The Covert War on Terrorism Funding
To stage a terrorist attack, perpetrators need money – and a lot of it. Terrorist organizations employ international networks for transferring funds, laundering money and for other, similar operations intended to finance their activities. Special review of global terrorism funding networks in the 21st century
Ami Rojkes Dombe
| 18/08/2017
Hezbollah militants in Lebanon (Photo: AP)
One of the most complex aspects of counterterrorism is monitoring, tracking and preventing the funding of terrorist organizations. Terrorism funding infrastructures often extend to five continents and dozens of countries and involve criminal organizations, straw companies, wayward banks and secret couriers. It is easier to sell the public on how a terrorist was arrested or how a terrorist attack on a busy street was prevented than showing how the laundering of a million dollars was spotted and prevented.
The Crime & Terrorism Match
"Hezbollah receives 800 million US dollars from Iran every year," said IDF Chief of Staff Lt. Gen. Gadi Eizenkot at the last Herzliya conference. At that conference, the Chief of Staff reconfirmed the fact that Hamas receives about 70 million US dollars from Iran every year. According to data published by the Coordinator of Government Activities in the Territories, Hamas collects some 1.2 billion ILS per year from the inhabitants of the Gaza Strip. The total annual turnover of Hamas amounts to about 1.5 billion ILS – and this information is based exclusively on open source data. It is reasonable to assume that the actual turnover exceeds the above figure.
Hezbollah and Hamas may be high on the awareness of Israelis, but all of the major terrorist organizations, including ISIS, al-Qaeda, Taliban, Boko Haram, the Houthis and other, smaller organizations, generate proceeds of millions of US dollars each per year. A recent report on ISIS revealed that the organization's proceeds decreased substantially in the last two years. Instead of a quarterly income of about US$ 80 million in 2015, it generated a turnover of "only" US$ 16 million in the second quarter of 2017. Apparently, one of the reasons for this decrease is the fact that ISIS has exhausted the options of extorting the civilian population under its rule.
The revenue of the terrorist organizations comes from diversified sources. A substantial part of the money comes from drug trafficking. Terrorist organizations cooperate with criminal organizations worldwide, including drug cartels in Central and South America. The terrorist organization serves as a courier for the distribution of the drugs produced by the criminal organization as well as providing drug money laundering services.
Another part of the money comes from controlling civilian populations, which enables the terrorist organizations to collect taxes and protection money and engage in human trafficking – mainly women and slaves. There are also indications of organ trading. Yet another part of the money comes from the exploitation of natural resources in the territory dominated by the terrorist organization. ISIS made billions from the sales of oil and antiquities.
Another source of financing is the smuggling of potential immigrants from poor countries into richer countries. The various conflicts of the last few years in Syria, Iraq and Libya led to tremendous pressure by potential immigrants wishing to leave Africa and Asia for richer countries, mainly in Europe, but to Israel and the USA as well. Terrorist organizations such as ISIS take advantage of this trend to generate revenue. The terrorist organization provides the smuggling route, and every immigrant pays thousands of dollars for his or her attempt at a better life. Other ways to make money from terrorism include gambling and trading in animal organs in Africa. Cybercrime is a recent addition to this list.
"Terrorist organizations are deeply involved in an extensive range of criminal activities, from the mining of blood diamonds to auto theft. At the same time, the international drug industry, around which the terrorism-crime connection had started to form in the 1980s, still constitutes the most common criminal activity among the terrorist organizations," stated an article published by INSS.
"In 1993, the President of Bolivia coined the term 'narco-terrorism' in connection with the use of terrorism tactics by the drug cartels in his country, and since then this term has been the codename for the close connection between terrorist organizations and the international drug industry. According to the US Drug Enforcement Agency, 19 out of 49 organizations included in the list of terrorist organizations of the US State Department, and about 60% of all terrorist organizations worldwide, are associated with the international drug market. Among the most prominent organizations on that list: al-Qaeda, Taliban, FARC of Colombia and Hezbollah."
The Money is Difficult to Track
The war against terrorism funding is a complex undertaking. A major part of the money is transferred in cash. Without specific intelligence, it passes under all of the controls of the financial system. Another part of the money is laundered by a network of legitimate straw companies and financial organizations that do not adhere to the rules against money laundering, and that includes certain banks. In the past, well-established bankers in western countries were caught violating the sanctions imposed on Iran or laundering money for the drug cartels of Mexico and for other parties.
