Al-Qaida and its sympathizers have taken an interest in cyber-crime, as stolen credit cards gained through phishing have enabled terrorists to purchase millions of dollars worth of much- needed supplies, including plane tickets and prepaid mobile telephones which can be used and then disposed of quickly before authorities have an opportunity to trace any calls made to or from these “burners.” In a post-Snowden environment, it is likely that terrorists have resorted to even more surreptitious methods of communication. Furthermore, rigged transactions between two companies controlled by the same organization, the use of falsified documents, and the diversity of payment methods (personal and bank checks, transfers, payment orders, banking remittances and credits, etc.) all contribute to the difficulty of countering groups adept at these processes.13 Terrorists continue to transfer funds through a variety of means, including the use of cash couriers and hawalas but also electronically in real-time. In the past, when methods including Western Union, credit cards, or online payment sites like PayPal have come under scrutiny, terrorists and their sympathizers post warning messages on a variety of online forums.14 Issues like this should remain a priority for the intelligence community and Congress, including the House Financial Services Subcommittee on Oversight and Investigations.
It is critical to deny money to terrorists and insurgents by disrupting and destabilizing operations, which causes them to expend more effort devoted to financing, in turn leaving them with less time to train and recruit or to plot, plan, and execute attacks. As Shapiro and Siegel note, “seizing funds, and thereby tightening terrorists’ budget constraints can increase friction within an organization to the point where leaders choose to spend on activities other than attacks.”15 Addressing fund-raising through crime remains essentially a law enforcement challenge, suggesting the need to devote more resources to border security and customs enforcement and the agencies that are responsible for these issues, as well as local and federal police. In many countries, this remains an issue of both capacity and will. Furthermore, it is important to recognize that this is a multi-player game. The efficacy of these programs depends not only on the resources marshaled by the host-nation government (and in some cases the resources of its neighbors, allies and/or the international community), but also on the nature and severity of the threat. What worked in Colombia may not necessarily be realistic in Somalia.
And, while the ability to kill, capture, arrest and prosecute depends on actionable intelligence and a capable kinetic force, terrorist and insurgent groups are not comprised solely of “trigger pullers,” as demonstrated throughout the case studies. Therefore, neither should those agencies working to counter these groups be purely kinetic. Employing smart financial power means being able to “follow the money” and conduct sound financial network analysis. In many ways, success breeds further challenges. Success in focusing on funds generated by Al-Qaida has had an atomizing effect on the organization, thus fracturing the group’s fund-raising arm into many smaller pieces, which are in turn, more difficult to track. The more vulnerable terrorists feel in using the international financial system, the more likely they will be to rely upon more informal means of raising and moving money. “With greater restraints on international money transfers, a ‘ceiling’ may have been established under which terrorist funds may begin to pool,” note Rabasa et al. When funding flows are stagnant between the core and the periphery, with no money sent in either direction, local cells are forced to finance their own activities and indeed may be called upon to send money from the periphery back to the core.16 As the case studies related, local cells in both the PIRA and the Afghan Taliban demonstrated considerable success in raising money, part of which was in turn used to support both groups’ leadership cadre. If ISIS is able to successfully expand beyond Iraq and Syria, its local cells will be required to do the same.
Just as terrorist and insurgents are resilient and adaptive, so too do nation-states need to strive for agility in responding to current and emerging threats. This includes being prepared to take advantage of changing geopolitical dynamics. As the attacks of September 11, 2001 demonstrated, major international events can impact how governments view national security issues. While the Sri Lankan government struggled to influence governments in the United States, United Kingdom, and Canada to take action on the LTTE before 9/11, all three nations eventually agreed to clamp down on this group in the years following the attacks. Similarly, in the wake of the Arab Spring, the Israelis have seized the opportunity provided by a new government in Egypt to restrict the flow of resources to Hamas in Gaza.
THE UNITED STATES AND ITS ALLIES CANNOT SUCCEED ALONE
Even with all of the resources that the United States and its allies are able to marshal, there is still the issue of getting other states to cooperate. Some countries have made little to no effort to curb the activities of informal money transfer systems, which can then be used by terrorists to move and launder money obtained through the gray and dark economies.17 For a variety of reasons, cooperation from states can be, and often is, somewhat limited due to domestic political concerns and differing opinions of what constitutes a threat to national security. While the Kuwaitis and Qataris may say one thing privately, public actions could be much different, leading to accusations of “two-facedness,” or “playing a double game.”18
This dilemma should not be surprising, however. For two decades, the United States largely decided to look the other way with respect to PIRA activity on U.S. soil, much to the chagrin of London. The Tamils in Canada maintained sufficient political clout and enough influence to avoid being proscribed a terrorist organization for many years. Even now, with ISIS threatening to destabilize much of the Middle East, countries like Turkey remain undecided on whether or not to fully cooperate with the United States and its allies. Regarding Al-Qaida, shift away from its original “business model” and toward a more grassroots financing system will present a challenge to authorities that are still attempting to perfect the art of combating large donors and more obvious transmission mechanisms.19
The American experiences in Iraq and Afghanistan have led to the realization that it takes time and a sophisticated understanding of the operational environment in order to piece together a comprehensive and accurate intelligence picture of what local network structures look like on the ground. Only with the help of the host-nation governments will it be possible to improve the transparency and accountability of indigenous institutions, locate and positively identify the bankers and financiers who comprise critical nodes in the business cycle of a particular network, and seize cash as it flows into and out of a country’s borders, although another major challenge is that most of this funding can be raised and spent locally. Even with the active assistance of a partner nation, affecting terrorist and insurgent networks and preparing for second and third order effects is a tenuous proposition. Countering the financing of terrorism is not a linear problem set and is frequently plagued by a lack of robust metrics, a dearth of international cooperation, and poor information sharing.20 Because there are widely varying perceptions of the severity of the threat, the result is a half-hearted approach to monitoring suspicious transactions in financial institutions throughout the globe. This remains an issue of capacity as well as an issue of will.
