Terrorism, Inc.: The Financing of Terrorism, Insurgency, and Irregular Warfare

by Colin P. Clarke Ph. d.

  Without question, Hamas’s ideology has changed over time. Like Hezbollah, despite inflammatory rhetoric on occasion, Hamas’s ideology is pragmatic and the group has demonstrated “ideological flexibility,” though some themes have remained constant. The organization has consistently emphasized the closely related themes of the legitimation of violent tactics as a form of resistance while also stressing the temporary nature of its compromises. Through its numerous Web sites, Hamas engages in “ideological marketing” in an attempt to appeal to a wide range of audiences—Palestinian, Arab, Islamist, and so on.93

  A more recent phenomenon in Gaza is the rise of radical Islamist groups associated with Al-Qaida’s brand of Salafist Islam, groups that Hamas has gone to great lengths to distance itself from, especially from an ideological standpoint.94 Israeli Prime Minister Benjamin Netanyahu consistently conflates the Al-Qaida threat with that from Hamas, perhaps to elicit sympathy from the United States, its population, and especially its elected officials. Nevertheless, Hamas has continuously disassociated itself from Al-Qaida ideologically, even as other Salafist groups continue to pledge fealty to Al-Qaida or the even more radical Islamic State in Iraq and Syria (ISIS).

  Human Resources and Recruitment

  By the late 1980s, Israel had arrested over 1,000 Hamas militants and less than three percent of Palestinians in Gaza were considered supporters of the organization.95 This support has changed dramatically over the past two decades as Hamas has demonstrated its ability to confront Israel while also vying for leadership of the Palestinian people. Hamas is undoubtedly more popular in Gaza than it is in the West Bank, where it remains weak organizationally. Still, despite this reality, some scholars speculate that popular support for Hamas in the West Bank has increased exponentially over the last decade and that, were an election for the presidency to be held today, Hamas would beat out Fatah.96

  As the organization has grown over time, Hamas has begun to recognize the inescapable fact that maintaining such a vast social services infrastructure necessarily requires a rather robust bureaucracy. Hamas openly acknowledges that some of the money it receives from Iran goes toward helping pay the salaries of teachers, police officers and doctors in Hamas-ruled territories.97 The internal leadership is tasked with recruiting, which it does on campuses, in mosques and through its many social service organizations. In line with the growing culture of martyrdom, a major part of the Hamas recruitment pitch is the opportunity to become a martyr, or Shaheed, a figure glorified in broader Palestinian society. There is also an economic incentive—payments to the families of suicide bombers are typically between $12,000 and $15,000.98

  In addition to shouldering the responsibilities of a vast social services infrastructure, Hamas needed to further develop its human resource capabilities before contesting elections. Hamas first began reconsidering its stance on electoral participation in 1992 although this process took years to mature. Hamas eschewed participation in the 1995 elections. According to Brathwaite, one of the main reasons that Hamas changed its stance on running for elections was financial. Just after the Oslo Accords, an Israeli intelligence estimate put Hamas’s annual budget at between $10 and $20 million, while Fatah was bringing in $1.5 billion each year. Hamas saw political participation as an avenue to expand its support base and with that base, the group’s war chest.99 Collectively, Hamas’s leadership decided to send representatives to the municipal elections between December 2004 and May 2005, where Hamas candidates won majority seats in 7 out of 26 councils in the West Bank and 7 out of 9 councils in Gaza, before moving on to win elections for the Palestine Legislative Council the following year.

