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

by Colin P. Clarke Ph. d.

  Another method to move money is through the use of “mules,” which are couriers used to physically transport large quantities of bulk cash, valuable commodities (gemstones, precious metals), and other valuable items that can be converted to cash or used in nonmonetary barter transactions. These couriers can link up with other couriers to exchange money and goods, creating a complex chain in an attempt to obfuscate both the origin and final destination of the money. In Europe, terrorists and their supporters have utilized the hassle-free bus and rail system to transport cash throughout the continent with ease.

  Al-Qaida has favored Mogadishu, Dubai, Mombassa, and Nairobi for much of its money laundering ventures.44 Persian Gulf countries like the UAE and Yemen are both source and destination countries for funds transferred through hawala networks. The takeaway for law enforcement and those attempting to curb Al-Qaida’s flow of money is that the group evolves and consistently seeks and finds workarounds to efforts to combat its money laundering. The group and its affiliates have implemented innovative techniques to hide and launder money, including the use of online gambling sites.45 Indeed, Al-Qaida even once attempted to invest in a Chicago futures brokerage house.46

  Dark Economy

  In addition to raising money through the gray economy, Al-Qaida’s criminal activities also provide a significant portion of its operating budget. The combination of ways in which Al-Qaida raises money in the dark economy is not static. To be sure, this mix changes over time as terrorists adopt an approach to fund-raising that has been described as “eclectic and opportunistic.”47 In Afghanistan and Pakistan, Al-Qaida works closely with the Haqqani Network to raise funds through a range of criminal activities.48 In Yemen, AQAP colludes with local tribes to earn money through kidnapping and other illicit means.49 In short, Al-Qaida and its affiliates have successfully adapted to their surroundings to raise money through an array of illegal ventures, which will be detailed throughout the remainder of this section.

  Kidnapping for Ransom (KFR)

  Al-Qaida Central and each of the Al-Qaida affiliates rely on kidnapping for ransom as a form of fund-raising, although certain affiliates—particularly AQIM and AQAP—rely on this tactic more than others. Throughout the Maghreb, a sparsely populated stretch of arid desert territory stretching throughout Northwest Africa, AQIM fighters have continuously kidnapped Westerners, especially European citizens, and exchanged them for hefty ransoms paid by governments including Germany, Switzerland, Austria, Sweden, Holland, France, and Spain. According to a July 2014 investigative report by The New York Times, Al-Qaida and its affiliates have pulled in at least $125 million from KFR since 2008, with $66 million paid in 2013 alone.50

  Another Al-Qaida affiliate, AQAP, also relies on KFR as a primary revenue stream to finance its operations, with at least half of the group’s operating budget funded through kidnapping. Local Yemenis work on commission for AQAP, scouring the streets of San’a searching for foreigners to abduct.51 Indeed, KFR has become such a central tactic of these groups that AQAP, AQIM and Al-Shabaab in Somalia have coordinated efforts through the establishment of a common kidnapping protocol. These groups work closely with local criminal groups who conduct the actual kidnapping and then exchange the hostages for a percentage of the ultimate fee.52 Kidnapping is a crime of opportunity and successful kidnappings that generate revenue encourage more kidnappings. Local cells of Al-Qaida sympathizers utilize KFR to raise funds as well. Pakistanis jihadists living in Spain have engaged in so-called “express kidnappings,” which are quick hit snatch and grab jobs that end once the victim’s family in Pakistan pays the ransom.53

  Armed Robbery and Theft

  Like fraud, independent or grassroots Al-Qaida cells often rely on petty crime, armed robbery and theft to support their operations. An Al-Qaida cell in France robbed automatic teller machines (ATMs), while a separate French cell attempted to rob a cash distribution center by blowing a hole in the wall of the building as it attempted (and failed) to steal 4 million Euros.54 Terrorists inspired by Al-Qaida in Spain and Switzerland committed robberies to finance armed attacks and terrorist training abroad. The theft and sale of designer watches, gold bracelets, and emerald necklaces stolen by a Salafist group calling itself the “Group of Truth,” and operating in Costa del Sol, generated funds which were used to fund assassinations in Algeria and Mauritania.55 Al-Qaida cells have also been known to support operations through credit card theft. Stolen credit cards have been used to purchase items such as GPS, night vision goggles, sleeping bags, telephones, knives, tents, and other supplies for jihadists operating in Iraq.56