It is worth noting, however, that there have been some bright spots in this area. In late 2000, an Al-Qaida attack on the Strasbourg Christmas market was foiled partly due to German cooperation with a British surveillance team focused on the attack’s primary logistician and financier, Abu Doha.21 Then in 2002 in Sarajevo, following a raid, the security services discovered a list with the names of twenty-three individuals, including some prominent Arab businessmen, who were identified as primary donors to Al-Qaida. The list became known as “the Golden Chain” and it provided law enforcement and intelligence authorities with a solid foundation for unraveling Al-Qaida’s fund-raising network.22 In 2003, the Society for Worldwide Interbank Financial Telecommunications (SWIFT), an e
lectronic system by which banks send transfer instructions to each other, was credited with providing information which helped lead to the capture of Jemaah Islamiyah’s operational commander.
Basile makes an argument that the United States should continue its foreign policy push for banking oversight and regulation in the Middle East as well as pressure on local governments in the region to crackdown on unregulated charities.23 Diplomatic efforts should focus on strengthening bilateral relations with the individual countries of concern, which includes not only countries like Kuwait, Qatar, Saudi Arabia, and Pakistan but also countries that provide offshore havens and money laundering hubs such as the Cayman Islands, Cyprus, and the UAE, among others. Progress is possible working by, with and through embassies in the country of concern and also with financial institutions and major multinational banks.
Combating the financing of terrorism and insurgency in the modern era requires governments to cooperate, share intelligence and information and a whole-of-government approach, information and intelligence sharing among countries and their security services as well as multilateral cooperation both within and between agencies. Often times, as happened with the British government pressuring the Americans or the Sri Lankan government’s diplomatic offensive to persuade the Canadians and British, states must encourage foreign governments to take action against terrorists and insurgents that enjoy sanctuary on foreign soil. Furthermore, countering corruption can also unearth evidence of illicit funds tied to the insurgency, although any successful counter-corruption campaign must involve significant cooperation between a broad range of actors, which is not always feasible or realistic. As the case study on the Afghan Taliban showed, building local institutions and capacity (NDCS, SIU, TIU, and the NIU) can be a step in the right direction but these efforts can be extremely costly, in terms of both money and time, and they can be politically risky since there is no guarantee of progress, much less success.
FAILED AND FRAGILE STATES AND UNGOVERNED SPACES REMAIN ISSUES OF CONCERN OVER A DECADE AFTER 9/11
More than a decade after U.S. forces beat Al-Qaida militants across the Afghan border into Pakistan, failed states and ungoverned or poorly governed spaces continue to serve as a breeding ground for terrorists, insurgents, violent drug trafficking organizations and transnational criminal networks. In areas where insurgents have carved out sanctuary, they can exert control over local economies, including any businesses operating in this territory. Weak states often lack the ability to maintain proper oversight of the financial institutions operating within their borders and even less ability to control or monitor the informal institutions like hawalas and other informal value-transfer institutions.
Where governments suffer from capacity gaps and functional holes, alternative sources of governance will fill the void.24 Insurgents are just one form of alternative governance that often emerge in response to centralized political collapse, where a government either cannot or will not provide its citizens with basic services. The result is that governments can suffer from a dearth of legitimacy, thus allowing non-state entities to act both financially and politically without interference from the state in which they are based. These organizations flourish where cultural identities are fragmented, political space is in flux, and where the absence of traditional governance mechanisms is apparent.
