48
Formal financial institutions can also provide cover for terrorists to conduct transactions or conceal the origin of their funds. In the case of Al-Qaeda, it was discovered that Osama Bin Laden, while he lived in Sudan, opened different accounts under fake names in different countries, which guaranteed his privacy.49
In addition to formal financial systems, informal value transfer systems (IVTS) are deployed for financing terrorism. An informal method of money and value transfers refers to a trust-based mechanism through which money is ensured to be transferred to another geographic location by “using a series of informal, and often unlicensed, money exchanges.”50 In this mechanism, there may be no actual movement of cash; instead, value is transferred between two locations. Such financial arrangements, which are very well known in South Asia, the Middle East, and parts of Africa, are known by different names: for example hundi in India, fei chi’ien in China, phoe kuah in Thailand, and hawala in Muslim countries.51 Hawala, for example, operates as follows:
1. [The] Originator gives currency to the Hawaladar [the agent] in Country A.
2. The Hawaladar in Country A provides the Originator with a payment code.
3. The Hawaladar in Country A notifies his counterpart in Country B by phone, fax, or email of the transaction amount to pay the beneficiary, as well as the payment code.
4. The Originator contacts the beneficiary (in Country B) and provides the payment code to him/her.
5. The beneficiary goes to the Hawaladar in Country B, gives [them] the payment code, and picks up the specified [amount] sent.52
Informal methods are attractive to criminals, including terrorists, for their convenience, level of anonymity and rapidity.53 Also, it is a reliable means to transfer money especially in countries with poor, corrupt, or nonexistent banking
