This article has multiple issues. Please help improve it or discuss these issues on the talk page. (Learn how and when to remove these template messages)(Learn how and when to remove this template message)
Most countries have implemented measures to counter terrorism financing (CTF) often as part of their money laundering laws. Some countries and multinational organisations have created a list of organisations that they regard as terrorist organisations, though there is no consistency as to which organisations are designated as being terrorist by each country. The Financial Action Task Force on Money Laundering (FATF) has made recommendations to members relating to CTF. It has created a Blacklist and Greylist of countries that have not taken adequate CTF action. As of 24 October 2019, the FAFT blacklist (Call for action nations) only listed two countries for terrorism financing: North Korea and Iran; while the FATF greylist (Other monitored jurisdictions) had 12 countries: Pakistan (Pakistan and state-sponsored terrorism), Bahamas, Botswana, Cambodia, Ghana, Iceland, Mongolia, Panama, Syria, Trinidad and Tobago, Yemen, and Zimbabwe. In general, the supply of funds to designated terrorist organisations is outlawed, though the enforcement varies.
Initially the focus of CTF efforts was on non-profit organizations, unregistered money services businesses (MSBs) (including so called underground banking or ‘Hawalas’) and the criminalisation of the act itself.
After September 11 attacks
The United States Patriot Act, passed after the September 11 attacks in 2001, gives the US government anti-money laundering powers to monitor financial institutions. The Patriot Act has generated a great deal of controversy in the United States since its enactment. The United States has also collaborated with the United Nations and other countries to create the Terrorist Finance Tracking Program.
Many initiatives have stemmed from the USA PATRIOT Act such as the Financial Crimes Enforcement Network, which focuses specifically on money laundering and financial crimes.
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act was also enacted in 2001. In 2009 the act aided in blocking around $20 million and another $280 million that came from State Sponsors of Terrorism.
In 2020, Veit Buetterlin, who conducted investigations on-site in more than 20 countries and who was kidnapped in course of his work, explained in an interview with CNN that the fight against terrorism financing will be an ongoing challenge (“it’s actually impossible to defeat a concept”). He noted that the world’s top 10 terrorist organizations have an estimated annual budget of USD 3.6 billion.
Methods used for terrorism funding
A number of countries and multinational organisations maintain lists of organisations that they designate as terrorist organisations, though there is no consistency as to which organisations are so designated. In the United States, the Treasury Department's Office of Foreign Assets Control (OFAC) maintains such a list. Financial transactions that benefit the designated terrorist organisations are usually outlawed.
Designated terrorist organisations may adopt a variety of strategies to get past efforts to prevent such funding. For example, they may make multiple smaller-value transfers in an attempt to bypass scrutiny; or they may use people who have no criminal backgrounds to complete financial transactions to try to make fund transfers harder to track. These transactions may also be disguised as donations to charities or as gifts to family members. Countries are not able to combat terrorism on their own, as corporate actors are needed to scan financial transactions themselves. If corporate actors do not comply with the state then penalties or regulatory sanctions may be applied.
Terrorists and terrorist organizations often use any resource of money they can have access to in order to fund themselves. This can range from the distribution of narcotics, black market oil, having businesses such as car dealerships, taxi companies, etc. ISIS is known to use black market oil distribution as a means of funding their terrorist 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. Terrorist organizations also use the front of being a charity to finance themselves. Al- Qaeda is a known terrorist organization that has used the internet in order to finance their organization, as through this platform they are able to reach a wider audience.
Often linked in legislation and regulation, terrorism financing and money laundering are conceptual opposites. Money laundering is the process where cash raised from criminal activities is made to look legitimate for re-integration into the financial system, whereas terrorism financing cares little about the source of the funds, but it is what the funds are to be used for that defines its scope.
An in-depth study of the symbiotic relationship between organised crime and terrorist organizations detected within the United States and other countries referred to as crime-terror nexus points has been published in the forensic literature. The Perri, Lichtenwald and MacKenzie article emphasizes the importance of multi-agency working groups and the tools that can be used to identify, infiltrate, and dismantle organizations operating along the crime-terror nexus points.
