Terrorism, Inc.
The Financing of Terrorism, Insurgency,
and Irregular Warfare
COLIN P. CLARKE
Praeger Security International
Copyright © 2015 by Colin P. Clarke
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, except for the inclusion of brief quotations in a review, without prior permission in writing from the publisher.
Library of Congress Cataloging-in-Publication Data
Clarke, Colin P.
Terrorism, inc. : the financing of terrorism, insurgency, and irregular warfare / Colin P. Clarke.
pages cm. — (Praeger security international)
Includes bibliographical references and index.
ISBN 978–1–4408–3103–4 (hard copy : alk. paper) — ISBN 978–1–4408–3104–1 (ebook) 1. Terrorism—Finance. 2. Insurgency—Finance. 3. Irregular warfare. I. Title.
HV6431.C52 2015
363.325—dc23 2015004931
ISBN: 978–1–4408–3103–4
EISBN: 978–1–4408–3104–1
19 18 17 16 15 1 2 3 4 5
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Contents
Preface
Acknowledgments
1. Introduction
2. The Provisional Irish Republican Army (PIRA): “The Troubles” in Northern Ireland
3. The Liberation Tigers of Tamil Eelam (LTTE): A Diversified Funding Portfolio
4. Hezbollah: Financing the Party of God
5. Hamas: Guns and Glory in Gaza
6. Afghan Taliban: From Strugglers to Smugglers
7. Al-Qaida: 9/11, Franchise Groups, and the Future after Bin Laden
8. The Islamic State of Iraq and Syria (ISIS): Building a Caliphate in the Levant
9. Conclusion
Notes
Bibliography
Index
Preface
Terrorism, insurgency, and irregular warfare (IW) are defining features of conflict in the twenty-first century. These types of conflict are indicative of the harsh reality of both the current and future operating environments. As globalization accelerates unimpeded, a host of continuing trends reinforce the threats posed by violent non-state actors operating in a milieu that can be most aptly described as complex and unpredictable.
Although the United States eschewed more direct involvement in Syria (at least as of early 2015), her status as the world’s preeminent global power will no doubt necessitate future involvement in various failed states, alternatively governed spaces and other zones of instability. Whether fighting against ethnically-based militias, warlord-led criminal gangs, or transnational terrorist and insurgent groups, combating how these entities are funded and financed will remain a critical challenge. This challenge is compounded by the globalization of banking and finance and the ubiquity of communications and information technology that facilitates the virtual movement of money.
In 2015, the international security landscape is as pernicious as ever. Despite a massive commitment of resources, the United States was never able to completely stabilize Iraq or Afghanistan, which still continue to battle overlapping insurgent groups and terrorist organizations. Iran continues to support myriad terrorist organizations throughout the Middle East, and Al-Qaida has evolved from an organization based in South Asia to a networked model of regional affiliates stretching from the Sahel to the Arabian Peninsula to the Horn of Africa. The threat from one of Al-Qaida’s spawn, the Islamic State of Iraq and Syria (ISIS) is as tangible as it is enduring.
This book will analyze seven terrorist and insurgent groups to determine how these groups fund their organizations, the various ways in which funding supports their operational and organizational capabilities, and how this funding could be disrupted. The groups covered are geographically diverse, rely on a wide range of tactics and sources of financing, and face a multitude of states and organizations seeking to disrupt and dismantle their activities and infrastructure. Historical lessons learned will inform policy recommendations for the cases still ongoing. This research should be interesting to a range of individuals and organizations, including academics and scholars, military leaders, policymakers and government officials, as well as banks, financial institutions and other multinational corporations concerned with the growing challenge of analyzing threat finance.
This book will proceed as follows:
CHAPTER 1. INTRODUCTION
Chapter one lays out the motivation for this book, introducing the analytic framework of the gray and dark economies. Next, chapter one reviews the various operational and organizational capabilities of terrorist and insurgent groups. Finally, the chapter provides a synopsis of the various means of combating the financing of terrorism, including both kinetic and non-kinetic efforts pursued by states and governments, as well as a brief history of the evolution of the effort to combat the financing of terrorism.
