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

by Colin P. Clarke Ph. d.

  Besides foreign fighters and militants from Saudi Arabia, Tunisia, Lebanon, and Jordan, ISIS is comprised of thousands of Iraqis and Syrians.124 After the initial U.S. invasion of Iraq in 2003, a radical Salafi cleric from Aleppo named Abu al-Qaqaa became the primary point of contact for Syrian recruits eager to join AQI under the leadership of Zarqawi.125 Many of those contacts likely remain in place today. The group has also won recruits following large-scale prison breaks throughout Iraq, replenishing its ranks with hardened jihadists, violent sociopaths, and career criminals.126 Included in the panoply of individuals recruited by ISIS are children as young as six years old, some of whom are trained to become suicide bombers.127

  Perhaps in an effort to avoid repeating the mistakes of AQI in Anbar province throughout the late 2000s, especially the violence against local Sunni Iraqis that led in part to the Anbar Awakening, ISIS has displayed an awareness of winning the hearts and minds of Iraqi and Syrian Sunnis. In areas that ISIS claims to control, it ensures the availability of basic necessities like gas and food.128 In Mosul, ISIS has held a “fun day” for kids, distributed gifts and food during Eid al-Fitr, held Quran recitation competitions, started bus services and opened schools. More so in Iraq than in Syria, ISIS has been more aware of dealing with the local population in Sunni-predominant towns, villages, and cities.129

  An analysis of Al-Qaida in Iraq reveals that that group, too, was a bureaucratic and hierarchical organization that tried to keep an ironclad grip over the money it earned from a series of rackets.130 So, it should come as little surprise than its progeny is as well. ISIS may be wealthy, especially when compared to other terrorist groups, but it also maintains a vast human resources type network to deal with medical expenses for fighters (and their families), legal support, safe houses, administrative expenses (e.g., utilities) in the areas under its control and other logistical requirements of clandestine organizations.131 In what may be a sign that ISIS has learned from its mistakes in Anbar Province during the “Awakening,” when ISIS has removed some civil servants from their leadership positions, it has consistently compelled mid-level bureaucrats and technocrats to remain in their positions in order to ensure continuity.132 ISIS’s use of former Assad regime loyalists displays a pragmatism that has been vital to its success holding onto territory it has captured.133 The lessons from America’s disastrous de-Baathification policy in Iraq under L. Paul Bremer’s Coalition Provisional Authority (CPA) during the initial invasion apparently have not been lost on ISIS.

  Media, PR, Propaganda, and Publicity

  When ISIS reemerged on the radar of the Obama administration in the summer of 2014, much hyperbole surrounded the group’s military capabilities. Indeed, its blitzkrieg-like offensive throughout northern Iraq was well executed, but insurgent groups with conventional military capabilities are not a new phenomenon (e.g., LTTE, PIRA, the Afghan Taliban, etc.). What was new, however, was ISIS’s sophisticated use of media, especially social media, in spreading its message, sowing terror and fear, recruiting new members, and countering Western efforts to shape the narrative.134 Perhaps most impressive has been the speed with which ISIS is able to produce its media campaigns, responding in real-time (by “live tweeting”) to events as they unfold on the ground. This mode of communication has been described as a “swarmcast” for its interconnected, dispersed, and resilient form.135

  ISIS did use social media to broadcast the beheading of several Westerners it had kidnapped, but it also used Twitter,136 Instagram, YouTube, and Facebook to show its humanitarian efforts, including fighters handing out ice cream cones to children, in an attempt to appeal its constituents. It has even developed its own video game modeled after “Grand Theft Auto.”137 ISIS has produced several popular series such as “Knights of Martyrdom” and “Risen Alive,” which emphasize the camaraderie of jihad by showing militants fighting together on the battlefield.138 Dabiq is ISIS’s magazine, which is an English-language production used to help lure more recruits.139 The magazine is multi-faceted, reporting battlefield statistics, but also laying out a thoroughly detailed religious explanation for its actions, especially its attempt to establish an Islamic caliphate in Syria and Iraq.140