Bulk cash smuggling and placement through cash-intensive businesses is one typology. They are now also moving monies through the new online payment systems. They also use trade linked schemes to launder monies. Nonetheless, the older systems have not given way. Terrorists also continue to move monies through MSBs/Hawalas, and through international ATM transactions. Charities also continue to be used in countries where controls are not so stringent.
Said and Cherif Kouachi, before the Charlie Hebdo shooting in Paris, France in 2015, used transaction laundering to fund their activities. Examples included reselling counterfeit goods and drugs.
"This chain of funding shows a clear correlation between transaction laundering and terrorism, using legitimate marketplaces to conduct illegal activity (in this case, selling counterfeit shoes) and then using the proceeds to launder money for terrorists."
Preventing the funding of terrorism
AML and CTF both carry the notion of Know Your Customer (KYC), this entails financial organizations to have in person identification and to observe the lawfulness of the transaction in question. Although this methodology is not favoured by banks, lawyers or other professionals who are able to see the transaction of money or legal aid occurring, because of the business and client relationship that can be hurt through the process of personal identification. This can damage relationships between long term clients who need to prove their identity, and respected members of society do not want to be asked for personal identification every time.
The FATF Blacklist (the Non-Cooperative Countries or Territories list) mechanism was used to coerce countries to bring about change.
Operation Green Quest, a US multi-agency task force established in October 2001 with the official purpose of countering terrorism financing considers the following patterns of activity as indicators of the collection and movement of funds that could be associated with terrorism financing:
- Account transactions that are inconsistent with past deposits or withdrawals such as cash, cheques, wire transfers, etc.
- Transactions involving a high volume of incoming or outgoing wire transfers, with no logical or apparent purpose that come from, go to, or transit through locations of concern, that is sanctioned countries, non-cooperative nations and sympathizer nations.
- Unexplainable clearing or negotiation of third party cheques and their deposits in foreign bank accounts.
- Structuring at multiple branches or the same branch with multiple activities.
- Corporate layering, transfers between bank accounts of related entities or charities for no apparent reasons.
- Wire transfers by charitable organisations to companies located in countries known to be bank or tax havens.
- Lack of apparent fund raising activity, for example a lack of small cheques or typical donations associated with charitable bank deposits.
- Using multiple accounts to collect funds that are then transferred to the same foreign beneficiaries
- Transactions with no logical economic purpose, that is, no link between the activity of the organization and other parties involved in the transaction.
- Overlapping corporate officers, bank signatories, or other identifiable similarities associated with addresses, references and financial activities.
- Cash debiting schemes in which deposits in the US correlate directly with ATM withdrawals in countries of concern. Reverse transactions of this nature are also suspicious.
- Issuing cheques, money orders or other financial instruments, often numbered sequentially, to the same person or business, or to a person or business whose name is spelled similarly.
It would be difficult to determine by such activity alone whether the particular act was related to terrorism or to organized crime. For this reason, these activities must be examined in context with other factors in order to determine a terrorism financing connection. Simple transactions can be found to be suspect and money laundering derived from terrorism will typically involve instances in which simple operations had been performed (retail foreign exchange operations, international transfer of funds) revealing links with other countries including FATF blacklisted countries. Some of the customers may have police records, particularly for trafficking in narcotics and weapons and may be linked with foreign terrorist groups. The funds may have moved through a state sponsor of terrorism or a country where there is a terrorism problem. A link with a Politically exposed person (PEP) may ultimately link up to a terrorism financing transaction. A charity may be a link in the transaction. Accounts (especially student) that only receive periodic deposits withdrawn via ATM over two months and are dormant at other periods could indicate that they are becoming active to prepare for an attack.
Nation specific actions
As at 24 October 2019, Pakistan was on the FATF greylist for terrorism financing and has met only 5 of 27 action items, and it has been given four months to comply with the remaining action points for the prevention of terror financing.
