Essay: The issue of terrorist financing

Introduction:
Since September 11, 2001, the threat of terrorism has grown exponentially. The threat pervades the U.S. government as well as society, not just in the United States but internationally. Though the majority of the focus is placed on militarily combating these threats, terrorist financing is an extremely important factor that fuels terrorism, which generally cannot be combatted militarily. Terrorist financing is void of ideology but is still a valid concern that must be combatted, mainly through policy implementations.
Background: Terrorist Financing
To begin, there are three main factors that influence how terrorist organizations are able to fund themselves: their level of support, their ability to utilize their illicit economies, and their ability to access legitimate money sources (Jacobson, 2010). The level of support is relevant in groups like Hamas and Hezbollah, since they can operate fairly openly in many Middle Eastern countries where they aren’t considered terrorist organizations (Jacobson, 2010). Terrorists also fund from illicit economies by smuggling valuables like oil and ivory (Jacobson, 2010). When an organization is funded by legitimate sources of money, it is harder to prevent their growth, as shown by bin Laden’s use of entirely legal and personal funds (Jacobson, 2010).
Although terrorist organizations can create a massive impact through their activities, these operations are generally lower in cost than anyone might expect (Alexander, 2011). Terrorist financing is a silent operation and is often overlooked as a source of terrorism (Alexander, 2011). For instance, the attacks on September 11, 2001 cost approximately $500,000 (Alexander, 2011). It is entirely too easy for terrorists to finance large-scale devastation by taking advantage of the loopholes they find within the economic system (Alexander, 2011). Through the opportunities they find in the economic system, they gain organizational assistance, operational tools such as training and radicalization, and financial assistance (Alexander, 2011).
Not only does terrorist financing support large-scale operations, but it is also important to support the leadership and the members of the group with basic necessities such as food, transportation, shelter, basic weaponry, and training, along with many other simple components that are vital to a terrorist organization (Alexander, 2011). However, outside of the traditional terrorist organization, lone wolves have different means of supporting themselves and their operations (Alexander, 2011). Lone wolves may require significantly less funding and will need this funding far less frequently than a larger organization would (Alexander, 2011).
There are various methods that terrorists use to fund their organizations. For some organizations, the members use personal funds from the community; this is especially true for lone wolves or very small groups (Alexander, 2011). A larger organization may get funding from corporate funds that the terrorist organization owns, or from a state-sponsor (Alexander, 2011). Many terrorist organizations have established their own charities that are used to fund their operations; these charities can be advertised as ethnic, racial, or religious (Alexander, 2011). Some terrorists may finance their groups from trading valuable commodities, such as conflict diamonds and gold (Alexander, 2011). Additionally, international trade schemes are commonly used through methods such as multiple invoicing or undervaluing and overvaluing the goods being traded (Alexander, 2011).
Terrorist financing has become more difficult to prevent in the age of globalization and with the rise of technology, especially now that terrorists can glean funding from the internet across the globe (Alexander, 2011). Funds can now be transferred from person to person within the organization at the click of a button and through multiple currencies (Alexander, 2011). The Internet has allowed for terrorists to transfer funds quickly and cheaply, as well as often anonymously or well-disguised (Alexander, 2011). However, groups still use transfer systems such as hawala and hundi, which are virtually transparent and enable terrorists to move money around in a manner that is practically impossible to detect (Alexander, 2011).
All of this growth has helped terrorist financing to expand vastly in recent years, with nations struggling to prevent people, weapons, and assets from being transferred across borders (Alexander, 2011). Because terrorism is so flexible, terrorists are able to expand their financing and to disguise it as general crime, or to thrive in conflict zones and failed states (Alexander, 2011). Instability and government corruption in failed states drives terrorist financing to expand in those particularly vulnerable areas (Alexander, 2011). In these places, terrorist financing and organized crime have been converging, linking drug trade and human smuggling to terrorism while disguising these acts as organized crime instead so that they are harder to detect (Alexander, 2011).
Methods Utilized to Disrupt Terrorist Financing:
After the attacks on September 11, 2001, the United States began to launch a domestic and international campaign to stop terrorist financing (Lee, 2002). The government has attempted to freeze, seize, and intercept funds as they flow from sources into terrorist groups (Lee, 2002). Soon after the attacks, Bush stated in a speech that the government would attempt to disrupt terrorist financing using Presidential Executive Order 13224, blocking approximately 250 specific designated terrorists, mostly related to al Queda, and entities that supported them from “all property and interests in property” (Neumann, 2017).  After this order was issued, approximately $36 million in suspected terrorist-related funds had been frozen (Lee, 2002). However, it is incredibly difficult for the U.S. government to disrupt terrorist financing when groups rely on non-bank sources to move their money around, such as hawala (Lee, 2002).
One major issue with the campaign for Executive Order 13224 is that there is no internationally adopted definition of what is a terrorist and what is considered a terrorist operation (Lee, 2002). As previously mentioned, Hezbollah and Hamas often fall under this grey area, where freezing order may or may not reach their organizations (Lee, 2002). A more controversial issue around the U.S. government’s methods of preventing terrorist financing would be the freezing of assets for Islamic charities and similar nongovernmental organizations (Lee, 2002). Just because a charity partially funds a terrorist organization does not mean that it doesn’t also legitimately support humanitarian ventures as well (Lee, 2002). For example, the charity organization called the Holy Land Foundation for Relief and Development (HLFRD) has been known to lend financial support to suicide bombers with Hamas connections, but also financially supports Palestinian refugee families in need (Lee, 2002).
