Countering Terrorism Financing (CTF)

Learning Objectives:
On completion of this unit, you will be able to:
• Identify the main sources of terrorist funding.
• Describe the main methods used to counter terrorism financing and some of their limitations.

Required Reading:
The cost of individual terrorist attacks varies enormously, but all
terrorist groups need money. It took an estimated $500,000 to
finance the 9/11 attacks, but even simple operations require
surveillance, reconnaissance, rehearsals, and weapons or
explosives. The leadership of al-Qaeda in the Arabian Peninsula
(AQAP) famously boasted that the failed printer cartridge bomb plot
of 2010 only cost the organization $4,000. However, this is
misleading because support activities such as propaganda,
recruitment, procurement, travel, and training demand considerable
financial assets.
A terrorist group, like any criminal organization, builds and
maintains an infrastructure to exploit sources of funding and channel
those funds to providers of materials and services. This can involve
money laundering, sometimes through the use of “shell companies”
and often through the use of informal money value transfer services
(MVTS) commonly known as hawalas. Trade can also be used to
launder money. A basic technique is to use false invoices, slipping
money into a country by under-valuing imports or over-valuing
exports and doing the reverse to get the money out. Terrorists have Copyright: Simon Ellinas | Source: The Daily Telegraph
certainly been able to exploit laws on confidentiality, advances in
The US Treasury has designated Qatari businessman
technology, and the process of globalization in order to enable the Abdul Rahman a global terrorist claiming that he has
easy transfer of money around the world. sent large amounts of money to Al Qaeda affiliates.
Terrorist organizations usually derive income from a variety of sources. Funding for Islamic State (IS), for example, has
included revenue from taxation (zakat), extortion and confiscation, oil smuggling, kidnaping-for-ransom and even the
sale of ancient artifacts. Funding can combine both lawful and unlawful activities and sometimes the agents involved
may be unaware of the purpose of the income being generated. Financial support can come in the form of donations
through charities, community solicitation and wealthy supporters. Irish-American communities in the U.S., for
example, were asked to support Irish “charities” that were used to channel funds to the Irish Republican Army. The Sri
Lankan Tamil Tigers coerced businesses throughout the world-wide Tamil diaspora to supply donations for their
campaign. Income may also be derived from legitimate business activities such as trading in gems or real estate
investment. Legitimate businesses help to launder money and the shipment of legal goods can be used to conceal
contraband.
A few terrorist organizations, such as Hezbollah, receive funds from state sponsors, but the majority engage in criminal
activities such as kidnapping, extortion, drug trafficking or fraud, even though such behavior threatens to undermine
the perceived legitimacy of their cause. The U.S. State Department has claimed that around half of all terrorist groups
are funded by the illegal drugs trade, although it is difficult to verify the extent to which terrorists rely on such criminal
activities for funding. The World Bank estimates that Taliban received 10% of the $1.5 billion generated by the drugs
trade in Afghanistan in 2015 alone. In recent years kidnapping for ransom has increased significantly as a source of
terrorist financing, not least in the Sahel. According to an investigation by the New York Times, al-Qaeda in the Islamic
Maghreb (AQIM) collected $91.5 million in ransom payments from 2008 – 2014 alone. The Abu Sayyaf Group is
known to have received up to $5 million for individual Westermn hostages and has beheaded those who were not

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ransomed. Lone actors and foreign fighters tend to indulge in petty crime. According to Colin Clarke, the author of
Terrorism, Inc. their methods of financing include: SMS Loans, false companies, VAT, credit card and mortgage fraud
and the sale of stolen goods.
The first serious international effort to criminalize terrorist financing was the UN’s Terrorist Financing Convention of
1999, which has since been ratified by 187 countries. UN Security Council Resolution (UNSCR) 1373 (2001) also
obligated all member states to take CTF measures. More recently UNSCRs have addressed IS funding and financial
support to foreign fighters. Anti-money laundering agencies such as the Financial Action Task Force (FATF) and the
G7’s Counter Terrorism Action Group (CTAG) have implemented tough anti-money laundering regulations. In
particular, FATF has adopted and continually reviewed special recommendations on terrorist financing. For example,
in October 2015, FATF released a study entitled “Emerging Terrorist Financing Risks” to address new and emerging
sources of terrorist funding such as the use of social media to raise donations and the exploitation of virtual currencies
to transfer money. National Financial Intelligence Units (FIU) have taken the lead in sharing information and providing
advice. In March 2015, for example, a Counter-ISIL Finance Group was established by a number of countries to
specifically target IS’s use of the international financial system. Much progress has been made in CFT since 2001 in
coordinating government efforts to track and shut down terrorist financing and to exploit financial intelligence (FININT)
to uncover terrorist cells and disrupt potential planning activity.
Thanks to concerted national and international efforts, terrorists have largely been deterred from using the formal
banking system. “Naming and Shaming” individuals and financial institutions as well as financial sanctions against
offending governments have proved successful at curtailing financial support for terrorism. An interagency effort that
builds on local law enforcement agencies’ expertise in conducting complex criminal financial investigations and
utilizes their long-established relationships with the financial sector has proved effective. Through these initiatives,
states and regions have made significant progress in tracking and freezing terrorists’ assets.
US CTF analyst, Matt Levitt, has described CTF as a “very powerful part of the toolkit” against terrorism, even though
he recognizes that counter finance initiatives alone cannot be decisive. Sometimes, as in the case of IS or Al Shabaab,
only military action to reduce the territory controlled and taxed by a terrorist group can bring significant results. Real
legal and financial CTF challenges persist. Law enforcement agencies have to conduct full financial analyses of terrorist
suspects and their support structures. They must also obtain and utilize financial information resources from both the
private sector and government agencies. With contemporary transnational terrorism, it is essential to cooperate with
foreign law enforcement, intelligence agencies, and international regulatory institutions.
The CTF process is inevitably costly, time consuming and sometimes not cost effective. Many CTF measures penalize
legitimate money transfers, normal banking activity and even aid agencies. Some governments have not implemented
FATF recommendations and even between allies such as EU states and the U.S. there have been disagreements over
financial privacy rights. Terrorists are also adept at finding ways around the formal financial system, not least because
of widespread criminality and corruption in fragile or failing states.

Discussion Questions:
1. How do terrorists and their sympathizers raise money in your country? What measures does your
government take to combat this?
2. What do you think the main barriers are to shutting down financial support for terrorism in your country?
3. If you had the authority, what specific measure would you implement in your country to help CTF efforts be
more effective?

Additional Resources:
Sawicki, John. 2016. Counter-Terrorist Financing. In Combating Transnational Terrorism. eds. James .K. Wither and S. Mullins,
217–234. Sofia, Bulgaria: Procon Ltd. MCRL Call No.: HV6431 .C663 2016 c. 1 [Available in Marshall Center Research
Library]
FATF. 2015 Emerging Terrorist Financing Risks. Paris: FATF.
Norton, Simon and Paula Chadderton. 2016. “Detect, Disrupt and Deny: Optimising Australia’s Counterterrorism Financing
System,” Special Report. Barton, Australia: Australian Strategic Policy Institute.

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