Understanding and Disrupting Terrorist Financing

By Dennis Lormel

To achieve a meaningful and consistent impact in disrupting terrorist financing, there must be a better understanding of the multi-dimensional elements involved in the funding process. Understanding begins with training. This holds true for the government, business and financial sectors. Terrorist financing is usually discussed in a broad and generic context and therefore seldom understood. To truly understand terrorist financing it must be presented and assessed in specific terms. Terrorist financing training should focus on factors to include:

1. Types of terrorist groups

Terrorist groups possess certain similarities. However, they differ in many ways due to demographics and logistics, to include how and where they operate, raise funds, launder funds and disperse funds. For example, where Al Qaeda relies more on wealthy donors, charities and individual criminal activities to raise funds; Hezbollah relies on state sponsors, donations and organized criminal activities; and Hamas relies on charities, donations, friendly Arab states and state sponsors. Also, each organization possesses different funding requirements in order to operate.

2. Funding capacity

In order to succeed, a terrorist group must have the capacity to raise funds, the means to launder funds and the availability of funds to operate. Terrorist fundraising is much different than the funding of terrorist operations. Raising funds from various sources differs greatly from the use of the available funds. As a result, detective and preventive strategies must be modified to specifically focus separately and collectively on the sources and application of funds. In addition, the manner in which funds are generated and used varies from organization to organization because of demographic and logistical considerations.

3. Mechanisms for fundraising and operations

The two mechanisms used for funding purposes are the formal and informal financial systems. In certain venues, the economies are cash based and more informal, while in many others, the economies are more formal, relying on the mainstream banking system. Depending on the situation, terrorist groups will use whichever system best facilitates their needs. Terrorist organizations operating throughout the world will rely on both systems. This is the point in the funding flow process that terrorists must have the means to launder funds. Whichever funding mechanism is used, serves as the conduit between the source and distribution or application of funds.

4. Individuals and cells

Individuals engaged in terrorism should not be viewed in the general sense of being “terrorists.” They are not one dimensional. It is essential to identify them according to their specific roles and functions. They include donors, fundraisers, facilitators, recruiters, conduits, leaders, foot soldiers and suicide bombers. Each type of individual possesses specific and unique funding requirements. Some may deal solely with the sources of funds (fundraising), some may deal solely with the use of funds and some with both. Cells function in a parallel manner.

Business and financial sector training seldom provides specific sessions dedicated to terrorist financing. In most instances where terrorist financing is discussed, it is in a basic and generic context. There is nothing basic or generic about understanding the full gamut of terrorist financing.

Forming an understanding of the multiple dimensions of terrorist financing, as outlined in the four steps above, both within the government and private sector, will more effectively facilitate development of methodologies to detect, deter and prevent the funding of terrorism. Consequently, this will result in the establishment of more successful mechanisms to address the challenges associated with identifying terrorist financing.

Terrorist financing is extremely difficult to identify. The reality is, in totality, it is possible to detect terrorist financing but not highly probable. Methodologies must be developed and implemented to increase the probability of detection. The first step is to provide appropriate and specific training that establishes the framework for understanding. Better understanding, in turn, will set the stage for development and implementation of strategies to enhance the probability of detection, deterrence, disruption and prevention. This will diminish the ability of terrorists to operate.

In terms of the sources of funds, the ability to launder funds and the availability of funds, the focus should be placed in the middle, on the ability to launder funds. By focusing in the middle, government can develop strategies to move outward in both directions by tracing the sources and application of funds. In essence, they will be able to go directly after the individuals and entities responsible for providing funds, disrupt their flow, identify and trace the use of funds, and go directly after the facilitators and operatives conducting terrorist activities. By focusing in the middle, the financial sector, as a conduit between sources and application of funds, can develop filters to disrupt the flow of funds from one side to the other, thereby diminishing the ability of terrorists to operate.

Training leads to understanding. Understanding leads to meaningful and consistent strategies. Meaningful and consistent strategies deny terrorists funding. Denying terrorists funding limits their ability to strike and successfully carry out devastating attacks.

(This is the first of five related articles. Subsequent articles will focus on the four points outlined above).

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