Another aspect which makes financial monitoring of terrorist organizations particularly difficult has to do with the fact that some of these organizations are financially backed by states. Iran, Saudi Arabia and Qatar are just a small part of a long list of countries, including western countries, which secretly support terrorist organizations for the purpose of promoting their political objectives. The implication of this state of affairs is that the intelligence agencies and financial institutions of the country that funds terrorism actively conceal the transfer of funds to the terrorist organization. In some cases, even if other countries are aware of this process, they would not betray the wayward countries owing to political interests.
The terrorist organizations sometimes exploit social organizations and NGOs that operate in their countries. The transfer of funds to a social organization operating for the benefit of the inhabitants of that country is regarded as a legitimate donation. In some cases, the employees of these organizations belong, either directly or indirectly, to a terrorist organization in that country, and they transfer a part of the organization's funds to fictitious social projects. In these cases, the money is used to fund terrorist activities and is extremely difficult to trace. Once again, even if the money is traced, this information is not always usable on the geo-political arena.
The Internet as a Double-Edged Sword
Another challenge the intelligence agencies face in their effort to track the funds of terrorist organizations is the Internet. The Internet consists of the normal web – the Internet with which the general public is familiar, and the 'Darknet' – a web based on TOR servers and a routing method known as Orion. While the normal web is used for an extensive range of positive activities, it also serves as a medium that supports terrorism funding activities.
Another element associated with the Internet is encryption. While in the past encryption was a capability possessed by the regular armed forces and intelligence agencies of states, today it is a technology readily available to everyone. Message services like Facebook, WhatsApp, Telegram or Signal transfer contents in encrypted format. Almost all websites use the encryption protocol SSL.
Alongside these encryption technologies, encrypted virtual currencies have emerged in recent years. Bitcoin is the most prominent example, but it is not the only one. These currencies are based on a Blockchain technology that enables the transfer of encrypted information in a manner that makes it nearly impossible to trace – at the present time.
Civilian encryption and the Blockchain technology made the task of monitoring and tracking money transfers much more challenging for the intelligence agencies. The problem is so severe that recently, western countries, including the USA and European countries, have been conducting discussions intended to encourage legislation that would provide government organs with access to civilians' encrypted traffic.
Insufficient International Cooperation
Another aspect of the challenge of tracking the money of the terrorist organizations involves international cooperation. The world's banking system has initiated some moves in recent years in order to minimize terrorism funding through legislation banning money laundering and funding of terrorism. There have been several attempts around the world to minimize the use of cash. The USA, the UN and other countries have imposed several economic sanctions on individuals and organizations that financially support terrorism.
However, the extent of cooperation between security organizations around the world has not yet reached the level where it would succeed in stopping the funding of terrorism. No country can cope on its own with such organizations as al-Qaeda, Hezbollah, and ISIS, which operate around the globe. One should bear in mind the fact that the terrorist organizations and drug cartels are extremely rich organizations. Some of these organizations have more money that states. These organizations maintain superior intelligence, offensive and defensive setups.
While terrorist and criminal organizations cooperate on the basis of economic or ideological interests, the states fighting them do not always cooperate with one another. Quite naturally, every security service wants to keep its cards to itself and at the international level, every country wishes to safeguard its information. The questions begin to surface when the same organization operates within the sovereign territory of several countries, with each country constituting an independent, sovereign link in a long chain. How do you synchronize the collection of intelligence among those countries? How do you enforce or prevent the financial activity of that organization in all of the links in the chain? How should military organizations, police forces and intelligence agencies operate jointly in all of those countries and along the same money trail in order to block the financial force build-up by the terrorist organization?
Hezbollah as a Particular Case
If we were to examine Hezbollah as a particular case of terrorism funding, we would be able to notice, first of all, the globalization of the funding process. Hezbollah operates in Lebanon and Syria, but funds itself through activities in various countries in South America, Europe, Africa and the Middle East. One of the major projects initiated by the US DEA against Hezbollah in recent years, Project Cassandra, targeted the organization's money laundering infrastructure. The operation was aimed specifically at an external unit operated by Hezbollah under the name "The External Security Organization Business Affairs Component". This unit had been established by Imad Mughniyah, who was allegedly eliminated – according to foreign sources – by the Mossad and CIA.
"The unit is involved in international criminal activities such as drug trafficking and the laundering of drug money," states the DEA announcement. "These proceeds are used to acquire arms for Hezbollah and to finance their operations in Syria. This on-going investigation extends to multiple international law enforcement agencies in seven countries, and once again highlights the dangerous global connection between drug trafficking and terrorism."
Hezbollah also established a number of technological companies that were allegedly involved in the importation and marketing of electronic products. In effect, however, these companies attempted to purchase for Hezbollah such items as UAVs and related products.
