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

by Colin P. Clarke Ph. d.

  The decision by the Obama administration to go ahead with the troop surge and increased drone strikes across the border in Pakistan were supposed to be the great equalizers, however, neither has been able to crush the Taliban in the manner that many expected. Cutting off the Taliban’s primary sources of funding should be one of the highest priorities of any line of effort, especially as the decision on whether or not to sustain a significant counterterrorism capability looms on the horizon.

  Non-kinetic Activities

  One of the primary task forces created to counter threat financing in Afghanistan is the Afghan Threat Finance Cell (ATFC), a unit comprised of agents from the FBI, the DEA, Treasury, and the DoD. The ATFC was organized in 2008 to investigate the Taliban’s financial structure and how the insurgency was funded.128 Perhaps the most significant victory of the ATFC was its exposure of the Kabul Bank scandal, a fiasco that involved characters so nefarious that the plot unfolded like a Hollywood-style mafia movie, with insurgents connected to warlords, Afghan government officials, and economic powerbrokers from the Persian Gulf to South Asia.

  Since 2001, and mostly as a result of international pressure, Afghanistan (as well as countries like the UAE, and Pakistan) has drafted money laundering legislation and stricter regulations and oversight on bank transfers. The United Nations has passed a series of resolutions dating back to 1999 directed at freezing Taliban assets and resources. In the United States, Executive Order 13129 blocks any property and prohibits transactions with the Taliban, while Executive Order 13224 allows the United States to attack the broader terrorist group infrastructure, to include the ability to block U.S. assets of, and deny access to U.S. markets to, foreign banks who fail to comply with U.S. authorities’ continued attempts to freeze terrorists assets throughout the globe.129

  Still, tracking the money is complicated because narcotics coming from Afghanistan are traded for commodities (e.g., automobiles, electronics) with no money trail to follow.130 Some important steps in Afghanistan include the creation of a National Drug Control Strategy (NDCS) as well as efforts to build the capacity of the Sensitive Investigative Unit (SIU) and Technical Investigative Unit (TIU) as the investigative branches of the National Interdiction Unit (NIU). Accordingly, the enforcement capabilities of these units are also being bolstered, in part by further strengthening Afghanistan’s formal legal processes and the ability of the Criminal Justice Task Force (CJTF) to successfully prosecute guilty parties.131 The Government of the Islamic Republic of Afghanistan (GIRoA) has begun working to introduce regulation, transparency and trade controls at the border while government agencies like the Afghanistan Investment Support Agency (AISA) is working to attract FDI, though much of this depends on the stability or fluidity of the security situation in the country.

  CONCLUSION

  Taliban insurgents who fight against the United States and ISAF troops in late 2015 are motivated by a different set of factors than the group of young madrassa students that initially comprised the movement in the mid-1990s. Then, the Taliban was primarily motivated by the desire to establish an ideal Islamic state governed by sharia law. After all, the Taliban’s ranks were made up of young Afghans who grew up in the refugee camps of Pakistan, displaced from the fighting of the Soviet-Afghan War. Today, the Taliban fight first and foremost to expel foreign troops from Afghan soil.

  Following 14 years of fighting against Coalition forces, the Taliban has been seriously degraded. Estimates put the number of insurgents somewhere between 60,000 and 70,000, of which approximately 15,000 insurgents are full-time fighters.132 American airpower, ISAF counterinsurgency warfare, and special operations night raids have damaged the organization and caused it to disperse throughout Afghanistan and across the border in Pakistan. However, this is the same group that claims membership in the mujahedin that drove the Soviets out of Afghanistan in the late 1980s. Despite suffering major losses, elements of the insurgency remain confident that if its fighters are able to muddle along, the Taliban can survive until U.S. troops are withdrawn from Afghanistan. This could potentially set the stage for a return to violence and yet another Afghan civil war.

  If the Taliban were to lose its two primary sources of revenue—donations from wealthy sponsors abroad and money obtained through the drug trade—it could have a significant impact on the insurgents’ ability to continue fighting. Neither of these two outcomes is likely, however. Moreover, the Taliban maintains a diversified revenue stream, with other income garnered through various organized crime rackets, to include KFR and extortion. In short, the only way funding will play a role is in possible financial incentives offered to insurgents as part of a reintegration package.