  Media, PR, Propaganda, and Publicity

  Hamas maintains an extensive media and public relations element as it attempts to control the narrative in its fight against Israel. One of the group’s most important periodicals is Filastin al-Muslimah, which is released monthly and features Hamas propaganda, reaching supporters in the Middle East, as well as further abroad in Europe, the United States, Canada, and Australia.100 Weekly newspapers include Al Watan and A Risala, Sawt al Aksa is the group’s legal radio station (which broadcasts in addition to the many illegal radio stations associated with Hamas) and shortly before the 2006 general elections, Hamas acquired a license to operate a television channel, al-Aqsa TV, which offers a variety of shows including children’s programs and productions focused on religion and world news. Hamas also runs numerous Web sites which vary in sophistication and content.101

  Because it has only been in power for a short time, Hamas has been able to successfully portray itself as the non-corrupt alternative to the PA. Indeed, Hamas owes much of its popularity to the ineptitude of the PA, which failed in its promise to deliver transparent, democratic, and efficient governance. Hamas has been able to remain popular in Gaza despite repeated Israeli attacks in response to repeated provocations by the militants, from kidnappings to rocket attacks. Historically, the group’s use of suicide bombings has not caused its popularity to ebb—in May 2002, one survey revealed that nearly 70 percent of Palestinians believed that suicide bombing was a perfectly legitimate tactic in the conflict with Israel.102 Some pamphlets, posters, and CDs sold in the West Bank and Gaza feature Hamas leaders alongside figures from the Iraqi insurgency as well as with Chechen militants.103

  HOW HAMAS FINANCING WAS COUNTERED

  Through a combination of kinetic and non-kinetic actions, Israel, the United States, and the European Union have each targeted the financing of Hamas at various points. Since Hamas emerged in 1987, Israel has remained in an almost near state of constant warfare with the group, with the intensity of the conflict ebbing and flowing over time and punctuated by spasms of extremely violent periods of conflict varying in duration. Over the past decade, Israel launched countless kinetic actions against Hamas, including Operation Rainbow and Operation Days of Penitence in 2004, Operation Summer Rain and Operation Autumn Clouds in 2006, Operation Hot Winter in 2008, Operation Cast lead in 2009, Operation Returning Echo and Operation Pillar of Defense, which was an eight day Israeli offensive that killed Hamas military chieftain Ahmed Jabari, in 2012 and Operation Protective Edge in July 2014.

  Kinetic Activities

  As detailed throughout this chapter, Hamas has developed into a fierce politico-military organization capable of waging an ongoing guerilla war against Israel while consolidating power in Gaza and establishing linkages with foreign sponsors such as Iran. With a robust funding stream and tactical skills honed from both the First and Second Intifada, Hamas and its never ending barrage of increasingly more sophisticated Qassam rockets threaten the security of Israel like never before. In the mid-2000s, the Israeli army and intelligence services increased kinetic activities against Hamas specifically designed to hinder affiliated charities that served as a conduit for funding. Frequent raids were launched against organizations suspected of working closely with Hamas.104 During Operation Cas Lead in 2009, the IDF attacked Hamas bases (including the University of Gaza, which the Israelis claimed was a paramilitary base and thus a fair target), rocket launch sites, the homes of some of the group’s leadership and its overall infrastructure, including police training camps, offices and any hospitals, mosques, or schools suspected of doubling as military site.105

  Non-kinetic Activities

  Israeli and Fatah security operations against Hamas in the 1990s left the group weak organizationally.106 During the Second Intifada, the Israelis convinced the PA to freeze the bank accounts of Hamas-affiliated charities in both Gaza and the West Bank.107 In 1997, the United States designated Hamas a FTO and then two weeks after the 9/11 attacks, the militant group was labeled as a Specially Designated Global Terrorist (SDGT) under executive order (EO) 13224. This order was intended to assist the American government in blocking the assets of individuals and entities, and their subsidiaries, front organizations, agents and associates.108 The U.S. Treasury designated six Hamas commanders under this order: Sheikh Ahmed Yassin, Imad Khalil al-Alami, Us
ama Hamdan, Khaled Meshall, Musa Abu Marzouq, and Abdel Aziz Rantissi. But the group’s level of cohesion has fluctuated over time. Between 2003 and 2005, during a time of internecine Palestinian violence, Hamas remained above the fray, demonstrating a “high degree of internal unity and discipline” during a three year span that saw 325 fatalities related to Palestinian internal violence.109 After years of deliberating, the European Union finally banned all Hamas wings, including the group’s charitable and political factions (the EU proscribed the Izz ad-Din al-Qassam wing in 2001 and the entire organization in 2003). Charities in France, Switzerland, Britain, Austria and Lebanon had their American assets frozen.110