  Smuggling, Trafficking, and Counterfeiting

  Al-Qaida and its affiliated groups have engaged in smuggling, trafficking and counterfeiting of numerous commodities in order to raise cash for their respective organizations. In African countries including Sierra Leone, Liberia, and the DRC, Al-Qaida has profited from the sale of gold, gemstones, tanzanite and so-called conflict diamonds or blood diamonds. Douglas Farah estimates that Al-Qaida invested approximately $50 million in the West African illicit diamond market.57 Participation in the illicit diamond market likely brought Al-Qaida in contact with members of Lebanese Hezbollah, also active in the trade through a dense network of contacts from the Lebanese diaspora living in West Africa.

  As the noose was tightened around charities that funded Al-Qaida after 9/11, the group attempted to diversify its revenue sources, to include allegedly garnering money earned through drug trafficking, possibly through an alliance with the IMU in Central Asia, but also in North Africa by one of its affiliates. In the latter case, AQIM has been linked to Colombian cocaine traffickers in a quid pro quo relationship that brings cash to the terrorists while providing the traffickers with access (and in some cases, heavily armed escorts) across the desert region between Mauritania, Mali, and Algeria, where narcotics transit through on their way to the European market. In addition to money obtained through KFR, AQIM earns significant sums of money from trafficking tobacco, cocaine and synthetic drugs between Spain and Algeria.58

  By operating on the black market, terrorists and insurgents come into contact with a panoply of shadowy figures, including assassins, arms dealers, human traffickers, document forgers and others who exist on the margins of society. These contacts with the criminal underworld are crucial to many of the logistical needs of violent non-state actors.

  Extortion and Protection

  In Afghanistan and Pakistan, Al-Qaida has forged a working criminal relationship with another terrorist group, the Haqqani Network, in which the two organizations collaborate to extort businesses in zones under the control of militants.59 Other business owners offer protection payments, sometimes referred to as “security investments,” to make sure that jihadists do not destroy or interfere with the properties and businesses they manage and own.60 The Pakistani Taliban also engages in extortion and is known to work closely with Al-Qaida in this area, as they do with KFR. In fact, cooperation between Al-Qaida, the Haqqani Network, and the Pakistani Taliban has been characterized as “seamless,” indicating that these groups maintain a close working relationship.61

  External State Support

  External state support to terrorism can come in a variety of ways: financial, logistical, political, etc. During the height of the Cold War, the United States and the Soviet Union funded proxy actors throughout the globe and indeed, in an ironic twist, the United States provided support for the mujahedin fighting the Soviets in Afghanistan, some portion of whom would go on to form the core of Al-Qaida. States can be active supporters of terrorism, knowingly allowing groups to occupy parts of their sovereign territory, as Sudan did with Al-Qaida. States can also be what Byman calls passive sponsors of terrorism, where their inaction proves in some way to be vital to the group’s success.62 No state formally sponsors Al-Qaida today.63 Some scholars find it far-fetched that elements of the Pakistani government were unaware that Osama bin Laden was hiding in Abbottabad, but a review of documents captured in the ra
id that ultimately killed Al-Qaida’s chieftain “do not explicitly point to any institutional Pakistani support to Bin Ladin.”64 According to Seth Jones, over the past several years, Iran has been willing to expand its relationship with Al-Qaida.65

  WHAT AL-QAIDA ACHIEVED WITH THESE FUNDS

  Al-Qaida uses funding to pay the salaries of its members, to maintain training camps, to secure weapons and explosives, and to conduct the mundane day-to-day operations of a transnational terrorist group. One of its main challenges is to utilize the strengths of its networked structure, without losing unity, cohesion, and collective action capacity.66 Prior to the terrorist attacks of September 11, 2001, Al-Qaida was, in the words of terrorism scholar Bruce Hoffman, “a lumbering bureaucracy.”67 But following the U.S. invasion of Afghanistan, the group has dispersed like mercury, fanning out to different parts of the globe. In addition to Al-Qaida’s more formal affiliates, the group maintains contact with a broader network of jihadist organizations, including Boko Haram in Nigeria, JI in Southeast Asia, the ASG in the Philippines, TTP),68 LeT in Pakistan, the Libyan Islamic Fighting Group, the Islamic Jihad Union, and the IMU, just to name a few. “Global Jihad” fighters have traveled to fight alongside insurgents in places like Tajikistan, Bosnia, Chechnya, Kashmir, Mindanao, Indonesia, Somalia, and many others.69 Most recently, Afghanistan and Syria have been among the most popular destinations for jihadists.