One of the activities the USA initiated against funding for Hezbollah is the legislation bill Hezbollah International Financing Prevention Act (HIFPA). This act led to the closing of bank accounts in Lebanon that were affiliated to Hezbollah. Consequently, Hezbollah diverted some of its financial activities to such places as Iraq and Dubai.
Covert War
Without a doubt, the war against terrorism funding is harder to sell to the public compared to the prevention of terrorist attacks. When an intelligence agency prevents a terrorist attack a moment before it takes place, the credit for the operation is settled by the media at that very moment. On the other hand, the public does not get to see the war against terrorism funding.
The war against terrorism funding is time-consuming, on-going, Sisyphean and not always successful. If an intelligence agency fails to prevent a terrorist attack, people in the streets will be killed and wounded. If the same intelligence agency fails to prevent a money laundering transaction involving a few millions, nothing will happen. At least not immediately.
Another challenge for the war against terrorism funding, alongside the media aspect, involves the Internet. On-line banking, encryption, open source intelligence, social media, forums and messaging services are only a few of the tools currently available to terrorist organizations. One should bear in mind the fact that these tools are available to innocent civilians to the same extent that they are available to the terrorist organizations. This overlapping between civilian and defense technologies makes it difficult for the intelligence agencies to operate effectively.
The money of the terrorist and criminal organizations enables them to acquire the services of professionals, as well as technological tools, of the same quality as those that a state would acquire. Hacker groups and criminal organizations sell cyberattack and intelligence services to the highest bidder. Alongside these elements, technology business enterprises sell to any buyer who can provide them with an end-user certificate, whether the buyer is a legitimate company or a straw party operating on behalf of a terrorist or criminal organization. The leakage of state-standard technological capabilities to the hands of non-state organizations challenges the security organizations that attempt to spot and prevent funding for terrorism around the globe.
The challenges and difficulties notwithstanding, it seems that the war against terrorism funding has shifted, in the last year, from the margins to the center of the public stage, especially owing to the latest terrorist attacks in Europe and the election of Donald Trump as US President. In Europe, they are already speaking about addressing the encryption issue through legislation. Additionally, a discourse has started which places on the scales personal security versus privacy. The USA, for its part, has tightened the sanctions imposed on individuals and corporations that support terrorism worldwide. These changes could indicate that the international ship is currently heading toward an attack against the financial infrastructure, having realized that with less funding for terrorist organizations there will be less terrorism.
To stage a terrorist attack, perpetrators need money – and a lot of it. Terrorist organizations employ international networks for transferring funds, laundering money and for other, similar operations intended to finance their activities. Special review of global terrorism funding networks in the 21st century
Hezbollah militants in Lebanon (Photo: AP)
One of the most complex aspects of counterterrorism is monitoring, tracking and preventing the funding of terrorist organizations. Terrorism funding infrastructures often extend to five continents and dozens of countries and involve criminal organizations, straw companies, wayward banks and secret couriers. It is easier to sell the public on how a terrorist was arrested or how a terrorist attack on a busy street was prevented than showing how the laundering of a million dollars was spotted and prevented.
The Crime & Terrorism Match
"Hezbollah receives 800 million US dollars from Iran every year," said IDF Chief of Staff Lt. Gen. Gadi Eizenkot at the last Herzliya conference. At that conference, the Chief of Staff reconfirmed the fact that Hamas receives about 70 million US dollars from Iran every year. According to data published by the Coordinator of Government Activities in the Territories, Hamas collects some 1.2 billion ILS per year from the inhabitants of the Gaza Strip. The total annual turnover of Hamas amounts to about 1.5 billion ILS – and this information is based exclusively on open source data. It is reasonable to assume that the actual turnover exceeds the above figure.
Hezbollah and Hamas may be high on the awareness of Israelis, but all of the major terrorist organizations, including ISIS, al-Qaeda, Taliban, Boko Haram, the Houthis and other, smaller organizations, generate proceeds of millions of US dollars each per year. A recent report on ISIS revealed that the organization's proceeds decreased substantially in the last two years. Instead of a quarterly income of about US$ 80 million in 2015, it generated a turnover of "only" US$ 16 million in the second quarter of 2017. Apparently, one of the reasons for this decrease is the fact that ISIS has exhausted the options of extorting the civilian population under its rule.
The revenue of the terrorist organizations comes from diversified sources. A substantial part of the money comes from drug trafficking. Terrorist organizations cooperate with criminal organizations worldwide, including drug cartels in Central and South America. The terrorist organization serves as a courier for the distribution of the drugs produced by the criminal organization as well as providing drug money laundering services.
