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

by Colin P. Clarke Ph. d.

  Since the primary responsibility of NORAID was to raise funds for the Provisionals, it became the main vehicle through which American donations flowed.14 The organization benefited greatly from a mature infrastructure of previously established groups, like the Ancient Order of Hibernians, myriad unions (police, “Longshoremen,” etc.), and a network of Irish pubs throughout the Northeast United States.15 NORAID enjoyed spikes in fund-raising following acts of high-profile British violence like Bloody Sunday, an incident that was perceived as the group’s first big publicity break. Much of NORAID’s support came from the conservative, anti-Communist trade union movement in the United States.16 Besides being a major recruiting boon for the PIRA, the donations offered to NORAID following Bloody Sunday foreshadowed the strength of the financial link with the Irish-American diaspora.17 The hunger strikes and death of Bobby Sands and nine other men in 1981 also provided a resurgence of NORAID fund-raising efforts.

  During the height of the conflict, counterterrorism efforts cost the British government an estimated £4 million ($6 million) a day.18 But unlike a small NGO, the United Kingdom could sustain these expenses. External support to the insurgency could not. Like other terrorist support systems, NORAID’s bureaucracy grew cumbersome. A substantial portion of funds never made it to Northern Ireland and the PIRA, and were instead diverted to pay for salaries and propaganda in the United States.19

  Another budgeting concern for the PIRA leadership was the sustenance of the families of insurgents who were killed or in prison, men (and their families) who were “on the run,” and PIRA members who had served extended jail terms and as a result, were highly unlikely to secure employment in the licit sectors of the economy. While the families of prisoners received financial support on a weekly or monthly basis, for various reasons it is unknown exactly how much money was reserved for these expenses.

  While the official line in pubs and fund-raising dinners was that the money would go toward sustaining the families of PIRA prisoners, many of those donating were well aware that a portion of the money, if not most of it, would be diverted to purchasing arms and explosives to continue the “armed struggle.” Nevertheless, longtime IRA supporters George Harrison and Martin Flannery (the former an IRA veteran who fought the “Black and Tans” in the 1920s), always denied that the money went for guns. They admit that money was collected for guns, but this was kept separate from the money used to support the families of those most directly affected by “the Troubles.”20 Official public statements and facts on the ground rarely converged.

  Fraud

  The PIRA engaged liberally in tax “fiddles” involving the use of false tax exemption certificates (on building sites throughout Northern Ireland) as one of several fraud-related money making enterprises.21 The Northern Ireland Housing Executive was a common target of fraud by terrorists, who also sought to devise complex scams to deceive European Community regulations, including mortgage frauds and false accounting.22

  The South Armagh contingent of the PIRA raised important funds for the group through both agricultural and animal subsidy fraud, aided during the 1980s, relying on Slab Murphy’s farm, which straddled the Northern Ireland–Republic of Ireland border.23 These frauds involved false claims for different rates of agricultural subsidies on different sides of the border and involved goods such as butter, beef, pork, lamb, and cattle. These goods were exported from the Republic to Northern Ireland, thus earning an export subsidy before being smuggled back across the border and exported again at a later date. Other forms of fraud perpetrated by the PIRA include social welfare fraud and petrol fraud, the latter of which took advantage of different rates of excise duties on either side of the border for fuel oil (petrol and diesel).24

  Legal Businesses

  The PIRA counted pubs, private security firms, taxicab services, guesthouses, courier services, social clubs, cars and machinery, construction firms, and restaurants among its licit activities through which to both earn and launder money.25 Amongst its businesses, the PIRA counted pubs in Boston, Finglas, Co. Dublin, Coolock, Dublin city center, Letterkenny, Co. Donegal, and Cork, with other small pubs throughout the Republic. Other businesses included video shops, a haulage company, and quasi-legal drinking clubs called shebeens, which could be outfitted with illegally installed slot machines.26 The PIRA established the Andersonstown Cooperative Industrial and Provident Society, which then purchased legal businesses, including a butcher’s shop, a supermarket, and a construction business.27 As Keith Maguire remarked, “By the late 1980s, terrorist groups had become businessmen with terrorist interests.”28