  Operational Capabilities

  Al-Qaida’s operational capabilities help contribute to its ability to plan and execute attacks. And while the group has not been able to successfully strike the U.S. homeland since September 11, 2001, it has, along with its affiliated groups, conducted attacks throughout the world. Prominent Al-Qaida strikes have killed citizens in the Bali attacks in Indonesia in 2002, the Casablanca attacks in Morocco in 2003, the Madrid attacks in Spain in 2004, the London attacks in England in 2005, and so on.70 Moreover, there have been innumerable failed plots and attacks, which demonstrate both the competence of those organizations countering Al-Qaida, but also Al-Qaida’s will to strike the West.

  Weapons

  Al-Qaida relies on a range of weapons to execute its attacks, from small arms to vehicle-borne improvised explosive devices (VBIEDs) and just about everything else in between. Moreover, the methods of delivery are diverse, relying on land, sea, and air. The East Africa embassy attacks of 1998 were conducted on land using truck bombs, pistols, and stun grenades. The 2000 USS Cole bombing involved a small boat packed with hundreds of pounds of explosives. The 9/11 attacks involved the use of civilian passenger aircraft to fly into the World Trade Center and the Pentagon. According to data analyzed by Robert Pape, Al-Qaida employs teams of suicide attackers, as opposed to single, one-off attackers, more often than any other group that also employ suicide bombing as a tactic.71 Suicide attacks are considered to be effective because they deliver multiple benefits on various levels without incurring significant costs to an organization as a whole.72

  In Afghanistan, Al-Qaida attacks against ISAF forces usually consist of IEDs, rocket and mortar attacks, ground assaults, and suicide bombings. Al-Qaida is able to acquire weapons from the Taliban, which in some cases is obtaining weapons from Pakistan’s ISI. Proximity to Peshawar and leftover weapons from Soviet-Afghan War; as well as extensive use of the worldwide black market in arms and munitions also stocks Al-Qaida’s arsenal. The group’s fighters deliberately seek out failed states and ungoverned areas, which are already awash in weaponry, from small arms to more sophisticated weapons like shoulder-fired surface to air missiles. In addition to guns and ammunition, Al-Qaida also needs vehicles, technology (GPS, surveillance material, etc.), and bomb-making materials to carry out attacks.

  According to Moisés Naim, of the roughly 80 million AK-47s in circulation today, most are in the wrong hands. Naim cites a United Nations statistic that only 18 million (or about 3 percent) of the 550 million small arms and light weapons in circulation today are used by government, military, or police forces. Illicit trade accounts for almost 20 percent of the total small arms trade and generates more than $1 billion a year.73 Weak states simultaneously serve as the source, transition, and destination countries for the illegal arms trade.74 Al-Qaida militants tend to travel lightly, which enables the jihadists to function as a parasite, attaching themselves to local groups, exploiting parochial grievances, and taking advantage of instability in countries or regions where conflict is ripe and weapons aplenty. To this end, Al-Qaida is particularly adept at linking up with warlords, as it has in North Africa, Central Asia, and East Africa, where it has supported and exploited relationships with a range of other violent non-state actors in order to acquire the weaponry needed for its own fighters.

