Counterterrorism Blog

By Dennis M. Lormel

Terrorist financing presents a multi-dimensional challenge. When assessing terrorist financing, the tendency is to do so in an all encompassing generic sense. In actuality, terrorist financing should be broken down to its myriad of component parts. Strategies and methodologies should be focused on specific considerations, not generalities.

On the terrorist side of the ledger, there are two basic funding needs: fundraising and operational sustenance. Each consideration should be assessed separately. Terrorists must have sources of funding, the means of laundering funds and the availability of funding in order to achieve their goals. Terrorist organizations have had many years to perfect their funding methodologies. This has placed anti-terrorist financing efforts in a greater reactive mode. To truly succeed, more proactive and innovative detective measures must be devised and implemented. Strategies must be developed which enable investigators to track funds back to their point of origin and forward to terrorist strike teams. The challenge of identifying and disrupting funding flows is exacerbated by the variety of functional dimensions of terrorists. We are not dealing with terrorists as one dimensional individuals or organizations. Terrorists must be viewed in their functional roles. Functional roles include donors, fundraisers, facilitators, conduits, leaders, and jihadists to include operatives, martyrs and suicide bombers. Each function entails different funding requirements, relying on various funding streams to include both the formal and informal financial systems. If you’re in a detective position in government or industry in dealing with terrorist financing, the question to ask is…who are you most likely to deal with and in what capacity? This should factor into developing more focused disruptive strategies.

On the opposite side of the ledger or spectrum are anti-terrorist financing interests. From the perspective of the United States (U.S.), anti-terrorist financing interests should be placed in four broad rings. The inner ring consists of domestic government agencies. The second ring contains the domestic financial sector. The third ring encompasses the international government sector and international or regional organizations. The forth or outer ring is the international financial sector. Each of these rings or dimensions should be assessed individually in terms of their response to terrorist financing before being generically linked together and viewed from a global “terrorist financing” perspective.

Within the inner ring there are the law enforcement, intelligence, regulatory and diplomatic agencies possessing responsibility for terrorist financing. The first key in the U.S. to adequately addressing terrorist financing rests with interagency cooperation and coordination. The second key rests with the financial sector within the U.S. in terms of anti-money laundering and terrorist financing detective mechanisms. Germane to the success of the domestic financial sector is the level of cooperation and communication between the government and financial sectors. Government guidance is an important consideration. The third key, which is the most challenging key, lies with the international government community to include international and regional organizations such as the United Nations and the Financial Action Task Force. The appetite, willingness and wherewithal of the international community to deal with terrorist financing issues are critically important to the overall global response to terrorist financing. Consistent government to government, and international or regional organizational strategies must regularly be developed and implemented. U.S. government visibility and interaction with the worldwide government community is an important consideration. The forth key to adequately addressing terrorist financing rests with the international financial community. This sector must be reliant on cooperation and communication with the U.S. government and financial communities, as well as with the international government sector, to ensure a true global solution can be achieved.

When measuring the success of the U.S. government response to terrorist financing, the first consideration should be to assess its performance within the first ring or the foundation, that being the interagency community. In this regard the U.S. government deserves high grades, as validated by the 9/11 Commission report card grade of A-. With that stated, the U.S. government must strive to improve its interagency performance. The U.S. government should than be assessed against its interaction with each of the other three rings. With respect to the second and forth rings, the domestic financial and international sectors, respectively, the U.S. government deserves adequate grades. Areas where the U.S. government needs to improve include providing feedback and guidance concerning Bank Secrecy Act (BSA) reporting requirements and use BSA records. The area of greatest concern is the third ring, the international government sector. On balance, the international government community must do a much better job of attaining consistency and implementing meaningful global mechanisms to address the multitude of complex terrorist financing issues. It is not fair to hold the U.S. more responsible for global shortcomings than is deserved nor is it fair to evaluate the entire U.S. response based on global considerations without considering the totality of the U.S. government’s performance. However, the U.S., along with the global community, must step up significantly to establish forward thinking strategies and methodologies to disrupt the flow of funds to and from terrorists. A viable international response is critical to any level of success in truly diminishing terrorist funding streams.

The financial sector has done an adequate job of addressing BSA reporting requirements. Many institutions, entities and individuals in the financial sector deserve special credit and recognition for the level of cooperation they have demonstrated in assisting the U.S. government in various initiatives and in reporting suspicious activity. Overall, anti-money laundering programs within the industry have been fairly robust. Terrorist financing detection has been more challenging. The financial community has looked at terrorist financing through generic lenses as opposed to the multi-dimensional lenses required. One solution to this problem would be for the financial sector to develop and implement a specific terrorist financing training program. From training and understanding, better and more focused detective methodologies could be developed, tailored to the specific needs and dynamics of financial institutions.

Terrorist financing strategies and methodologies should be flexible and specifically focused with multi-dimensional considerations.