  Just like other millennials, the concept of “oversharing” extends to terrorists as well. The use of multiple media platforms has served as a source of open source intelligence (OSINT) for intelligence and law enforcement authorities attempting to track, monitor, and combat ISIS.141 Simply from monitoring jihadists’ use of social media, Western authorities have been able to gain insight into foreign fighters traveling to Syria and Iraq to fight with the group, as well as mapping the rift that developed and eventually led to a split between ISIS and Jabhat al-Nusra.142

  Even though ISIS militants communicate openly on some social media forums, its media wing remains incredibly agile. When its accounts on Twitter and other sites are shuttered, new accounts appear almost immediately. It relies on services like JustPaste to distribute battle summaries, SoundCloud for the release of audio reports, Instagram to share photos, and WhatsApp to swap graphics and videos.143

  HOW ISIS FINANCING WAS COUNTERED

  It should be noted that at the time of this writing, late 2014/early 2015, the fight against ISIS is merely in its nascent stage. U.S. strategy is currently comprehensive in nature, primarily focused on disrupting ISIS revenue streams, restricting ISIS’s access to the international financial system and targeting ISIS leaders, facilitators, and supporters with a range of kinetic and non-kinetic actions, from kill/capture operations to sanctions, where appropriate. Convincing our allies not to indirectly fund ISIS is part of this strategy. In his work on ISIS, Philipp Holtmann has noted that some European oil companies, with the knowledge of European governments and worried about Russian unreliability, have purchased oil through proxies at dumping prices. Until the oil fields are recaptured, international companies should be prohibited from buying crude oil through middlemen.144 At present, the U.S. Treasury Department is seeking to blacklist any purchaser or facilitator purchasing oil from ISIS, no matter how high or low on the value chain.145

  Another key element of the CFT strategy against ISIS is working to identify middlemen and buyers for the smuggled fuel and stop those transactions by any means required. Mobile refineries should be targeted and roads and other pathways that tanker trucks use to transport oil to and from fields should be made impassable by military means.146 And with respect to recapturing the oil fields, to avoid market perturbations and regional disarray, the tap cannot be shut off overnight. Rather, as Charles Lister notes, “Though necessitating a gargantuan effort in minimal time, the provision of large quantities of diesel fuel and oil for generators into opposition areas of northern Syria should be an immediate policy priority.”147

  Kinetic Activities

  Curbing ISIS’s revenue from the sale of smuggled oil meant pressuring Ankara to assist with stemming money laundering and stopping traders in Turkey from purchasing smuggled oil from ISIS.148 In September 2014, U.S. airstrikes targeted oil refineries controlled by ISIS in Syria. U.S. Central Command (CENTCOM) estimated that the refineries targeted were responsible for producing between 300 and 500 barrels of oil per day.149 Western law enforcement agencies, including the FBI have attempted to prevent ISIS recruits from leaving the country, arresting those individuals suspected of traveling to join the group and charging them with providing material support to a terrorist organization. If convicted, an individual could face a maximum of 15 years in prison and a $250,000 fine.150

  Non-kinetic Activities

  In September 2014, the UN Security Council passed Resolution 2178 on policies and security measures to better track and deter terrorist travel activity, which requires member countries to implement improved border controls and to disrupt or prevent financial support to terrorists, though enforcement of these policies will be more difficult in reality.151 Later that same month, the U.S. Treasury Department stepped up its efforts to crack down on Al-Qaida and Islamic State fund
ing by designating several individuals with links to Qatar. One of the designated individuals was Tariq Bin-Al-Tahar Bin Al Falih Al-Awni Al-Harzi, accused of gathering support from Qatar and arranging for ISIS to receive approximately $2 million from a Qatar-based financial facilitator who expressly stated the money should be used for military operations.152 Though ISIS is not acquiring a serious amount of funding from the Gulf States that could change in the future. “To date, implementation and enforcement have not been a component of Qatar’s approach” to combating terrorist financing, according to Levitt. Indeed, he notes that “Qatar routinely stresses to investors and critics alike the passage of laws that, on paper, appear robust but are almost never implemented or enforced.”153 It is not as much about the passing of laws in countries like Kuwait and Qatar but more about the implementation and enforcement of those laws.

