Furthermore, such systems are subject to generally less strict regulatory control. It is reported that Hamas, the Jemaah Islamiya organization, and the Liberation Tigers of Tamil Eelam, as designated terrorist groups, either received or continue to receive funds through hawala.55
Physical Movement of Funds
Terrorists may also use the traditional money laundering method of smuggling cash. Cash smuggling is attractive because smuggled money is completely fungible, anonymous, and more importantly, easy to convert into any other resources needed. Cases highlight that smuggled money can be transported either to where terrorist operations are to take place or to where the cash can be deposited into financial systems with less risk.56
Due to some of the disadvantages of cash smuggling such as difficulties in concealing large quantities of cash or the danger of being detected or having the cash stolen, terrorists and their supporters may use precious metals and stones such as gold and diamonds, antiques or any other expensive items to move and store terrorist funds. While maintaining their value and liquidity, they are easy to conceal and untraceable.57 These items can be converted into cash whenever needed. Al-Qaeda and Hezbollah are believed to have been active in this field.58 Also, it has been reported that donations to the Taliban and Al-Qaeda from Saudi wealthy donors were made in gold.59
Trade System
The international trade system provides an opportunity for perpetrators to transfer value and goods through legitimate trade flows. This is the area in which enormous wealth can cross borders without raising suspicion “as the paperwork and shipments may look completely legitimate to outside inspection.”60 Over- and under-invoicing practices61 are commonly used by launderers to transfer value across borders. It is possible, although it has not been confirmed,62 that terrorists or their supporters also use such methods to finance terrorism. For example, by selling and shipping a commodity at a lower rate than the actual value, a seller, as a terrorist financer, can provide funds for the buyer who sells the products at a higher price and keeps the difference for terrorist purposes.63
Financing of Terrorism and Terrorism Typologies
There are many different categories of terrorism. These categories help to differentiate terrorist groups according to specific criteria related to a specific field.64 On the basis of the strategies that terrorists use to finance their activities, terrorism can be divided into seven groups: state-sponsored, state-sponsoring, shell state, franchise, bundled support, transnational corporation, and lone wolf.65
A state-sponsored group receives substantial supports from a state which seeks particular political or ideological objectives. The state may find numerous ways to support terrorists such as supplying them with false documentation and passports, allowing them to travel safely within the nation or to other countries, and providing them with sanctuary and weapons.66 The autonomy of groups in this category depends on how integrated they are into a particular state’s command and control structures.67 Terrorists may usefully receive support from states as long as that aid does not disturb their independence to pursue their own agendas. However, state sponsors may place requirements on groups for receipt of support in order to guide them in a specific direction. In such a case, in what are called “state-directed groups,”68 the groups exist as long as they are worthwhile for the sponsor states.
A state-sponsoring terrorist group is one that is capable of providing facilities for a state sponsor in return for receiving support from that state.69 For example, the government of Sudan let Al-Qaeda have training camps in Sudan in exchange for money and building infrastructure.70 It is believed that terrorist-sponsoring groups have to have achieved a high level of capability to attract state sponsor attention.71
In the case of “shell states,”72 terrorists take control of a geographical area and exploit it for sanctuary and their needs.73 An area can be as small as a few neighborhoods or as large as a huge area in a country. The Islamic State in Iraq and the Levant were other examples, which met their financial needs largely through “proceeds from occupation of territory, such as bank looting, extortion, control of oil fields and refineries, and robbery of economic assets and illicit taxation of goods and cash that transit” and so on.74
In the franchise category, terrorist groups receive a large percentage of their support from one source, but their resources are diversified enough to remain independent.75 In this case, if sponsors stop supporting them, although terrorist groups may weaken, they do not face extinction. For example, it is claimed that Hamas and Hezbollah are franchisees of Iran, from whom they receive much of their support,76 but they also maintain their own network of charities, front companies, and criminal networks to sustain their activities.77
In the “bundled support” category, terrorists do not rely on one or few sponsors; instead, they receive a number of tangible and intangible resources from numerous non-state contributors.78 The phenomenon of diaspora support, in which terrorists receive support from dispersed donors of the same ethnicity or nationality, is the prominent example of this category. Many small contributions from different contributors give terrorist groups more autonomy than a state-sponsored terrorist group. However, they receive support only so long as their actions satisfy their supporters.79
In the transnational corporation model, extensively used to describe Al-Qaeda, terrorist groups act on a global scale without any specific national identification. These groups, utilizing globalization,80 are highly sophisticated and complex in resourcing, membership, and geographical operations.81 Groups within this model are experts at using formal and informal financial systems, front companies, charities, money laundering, and other criminal activities. They also have a high level of autonomy as they have access to various financial resources.
Lone wolf terrorism is carried out by terrorism groups (or individuals) which are not essentially involved in collective, organized activities.82 Lone wolf terrorist groups are individuals or small groups which are identifiable by a particular ideology or grievance, and which carry out actions in support of their radical beliefs.83 Unlike other types, lone wolf terrorist groups are small in size with few financial requirements and limited capabilities. They are self-contained, free to choose their targets and tactics. Terrorism in this form is very cheap, but the impact can be significant. It is claimed that there is a considerable trend indicating the increasing frequency of lone wolf attacks by individuals with little or no connections to formal organizations.84 Terrorist attacks in Germany in March 2011,85 in France in March 2012 and April 2017,86 in Norway in July 2012,87 and England in May 2017 are recent examples of lone wolf terrorism.
Conclusion
This chapter has explored the nature and characteristics of terrorist financing. Terrorist financing can most narrowly be interpreted to mean financing planned, attempted, or completed terrorist acts. In a broader sense, the terms financing terrorism, or financing terrorists, or terrorist groups can be used to include any activities carried out to finance the activities of these individuals or groups. Action to finance these activities can include raising, moving, and restoring funds allocated to carry out these activities.
Techniques and methods to raise, move, and restore funds are also not necessarily carried out through illegal activities. In other words, terrorists and their activities can be funded by any means, legal or illegal, and by anyone, terrorists or non-perpetrators. Due to these particular nature and characteristics, it seems that the terroristic criminality of these financing activities can be only derived from their connection with terrorism or terrorist acts. Obviously, these features of terrorist financing should be taken into account in the adoption and implementation of any counterterrorist financing measures. In the rest of the book, I seek to examine how the international
