While terrorist organizations may use legal sources to cover for their financial needs, most terrorist organizations heavily rely on illegal sources. Let’s discuss the four most common illegal sources of terrorist financing. This article elaborates on ‘Illegal Sources of Terrorist financing’.
Terrorists use different methods to be able to finance their illegal activities and conceal the true origin of their funds. The funds may come from legitimate sources, such as legal businesses. It also may come from illegal sources such as drug trafficking, kidnapping and government corruption. In this article, we are going to be talking about the four most commonly used illegal sources of terrorist financing.
Drug trafficking is an unlawful international or domestic trade involving the cultivation, manufacturing, distribution and sale of products or substances that are prohibited by law. Criminal networks mainly traffic a range of drugs including cannabis, cocaine, heroine and methamphetamine. As international borders become increasingly secure, global abuse and access to drugs have become increasingly widespread in return.
The narcotics industry is undisputedly one of the major sources of funding for terrorist groups. Since the 1970s, illicit drug trafficking has been the most common illegal enterprise for terrorist groups. Terrorist groups such as “Euzkadi Ta Askatasuna” (ETA – Basque Fatherland and Liberty), “Fuerzas Armadas Revolucionarias de Colombia” (FARC), “Sendero Luminoso” and “Partiya Karkaren Kurdistan” (PKK – Kurdistan Workers Party) have all been involved in drug trafficking.
To date, Islamist terrorist groups have been documented engaging in drug trafficking as well. For example, Al-Qaeda has been involved for a long time in drug trafficking in Pakistan and Afghanistan. Scholars have also reported heroin and opium trafficking in Tajikistan.
Between 2000 to 2010, the Islamic Movement of Uzbekistan made huge profits smuggling drugs out of Afghanistan and trafficking them through Central Asia to Russia and Europe. There are also other Islamist groups located in Central Asia that have been reported to have strong ties to drug trafficking.
Oil smuggling is another area terrorists have exploited to fund their activities. There are various countries that have significant difficulties with oil smuggling including China, Thailand, Russia, Iran, Nigeria, and Cambodia. Oil smugglers in these countries earn substantial amounts of petrodollars and a large portion of the money finds its way into the money laundering cycle. Remember also that oil smuggling and arms trade are closely linked.
Illegal Diamond Trading
Diamonds are the leading commodities in the gem business and have been used to finance terrorist groups. In the past, Al-Qaeda has been linked with the illicit trade related to blood diamonds purchased from rebel groups in Africa. There have also been reports of al-Qaeda engaging in Tanzanite trading in East Africa.
Illicit trade in arms explicitly shows how simple it is to attain false documentation that accompanies arms shipments, especially end-user certificates. Since countries have different documentation requirements, the environment of trading arms can be easier. The situation is exacerbated by inefficient control in ports and customs authorities, making illicit arms trading flourish.
Illicit arms trade mainly occurs in three different forms:
- When a country is engaged in supplying arms to an embargoed state, payments are made through commercial payments such as an exchange of oil for arms to avoid bank transactions.
- When an insurgent or terrorist group in an embargoed state is supplied with arms from an arms broker, banks are typically used for the exchange since most shipments are paid either through a direct transfer of hard currency or using letters of credit. In the case of hard currency, money laundering plays a significant role to ensure that the destination of the arms remains disguised. Offshore banks, thereby, play a crucial role in facilitating the exchange and ensuring any transfer or deposit is channeled through various intermediary institutions. Offshore banks facilitate transfers or deposits in the name of different shell companies. These techniques ensure that the financial trail remains anonymous.
- In instances where it is difficult to come across normal banking channels like non-state actors, financing arms takes a different route involving commodity exchanges.
Terrorists use different methods to be able to finance their illegal activities and conceal the true origin of their funds. The funds may come from legitimate sources, such as legal businesses. It also may come from illegal sources such as drug trafficking, kidnapping and government corruption.