  CONCLUSION

  In its current incarnation, Hamas is heading down the path of Hezbollah—a daunting prospect to the Israelis and perhaps its Palestinian rivals as well. Through robust state sponsorship of funding and weapons, Hamas has emerged as a lethal non-state actor with growing political clout. With a charity network that is firmly entrenched and an ability to collect taxes from the tunnels running below its territory, Hamas has displayed a sophisticated understanding of the gray and dark economies.111 Much like Hezbollah in Lebanon, it is no longer feasible to disarm Hamas, now that it has grown into a full-blown politico-military force in Palestine.112 The options for the international community seeking to counter Hamas’s activities are limited, although targeting the group’s main sources of support will continue to remain a priority for the Israelis and other nations attempting to limit its influence.

  CHAPTER 6

  Afghan Taliban: From Strugglers to Smugglers

  BACKGROUND

  The Taliban first emerged in Kandahar province in 1994 as a vigilante group comprised of madrassa students, or Talibs. Unlike the Northern Alliance or the various militias led by former mujahedin turned warlords, Taliban fighters were “students,” or “seekers,” to use the religious connotation.1 Led by Mullah Mohammed Omar, this group of religious students initially rose to prominence after providing security to local Afghans being preyed upon by warlords and militia commanders. In the spring of 1994, the Taliban freed two young girls who had been kidnapped and abused by a militia commander in Singesar. The commander was killed and hung from the barrel of a tank as an example to others. Later that year, the Taliban rescued a young boy whom two local commanders were fighting over—in order to determine who would get to sodomize him.2 By 1996, the Taliban controlled the southern Pashtun heartland of Afghanistan, as well as Herat and Kabul.3

  It is important to note, however, that Taliban is far from a monolithic entity. Indeed, there are many differences to be cognizant of—Afghan versus Pakistani Taliban, “old” Taliban versus “neo-Taliban,” and stark divisions within the Taliban itself, between Durrani and Ghilzai Pashtuns.4 Throughout this chapter, I have used the terms Taliban, Afghan Taliban, neo-Taliban, and Quetta Shura Taliban (QST) to refer to the same group, led by Mullah Mohammad Omar.5

  HOW TALIBAN FUNDED ITS ACTIVITIES

  The Taliban’s two primary sources of funding are the narcotics trade and money donated by sympathizers in the Middle East.6 Though figures vary widely, the narcotics trade generates a profit between $70 million and $500 million per year for the Taliban.7 Even after the costs of sustaining an insurgency are debited, this is hardly a “rainy day fund.” How an insurgent group finances itself has a major impact on the motivation of its members, overall group morale, political legitimacy, and the trajectory of the conflict.8 The Taliban does not rely solely upon narcotics as a means of funding its insurgent activities in Afghanistan and indeed maintains diverse sources of financing, coupled with a robust support network that offers both active and passive support.9 Part of the Taliban’s war chest is derived from a multibillion dollar trade in goods smuggled from Dubai to Pakistan.10

  Gray Economy

  Since Afghanistan has been a nation at war continuously for over three decades, much of the formal economy has been destroyed and is only now being rebuilt, albeit slowly. As such, much of the country’s economic activity resides in a space somewhere between licit and illicit, which is a boon to the insurgency. Accordingly, “the Taliban is able to pursue financial practices beyond the reach of the enforceable state regulation and without being subjected to any sort of tax or other state induced cost occurrence.”11 The “Warlord Economy” of Afghanistan is conducive to fraud, money laundering, and the financing of terrorism through charities, which all serve to complement the Taliban’s criminal and insurgent activities.