Bahrain has been regularly accused of doing very little to prevent the flow of funds for the terrorism financing in other nations. Bahrain accepts Muslim Brotherhood affiliate Minbar as a legitimate political player.
Saudi Arabia have been regularly accused of doing very little to prevent the flow of funds for terrorism financing in other nations. Saudi Arabia collaborates with the Muslim Brotherhood affiliate al-Islah in Yemen. Saudi Arabia has been pointed out as hypocrite as it too faces accusations of not doing enough to stop terrorism financing.
Saudi Arabia has been keen on joining the FATF so as to have an easy access to global financial markets. However, a recent report by FATF highlighted serious deficiencies in Saudi Arabia's efforts to counter terrorism. Terrorism financing budding in Saudi Arabia became an important source of funding for al-Qaeda and other terrorist organizations.
In 2019, the European Commission added Saudi Arabia, along with several other countries, to its blacklist list of states that have failed to control money laundering and terrorism financing. Saudi Arabia has been accused of not making an effort to control the huge amounts of money being transferred to Islamist extremists and terrorist groups.
United Arab Emirates
The United Arab Emirates had been accused[by whom?] of being a financial hub for terrorist organisations. The UAE banking system was found to be involved in the attacks on 11 September 2001 against the United States carried out by al-Qaeda. The 9/11 terrorists had bank accounts in the UAE. Executing the attack cost the terrorist group around $400,000–500,000, out of which $300,000 was transacted via one of the hijackers’ bank accounts in the US. The movement of funds took place with the help of both public banking systems and the Al Qaeda established Hawala networks.
According to the 9/11 Commission Report, in response to concerns that the UAE banking system had been used by 9/11 hijackers to launder funds, the UAE adopted legislation giving the Central Bank in 2002 the power to freeze suspect accounts for 7 days without prior legal authorisation. The report stated "banks have been advised to carefully monitor transactions passing through the UAE from Saudi Arabia and Pakistan and are now subject to more stringent transaction and client reporting requirements." The UAE government has since affirmed its stance and policy of zero tolerance towards terrorism financing.
Australian anti terrorism financing laws include:
- Criminal Code Act 1995 (Cth):
- section 102.6 (getting funds to, from or for a terrorist organisation)
- section 102.7 (providing support to a terrorist organisation)
- section 103.1 (financing terrorism)
- section 103.2 (financing a terrorist), and
- section 119.4(5) (giving or receiving goods and services to promote the commission of a foreign incursion offence).
- Charter of the United Nations Act 1945 (Cth):
- section 20 (dealing with freezable assets), and
- section 21 (giving an asset to a proscribed person or entity).
These offences sanction persons and entities under Australian and international law. The responsibility of prosecuting these offences in Australia rests with the Australian Federal Police, State police forces and the Commonwealth Director of Public Prosecutions.
In July 2010, Germany outlawed the Internationale Humanitäre Hilfsorganisation (IHH), saying it has used donations to support projects in Gaza that are related to Hamas, which is considered by the European Union to be a terrorist organization, while presenting their activities to donors as humanitarian help. German Interior Minister Thomas de Maiziere said, "Donations to so-called social welfare groups belonging to Hamas, such as the millions given by IHH, actually support the terror organization Hamas as a whole."
According to a research conducted by the Abba Eban Institute as part of an initiative called Janus Initiative, Hezbollah is financed through non-profit organizations such as the “Orphans Project Lebanon”, a German-based charity for Lebanese orphans. It found that it had been donating portions of its contributions to a foundation which finances the families of Hezbollah members who commit suicide bombings. The European Foundation for Democracy published that the “Orphans Project Lebanon” organization directly channels financial donations from Germany to the Lebanese Al-Shahid Association, which is part of the Hezbollah network and promotes suicide bombings in Lebanon, particularly among children. In Germany, financial donations to the Orphans Project Lebanon are tax-deductible and thus subsidized by the German State's tax policy.