  From the point of view of the PIRA’s leadership, the move into legal businesses was necessary. It meant that dirty money could be made clean, and this clean money could be used for legitimate purposes, like financing the group’s growing political wing, Sinn Fein. However, when terrorists move into the licit, private sector, they expose themselves as vulnerable to those agencies looking to combat them. Adams has described this phenomenon thusly, remarking, “Terrorists are extremely good at using their muscle to beg, to steal or to borrow but do not operate as well in a semi-legitimate way (with the exception of the protection companies). When they have to file accounts and turn in a regular profit, they are less effective.”29 The turning point, however, in the PIRA’s reliance on legal businesses was when the group determined that to defeat the British, it would have to fight “the long war.” As such, this drove the need for sustainable funding, which in turn meant figuring out how to make the proceeds of the organization’s numerous ventures into legitimate funds through investment in businesses and companies.30

  Money Laundering

  The PIRA laundered money in a number of ways. One method was to work with failing business owners to help resuscitate their companies. A PIRA member would supply the business owner with cash and bank drafts (this money could come from “short-term loans” from PIRA associated, armed robberies, etc.). Successful ventures were those that provided a return on investment, especially those that happened quickly and without strings attached. Of note, the PIRA was at times willing to engage with individuals outside of its established networks, which made the organization vulnerable. Accountants used by the insurgents were sometimes able to secure fraudulent bank references from unscrupulous bank managers (in exchange for cash or out of ideological affinity, or both) that would allow them to buy property and businesses.31 An important point to note, as highlighted by Horgan and Taylor, is the distinction between running a successful business and executing a successful money laundering scheme, which are not mutually exclusive. Indeed, even when a business is sold at a loss, the loss must be framed in the context of already illegally obtained money.32 A very small cadre of individuals was tasked with money laundering, with operations coordinated by members or associates skilled in banking and accounting.33

  Dark Economy

  The scale and scope of the PIRA’s internal funding capabilities is complex. To generate the income necessary to operate the organization on a day-to-day basis, the group engaged in a wide array of illegal activities, including—KFR, armed robbery, smuggling, extortion and “riding shotgun”34 and external state support. Less lucrative, but still valuable activities included film piracy (including pornography) and automobile theft.

  Kidnapping for Ransom (KFR)

  Kidnapping for ransom is one of the most insidious forms of organized crime. It contributes directly to instability in a country and presents a challenge to the legitimacy of the state and its security forces. Other corrosive effects include inducing a climate of fear among both domestic and multinational corporations, which in turn affects the economy. KFR targets often include wealthy businessmen or executives of successful companies.

  In October 1979, the PIRA kidnapped Ben Dunne, the wealthy scion of a family that owned a chain of retail stores throughout Ireland. The operation is thought to have netted the PIRA £750,000.35 Two months later, in December 1979, the PIRA kidnapped Margaret Fennelley, the wife
of a bank manager. Two more daughters of bank managers in Dundalk and Ardee (Co.Louth), respectively, were kidnapped and ransomed for £50,000 each.36 Through it failed to net a ransom, one of the most “impressive,” if not bizarre “kidnappings” pulled off by the PIRA was the February 1981 kidnapping of a thoroughbred horse named Shergar. Other kidnappings executed by the insurgents included the following:

  Canadian businessman and multimillionaire Galen Weston

  Alma Manima (a scheme which allegedly resulted in a £60,000 payday)

  Associated British Foods executive Don Tidey

  Jennifer Guinness, the daughter of merchant banker

  Kidnappings were not always necessarily for ransom. Sometimes, as was the case with the kidnapping of Caroline Moorland, the intent is intimidation or revenge against perceived informers. Moreover, kidnappings often had unintended consequences. The kidnapping of Don Tidey resulted in the death of an Irish soldier and Garda, or Irish police, who were killed in a firefight with the PIRA.37 Events like that led to a loss of popular support for the insurgency, which in effect led the PIRA to reconsider KFR as a viable form of fund-raising.