CHAPTER 2. THE PROVISIONAL IRISH REPUBLICAN ARMY (PIRA): “THE TROUBLES” IN NORTHERN IRELAND
Chapter 2 details how the PIRA relied on a range of activities to finance the insurgency in Northern Ireland over the course of 30 years, including diaspora donations from abroad (especially the United States), armed robbery, extortion, and coercing shopkeepers and business owners into paying protection money. Less lucrative but still valuable activities included income tax fraud, livestock smuggling (pigs, cattle, and bovine antibiotics), film piracy (including pornography), and automobile theft. The group also relied on legitimately owned businesses and has counted pubs, private security firms, taxi cab services, construction firms, and restaurants among its licit activities through which to both earn and launder money. These funds were used to purchase sophisticated weaponry, sustain its members, provide for the families of those members in prison, and develop a mature propaganda campaign. In time, the PIRA’s funding stream afforded the group with the ability to transition to politics, embodied in its political wing, Sinn Fein. The British government relied on an extensive counterintelligence network to disrupt PIRA finances, while also targeting the group’s leadership for kill, capture, arrest, prosecution, and imprisonment.
CHAPTER 3. THE LIBERATION TIGERS OF TAMIL EELAM (LTTE): A DIVERSIFIED FUNDING PORTFOLIO
Chapter 3 traces the rise and fall of the Tamil Tigers. Between its inception as an insurgent group in the mid-1970s and its demise in late 2009, the LTTE developed perhaps the most comprehensive array of military capabilities ever demonstrated by a terrorist group. Driving these capabilities was a diversified network of fundraising activities, ranging from extortion to human smuggling to armed robbery. The Tamil Tigers posed a truly asymmetric threat to the government of Sri Lanka and with the aid of its funding, boasted a navy, an air force, and an elite suicide commando unit used to assassinate heads of state and COIN force commanders. A transnational diaspora network provided propaganda, funding and weaponry to sustain the Tigers for most of the group’s existence. The Sri Lankan government and its armed forces never effectively disrupted the LTTE’s financing and only defeated the group through a scorched earth campaign that included mass atrocities against civilians.
CHAPTER 4. HEZBOLLAH: FINANCING THE PARTY OF GOD
Chapter 4 assesses Lebanese Hezbo
llah, a group that relies on support from Iran, a worldwide diaspora, and an extensive criminal portfolio to sustain its military capabilities and robust network of social services. Some of the larger services include Jihad al-Binaa (JAB), or Construction Jihad, the Islamic Health Committee (IHC), and the Relief Committee of Imam Khomenei (RCIK). The group’s funding allows Hezbollah to maintain a vast arsenal of weaponry to expand its attack capability, sustain its operations over the long-term, inflict psychological damage on its adversaries, and diversify its methods and tactics. Multiple entities have attempted to combat Hezbollah, including the Lebanese government, the state of Israel, and the United States, although counter-threat finance efforts by each of the aforementioned have been met with mixed success. In turn, Hezbollah remains anchored in Beirut and its surrounding environs as perhaps the world’s most capable hybrid actor—part terrorist group (with some conventional capabilities), part socio-political organization. The result has been a muddled response from those unsure of how to deal with this type of IW threat.
CHAPTER 5. HAMAS: GUNS AND GLORY IN GAZA
The analysis in Chapter 5 focuses on the Palestinian Hamas, a group that effectively balances its efforts to raise funds between gray market and dark market activities. The group’s decision to dedicate more funding to its political activities may hint at a shift away from violence, yet its growing rocket arsenal suggests otherwise. Israel has enacted an array of policies, both kinetic and non-kinetic, that have affected the financial portfolio of Hamas. Similar to Hezbollah, Hamas presents a unique irregular warfare challenge to the Israelis, as well as to the broader Middle East. Hamas seems to have modeled itself on Hezbollah in some ways, as it has grown from a rag-tag terrorist group into a well-equipped hybrid threat. Countering Hamas will require a broad range of capabilities, likely to require both military and law enforcement measures, in addition to legal, civilian, diplomatic, and ministerial assistance.