In 2018, an investigation by the U.S. Drug Enforcement Administration (DEA) called “Operation Cedar” led to the arrest of Hezbollah operatives involved in laundering millions of euros in South American drug money to Europe and Lebanon. One of the operatives arrested was Hassan Tarabolsi, a German citizen who manages a worldwide money laundering business. Tarabolsi represents the close connection between the criminal operation and the leaders of Hezbollah.
India has campaign for linking of the IMF's macroprudential regulation and lending policies with key provisions of FATF's anti-money laundering (AML) and countering financing of terrorism (CFT) to significantly enhance its IMF member nation's compliance on these issues which cause threat to the global economy. India also seeks to link these IMF policies with the secrecy jurisdictions, cyber-risks and tax havens.
In February 2019, the Spanish Treasury, through the Commission for the Prevention of Money Laundering and Monetary Offences (SEPBLAC), published their strategy for preventing the financing of terrorism.
The UK Prevention of Terrorism Act was put in place in 1989 to help prevent the financing of terrorism. This was more so to help shut down the funding of the Republican paramilitary in Northern Ireland. Income sources for the Republic paramilitary came from gambling machines, cab companies and charitable donations and terrorism funding.
European Union has undertaken several actions against money laundering and terror funding. This includes production of following reports and implementation of their corresponding recommendations: Supranational Risk Assessment Report (SNRA), Report on publicly known anti-money laundering cases involving EU banks, Financial Intelligence Unit (FIU) report, interconnection of central bank account registries.
Article 2.1 of the 1999 Terrorist Financing Convention defines the crime of terrorist financing as the offense committed by "any person" who "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 act "intended to cause death or serious bodily injury to a civilian, or to any other person not taking an active part in the hostilities in a situation of armed conflict, when the purpose of such act, by its nature or context, is to intimidate a population, or to compel a government or an international organization to do or to abstain from doing any act."
The UN Security Council adopted Resolution 1373 after the 9/11 attacks. This outlined that states were not allowed to provide financing to terrorist organizations, allow safe havens to them and that information regarding terrorist groups had to be shared with other governments.
A committee was formed in the United Nations that were in charge of gathering a list of organizations and people who had ties with terrorism or were suspected of terrorism whose financial accounts needed to be frozen and that no financial institutes would be able to do trade with them.
Evasive actions of terrorist organisations
Al-Qassam Brigades appealing for Bitcoin
In January 2019, the military wing of Hamas, known as the al-Qassam Brigades, began a campaign to get supporters to donate USD. Soon after announcing its intention to crowdfund through Bitcoin, the al-Qassam Brigades provided a Bitcoin address to which donors could send funds and posted infographics and tutorials about Bitcoin on social media.
- Lin, Tom C. W. (14 April 2016). "Financial Weapons of War". SSRN 2765010. Cite journal requires
- FATF nations, Full member nations, Observer nations, Call for action nations (Blacklisted nations), Other monitored jurisdictions (greylisted nations), FATF, accessed 24 October 2019.
- Clear warning: FATF statement, Business recorder, 22 October 2019.
- The FATF tribulations, Business recorder, 23 October 2019.
- "EU ups its fight against terrorist financing". DW.COM.
- "DGs - Migration and Home Affairs - What we do - ...Crisis & Terrorism - Terrorist Finance Tracking Programme". 2016-12-06.
- "Handbook on Anti-Money Laundering and Combating the Financing of Terrorism for Nonbank Financial Institutions". 2017-03-01. doi:10.22617/tim168550. Cite journal requires
- Levi, M. (2010-05-17). "Combating the Financing of Terrorism: A History and Assessment of the Control of 'Threat Finance'". British Journal of Criminology. 50 (4): 650–669. doi:10.1093/bjc/azq025. ISSN 0007-0955.
- Ridley, Nicholas; Alexander, Dean C. (2011-12-30). "Combating terrorist financing in the first decade of the twenty‐first century". Journal of Money Laundering Control. 15 (1): 38–57. doi:10.1108/13685201211194727. ISSN 1368-5201.