  Diaspora Support

  Perhaps the most significant event to affect the modern day Afghan diaspora was the Soviet invasion in 1979. Since that time, Afghanistan has been embroiled in some type of conflict, which has led many refugees to flee the country and settle elsewhere, both in the region (Pakistan and Iran) as well as further abroad. The diaspora has been linked to illicit transnational trade networks that include smuggling and trafficking groups connected to the narcotics trade.12 In other words, the Afghan diaspora is linked with what Barnett Rubin labels the “Afghan war economy,” which has “generated a pattern of regional economic activity and associated social and political networks that compete with and undermine legal economies and states.”13 This war economy is facilitated by porous borders and a lack of customs enforcement throughout the country and the region. In addition to organized criminal activities, the Taliban has also relied on expertise from the Afghan diaspora to help it develop its media messaging strategy.14

  Charities

  In addition to the money funneled through charities, some of the Taliban’s funding comes from a network of sympathizers located throughout Pakistan and the Gulf. At one point, the Taliban was thought to earn approximately 15 percent of its overall income from donors in the Gulf.15 This network is comprised of businessmen from Karachi, goldsmiths in Peshawar, Saudi oil tycoons, Kuwaiti traders and members of the Pakistani military and intelligence services who sympathize with the jihadist ideology.16 Charities from Kuwait, Saudi Arabia, and other Islamic countries have operated in Afghanistan both during and after Taliban rule. While some are known for social welfare and humanitarian assistance, others, like the Al-Rashid Trust, exploited its status as a charity to raise funds for the Taliban.17

  Fraud

  Throughout much of the war in Afghanistan, there have been allegations of massive fraud in United States contracting, including an estimate that (at a minimum) 10 percent of the Defense Department’s logistics contracts (in the hundreds of millions of dollars) consist of payments to insurgents.18 One of the companies implicated in this fraud is the Watan Group, a consortium that includes telecommunications, logistics, and security. Another Afghan security company, NCL Holdings, was one of six companies that were paid to bring supplies to U.S. bases and outposts dotted throughout Afghanistan. Afghan International Trucking (AIT), another component of the Host Nation Trucking contract, paid $20,000 a month in kickbacks to a U.S. Army contracting official. The money that trickles down to the insurgents is intended as a quid pro quo—payments are made to ensure that the Taliban refrains from attacking the convoys delivering toilet paper, water, fuel, guns, and vehicles.19

  Legal Businesses

  Taliban operations were organized horizontally across the narcotics trade, with money invested in transport businesses and import-export companies in order to hide the drug shipments while also laundering the profits.20 Over 3,500 import-export “firms” pockmark the Chaman border-crossing between Afghanistan and Pakistan. The UAE is a common destination for Afghan front companies, where totally fabricated companies move millions of dollars in laundered money each year. Establishing a front company is surprisingly easy. First, the firm is registered, next, an employment visa is procured for the director of the company, and finally, an account is opened “where the boss supposedly would receive a generous salary.”21

  Money Laundering

  The Taliban launders money from its drug proceeds through myriad pipelines, including commodities, hawala money transfers, overpricing go
ods, real estate, shell businesses, and the stock exchange. Trade-based money laundering is another common activity in the narcotics trade, as two traders agree to misprice a deal by overvaluing it by a certain amount so that the extra money is undetectable by authorities. The lack of a single operational trade transparency unit between the Middle East and South Asia has further hampered efforts to counter money laundering between these regions.22 In addition to a popular destination for establishing front companies, Dubai has also become known for its burgeoning real estate market, which is another way that Afghan drug traffickers have laundered money. Finally, a significant amount of drug money is likely laundered through the stock market, including the Karachi Stock Exchange (KSE), where wealthy brokers have expanded their operations into private banking, real estate, and energy (oil and natural gas) exploration.23 Because there is so little paperwork involved in the movement of funds, there is little government oversight, which means less of a chance that the money can be interdicting using standard AML/CFT anti-money laundering tools.24

  Dark Economy

  Are the Taliban strugglers, or merely smugglers?25 Though the group’s staunch Islamic ideology would suggest the former, its panoply of criminal activities might lend some to label it the latter. To be sure, the Taliban’s reliance on the dark economy provides the majority of the revenue it needs to sustain the insurgency.26 In Kandahar, each commander is tasked with raising funds for his group and there are no regular salaries, per se. Instead, between fifty dollars and several hundred dollars are distributed to fighters on a semi-regular basis roughly each month.27