  Armed Robbery and Theft

  Though not all armed robberies in Northern Ireland during “The Troubles” could be traced back to the Provos, many that were among the most valuable and well organized can be attributed to the group. Indeed, certain active service units (ASUs) specialized specifically in armed robbery.38 In addition to stealing cars and antiques, the PIRA focused on banks, post offices, and building societies, as robbery remained “one of the PIRA’s main ‘outwardly’ sources of funding, if not the single main source” during various periods of the group’s existence.39 Armed robberies provided a consistent flow of money to the insurgents, especially in the 1980s. In 1984 in Northern Ireland there were 622 armed robberies totaling $1.2 million; the previous year, 359 robberies netted an estimated $6 million.40

  As a method of fund-raising, armed robbery and theft fell out of favor for several reasons. First, as the success and popularity of Sinn Fein increased, there was a need not only for more funds (which meant expanding beyond just armed robbery), but moreover, armed robberies “created a bad name” for the PIRA.41 In June 1996, a Garda named Jerry McCabe was shot and killed by an insurgent unit, provoking backlash against the PIRA during a critical period in the conflict’s final phase.

  Smuggling, Trafficking, and Counterfeiting42

  To diversify its criminal portfolio, the PIRA engaged in the smuggling and trafficking of goods, both licit and illicit. This included cross-border smuggling and trafficking, the most notorious of which involved pigs, cattle, livestock grain, and animal antibiotics. At one point in the 1980s, customs officials identified 240 unauthorized border crossings (and these were only the ones they knew about). The border between Northern Ireland and the Republic offered the insurgents numerous opportunities to ferry smuggled goods back and forth while evading capture. South Armagh developed a reputation as “bandit country,” where hijackings were common, thieves and traffickers dominated, and locals refused to speak with the authorities.

  Through some of its smuggling activities, the PIRA was able to take advantage of the sales tax (VAT) on luxury goods and alcohol. In addition to the aforementioned activities, the PIRA also dealt in counterfeit goods, ranging from videos (including pornography) to CDs, computer games, contraband cigarette lighters, and brand-name jeans.43 According to Dingley, the PIRA’s counterfeiting and smuggling operations grew so expansive that the group acquired its own factories in Eastern Europe and Turkey, where counterfeit goods could be produced before being shipped back to Northern Ireland and sold for a profit.44 Licit and illicit goods were smuggled along transportation and distribution networks that doubled as arms smuggling routes. The PIRA’s smuggling operations extended from Northern Ireland all the way to China.45

  Extortion and Protection

  In what has been dubbed by James Adams as the PIRA’s “Capone discovery,” the leadership learned that the organization could raise significant amounts of money from coercion. The group would demand protection money from publicans, local businessmen, shopkeepers, and so on. The maturation of this crime pointed to the later establishment of security companies; by hiring the right company, business owners could almost certainly avoid extortion. This allowed the PIRA to “provide a legitimate veneer for what remains a simple racket.”46

  Another popular tactic was strong-arming business owners to add “ghost” employees to their payrolls. Extorting building sites was particularly easy if the builders were small local businesses because this often meant that the owners not only worked, but also lived in the area. Extortions of small business became so frequent and commonplace that the Inland Revenue eventually allowed businesses to claim the extortion money they paid against their tax burden.47

  This reliance on extortion demonstrates the complex nature of insurgent groups. On one hand, the PIRA was widely revered as a true protector of Catholic neighborhoods, but it could also be predatory in nature, strong-arming the very population it was sworn to protect. Furthermore, there was follow through taken after a series of verbal threats. In August 1985, PIRA insurgents shot and killed Seamus McEvoy after he refused to pay £8,000 in protection money.48