CHAPTER 6. AFGHAN TALIBAN: FROM STRUGGLERS TO SMUGGLERS
In chapter six, the author examines the Afghan Taliban, a group that relies on donations from sympathizers abroad, as well as a growing involvement in the opium trade to fund its activities in Afghanistan and Pakistan. Still, a divide between the Taliban’s leadership in Quetta and its mid-level commanders and foot soldiers in Afghanistan has been reflected in its fundraising activities. Different factions of the insurgency rely on different parts of the gray and dark economies, and the Taliban has ordered religious guidance specifically dealing with the trafficking of opium. While organizations like the Afghan Threat Finance Cell (ATFC) have made an impact by attenuating the Taliban’s coffers, the international presence in Afghanistan is dwindling, so future efforts by the insurgency to raise funds will likely face fewer obstacles.
CHAPTER 7. AL-QAIDA: 9/11, FRANCHISE GROUPS, AND THE FUTURE AFTER BIN LADEN
Chapter 7 focuses on several important differences that exist between how Al-Qaida funds its organization now compared with how the group funded itself in the lead up to September 11, 2001. Al-Qaida central is far less relevant than it once was, having ceded autonomy to the fundraising committees of its affiliates in North Africa and the Arabian Peninsula. Determining the most effective way to counter the funding of a group that operates on such a transnational scale remains a continuous work in progress, but nevertheless retains significance for combating whatever the next iteration of this group ultimately morphs into over time. With its charismatic leader deceased, Al-Qaida has struggled to remain relevant, losing ground to the Islamic State of Iraq and Syria in the battle for the hearts and minds of aspiring jihadis throughout the Islamic world and the West. While some of the immediate laws enacted following the attacks of September 11, 2001, have been successful, many efforts have stalled or failed. This chapter addresses some of the successes, but also the failures, in order to discern best practices for countering this threat.
CHAPTER 8. THE ISLAMIC STATE OF IRAQ AND SYRIA (ISIS): BUILDING A CALIPHATE IN THE LEVANT
Chapter 8 examines the evolution of ISIS, which is the progeny of Al-Qaida in Iraq/Al-Qaida in the Land of the Two Rivers (which was originally known as Jama’at al-Tawhid wal-Jihad, or “Monotheism and Holy War Group”) and is currently referred to as the Islamic State in Iraq and the Levant (ISIL)/the Islamic State in Iraq and al-Sham (ISIS), or the Islamic State (IS). ISIS has been labeled the richest terrorist group in history, flush with funds from robbery, extortion, and the smuggling and trafficking of oil. ISIS burst back onto the geopolitical radar following the withdrawal of U.S. troops from Iraq in 2011, coupled with the neighboring Syrian civil war and the marginalization of Iraqi Sunni Arabs by the sectarian government of Nouri al-Maliki. Since most of ISIS’ funds are sourced locally, countering the financing of this group will be extremely challenging going forward and will require the cooperation of states in the region as well as the international community more broadly.
CHAPTER 9. CONCLUSION
This book concludes by analyzing, from a historical perspective, how terrorists and insurgents have funded their operations and organizations. Moreover, the concluding chapter revisits an examination of how terrorist and insurgent groups bankroll irregular warfare by dissecting the various ways they spend the money obtained from various revenue generating activities through the lens of a complementary set of operational and organizational tools. Next, Chapter 9 revisits what has worked and what has failed in the effort to combat terrorism financing, in addition to discussing the current limitations to countering insurgency and combating the financing of terrorism. The chapter concludes by discussing what obstacles lay ahead in the ever changing landscape of terrorism, insurgency, and irregular warfare and how some of these challenges can be managed effectively.
