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Terrorist Financing: Definition and Process

Terrorist Financing

Terrorist financing is the act of providing financial support or resources to individuals or groups engaged in terrorist activities. The funds may be used to purchase weapons, recruit new members, or carry out attacks. Financial Action Task Force or FATF defines terrorism financing as the transfer of cash to terrorists or terrorist organizations to carry out terrorist acts. It may be using other resources or valuables to facilitate terrorist acts. Saving value in various tangible or intangible non-financial assets can also serve as an indirect source of finance.

Terrorist Financing

What is Terrorist Financing?

Significant hazards to individuals as well as the global society are posed by large terrorist organizations, especially the Islamic State of Iraq and the Levant and ISIL or Da’esh, overseas terrorist combatants, and small terrorist cells. Terrorist organizations like ISIL or Da’esh and Al Qaida maintain ties to several nations by aiding in the organization of rebels or extremists or by existing terrorist organizations swearing allegiance to them.

In Libya, entities such as Boko Haram and ISIL or Da’esh have sought ISIL or Da’esh membership in order to acquire reputation, financial backing, and recruitment. These affiliates also recruit overseas terrorist warriors from around the world, encourage minor terrorist groups or lone terrorists to carry out terrorist attacks in many nations, and create facilitation networks.

The size, composition, operational extent, motives, recruitment practices, and capabilities of terrorist organizations vary. Despite variations between terrorist organizations and specific terrorists and their followers, there is always a need for money to carry out terrorist attacks and fund the complete spectrum of operations that terrorist organizations carry out.

Why Do They Need Financing?

Why do they need financing if they can put someone in danger and are powerful enough? 

Funding is needed by terrorist organizations to carry out particular terrorist acts and conduct pre-operational monitoring. This covers transportation to and from the target area, the employment of vehicles and other equipment, and the acquisition of a variety of weaponry, including light assault rifles and improvised explosive devices.

Terrorist organizations need resources to effectively attract members and generate finances, which may be costly as this recruiting process necessitates the use of many channels. The early steps of recruiting are made easier by using the internet, but the follow-up activities come at an added expense.

All terrorist groups seek funding to support the training of members and supporters in various disciplines, including firearm proficiency, bomb-making, covert communication, and ideology. Terrorist organizations frequently buy property to utilize it as training camps, buildings to employ as a sanctuary for instructors and trainees, and training facilities in this context.

Many terrorist organizations set up or support social institutions that offer social, health, and educational services using their financial resources. Many terrorist organizations set aside money for their leaders’ and members’ wages and the relatives of imprisoned or deceased members. Group members’ commitment to the organization’s objectives and philosophy may be strengthened by offering them incentives and financial stability.

Small cells and lone terrorists, in contrast to huge terrorist organizations, have little financial demands because the expenses of terrorist strikes are frequently low. As a result, given that they do not exercise territorial control, deploy conventional militias, conduct recruiting or propaganda operations, maintain checkpoints or provide social services, lone actors and small-cell terrorist networks have a far lower budget demand.

Terrorist Financing

Steps of Terrorist Financing

In contrast to other illegal conduct, where monetary gain is typically the end goal, funding terrorism has no financial motivation. The funding of terrorism is a linear process in which the funds are utilized to support various phases of terrorism. All of the steps are not necessary. For instance, simply raising money will be sufficient to qualify as terrorist funding.

The stages of terrorist financing:

Raising Funds

This stage comprises the collection of finances from sources used to finance terrorism, which often includes direct contributions from businesses or people, certain criminal activity, or charitable and nonprofit organizations.

It can be collected by donations. These funds may come from big firms, organizations, foreign nations, and other major entities, depending on how much they provide. People may also contribute money from their profits or savings. Charities and nonprofit organizations could be abused to finance terrorism. They draw a lot of potential donors because of their emotional appeal at a deep emotional level. Criminal networks may work with terrorist organizations to raise money.

Storing Funds

After generating income, the money now has to be stored in a secure location. Money can be kept in various places, including bank accounts and other types of accounts, prepaid debit cards, high-value commodities like oil, works of art and antiques, agricultural goods, rare metals and stones, and even used cars. Even worse, terrorist groups keep the money as cash and store it as cryptocurrency. They are keeping the money in a safe place until they decide how they will use it. 

Moving Funds

Terrorist groups do not have a single headquarters. Many of them also conduct business abroad. Similarly, funds raised in one location might need to be transferred to others if they are to be used in terrorist activities. The banking industry, the remittance industry, foreign exchange bureaus, and unofficial value transfer channels like hawala all provide services for money movement. Smuggling of those goods also acts as a means of moving the funds because they are held as highly valuable objects. Terrorists may employ money laundering strategies to avoid detection and conceal the identities of their supporters and the final recipients of the monies generated.

Using Funds

The final step in funding the terrorism supply chain is the deployment of income raised in terrorism-related activities. Money may be widely used for various things once it gets to the right place or person. Terrorist organizations frequently invest significant funds in spreading their ideas, for instance, through social media marketing and periodicals. They acquire some gravitas and “credibility” as a result. It has the potential to draw funds as well as resources like cash, weapons, and/or foreign terrorist combatants. Terrorist organizations may also provide patronage, such as seed money, to emerging terrorist cells or pay for assaults to be carried out in their name.

Terrorist Financing

Final Thoughts

Terrorist financing refers to the provision of funds or financial support to individuals or groups that carry out acts of terrorism. It is a critical aspect of the fight against terrorism, as the financial resources provided to terrorist organizations are often used to finance terrorist activities such as recruitment, training, planning, and executing attacks.

Terrorist financing can take many forms, including the use of traditional financial channels such as banks and wire transfers, as well as alternative methods such as the exploitation of charities, smuggling, and the use of cash couriers. To combat terrorist financing, governments and financial institutions have implemented a range of measures, including legislation, regulations, and technology-based solutions.