  Al-Qaida has used MANPADS several times while attempting to destroy aircraft. One attempt occured in May 2002 when militants used a shoulder-fired missile to take out a U.S. military aircraft in Saudi Arabia, although the missile misfired. Just a few months after that attempt, Al-Qaida terrorists in Mombasa, Kenya, tried to shoot down an Israeli charter aircraft using two shoulder-fired SA-7 Strela-2Ms, although this attempt also failed because the plane was beyond the range of the missiles.75

  The ultimate attack would be an Al-Qaida plot where terrorists detonate a chemical, biological, radiological, nuclear and explosives (CBRNE) weapon on U.S. soil. While acquiring this material and successfully employing it would be difficult, the results would be disastrous. Indeed, as Al-Qaida has made clear time and again, the will to conduct an attack is not lacking.76 U.S. authorities must remain vigilant and be prepared to deal with a worst-case scenario in the event of an Al-Qaida CBRNE attack.

  Intelligence

  Before it conducts operations, especially spectacular attacks, Al-Qaida seeks high levels of certainty and operational control. The group’s use of intelligence and counterintelligence in executing the 9/11 attacks demonstrate the importance of tradecraft in both the preparation of a detailed plan and the process of identifying and vetting targets. Moreover, intelligence greatly informed both the conceptualization and planning phases.77

  As a complement to its intelligence and counterintelligence activities, Al-Qaida also conducts surveillance and reconnaissance to prepare for its operations. Several of the 9/11 hijackers engaged in reconnaissance flights in both New York and Washington D.C. Dry-runs of flights were executed in order to carry out surveillance of the airplane, boarding process, cockpit access, and so on. Finally, Al-Qaida members relied on open source intelligence to compile data from Western aviation magazines, airline materials, and web searches of U.S. flight schools.78 Commenting on Al-Qaida’s use of counterintelligence protocols in the lead up to the 9/11 attacks, Ilardi believes that it “revealed a detached objectivity that allowed it [Al Qaeda] to form and respond to accurate and highly detailed assessments of its operating environment.”79

  Al-Qaida’s predecessor, MAK, produced an eleven volume encyclopedia of jihad, replete with an entire section dedicated to the importance of insurgent intelligence.80 In training manuals, large portions of jihadist literature are dedicated to how to resist interrogation methods and techniques commonly employed by governments and intelligence services. As Bill Rosenau has noted, insurgent intelligence is an auxiliary activity, as it seeks to reduce risk while reinforcing confidence in the insurgents that the planned operation or operations will succeed. Even more importantly, there is an obvious cost-benefit tradeoff involved with respect to intelligence—“funds, personnel, training, and other resources that are employed for intelligence purposes are resources that cannot be applied to other important insurgent activities.”81

  In Europe, to evade technical methods of monitoring by counterterrorism officials, Al-Qaida members have focused on operational security, honing their tradecraft and discipline. Al-Qaida cells have familiarized themselves with governmental security measures, including phone monitoring, and have adapted in kind to circumvent these measures intended to detect terrorist activity and plots.82

  Sanctuary
, Safe Haven, and Operational Space

  In terms of geopolitics, failed states usually make for poor neighbors, but can serve as welcome hosts to non-state actors, including transnational terrorist groups and violent insurgencies. Al-Qaida has enjoyed sanctuary in Afghanistan and Pakistan (1984–1991), Sudan (1991–1995), Afghanistan again (1995–2001) and finally, Pakistan (2001–present), which seems to be somewhat hospitable terrain for the militants, while providing them with access to other jihadists. After the U.S. led war against the Taliban, Al-Qaida operatives fled Afghanistan and found refuge in Pakistan’s Pashtun-majority FATA.83 Covering some 27,220 square kilometers of mountainous, rugged, and unforgiving landscape, the FATA offered an ideal location for the defeated Taliban and Al-Qaida forces to regroup.84 As Gunaratna has noted, “Al Qaeda members, with the help of the Taliban, have created FATA as the global headquarters of like-minded groups.”85

  By establishing a safe haven in the FATA, Al-Qaida has been able to take advantage of the jihadist infrastructure already in place. Indeed, Chechens, Uzbeks, Algerians, Tunisians, Libyans, Egyptians, and Chinese jihadists known as Uighurs and representing the East Turkestan Islamic Movement (ETIM) were already living and training in Pakistan’s tribal belt. The tribal regions are populated primarily by ethnic Pashtuns, who also constitute the majority of the population in eastern and southern Afghanistan and live by a code of pashtunwali, a pre-Islamic concept of living or philosophy regarded as an honor code, or unwritten law.86