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Globalization and Terrorism Funding

Money has never flowed around the world with such ease as it does today. Markets, banks, and economies worldwide are all interconnected allowing for currencies to change and to move fluidly and consistently. This constant movement of funds is just a small example of globalization. While many hail this bonding of currencies and global economies, there lies a darker reality under the surface. It has never been easier for funds to be used to provide training, weapons, and equipment by those whose sole purpose is kill, maim and cause terror around the world. In search of other revenues these terrorist groups have also embraced the new global economy through criminal actions to fund their operations. As the world interconnects and expands through communication networks, international communities, and world travel, the dark under surface of terrorist financing will expand with it. A harsh reality of globalization is that the funding of terrorism has not only become easier but in the future will be impossible to halt.

Historical Context.

With the collapse of the Soviet Union in 1991 there was a major shift in the funding of terrorist organizations. Pre-1991, state sponsored terrorism was the primary means for terrorist organizations to obtain funding, with the majority of that funding coming primarily from the Soviet Union or one of its allies. Also pre-1990s one could argue that most terrorist organizations were regional and not global. As terrorist groups focused on issues that were tied to states and their policies. However with the advent of the information age, more and more terrorist organizations developed international goals and wanted to have a global impact. Because these goals transcend borders and state politics, terrorist organizations can no longer rely on state benefactors for funding. Fortunately for these groups, the means exist to not only generate funds but to transfer those funds around the world with ease.

Most terrorist activities do not require significant amounts money to conduct operations. But training and logistics do require a budget. Two major funding resources are available to terror organizations: First, criminal activities, some of the more lucrative of these activities include, international drug trade, poaching, black market oil sales, and kidnapping. Second, are charitable donations. These donations can take the form of legitimate transfer of money from private donors sympathetic to the cause and schemes such as fake charity organizations. No matter how the money is obtained the money then needs to be moved where it is most beneficial to the terrorist group. This can occur through traditional methods such as Hawala or using Online Payment sites.

Criminal Activities

All international criminal organizations have benefitted from globalization. The ability to hire personnel, provide illegal services, move money, and transport goods have been facilitated through the interconnectivity of globalization. Criminal markets and networks have always existed but now they are more complex and expansive given transportation and communication technology. Terrorist organizations seeing the lucrative nature of these networks have entered the game. They do this either by taking over an existing network or becoming partners with the criminals themselves.

Illegal Narcotics Trade. According to statements made by the DEA in 2013, “approximately 50 percent of the foreign terrorist organizations have a connection to drug trafficking.” (Cohen and Maltz) Some of the more well known organizations include; Hezbollah, Al-Qaeda, and Al-Shabaab. Currently the global drug trade brings in around 400 billion dollars per year. If even a small percentage of this amount is controlled by terrorist organizations, it increases their survivability and capability greatly.

Noticeably drug production takes places in countries with weak governments. Afghanistan, Columbia, Mexico, Laos and Cambodia are all major illegal narcotics producers and all have governments that have difficulty controlling their own territory. Drug Cartels operate with impunity in these parts of the world; their products are then shipped worldwide. This lack of governance also makes it easier for terrorist groups to operate and establish bases of operation close to one of their money producing endeavors.

In some cases drugs have become a form of currency as itself. “The Madrid bombing (2004) network was mainly financed through trafficking in illicit drugs, which were also traded for industrial explosives stolen from a mine in Asturias, in northern Spain, by a criminal band of native Spaniards.” (Reinares) In the case of Madrid, illegal narcotics were part of the financing and payments for activities. The international drug trade existed long before many of the current terror groups rose to prominence. However by using existing networks these terror organizations expanded their global footprint and capacity. This was only made possible through the ever increasing connectivity of globalization.

Poaching. As part of the diversification process of financing operations, African terrorist groups have started to participate in the highly lucrative illegal ivory trade. According to a Report in the Scientific American, “a kilogram of elephant ivory can fetch $2,000 on the black market; the same amount of rhinoceros horn can command $65,000” (“How to stop the illegal wildlife trade from funding terrorism.”) An estimated “30,000 African elephants are slaughtered every year, more than 100,000 between 2010 and 2012.” (Christy) There is a direct tie to this slaughter, “in 2012 the terrorist group Al-Shabaab generated up to 40 percent of its funding from illegal ivory. (“How to stop the illegal wildlife trade from funding terrorism.”) It is not just Al-Shabaab that uses ivory trade to finances. Joseph Kony, of the Lord’s Army, was known to finance his operations through illegal ivory sales.

Similar to the illegal drug markets around the world, ivory smuggling functions very similarly. An illegal high demand product is harvested in a weak country. The product is then transformed and shipped to be marketed. These markets are of course in more well developed countries that are willing to pay top dollar for these illegal items. The number one and two leading purchasers of ivory are China and the United States.