Another method the United States government has used to disrupt terrorist financing has been to interrupt their financial infrastructures, meaning to challenge their formal and informal methods of moving finances across borders and between organizational branches (Lee, 2002). This method includes disrupting hawalas and underground charities as well as more legitimate means of transferring funds; international cooperation is absolutely essential for this to be successful, since the majority of these transactions happen outside of the U.S. borders (Lee, 2002).
More organizationally, the U.S. Customs Service and the Federal Bureau of Investigation have created an inter-agency task force called Operation Green Quest and the Terrorist Financing Operations Section (TFOS) which both are tasked with enforcement responsibilities in the realm of terrorist financing (Lee, 2002). Operation Green Quest attempts to find links between the ongoing investigations into traditional criminal financing and terrorist financing (Mehta, 2009). Alternatively, TFOS focuses solely on the financial links between terrorist cells (Lee, 2002). Separate from these two is the Foreign Terrorist Asset Targeting Group, which is led by the CIA’s Counterterrorism Center and assesses intelligence information regarding terrorist financing (Lee, 2002).
The U.S. Department of the Treasury also has its own task force called the Terrorist Tracking Task Force, which demonstrates the diplomatic capabilities of the Treasury by cooperating internationally to freeze terrorists’ access to financing (Lee, 2002). The State Department has a Counterterrorism Finance Unit as well, which oversees international technical assistances and information sharing about terrorist funding (Lee, 2002). In addition to these groups that focus specifically on terrorist financing, other miscellaneous units and task forces have begun to take on responsibilities regarding terrorist financing (Lee, 2002).
To look at a more specific example, the United States has in recent years become more concerned with the rise of ISIS and their financing (Jacobson, 2017). This organization’s financing is not easily disrupted because they do not generally use legitimate sources of income that can be attacked by freezing accounts or specific individuals (Jacobson, 2017). However, in 2015, a U.S. commanded coalition began to target certain areas that it realized ISIS relied on for monetary support, such as oil infrastructure, cash depots, and transportation systems (Jacobson, 2017). Over the course of the next year, this coalition was potentially able to deprive ISIS of sixty-two percent of its land in Iraq and thirty percent in Syria (Jacobson, 2017). By depriving ISIS of some of its funding, the organization also weakened militarily and lost some of its ideological appeal (Jacobson, 2017).
The White House and U.S. Congress have also been involved in disrupting terrorist financing. They have worked together to create rules that attack money laundering and terrorist financing in order to target organizations that fund terrorism (Kingah, et al, 2015). While these rules have had minor successes, a report was published noting that as long as terrorist organizations have access to any sort of viable financial network, they are still a major threat to the nation (Kingah, et al, 2015).
Results and Recommendations:
Some scholars would argue that efforts to disrupt terrorist financing have been a major failure, as there are more terrorist organizations now than there were before with higher budgets than before (Neumann, 2017). For instance, ISIS has a budget of approximately $1.7 billion, but all efforts were only able to seize less than $60 million of their assets; while this does have an effect on their operations, it may not have a long-lasting effect (Neumann, 2017). If anything, these efforts have only driven terrorists away from using the international financial system and have instead driven them toward methods that are significantly harder to detect (Neumann, 2017).
Policymakers have been made to realize that seizing assets cannot actually prevent terrorists from driving cards into large crowds or stop groups like ISIS from gaining territory when their income comes from inside themselves (Jacobson, 2017). Instead, the U.S. government needs to recognize that attempting to disrupt terrorist financing has been costly and often has hurt innocent people and businesses without actually affecting the intended groups (Jacobson, 2017). Instead, governments must find a different way to share information with the financial sector that is less costly and far more effective, certainly a tall task but with a high reward (Jacobson, 2017).
It may be wise of governments to incorporate the attack on terrorist financing into their counterterrorism strategies, including it in their political and military plans, instead of delegating the task to banks and finance ministries (Jacobson, 2017). When the U.S. military directly attacked ISIS’ cash depots by bombing them, they destroyed a more significant chunk of their funding than through any other method since the beginning of the caliphate (Jacobson, 2017). This demonstrates how the methods for attacking terrorist financing should be based on the specific terrorist organization at hand, instead of having one broad plan for multiples groups that differ significantly in their operations (Jacobson, 2017).
Conclusion:
The issue of terrorist financing is one that needs to be dealt with on a case-by-case basis instead of being given one overarching method. By attacking the funding sources of terrorist organizations, the U.S. government may be able to reduce the land mass acquired by these organizations and reduce the devastation of their operations. However, a lack of financing will not stop small-scale terrorist attacks from occurring. Lone wolves may be harder to reach than large-scale organizations such as ISIS or al-Qaeda. Overall, the issue of terrorist financing is an extremely important one that does not receive as much attention as it should, given its importance in