  The other primary line of effort against ISIS is attempting to identify and sanction those who benefit from the oil trade as well as working with governments in the region to devote more resources to shutting down existing smuggling networks and securing porous borders.154 Every node in the network—middlemen, traders, refiners and transport companies, to name a few—are targets of United States efforts to deny ISIS the ability to raise funds through the sale of black market oil.155

  CONCLUSION

  From 2003 through 2009, Syria was a safe haven for AQI fighters battling U.S. troops in Iraq. During this period, western Iraq, particularly Anbar province became a sanctuary for many AQI fighters. Tensions between AQI and the Sunni tribes resulted from the former’s attempt to take control over the traditional smuggling and black market activities of the latter. What followed was the Anbar Awakening and in turn, the defeat of AQI in Anbar province.156 Those nations countering ISIS hope that as the United States targets ISIS’s control of oil refineries, the group may be forced to rely more on criminal activities to fund its activities. In turn, this could provide an opening, as the group may repeat its mistakes by usurping traditional Sunni smuggling routes, thus opening the door for an “Anbar Awakening Part II”. But challenges lay ahead. As Levitt laments, “the problem is that we have tools—from military force to Treasury designations and more in between—to deal with oil smuggling and extensive sugar daddies in the Gulf, but our ability to counter ISIL’s local criminal enterprises is severely limited.”157 And though the fate of ISIS in Iraq and Syria is still to be determined, the group’s war chest makes it the wealthiest insurgent group in history and one seemingly determined to fight to its death.158

  CHAPTER 9

  Conclusion

  In his work on countering the financing of terrorism, Michael Freeman concludes that “without money, terrorists can neither function as organizations nor conduct attacks.”1 This rather simple statement of fact has been the basis for much of this book. Only by truly understanding how terrorist and insurgent groups raise money and how these funds are spent, can states and governments begin to formulate a strategy for countering the financing of terrorism. This book examines the challenges of combating the financing of terrorism through the analytic lens of the gray and dark economies. It also presents an assessment of how terrorist and insurgent financing bolstered operational and organizational capabilities. It concludes with implications from this examination and assessment that are relevant not only to the U.S. government, but to governments and nation-states throughout the world that recognize the importance of countering the financing of terrorism, insurgency and irregular warfare.

  CHALLENGES IN COMBATING THE FINANCING OF TERRORISM AND IMPLICATIONS

  As the case studies demonstrate, tremendous progress has been made in combating the financing of terrorism, insurgency and irregular warfare, though many challenges remain and new challenges are certain to arise. Some of these challenges will be more manageable than others, but no matter what obstacles present themselves, it is crucial to remember the lessons learned and best practices of the past several decades of CFT and to apply these lessons to confronting emerging threats like the Islamic State in Iraq and Syria (ISIS), the constellation of Al-Qaida franchises like Al-Qaida in the Arabian Peninsula (AQAP), Al-Qaida in the Islamic Maghreb (AQIM) and other terrorist and insurgent groups including Al-Shabaab in Somalia and Boko Haram in Nigeria.

  TERRORIST GROUPS ARE RESILIENT AND ADAPTIVE IN THEIR ABILITY TO RAISE FUNDS

  As demonstrated by the longevity of groups like the PIRA, the LTTE, and Hezbollah, it is clear that terrorist and insurgent groups can be highly capable and adaptive adversaries. With diversified portfolios, these groups demonstrated an impressive resiliency that made them more difficult to counter. Hezbollah is entering its third decade, with seats in Lebanon’s parliament and a sub-state military apparatus the envy of most states. Although a decapitation strike can be a highly effective approach to dealing with some insurgent groups,2 Hamas has survived the targeted assassination of several of its key leaders, due in no small part to its relatively high level of cohesion, underwritten by consistent if not always overwhelming levels of funding. In Afghanistan, the Taliban has now survived against the U.S. military for well over a decade and shows no signs of being defeated anytime soon. Even where the organization is fracturing, the most consistent threat of continuity remains the insurgents’ ability to raise money through taxing and sale of opium.3