Kidnapping/Ransom. The opportunity for lucrative payoffs from kidnapping is a direct result of global travel. Never before have so many first world citizens traveled around the world for either business or adventure. Each of these first world citizens represents serious possible source of income for terrorist organizations. “In 2003 the kidnappers received around $200,000 per hostage, now they are netting up to $10 million, money that the second in command of Al-Qaeda’s central leadership recently described as accounting for as much as half of his operating revenue.” (Calimachi) Al-Qaeda affiliates have expanded throughout the Middle East and Africa, covering larger regions, because of that, the opportunity to profit from kidnapping is on the rise. Average tourists will most definitely change their travel plans if they view a country as a high threat region, but business travelers may not have a choice. International companies have to send their employees into areas that might be unstable. Business and commerce must go on, it is all part of the international risk that companies take. Also, in Europe there is a mindset for adventure tourism. In spite of warnings, tourists enter into high threat regions. The expanding need for international travel has led to a windfall for terrorist groups, “Al-Qaeda and its direct affiliates have taken in at least $125 million in revenue from kidnappings since 2008.” (Carlimachi)

Black Markets (Oil). Whether you call ISIS an insurgency or terrorist group, its primary funding method needs to be mentioned. Since its inception oil drilling and production have been ISIS’s number one means of financing. “Isis’s main oil producing region is in Syria’s eastern Deir Ezzor province, where production was somewhere between 34,000 to 40,000 barrels a day in October (2015).” (Solomon, Kwong and Stevens 1) Depending on the price of oil this could lead to profits as high as 1.5 million dollars day. This high production allows ISIS numerous options for financing.

Whether the oil is sold to locals who use it for their own purposes or the oil is sold abroad is irrelevant. From an analysts perspective it is fascinating because you have a major terrorist/insurgent group participating in the trade and selling of a global commodity. ”Syrian (oil) smugglers say it has been declining in recent months, not because of tighter border controls but because the sharp fall in international oil prices make it unprofitable.” (Solomon, Kwong and Stevens 5) ISIS like any multi-national corporation or country is subjecting themselves to the highs and lows of the world energy needs.

Donations

Throughout the Muslim world, donations or alms are a very important part of the religious culture. Every Muslim is taught to give and support their fellow Muslims. Supporting of a fellow Muslim in need however, can mean supporting him or her in the Jihad or fight for Allah. These donations can come from any part of the world. A practicing Muslim in Indonesia can donate to a Muslim charity in India. These funds can be transferred through bank accounts, checks, or other means discussed later on.

Fake International Charity Organizations. Praying on the good natured willingness of people around the world, terrorist organizations are setting up international fake charities. This is not a new process, “Many of the charitable and service organizations serving as fronts for international terrorist groups today grew out of the network of organizations established in the 1980s to provide funding, materiel, recruits and more to the mujahideen fighting the Soviets in Afghanistan.” (Levitt) In December of 2004 a charity foundation in Chicago was raided, “the foundation’s videos and literature glorify martyrdom, and, according to the charity’s newsletter, seven of its officers were killed in battle last year in Chechnya and Bosnia.” (Levitt) The interconnectivity of fake charity organizations linked to terrorist groups is proof that money can be obtained from of anywhere around the world.

These Fake Charities are not static in their operations, they are technologically savvy. False foundations use Facebook, Twitter and blogs to advertise. Then they use private messaging applications like Wickr to communicate with potential donors. The donations are then, through private channels, moved around the world.

Private Donors. The opposite of the Fake Charity Organizations are the donors that are knowingly supporting a given terrorist cause. To aid in this process specific individual will work as facilitator to organize donations. For example, “in Kuwait, a family of parliamentarians—including Kuwaiti member of parliament Mohammed Hayef al-Mutairi—has raised funds for jihadist groups with direct ties to ISIS.” (di Giovanni, Goodman, and Sharkov) Banking processes in some countries have made this even easier. Though states may not be directly tied to terrorist groups, relaxed finance and banking regulation allows citizens of those countries to make large donations without any form of tracking.

Global Terrorism Money Movement

One cannot talk about terrorist funding without discussing the means with which money is moved around the world. “For terrorist groups to be effective, they must be able to move money from its origins to the operational areas where it is needed.” (Freeman & Ruehsen) All the criminal activities in the world cannot help a terrorist organization unless it can move those funds to where it is most beneficial. Those funds can be transferred in different ways but looking at two of the more common methods will help tie into the overall theme of globalization.

Online Payment Systems. In reference to terrorist financial transactions Michael Jacobson wrote, “transferring funds electronically using the internet to initiate transactions has become increasingly common through services such as PayPal.” (19) Terrorist organizations have embraced more modern means of financial transactions. It is not just PayPal, now there is Google Wallet, ACH, ipay and hundreds of others. Even though these systems need to be tied to some form of bank or credit card account they are still less prone to monitoring by governments because they are not tied to one specific nation. Currently Paypal only reports to the IRS in the United States a volume of payments or transactions that surpass twenty thousand US dollars. Using easily obtained credit cards through fake identities, one person can have hundreds of different accounts, easily transferring money around the world with little or no government oversight.