  The majority of Afghans want peace.133 Inevitably, the longer the conflict drags on, the more Afghan civilians are killed. This affects the level of popular support for the Taliban, even when the casualties are caused by the COIN force.134 Understandably, Afghans are war weary following over 30 years of constant conflict. If the Taliban is seen as a force for stability in the country, its members may be able to concentrate significant support among the Pashtun population. When translated into a political context, this bodes well for a negotiated settlement.

  Of all the seminal events in Afghanistan over the past decade—Quran burnings, civilian casualties, the Kabul Bank scandal—none will be more important than the phases immediately following the withdrawal of United States, NATO, and ISAF troops from Afghanistan. Then, and only then, will the international community have a hint at what the future may hold. The ANSF, to include the Afghan National Army (ANA) and the Afghan National Police (ANP) will be left with the difficult task of providing security throughout the country, likely with the assistance of a small footprint of U.S. Special Forces and other counterterrorist capabilities.135

  CHAPTER 7

  Al-Qaida: 9/11, Franchise Groups, and the Future after Bin Laden

  BACKGROUND

  The origins of Al-Qaida1 can be traced back to an organization called Maktab al-Khidamat, or MAK, established by a Palestinian jihadist named Abdulla Azzam. The organization’s early efforts focused on recruiting Arab fighters to join the resistance in Afghanistan, where the so-called mujahedin, or holy warriors, were fighting to expel Soviet troops from the country.2 Early members of MAK, which was founded in 1984, included Azzam, Osama bin Laden, and the Algerian, Abdullah Anas. In the mid-1980s, bin Laden met and joined forces with Ayman al-Zawahiri, the current leader of “core” Al-Qaida. Zawahiri eventually merged key members of his group, Egyptian Islamic Jihad (EIJ), with Al-Qaida, once it emerged as its own entity in the late 1980s, at which point MAK had become more focused on humanitarian efforts rather than actual fighting.3 Al-Qaida has continued to evolve over the years. Now entering its third decade, Al-Qaida is many things—terrorist organization, global jihadist network, brand and franchise group for Salafist jihadists throughout the world. This chapter will focus primarily on what is known as Core Al-Qaida,4 but will also touch upon several Al-Qaida affiliates,5 including Al-Qaida in the Arabian Peninsula (AQAP) and Al-Qaida in the Islamic Maghreb (AQIM), as well as, Al-Shabaab, and Jabhat al-Nusra.6

  HOW AL-QAIDA FUNDED ITS ACTIVITIES

  Al-Qaida raises funds through a variety of activities, ranging from donations from charitable organizations to KFR, drug trafficking, and robbery, among other methods. The group’s fund-raising methods have evolved over time, beginning with the Soviet Afghan War (1979–1989) and adapting with each subsequent conflict (Bosnia, Chechnya, Tajikistan, etc.) in which Al-Qaida operatives fought. Some methods of raising funds are crude, while others are more sophisticated. More recently, Al-Qaida members have utilized “anonymisers” that replace Internet Protocol (IP) addresses by an Internet service provider with an “anonymiser” address unable to be traced.7 The Internet remains an avenue that Al-Qaida and other terrorist groups can use to facilitate logistical and financial support of their organizations, which in turn enable them to conduct operations.8

  As Rabasa et al. have n
oted about Al-Qaida, “The organization is constrained largely by the limits of its own imagination. Many fund-raising criminal activities exist to which Al-Qaida could turn if it wants.”9 This is not to suggest that Al-Qaida maintains a consistent, steady supply of funding. On the contrary, like most terrorist or insurgent groups, the funding ebbs and flows. In 2008, Al-Qaida was struggling to raise money and sustain a high operational tempo.10 It was during this time that Al-Qaida sympathizers from Bahrain arranged to transfer money to Al-Qaida’s senior leadership in Pakistan, in an example of a reverse directional flow of funds. Only a few years earlier, in 2005, Al-Qaida’s then number two, Ayman al-Zawahiri, reached out to AQI chief Abu Musab al-Zarqawi to request $100,000 in financial assistance.11