Acknowledgments
I am grateful to many people for contributing to this study and for their enduring support, without which this effort would not have been possible. I have been shaped by my education at many levels, including Chaminade High School, Loyola University in Maryland, the National University of Ireland Galway (NUIG), New York University (NYU) and above all, the University of Pittsburgh. At Pitt’s Graduate School of Public and International Affairs (GSPIA), Phil Williams provided me with an intellectual safe haven at the Matthew B. Ridgway Center for International Security Studies. I am also thankful to Dennis Gormley, Forrest Morgan, and Donald Goldstein for shaping the research that evolved into my doctoral dissertation.
At the RAND Corporation, I would like to thank my friends and colleagues, Chad C. Serena, Christopher Paul, and Patrick B. Johnston for serving as a sounding board for my thoughts and ideas over the years, as well as for providing humor at times despite the grim nature of the subject matter we discuss.
At Carnegie Mellon University, I am thankful to several research assistants, including Max Goetschel and Christopher Skaggs, but especially Tiffany Tse.
I am particularly grateful for the opportunity to work with such dedicated and intelligent colleagues on Combined Joint Interagency Task Force Shafafiyat in Kabul Afghanistan in 2011. I am still close to several of those folks, you know who you are. That experience helped impress upon me exactly how difficult the challenge of countering the financing of terrorism and insurgency is and will continue to be in the future.
I would like to acknowledge the many named and unnamed scholars and practitioners who took time away from their busy schedules to avail me of their expertise and knowledge in this area. They include John Horgan, Peter Chalk, Louise Shelley, Gretchen Peters, Tom Keatinge, Matthew Levitt, and Jean-Marc Oppenheim, among others.
At Praeger Security International and ABC-CLIO, I would like to thank Steve Catalano, Suba Ramya, Nicole Azze, and Rebecca Matheson for their guidance throughout this process.
Most importantly, I would like to thank my family and friends, who provide me with the motivation to succeed and the humility to keep me grounded. Thanks and love to my mother Maureen, my father Philip, my brother Ryan, my sister Katie, my in-laws and my extended family, especially
my cousins, SSgt Timmy Ledwith and SGT Sean Ledwith, who are always faithful. Lastly, I would like to thank my wife Colleen for her unconditional love, unwavering support and perhaps most of all, her limitless patience. LMB.
This book is dedicated to all of those affected by the tragic events of September 11, 2001 as well as to the men and women who defend freedom, both at home and abroad. Any and all mistakes contained here within are the sole responsibility of the author.
CHAPTER 1
Introduction
The lifeblood of any violent non-state organization is its ability to generate funds. In an irregular warfare environment, the importance of funding is magnified because unlike nation-states, terrorists and insurgents do not possess the ability to legally tax citizens in order to raise a standing military. On the contrary, terrorists, insurgents, warlords, and militias rely on both licit and illicit means to generate funds. These funds are then applied to build, consolidate and sustain the group’s operational and organizational capabilities. The former augments a group’s ability to successfully execute attacks, while the latter contributes to group cohesion. In turn, states and international organizations, those entities primarily tasked with countering these groups and their funding streams, rely on a range of kinetic and non-kinetic operations to disrupt and when possible, dismantle a malevolent group’s ability to generate funds.
This book provides an overview of how terrorists and insurgents fund their activities, what these groups do with the revenue they generate, and how this funding can be disrupted. Terrorist financing—defined here as the process of raising, storing and moving funds obtained through legal or illegal means for the purpose of terrorist acts or sustaining the logistical structure of an insurgent organization—is an ongoing game of “cat and mouse.”1 Just as terrorists and insurgents are continually finding ways to adapt to evade law enforcement, security officials tasked with countering the financing of irregular warfare must rely on multiple countermeasures to deny, destroy, defend, detain, and disrupt a range of violent non-state actors. Nation-states and the international community rely on both military and law enforcement, in addition to efforts to build institutional capacity, establish norms, implement policies, and enforce laws as part of a broader combating the financing of terrorism (CFT) framework. This framework includes general crime fighting tools such as wiretaps and electronic surveillance, but also extends to sanctions and the freezing of funds and accounts.
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