  External State Support

  An important component for the insurgents’ external state support was the relationship the PIRA developed with Muammar Qaddafi’s regime in Libya, an ardent opponent of the British. Contact was formalized between the Provos and the Libyans in August 1972, which immediately served as a boon to the PIRA’s finances.49 Accordingly, the PIRA secured approximately $3.5 million from Qaddafi which could be used to keep the organization afloat in its nascent stages. This relationship was temporarily severed in the mid-1970s due to disagreements between senior PIRA leaders and high-ranking members of Libyan intelligence, but was later reestablished following the death of 10 Republican prisoners on hunger strike in 1981. Between contributions from abroad and the PIRA’s internal activities, revenue for the group in the mid-1980s is thought to have totaled somewhere around £7 million per year.50

  WHAT THE PIRA ACHIEVED WITH THESE FUNDS

  With all of the money produced from the PIRA’s portfolio of rackets, the group was able to greatly enhance its ability to conduct operations against both the Loyalists and British troops, both in Northern Ireland and abroad. The Provos consistently had access to first-rate weaponry, in turn allowing the group to escalate its campaign of terror at different intervals over the course of the conflict. On the organizational side, the group’s endowment made remaining a cohesive unit easier, thus promoting longevity. By subsidizing their full-time members and the families of those members, PIRA insurgents were able to specialize in designated skills, from bomb-making to sniping to counterintelligence.

  To be sure, when a group has to exert maximum energy on obtaining funds, there is less of an opportunity to plan for and execute attacks. Furthermore, a group constantly and solely focused on earning money, similar to the way an organized criminal organization would operate, would have insufficient time to build a political wing, as the PIRA did over time with Sinn Fein. By expanding its moneymaking ventures across such broad swaths of the gray and dark economies, the PIRA diversified its revenue base, thus ensuring consistent access to much-needed funds.

  There is little doubt that without such a robust financing network, the PIRA would never has been able to expand its operations beyond Northern Ireland and transform the group into the potent fighting force that it ultimately became. In sum, financing played a significant role in the success that the PIRA enjoyed against British COIN forces and allowed the group to remain relevant for nearly 30 years, before transitioning its efforts into the political arena.

  Operational Capabilities

  If leadership provides the brains of an insurgency, then its operation tools, or resources, serve as the lifeblood. Put simply, operational tools are used to defend territory, plan and execute attacks, de
ter adversaries, and destroy enemies. Without weapons, money, intelligence, training, and sanctuary, insurgents are only capable of waging a limited struggle. Because insurgents are most often, if not always, militarily inferior to the COIN force or host-nation government (this is what makes the conflict asymmetric), operational tools are critical to help sustain the insurgency and afford the insurgents with a slightly more level playing field. For the PIRA, this was certainly the case as it fought Protestant paramilitary groups, Northern Ireland security forces, and the British Army.

  Operational tools are indispensable to insurgents. At the same time, not all resources are created equal. Some are critical, others are valuable but not essential, and still others are only of minor import. The PIRA’s most valuable operational tools were sanctuary, training, and funding. To counter these capabilities, the COIN forces relied upon subversion, intelligence, and infiltration.

  Weapons

  Obtaining the material resources for guerilla war is expensive, especially when, like the PIRA, the group has a desire to acquire high-tech weaponry including surface-to-air missiles (SAMs) and SAM launchers, Russian-made (RPG) launchers, machine guns, assault and sniper rifles, and heavy weaponry like the Barrett Light-50 heavy machine gun.51 Due to the largesse of weaponry bestowed upon the group by Qaddafi, which is covered in detail later in this chapter, in the 1980s the PIRA had less of a need to devote a substantial portion of its operating budget to acquiring weaponry. Furthermore, the explosives used by the group were almost exclusively being made by the PIRA themselves.52 PIRA bomb makers, or engineers as they were called within the group, were universally acknowledged to be among the most skilled in the world at their craft. That most of the ingredients needed to construct homemade mortar equipment and homemade bombs could be obtained at a relatively low cost merely allowed the group to spend more of its budget on cutting-edge electronics, like radio-controlled detonation devices, to pair with its bombs.53