Understanding and Disrupting Terrorist Financing - Individuals and Cells

By Dennis Lormel

This is the fifth in a series of five articles.  In order to disrupt terrorist financing, there must be a more comprehensive understanding of the multi-dimensional elements involved in the funding process.  The first article in this series provided an overview of four components that must be included in training in order to establish a framework for understanding the complexity of terrorist financing.  The four components include:

1.    Types of terrorist groups
2.    Funding capacity
3.    Mechanisms for fundraising and operations
4.    Individuals and cells.

This article focuses on 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.  Entities are facilitation tools and serve as money laundering mechanisms.

Terrorist financing is complex and difficult to understand, let alone identify. It cannot be viewed from a generic or all encompassing standpoint. As noted above, a full range of individuals and entities possess terrorist funding requirements. Because of the variety of roles and functions, detective mechanisms must be more focused. In most instances, the various types of individuals and entities will have characteristics unique to them. For example, individuals to include leaders, donors, fundraisers, recruiters, facilitators and operatives (jihadists, martyrs, suicide bombers and others) by virtue of their positions will have differing funding requirements. Likewise, financial institutions, legitimate or illegitimate businesses, charities and other conduits will have varying funding needs. Financial requirements and flows for the full gamut of terrorists and terrorist supporters vary according to factors to include their role, location and affiliation.

As a result of the multi-dimensional face of terrorism, general characteristics, warning signs or red flags can be helpful, but are limited in identifying terrorist financing. A more robust process of identifying terrorist financing risk is to develop financial profiles for the specific individual and entity functions, as described above. Financial institutions and non-financial institutions should assess which terrorist groups, individuals and entities they are most likely to encounter and in what capacity. In so doing, they can more accurately develop reasonable detective mechanisms.  For example, terrorist operatives are more likely to deal at the retail level while wealthy donors are more likely to engage in private banking.

Terrorist and terrorist financing warning signs are constantly evolving due to changing dynamics in world events, such as the global response to terrorism and the ability of terrorists to adapt to changing dynamics.  Like characteristic indicators, warning signs are non-static.  For example, in response to the 9/11 terrorist attacks, the U.S. and international community took decisive steps to disrupt and dismantle terrorist groups and their financing.  In return, terrorists adapted new methodologies to exploit systemic vulnerabilities.  The same cycle was repeated following other significant terrorist activities, such as in the aftermath of the Madrid bombings of March, 2004. 

One of the true challenges in dealing with terrorist financing is the recognition of the dynamics of change and understanding that terrorist and terrorist financing methodologies will constantly change to avoid detection.  Developing mechanisms to identify emerging trends should be incorporated into the risk analysis process.

Based on a number of factors, including the international response to terrorism, the number of terrorist arrests and deaths, recruitment practices, emergence of younger terrorists and the regionalization of terrorist groups and affiliations, a new generation of terrorists is taking shape.  Individuals committing themselves to jihad tend to be better educated, less experienced, more radical, somewhat autonomous and resilient.  They are more engaged in criminal activities or interact to a greater degree with more traditional criminal groups.  This new breed is proficient in the exploitation and use of false identification documents.

The personal characteristics of terrorists are non-static.  Terrorists, especially Al-Qaeda related, are sensitive to investigative and regulatory scrutiny.  Their characteristics continuously evolve in an effort to avoid detection.  They have taken on characteristics of individuals more identifiable with western societies.  When assessing characteristics, you must consider the evolution of operational dynamics to consider factors to include operatives, targets, financing and communications.  Operatives have become more identifiable with their country of operation.  Targets have become increasingly soft.  The Madrid and London train bombings are somber references.  Financing has increasingly centered on criminal activity.  This places the operatives at higher risk of detection.    

Indicators to look for can be varied.  They should take on greater or lesser significance dependent on risk and vulnerability factors.  Numerous sources, to include FinCEN, the Financial Action Task Force and the Federal Financial Institutions Examination Council Examination Manual, have published reports and typologies listing money laundering and terrorist financing indicators.

Financial institution employees and other individuals having responsibilities to include compliance, AML, risk management, fraud, investigations and monitoring are on the front line of the economic or financial component of the war on terrorism.  Everyone should be mindful, in your area of responsibility, you may never encounter a terrorist or terrorist supporter, however, you may.

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