What is terrorist financing? Terrorist financing refers to the provision of funds or financial assistance to individual terrorists or non-state actors. Most countries have implemented counter-terrorism financing measures, which are frequently part of their anti-money-laundering legislation.
Terrorists and terror organizations have long threatened our lives. If we think about it, we probably all have some own experience with this. Be it that we witnessed an act of terrorism ourselves or that we know someone that did.
Terrorists and terror organizations threaten the security, infrastructure, citizens, and communities worldwide. It is estimated that terrorists kill an average of 21,000 people worldwide each year. Having said this, terrorism tends to be very geographically focused: 95% of deaths in 2017 occurred in the Middle East, Africa, or South Asia.
What Is Terrorist Financing?
There is a song called “Money makes the world go around”. This message is also true for terrorists and terror organizations. Money is the lifeblood of terrorism. Terrorist organizations require significant funding, both for the actual undertaking of terrorist acts and other issues. In particular, to maintain the organization’s functioning, provide for its basic technical necessities, and cover costs related to spreading their ideologies.
The Forbes Magazine has compiled a list of the Richest Terror Organizations in the World. They estimate the ten biggest terror organizations’ total annual income at an incredible amount of almost 4 billion US-Dollar. At the top of that list is the Hizbollah organization with 6.2 billion US-Dollar alone.
You might ask: How can it be that these terrorist organizations can receive so much money? This is especially in the light of the global fight against terrorism, global economic sanctions, and designated lists for terrorist organizations.
How can this be? Well, the answer is terrorist financing. Terrorist financing can be described quite simply as the financing of terrorist acts, terrorists, and terrorist organizations. But terrorist financing is more than just providing the money to them. Terrorist financing can also involve facilitating terrorist acts using other assets or stores of value such as oil and natural resources, property, legal documents, financial instruments, and others. But terrorist financing does not stop there.
Terrorists and terrorist organizations usually need to rely on money to sustain themselves and carry out terrorist acts. Terrorist financing encompasses the means and methods used by terrorist organizations to finance activities that threaten national and international security. Money provides terrorist organizations with the capacity to carry out terrorist activities, which can be derived from a wide variety of sources. Money can come from legitimate sources, including profits from businesses and charitable organizations and criminal sources such as drug trade, weapon smuggling, or kidnapping for ransom.
Terrorists also make more and more use of modern technologies, including the blockchain and cryptocurrencies. They use cryptocurrency to help fund attacks more easily than they could ever do with fiat currencies.
After September 11 Attacks
The United States Patriot Act, enacted in the aftermath of the September 11, 2001 attacks, grants the US government anti-money laundering powers to monitor financial institutions. Since its passage, the Patriot Act has sparked considerable debate in the United States. The US has also worked with the UN and other countries to develop the Terrorist Finance Tracking Program.
The USA PATRIOT Act has spawned numerous initiatives, including the Financial Crimes Enforcement Network, which focuses specifically on money laundering and financial crimes .
Resolution 1373 of the United Nations Security Council is a counter-terrorism measure aimed at preventing terrorist organizations and individuals from receiving funding.
Methods Used For Terrorism Funding
A number of countries and multinational organizations maintain lists of terrorist organizations, though there is no consistency in which organizations are designated as such. In the United States, such a list is kept by the Treasury Department’s Office of Foreign Assets Control (OFAC). Financial transactions benefiting designated terrorist organizations are typically prohibited.
To circumvent efforts to prevent such funding, designated terrorist organizations may employ a variety of strategies. For example, they may make multiple smaller-value transfers in an attempt to avoid detection, or they may use people with no criminal history to complete financial transactions in order to make fund transfers more difficult to track.
These transactions can also be disguised as charitable donations or gifts to family members. Countries cannot combat terrorism on their own because corporate actors must scan financial transactions. If corporate actors fail to comply with the law, the state may levy fines or impose regulatory sanctions.
Preventing The Funding Of Terrorism
Know Your Customer (KYC) is a concept shared by ML and CTF, which requires financial organizations to have in-person identification and to adhere to the legality of the transaction in question. Although this methodology is not preferred by banks, lawyers, or other professionals who can see a money transaction or legal aid taking place, because of the business and client relationships that can be jeopardized by the process of personal identification.
This can strain relationships between long-term clients who must prove their identity and respected members of society who do not want to be asked for personal identification every time.
The FATF Blacklist (the Non-Cooperative Countries or Territories list) was used to coerce countries into changing their ways.
The international community has prioritized the fight against money laundering and terrorism financing. Among the goals of this effort are to protect the integrity and stability of the international financial system, to cut off terrorists’ access to resources, and to make it more difficult for criminals to profit from their criminal activities.
The IMF’s one-of-a-kind combination of universal membership, surveillance functions, and financial sector expertise makes it an integral and necessary component of international efforts to combat money laundering and terrorism financing.