Another part of the money comes from controlling civilian populations, which enables the terrorist organizations to collect taxes and protection money and engage in human trafficking – mainly women and slaves. There are also indications of organ trading. Yet another part of the money comes from the exploitation of natural resources in the territory dominated by the terrorist organization. ISIS made billions from the sales of oil and antiquities.
Another source of financing is the smuggling of potential immigrants from poor countries into richer countries. The various conflicts of the last few years in Syria, Iraq and Libya led to tremendous pressure by potential immigrants wishing to leave Africa and Asia for richer countries, mainly in Europe, but to Israel and the USA as well. Terrorist organizations such as ISIS take advantage of this trend to generate revenue. The terrorist organization provides the smuggling route, and every immigrant pays thousands of dollars for his or her attempt at a better life. Other ways to make money from terrorism include gambling and trading in animal organs in Africa. Cybercrime is a recent addition to this list.
"Terrorist organizations are deeply involved in an extensive range of criminal activities, from the mining of blood diamonds to auto theft. At the same time, the international drug industry, around which the terrorism-crime connection had started to form in the 1980s, still constitutes the most common criminal activity among the terrorist organizations," stated an article published by INSS.
"In 1993, the President of Bolivia coined the term 'narco-terrorism' in connection with the use of terrorism tactics by the drug cartels in his country, and since then this term has been the codename for the close connection between terrorist organizations and the international drug industry. According to the US Drug Enforcement Agency, 19 out of 49 organizations included in the list of terrorist organizations of the US State Department, and about 60% of all terrorist organizations worldwide, are associated with the international drug market. Among the most prominent organizations on that list: al-Qaeda, Taliban, FARC of Colombia and Hezbollah."
The Money is Difficult to Track
The war against terrorism funding is a complex undertaking. A major part of the money is transferred in cash. Without specific intelligence, it passes under all of the controls of the financial system. Another part of the money is laundered by a network of legitimate straw companies and financial organizations that do not adhere to the rules against money laundering, and that includes certain banks. In the past, well-established bankers in western countries were caught violating the sanctions imposed on Iran or laundering money for the drug cartels of Mexico and for other parties.
Another aspect which makes financial monitoring of terrorist organizations particularly difficult has to do with the fact that some of these organizations are financially backed by states. Iran, Saudi Arabia and Qatar are just a small part of a long list of countries, including western countries, which secretly support terrorist organizations for the purpose of promoting their political objectives. The implication of this state of affairs is that the intelligence agencies and financial institutions of the country that funds terrorism actively conceal the transfer of funds to the terrorist organization. In some cases, even if other countries are aware of this process, they would not betray the wayward countries owing to political interests.
The terrorist organizations sometimes exploit social organizations and NGOs that operate in their countries. The transfer of funds to a social organization operating for the benefit of the inhabitants of that country is regarded as a legitimate donation. In some cases, the employees of these organizations belong, either directly or indirectly, to a terrorist organization in that country, and they transfer a part of the organization's funds to fictitious social projects. In these cases, the money is used to fund terrorist activities and is extremely difficult to trace. Once again, even if the money is traced, this information is not always usable on the geo-political arena.
The Internet as a Double-Edged Sword
Another challenge the intelligence agencies face in their effort to track the funds of terrorist organizations is the Internet. The Internet consists of the normal web – the Internet with which the general public is familiar, and the 'Darknet' – a web based on TOR servers and a routing method known as Orion. While the normal web is used for an extensive range of positive activities, it also serves as a medium that supports terrorism funding activities.
Another element associated with the Internet is encryption. While in the past encryption was a capability possessed by the regular armed forces and intelligence agencies of states, today it is a technology readily available to everyone. Message services like Facebook, WhatsApp, Telegram or Signal transfer contents in encrypted format. Almost all websites use the encryption protocol SSL.
Alongside these encryption technologies, encrypted virtual currencies have emerged in recent years. Bitcoin is the most prominent example, but it is not the only one. These currencies are based on a Blockchain technology that enables the transfer of encrypted information in a manner that makes it nearly impossible to trace – at the present time.
Civilian encryption and the Blockchain technology made the task of monitoring and tracking money transfers much more challenging for the intelligence agencies. The problem is so severe that recently, western countries, including the USA and European countries, have been conducting discussions intended to encourage legislation that would provide government organs with access to civilians' encrypted traffic.
Insufficient International Cooperation
Another aspect of the challenge of tracking the money of the terrorist organizations involves international cooperation. The world's banking system has initiated some moves in recent years in order to minimize terrorism funding through legislation banning money laundering and funding of terrorism. There have been several attempts around the world to minimize the use of cash. The USA, the UN and other countries have imposed several economic sanctions on individuals and organizations that financially support terrorism.