Weak governance and corruption contribute to weak, failing, failed, and collapsed states, which in turn become a haven for terrorists, insurgents and transnational criminal organizations that engage in money laundering, kidnapping for ransom, counterfeiting, and the smuggling and trafficking of humans, weapons, and narcotics. Failed and weak states are plagued by corruption, which attenuates the rule of law and makes police and border security officials more prone to bribery, increasing the porosity of borders and thus facilitating the flow of illicit goods into and out of the territory. Other challenges faced by failed states are too numerous to list, but include at least the following: insurgency, terrorism, energy insecurity, climate change, resource deprivation, brain drain, transnational crime, corrupt patronage networks, religious extremism and radicalization, piracy (both digital and maritime), cyber-warfare, weapons of mass destruction, global economic slowdown, and the spread of pandemics or disease. While strong states also face many of these same challenges, the primary difference is vulnerability to the threat and the ability (or inability) to respond.
Strong states have more robust institutions that are capable of mitigating many of these dangers before the threat is able to overwhelm the government. In turn, it is rather obvious why malevolent actors gravitate toward weak states. Terrorists, insurgents and criminals prefer to operate in the shadow, deliberately seeking out underground banking networks and unregulated offshore jurisdictions where banking supervision is limited, anti-money laundering legislation does not exist or is not enforced, and a culture of no-questions-asked banking secrecy is the rule, not the exception.25
Dealing with the threat posed by failing states and alternatively governed spaces will require international efforts to promote the rule of law and encourage good governance and transparency although as mentioned above, issues of both capacity and will continue to plague efforts in this area. Through a host of security cooperation activities, the international community, regional bodies, and/or individual nation-states should seek to build the partner capacity of failed states to help these nations counter transnational organized crime, as criminal activities are often a major funding stream for terrorist and insurgent groups.26 Before deciding on a course of action to assist states with CFT, it is important to recognize that “analysis of terrorist finance is easy to do badly and hard to do well,” which suggests the need to identify and work with “true experts on small topics,” such as indigenous financial systems and traditions and the economics of relevant value chains.27
In what Moises Naim has dubbed “mafia states,” organized crime has a corrupting influence on state institutions, including the government, parliament, and the judiciary.28 It is in these kinds of states that the provision of technical assistance in combating the financing of terrorism and insulating their vulnerable financial institutions against fraud and crime is most necessary.29 (It is less clear whom to work with if the state has been corrupted). This assistance can be offered by the World Bank, IMF, FATF, the UN and others and should be focused on improving countries’ legal, regulatory, and enforcement capabilities. Unfortunately, these programs too often emphasize individual training courses and due to inconsistencies with funding, are rarely long-term in nature.30 Increased capacity in the financial sector could even help some weak states recoup some of the estimated $120–$160 billion that is lost each year in tax revenues that are hidden in offshore accounts and shell companies.31
Building partner capacity to counter transnational organized crime and the financing of terrorism can be accomplished through focusing security cooperation efforts in weak and failed states on ministerial capacity, institution building, and defense reform, all of which are foundational to other forms of capacity. Furthermore, ministerial capacity can be improved even when the partner nation’s absorptive capacity is generally low. This is a self-reinforcing cycle since ministerial capacity building can itself improve a partner’s absorptive capacity, thus enabling future capacity building in other areas. With sufficient ministerial capacity, countries plagued by high levels of non-state violence will be better prepared to plan and integrate strategy and operations against the range of threats arrayed against them. Not all countries begin from the same starting point and many face issues of absorptive capacity—improving ministerial capacity is far more feasible in Northern Ireland than in Afghanistan, Iraq, or even Lebanon.
As demonstrated in the case studies of Hamas, Hezbollah, and Al-Qaida, security services need to be able to rely on actionable intelligence to conduct kinetic strikes including raids, targeted crackdowns and large-scale sweeps against terrorist fund-raising networks. In cases where resources provide terrorists with f
unding, as in Afghanistan, it is essential to understand the nuances involved between counterinsurgency and counterterrorism on the one hand and counternarcotics and countertrafficking on the other. These should not be “pick and choose” strategies but rather all part of an overarching and comprehensive plan to defeat the enemy.
NON-STATE ACTORS, THEIR GOALS, AND HOW STATES PERCEIVE THEM, MATTER
Throughout the majority of the Cold War, American policymakers and military leadership were understandably locked into a worldview dominated by nation-states. But after the 9/11 attacks, many within the U.S. government awoke to the notion that non-state actors can play an outsized role in accordance with either the experience and skills of the organization or the resources at its disposal. While the announcement of a Global War on Terrorism (GWOT) might have been a victim of poor nomenclature, the general concept underpinning the GWOT was successful in elevating the importance of non-state actors on the international security agenda. There is a growing consensus among analysts that, whether they are terrorists, insurgents, warlords, militias, paramilitaries, vigilante groups, organized criminal organizations, soldier-rebels (“sobels”) or even pirates, violent non-state armed groups have become a major security concern.32 The United States currently finds itself searching for footing in uncertain times of Russian aggression and Chinese military modernization, while seemingly somewhat flummoxed by a panoply of violent non-state actors, including insurgent groups with conventional military capabilities like ISIS, violent transnational drug trafficking organizations like Los Zetas, hacktivists and cyber criminals, diaspora populations, and NGOs that provide support to terrorists and insurgents.
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