  Gray Economy

  In response to pressure exerted by state governments, Al-Qaida has diversified its fund-raising portfolio to include money raised using a bottom-up approach, wherein some of the onus for donating money has shifted from wealthy donors and organizations to local efforts, supported by grassroots financing. Still, the group relies on money from the worldwide Muslim diaspora, funds sent to the group through various charities, multiple types of fraud, and a range of legal businesses, which are also responsible for laundering funds gained through illicit ventures. Funds flow from and through the Persian Gulf, especially countries like Saudi Arabia, Qatar, and Kuwait. Al-Qaida’s sectarian strategy is partly designed to appeal to its donor base in these and other Gulf countries with Sunni majorities.

  Diaspora Support

  Just as other groups have done, including the PIRA and the LTTE, Al-Qaida’s leadership has reached out to the ummah for financial assistance to allegedly help sustain the families of those Al-Qaida members imprisoned or dead.12 In Syria, jihadists receive a steady provision of financial contributions from wealthy individuals throughout the Persian Gulf.13 Pakistani jihadists living in Spain have sent millions of dollars to terrorists in Pakistan, money earned from petty crime.14 According to Rohan Gunaratna, Salafism has endured throughout the Islamic world, as well as through the growing Muslim diaspora across Europe, North America, and Australia.15

  As wars and instability continue to ravage predominantly Muslim countries, more refugees seek and are granted asylum in the United States, Scandinavia, and other Western nations. This trend is coupled by a worldwide increase in Salafist jihadist groups, as Seth Jones has noted.16 This trend is troubling for the counterterrorism apparatus of many Western nations. Many Muslims feel obliged to donate money to humanitarian assistance and disaster relief organizations, most of which are run by religious parties and organizations. Zakat is a form of obligatory almsgiving and a main tenet of the Islamic faith.17 Collections can be particularly hefty during the Muslim holy month of Ramadan. For those who can afford to give more, sadaqah are voluntary donations to the neediest recipients. Foreign diasporas are a major node in this fund-raising network.

  Charities

  Al-Qaida and affiliated groups have established a bevy of charities, humanitarian organizations, and religious associations to help with financial support.18 These charities collect, comingle, mask, maintain, transfer, and distribute the funds necessary to support the organization. Charities that fund terrorism and perform good deeds are not necessarily mutually exclusive. For example, a Kuwaiti charity called Lajnat al Daawa Al Islamiya (LDI) was linked to Al-Qaida, but was also known for its medical clinics and orphanages in Afghanistan and Pakistan.19

  Sometimes funds are solicited surreptitiously, while other times they are brazenly demanded. A December 2003 edition of al Hilal, a militant magazine published by Harakat-ul-Mujahideen (HUM) leader Maulana Fazlur Rehman Khalil, implored those Muslims who could not travel abroad to conduct jihad to contribute money to jihadists fighting in Iraq.20 In 2006, the U.S. Department of Treasury designated Abd al-Hamid al-Mujil as a terrorist financier. Al-Mujil served as the executive director of the Eastern Province office of the International Islamic Relief Organization (IIRO).21 Based in Jeddah, Saudi Arabia, the IIRO has established an Endowment Fund (Sanabil al Khair) and works closely with the Global Islamic League. Along with several of its subsidiaries, the IIRO has been accused of financing Al-Qaida and terrorist operations. Another Saudi-based charity, Al Haramain Islamic Foundation,22 has also been accused of financially supporting Al-Qaida and other jihadist groups, such as JI, Lashkar-e-Taiba (LeT), the Pakistani Taliban, and Al Itihaad al Islamia, a Somali group aligned with Al-Qaida.23 The Blessed Relief (Muwafaq) Foundation and the Rabita Trust were also linked to Al-Qaida.24

  A Kuwaiti charity called the Revival of Islamic Heritage Society (RIHS) has been accused of providing material and financial support to Al-Qaida and its affiliates,25 while some of its subsidiaries have been shut down by the governments of the countries26 in which these subsidiaries have operated. As Levitt notes, “Even with the proliferation of local and self-led terrorist cells, traditional methods of terrorist financing—such as the abuse of charities, individual major donors and organized facilitation and financial support networks—remain a mainstay of al-Qa’ida financing.”27