However, the extent of cooperation between security organizations around the world has not yet reached the level where it would succeed in stopping the funding of terrorism. No country can cope on its own with such organizations as al-Qaeda, Hezbollah, and ISIS, which operate around the globe. One should bear in mind the fact that the terrorist organizations and drug cartels are extremely rich organizations. Some of these organizations have more money that states. These organizations maintain superior intelligence, offensive and defensive setups.
While terrorist and criminal organizations cooperate on the basis of economic or ideological interests, the states fighting them do not always cooperate with one another. Quite naturally, every security service wants to keep its cards to itself and at the international level, every country wishes to safeguard its information. The questions begin to surface when the same organization operates within the sovereign territory of several countries, with each country constituting an independent, sovereign link in a long chain. How do you synchronize the collection of intelligence among those countries? How do you enforce or prevent the financial activity of that organization in all of the links in the chain? How should military organizations, police forces and intelligence agencies operate jointly in all of those countries and along the same money trail in order to block the financial force build-up by the terrorist organization?
Hezbollah as a Particular Case
If we were to examine Hezbollah as a particular case of terrorism funding, we would be able to notice, first of all, the globalization of the funding process. Hezbollah operates in Lebanon and Syria, but funds itself through activities in various countries in South America, Europe, Africa and the Middle East. One of the major projects initiated by the US DEA against Hezbollah in recent years, Project Cassandra, targeted the organization's money laundering infrastructure. The operation was aimed specifically at an external unit operated by Hezbollah under the name "The External Security Organization Business Affairs Component". This unit had been established by Imad Mughniyah, who was allegedly eliminated – according to foreign sources – by the Mossad and CIA.
"The unit is involved in international criminal activities such as drug trafficking and the laundering of drug money," states the DEA announcement. "These proceeds are used to acquire arms for Hezbollah and to finance their operations in Syria. This on-going investigation extends to multiple international law enforcement agencies in seven countries, and once again highlights the dangerous global connection between drug trafficking and terrorism."
Hezbollah also established a number of technological companies that were allegedly involved in the importation and marketing of electronic products. In effect, however, these companies attempted to purchase for Hezbollah such items as UAVs and related products.
One of the activities the USA initiated against funding for Hezbollah is the legislation bill Hezbollah International Financing Prevention Act (HIFPA). This act led to the closing of bank accounts in Lebanon that were affiliated to Hezbollah. Consequently, Hezbollah diverted some of its financial activities to such places as Iraq and Dubai.
Covert War
Without a doubt, the war against terrorism funding is harder to sell to the public compared to the prevention of terrorist attacks. When an intelligence agency prevents a terrorist attack a moment before it takes place, the credit for the operation is settled by the media at that very moment. On the other hand, the public does not get to see the war against terrorism funding.
The war against terrorism funding is time-consuming, on-going, Sisyphean and not always successful. If an intelligence agency fails to prevent a terrorist attack, people in the streets will be killed and wounded. If the same intelligence agency fails to prevent a money laundering transaction involving a few millions, nothing will happen. At least not immediately.
Another challenge for the war against terrorism funding, alongside the media aspect, involves the Internet. On-line banking, encryption, open source intelligence, social media, forums and messaging services are only a few of the tools currently available to terrorist organizations. One should bear in mind the fact that these tools are available to innocent civilians to the same extent that they are available to the terrorist organizations. This overlapping between civilian and defense technologies makes it difficult for the intelligence agencies to operate effectively.
The money of the terrorist and criminal organizations enables them to acquire the services of professionals, as well as technological tools, of the same quality as those that a state would acquire. Hacker groups and criminal organizations sell cyberattack and intelligence services to the highest bidder. Alongside these elements, technology business enterprises sell to any buyer who can provide them with an end-user certificate, whether the buyer is a legitimate company or a straw party operating on behalf of a terrorist or criminal organization. The leakage of state-standard technological capabilities to the hands of non-state organizations challenges the security organizations that attempt to spot and prevent funding for terrorism around the globe.
The challenges and difficulties notwithstanding, it seems that the war against terrorism funding has shifted, in the last year, from the margins to the center of the public stage, especially owing to the latest terrorist attacks in Europe and the election of Donald Trump as US President. In Europe, they are already speaking about addressing the encryption issue through legislation. Additionally, a discourse has started which places on the scales personal security versus privacy. The USA, for its part, has tightened the sanctions imposed on individuals and corporations that support terrorism worldwide. These changes could indicate that the international ship is currently heading toward an attack against the financial infrastructure, having realized that with less funding for terrorist organizations there will be less terrorism.