  Combating terrorist financing, and in particular the financing of groups like Al-Qaida and ISIS, is challenging because these groups and their fund-raising schemes are ever moving targets in many cases. In response to government counter-measures, the methods of financiers and cells adjust in kind. It is a continuous cycle of adaption and counteradaptation. Even with improved financial regulations designed to combat these groups, terrorists “have simply become more adept at masking these transactions and at using intermediaries to act on their behalf.”4 Moreover, as Gomez notes, “the speed and ease with which money can be moved via the international financial system enables terrorists to move funds efficiently, unfortunately often still with relatively small risk of detection.”5 Accordingly, these groups are more adaptive because of their financing but they are also resilient and adaptive in the way that they raise funds.

  As detailed throughout the case studies, successful terrorists and insurgent organizations develop an agile organizational structure and when the opportunity arises, they turn to new technologies and other non-state actors like criminals, which in many cases can act as force multipliers. Moreover, there is evidence that terrorists and insurgents are considering and in some cases already using digital currencies like Bitcoin to launder or conceal their funds.6 Even with all of the tools that Western powers have at their disposal it remains difficult, especially as an external actor, to significantly influence local or regional economies firmly entrenched in gray and dark sectors. Western nations are structured to deal in the legal financial system. Financial measures enacted by the U.S. Department of State and U.S. Department of Treasury can be ineffective at times because those individuals designated for targeting are also in the best position to evade the tangible effects of these sanctions.7

  Terrorist and insurgent groups have also learned to diversify their funding portfolios, to the extent possible, a lesson that several prominent groups learned the hard way following the end of the Cold War, when external state sponsorship of these groups declined significantly. The PIRA overcame the loss of Libya as an external state sponsor by focusing on a range of criminal activities, a lesson not lost on both Hamas and Hezbollah as those groups attempt to deal with shrinking annual donations from Iran. Diversification provides groups with the flexibility and dexterity to shift from one method of financing to another. In some cases, terrorist groups have deliberately reduced their infrastructure to alleviate stress on their financial needs.8 As the revenue ISIS earns from the smuggling and trafficking of oil continues to dwindle, that organization may need to seriously recalibrate considerable elements of its quixotic (and costly) struggle to build a caliphate.

  While state
s correctly focus on countering the ability of terrorists and insurgents to raise funds, another element of the CFT challenge is dealing with the difficulties inherent in tracing money that is transferred and stored through online entities like Cash-U or E-Gold.9 New methods of payment are constantly emerging and new developments in information technology mean that governments seeking to combat the financing of terrorism must try to remain one step ahead. Furthermore, when charities are implicated in the funding of terrorism, it is rather easy for these organizations to simply channel funds through another organization or change the name of the subsidiary in order to avoid the suspicious of the authorities.10 A group like Hamas is able to rely on a decentralized network of charities, so if authorities in Western Europe or North America successfully curtail funds raised in those locales, Hamas can simply seek to shift the onus to raise funds to charities in Africa or Asia.

  In the case of Al-Qaida, even after fund-raisers are identified and their assets frozen, the group has been able to replace these individuals with still unknown figures in a “next man up” type environment that allows its terror network to continue operating.11 Al-Qaida takes its finances seriously and has a section of its manual, sometimes referred to as the “Manchester Document,” dedicated to topics like “Financial Security Precautions” that emphasize the need to divide operational funds into two parts, one for investment and another for active operations.12 Indeed, as discussed throughout the individual case studies, every terrorist or insurgent organization analyzed in this book dedicated some portion of its manpower to raising, storing, moving, and managing funds.