- Clarke, Colin (Fall 2016). "Drugs & thugs: Funding terrorism through narcotics trafficking". Journal of Strategic Security. 9 (3): 1–15. doi:10.5038/1944-0418.104.22.1686.
- Jacobson, Michael (2010-03-15). "Terrorist Financing and the Internet". Studies in Conflict & Terrorism. 33 (4): 353–363. doi:10.1080/10576101003587184. ISSN 1057-610X.
- Perri, Frank S., Lichtenwald, Terrance G., and MacKenzie, Paula M. (2009). Evil Twins: The Crime-Terror Nexus. Forensic Examiner, 16-29.
- Makarenko, T. "The Crime-Terror Continuum: Tracing the Interplay between Transnational Organized". Global Crime. 6 (1): 129－145. doi:10.1080/1744057042000297025.
- Makarenko, T (2002). "Crime, Terror, and the Central Asian Drug Trade". Harvard Asia Quarterly. 6 (3): 1－24.
- Makarenko, T (2003). "A model of terrorist-criminal relations". Jane's Intelligence Review.
- Wang, Peng (2010). "The Crime-Terror Nexus: Transformation, Alliance, Convergence". Asian Social Science. 6 (6): 11–20. doi:10.5539/ass.v6n6p11.
- Cornell, S (2006). "The narcotics threat in greater Central Asia: from crime-terror nexus to state infiltration?". China and Eurasia Forum Quarterly. 4 (1): 37–67.
- Wheatley, Joseph (June 2005). "Ancient Banking, Modern Crimes: How Hawala Secretly Transfers the Finances of Criminals and Thwarts Existing Laws" (PDF). University of Pennsylvania Journal of International Law. 26 (2): 347–378.
- "When Transaction Laundering Finances Terror". Finextra Research. 2017-01-17. Retrieved 2019-02-07.
- "Transaction Laundering is the New, Advanced form of Money Laundering". EverCompliant. 2017-01-23. Retrieved 2019-02-07.
- New, Transaction Laundering is the; April 30, Advanced form of Money Laundering; Am, 2017 at 10:16 (2015-01-20). "Police probe Kouachi's counterfeit connections". Money Jihad. Retrieved 2019-02-07.
- "Terror Financing", Money Laundering Prevention, John Wiley & Sons, Inc., 2015-10-10, pp. 131–141, doi:10.1002/9781119200604.ch7, ISBN 9781119200604
- Qatar’s Links to Terrorism: The War of Narratives, Fair Observer, 21 October 2019.
- "Saudi Arabia still isn't doing enough to fight the financing of terrorism". The Washington Post. Retrieved 19 February 2019.
- "Saudi Arabia's measures to fight money laundering and the financing of terrorism and proliferation". Retrieved 24 September 2018.
- "Wikileaks: Saudis 'chief funders of Sunni militants'". BBC News. Retrieved 5 February 2010.
- "EU adds Saudi Arabia to 'dirty money' blacklist in crackdown on terrorism financing". The Independent. 2019-02-13. Retrieved 13 February 2019.
- "UAE: Financial and Transit Hub of 9/11 Terror". Huffpost. Retrieved 14 September 2017.
- "National Commission on Terrorist Attacks Upon the United States - Monograph on Terrorist Financing" (PDF). 9/11 Commission.
- "COUNTRY PROFILE: UNITED ARAB EMIRATES (UAE)" (PDF). Library of Congress – Federal Research Division. Retrieved 10 July 2017.
- "UAE calls for zero tolerance for all those who support terrorism financing". United Nations. Retrieved 15 September 2018.
- http://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/cca1995115/sch1.html. Missing or empty
- http://www.austlii.edu.au/cgi-bin/viewdb/au/legis/cth/consol_act/cotuna1945288/. Missing or empty
- "Germany bans group accused of Hamas links". ynet. 2010.
- "Germany Outlaws Charity Over Alleged Hamas Links". Haaretz.com. 2010-07-12.