  Fraud

  Similar to revenue generating activities like petty crime and robbery, fraud is typically committed more frequently at the grassroots level of Al-Qaida, where small cells of sympathizers not directly connected to the group raise funds in the few ways they can. Fraud tends to be a crime with low barriers to entry, which is one of the reasons it is favored by terrorist fund-raisers. Al-Qaida has remained active in acquiring money through online fraud.28 Al-Qaida cells have raised money through the abuse of government welfare benefits. While welfare fraud may only raise limited amounts of money, even small amounts of money can be used to conduct a narrowly-focused terrorist attack.29 One of the British jihadists who conducted the suicide attacks of July 7, 2005, committed bank fraud by deliberately defaulting on a £10,000 loan and overdrawing on his multiple bank accounts.30 In Italy, tax fraud has generated funding for Al-Qaida-linked militants,31 while in France, stolen credit card information has been used by Islamist militants to commit fraud online and finance attacks with the proceeds.32

  The 1993 attack on the World Trade Center was funded with money stolen through credit card and other low-level fraud, as was the December 1999 “Millennium Plot” to attack the Los Angeles International Airport, a case in which the plotters committed check fraud, credit card fraud, and identity theft.33

  Legal Businesses

  Controlling legal businesses becomes a must at some point for most terrorist and insurgent groups that eventually grow their operating budgets to finance operational and organizational goals. These businesses allow groups like Al-Qaida to disguise the transfer of currency through international trade. The over- and under-invoicing of goods and services, anticipated payments never delivered, and re-invoicing through free-trade areas are ways in which Al-Qaida could mask its movement of money. Front companies located in “high-risk jurisdictions” further complicate the challenge.34 In many cases, front organizations and legitimate businesses have provided cover for charitable organizations with more nefarious aims.35

  While based in Sudan, Al-Qaida was able to earn money through a range of legal businesses, including construction, manufacturing, currency trading, import-export companies, and agriculture.36 At one point, it was believed that bin Laden owned 80 companies scattered throughout the globe.37 Several of these businesses were located in Yemen, including the Al Hamati Sweet Bakeries, Al Nur Honey Press Shops, and Al Shifa Honey Press for Industry and Commerce. Al-Qaida’s network of businesses and shell corporations around the world also included Wadi al-Aqiq, the Laden International firm, Hijra Construction, the Themar al-Mubaraka Company, Khalifa Trading Industries, the Safa Group, ET Dizon Travel Pyramid Trading, NASCO conglomerate, Manpower Services, Daw al-Iman al-Shafee Inc., and the Konsojaya Trading Company, among others.38 Al Taqwa, with offices in Switzerland, Liechtenstein, Italy, and the Caribbean, helped Al-Qaida launder money while also providing important indirect investment servi
ces for bin Laden and co.39

  Al-Barakaat is a network of companies founded in Mogadishu, Somalia with headquarters in Dubai. This conglomerate was used by Al-Qaida in as many as 40 different countries, with services as diverse as telecommunications, construction, money remittance and other banking services. Al-Barakaat managed, invested, and distributed funds for Al-Qaida, while simultaneously functioning as a source of financing and cash transfers for bin Laden, during his tenure as the organization’s boss.40 On an annual basis, it is believed that this Al-Qaida front dealt with upwards of $140 million a year in transmitted payments, while skimming fees to the tune of 2 to 5 percent, a service that blessed Al-Qaida with millions of dollars.41

  Money Laundering

  Following the attacks of September 11, 2001, international banking transfers inevitably came under greater scrutiny. As a result, Al-Qaida began relying more on moving its money through hawala, which is an ancient form of money dealing and funds transfer that competes with state-governed finance in developing countries across the globe.42 Hawala is used because it is a known quantity throughout the Middle East and South Asia. It is mostly secure, relatively anonymous, and convenient for those who do not wish to deal with the scrutiny or due diligence procedures of banks. Furthermore, it is personal—linked to extended families, tribes, clans, and sub-clans. Al-Qaida’s reliance on hawala is not a new phenomenon. Historically, the international hawala transfer system has been Al-Qaida’s most effective and reliable means of smuggling cash around the world and remains the group’s “fallback” system of moving money.43