Hawala. Hawala is ancient means of transferring without ever actually exchanging actual funds. Developed long before modern technology and western banking practices, Hawala was a means to move money without having to move large sums of cash or coins. Originally part of everyday business practice Hawala is still used for business but it is also part of remittance systems around the world. Hawala is popular with terrorist organizations because of it requires no legal documentation to conduct a transaction.

Hawala works by a person (A) wanting to give money to someone (D) overseas. A approaches a hawala broker (B) that has a network of associates or other hawala brokers (C). All of these associates have numerous funds available to them. A gives the money to B, B then takes the money for a small commission. B then contacts C and informs him of the money that needs to be delivered. C then takes the money and delivers it to D. At this point B owes C money, A and D are no longer involved in the transaction. Through later business dealings or money transfers B and C will settle the debt. At no time during this process are promissory notes signed. “The components of hawala that distinguish it from other remittance systems are trust and the extensive use of connections such as family relationships or regional affiliations.” (Jost & Sandhu 5.) B and C might keep small amounts of paperwork but all records of transactions are between themselves not A and D.

What was an ancient technique designed for cultures that eschewed banking practices, has now embraced modern technology. Hawala transactions are still take place in the ancient way of couriers for absolute confidentiality but that majority of business is now conducted by phone, text, or email. In some ways hawala is a form of glocalization; it is a global service designed for local markets relying on old traditions using modern technology.

Conclusion

In the strange world of terror financing where by normal standards global connectivity is “thin”, this is where international terrorism financing flourishes. Criminal enterprise comes to life in regions of failed states and no borders. Drugs, kidnapping, poaching, and black marketing are all part of the means to create funds for terrorist groups. But would these things be so lucrative without globalization? Analyzing the above activities the answer is simple; no. International crime with its high profit margin exists because of the ease of transportation and technological communication.  By creating networks and relationships in these areas terrorist financing and funding actually are part of globalization increasing its density in parts of the world.

Thomas L Friedman was right, “the world is flat.” (1) A small terrorist organization has just as much chance to earn high profits as a larger more well known organization. Millions of dollars can move around the world with the push of a button and no one truly knows what the money will be used for. An elephant can be slaughtered in Africa for ivory or a tourist can be kidnapped in the Middle East, either way globalization is giving terrorist a level playing field to obtain funds. The world’s propensity for violence for a cause has only increased over the years.  Moise Naim in Foreign Policy pointed out that, “that the number of people killed by terrorist rose from 7,000 in 1995 to 25,000 in 2006.” (32) The networks that connect the globe are increasing but so are the networks of terrorist operations and their money making endeavors. If globalization is an unstoppable reality of the future then, so are the terrorist organizations and their ability to make money.

Notes

1. Even though different sources have used diverse spelling of terrorist groups, names were standardized for continuity and flow.

Works Cited

Reinares, Fernando. “The Madrid Bombings and Global Jihadism.” International Institute for Counter-Terrorism. Web April 17, 2010 Web

Jost, Patrick M. & Sandhu, Harijit Singh. “The Hawala Alternative Remittance System and Its Role in Money Laundering.” Financial Crimes Enforcement Network. PDF File.

Freeman, Michael & Ruehsen, Moyara. “Terrorism Financing Methods: An Overview.”  Perspectives On Terrorims Vol 7. No. 4 (2013).  Web.  2013

Hernandez, Joel “Terrorism, Drug Trafficking, and Globalization of Supply.” Perspectives On Terrorsim Vol 7. No. 4 (2013) Web. 2013

di Giovanni, Janine, Goodman, Leah McGrath, & Sharkov, Damien.  “How Does ISIS Fund Its Reign of Terror?”  News Week Web. Nov 6. 2014

Michael Jacobson. “Terrorist Financing on the Internet”  CTS Sentinel June 2009. Vol 2. Issue 6 Web June 2009.

Ritzer, George.  “Globalization: The Essentials.” West Sussex: Wiley-Blackwell,  2011. Print.

“How to stop the illegal wildlife trade from funding terrorism.” The Scientific American Web Dec. 1 2013

Cohen, David, Under Secretary of Treasury for Terrorism and Financial Intelligence; and Maltz, Derek,  Drug Enforcement Administration, Special Agent in Charge of the Special Operations Division. Combating Illicit Finance in the Middle East Washington, DC  Web.  April 23, 2013

Solomon, Erika, Kwong, Robin and Bernard, Steven.  ” Inside Isis Inc: The journey of a barrel of oil.”  Financial Times. Web February 29, 2016

Christy, Brian. “How Killing Elephants Finances Terror in Africa” National Geographic  Web Aug. 12 2015

Callimachi, Rukmini “Paying Ransoms, Europe Bankrolls Qaeda Terror” New York Times. Web. July 29, 2014

Levitt, Mathew.  “Charitable Organizations and Terrorist Financing: A War on Terror Status-Check” The Washington Institute. Web. Mar. 19, 2004

Friedman, Thomas L. “It’s a Flat World, After All” New York Times Web April 3, 2005

Naim, Moises “Globalization”  Foreign Policy Think Again March/April 2009 PDF

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