- Janus Initiative Research
- EFD Report: Hezbollah fundraising in Germany tax-deductible, European Foundation for Democracy, July 13, 2009
- Janus Initiave
- “Hezbollah on Trial in Europe”, Foundation for Defense of Democracies, November 19, 2018
- India Seeks Integration of Anti-money Laundering, Counter-terror Financing with IMF Lending Policies, News 18, 19 October 2019.
- "Sepblac | Servicio Ejecutivo de la Comisión de Prevención del Blanqueo de Capitales e Infracciones Monetarias". Retrieved 2019-02-08.
- "Spain: Strategy to Prevent the Financing of Terrorism | PaymentsCompliance". paymentscompliance.com. Retrieved 2019-02-08.
- "PREVENCIÓN DE LA FINANCIACIÓN DEL TERRORISMO" (PDF).
- Fact Sheet: Commission assesses risks and implementation shortcomings in fight against money laundering and terrorist financing: Questions and Answers, European Commission, 24 July 2019.
- United Nations 1999 International Convention for the Suppression of the Financing of Terrorism (Terrorist Financing Convention), art. 2.1
- Fanusie, Yaya. "Hamas Military Wing Crowdfunding Bitcoin". Forbes. Retrieved 2019-02-12.
- 9/11 Commission Report
- Rohan Bedi (2004). Money Laundering - Controls and Prevention. ISI Publications. ISBN 978-962-7762-87-4.
- El-Sheikh, Sharm (2005-10-20). "Financing terrorism: Looking in the wrong places". The Economist.
- Robinson, Jeffery (2006-02-14). "Brown's war just doesn't add up: you can't kill terrorists with a calculator". Times Online.
- Adams, James. The Financing of Terror. Sevenoaks, Kent: New English Library, 1986.
- American Foreign Policy Council. Confronting Terrorism Financing. Lanham, MD: University Press of America, 2005.
- Biersteker, Thomas J., and Sue E. Eckert. Countering the Financing of Terrorism. London: Routledge, 2008.
- Clarke, C.P. Terrorism, Inc.: The Financing of Terrorism, Insurgency, and Irregular Warfare. ABC-CLIO, 2015.
- , Sean S., and David Gold. Terrornomics. Aldershot, England; Burlington, VT: Ashgate, 2007.
- Ehrenfeld, Rachel. Funding Evil: How Terrorism Is Financed—and How to Stop It. Chicago: Bonus Books, 2003.
- Freeman, Michael. Financing Terrorism Case Studies. Farnham: Ashgate, 2011.
- Giraldo, Jeanne K., and Harold A. Trinkunas. Terrorism Financing and State Responses: A Comparative Perspective. Stanford, Calif: Stanford University Press, 2007.
- Martin, Gus, and Harvey W. Kushner. The Sage Encyclopedia of Terrorism. Thousand Oaks, Calif: SAGE Publications, 2011.
- Pieth, Mark. Financing Terrorism. Dordrecht: Kluwer Academic Publishers, 2002.
- Schott, Paul Allan. Reference Guide to Anti-Money Laundering and Combating the Financing of Terrorism. Washington, D.C.: World Bank, 2006.
- Vittori, Jodi. Terrorist Financing and Resourcing. New York, NY: Palgrave Macmillan, 2011.
- US Department of State International Narcotics Control Strategy Report (INCSR), annual report issued in March every year. Essential reading for all compliance officers for evaluating country money laundering risk
- US FinCEN (the US FIU) - Periodic SAR Reviews
- UK SOCA (merges NCIS (the UK FIU) - the UK Threat Assessment
- Compliance Web Search - A Google-powered vertical search engine designed to facilitate and accelerate the account vetting process for financial institutions
- Financial Market Integrity Unit, The World Bank
- International Centre for Political Violence and Terrorism Research - Strategic Counter Terrorism - Financial Response
- The funding of international islamic terrorism ~ Strategic analysis profiles ~ Guardia di Finanza General Headquarters - 2nd Department – Analysis Unit
- The Terror Finance Blog - Blog on all aspects of terrorism financing written by a group of independent analysts
- The Financial Action Task Force website
- World-Check.com - For negative news and sanctions screening.