Cash, Conflict, and… Crypto? AQAP's Financial Profile

Group Profile

Al Qaeda in the Arabian Peninsula (AQAP), the organization that claimed responsibility for the 2015 Charlie Hebdo attacks, employs a diverse financial strategy to fund its activities. Operating from Yemen, AQAP's revenue streams include kidnapping for ransom, smuggling, and online crowdfunding. The group directs its finances not only towards sustaining its operations locally, but also invests in recruiting, propaganda, and attempts to expand its influence abroad. These financial mechanisms, as further detailed in this article, are vital for its sustainability and execution of high-profile attacks.

Origins and Operations

Headquartered in southeastern Yemen, AQAP is one of Al Qaeda’s (AQ) strongest affiliates. AQAP was established in 2009 through the merger of AQ’s Yemeni and Saudi Arabian branches. However, the organization's historical roots extend back to the 1990s when mujahideen fighters resettled in the region after the Soviet-Afghan war. Despite many integrating into Yemeni society, a faction remained committed to pursuing violent jihad. The group’s official formation was precipitated by Saudi Arabia's expulsion of AQ members into Yemen.

AQAP has been responsible for attacks within Yemen and against Western targets, including the 2009 attempt to bomb a Detroit-bound airplane and the 2015 Charlie Hebdo attacks in Paris. Despite facing retreats due to Yemeni and US military pressures, AQAP remains a significant terrorist threat with a current strength of around 3,000 fighters based in Abyan, Ma’rib, Hadramawt, and Shabwa.

Figure: Yemen: Key Actors and Approximate Areas of Influence

Source: Congressional Research Service, February 2024

Raising Funds

AQAP has a diverse range of financing strategies but mainly uses criminal activities to fund its militancy. Up to half of its revenues stem from kidnapping for ransom, focused on targeting foreign employees of international organizations. In 2011, AQAP received $9 million for the release of three French nationals, a ransom paid by the French government. In 2012 and 2013, the group secured $20.4 million for freeing four Europeans, with the payments facilitated by Oman and Qatar on behalf of European governments.

As another stream of income, the group has robbed banks, obtaining an estimated $100 million from a central bank branch and an agricultural bank. The group then offered to sell or exchange the stolen currency at a discounted rate of $600,000 per $1 million stolen. It has also robbed smaller targets, such as a post office to obtain $140,000.

AQAP also participates in regional trade and smuggling activities. AQAP has acquired weapons and ammunition during raids on military bases and training camps, then sold them to Yemeni tribes and dealers. The sale of historical artifacts, petrochemicals, and counterfeit currencies looted from territories under their control also contributes to their income.   The group has even ventured into real estate, buying and selling land to earn money.

AQAP’s extortion efforts have also generated revenues. AQAP targeted national companies, demanding $4.7 million from each of the three largest national mobile phone businesses and $1.4 million from the national oil company. During its control over Mukalla and its coastline, AQAP exploited its position to impose "taxes" on shippers and traders, generating up to $2 million per day from these activities.

Finally, external donations and strategic alliances form key components of AQAP's funding model.  The group secures financial support through disguised charitable contributions,  support from Yemeni tribal members, and remittances from relatives of AQAP members living abroad. AQAP also benefits from the broader AQ network, receiving both funds and arms from affiliated groups. A 2010 letter revealed Osama bin Laden's direct instruction for Al Qaeda in the Islamic Maghreb to fund AQAP. Further extending its reach, AQAP has leveraged Somali militants travelling to Yemen to fight alongside them.

Using Funds

With an operating budget of approximately $10 million per year, AQAP strategically channels its resources to sustain and expand its influence through military operations, social governance, and propaganda efforts. The group has invested in weapons, guns, and explosives to facilitate its terrorist operations and kidnappings, mostly targeting counter-terrorism campaign leaders. Most recently, AQAP gained possession of several drones and created an accompanying specialized unit to operate and weaponize them.  Additionally, AQAP has allocated funds for the assassination of local officials that oppose the group, attempting to reduce dissent and bolster its control over territories. Finally, AQAP also uses funds to facilitate Al-Shabaab’s operations by providing them with regular financial, logistical, and ideological support.

AQAP also engages in social activities to showcase its governance and humanitarian efforts to the Yemeni community. The group frequently shares images of its members repairing bridges and roads in areas under its control. Videos have also surfaced of hospital officials stating they received funds from AQAP for staff salaries. In April 2015, upon capturing Mukalla, AQAP allocated a $3.7 million budget to the city council for governance purposes, covering public salaries and basic services like drinking water, electricity, and fuel, using funds from the looted central bank. Although AQAP did not directly administer Mukalla, it collaborated with tribal militias to maintain order and prevent looting, additionally running the Mukalla seaport and contributing to food distribution, infrastructure development, medical supply provision, and organizing community events. By late 2015, AQAP had formed a religious police to enforce Sharia in Mukalla.

The group also uses funds to pay fighters and their families. AQAP offers salaries that are higher than those of government soldiers—$200 monthly compared to the $140-150 received by regular Yemeni troops. AQAP has also provided some compensation for civilians it killed, such as providing a cheque for $56,000 to four families of civilians killed during an attempted robbery by the group.

On the propaganda front, AQAP has significantly revitalized its media strategy,  using the October 7 attacks to incite individuals worldwide. The group has been using funds to actively publish magazines and make media appearances to spread its ideology.

Storing and Moving Funds

AQAP uses a mix of cash, financial services, and digital currency. Primarily, AQAP uses cash to store and move funds.  However, the type of currency fluctuates due to Yemen's use of both old and new rials. Additionally, the group's physical cash storage has been targeted, notably with a US airstrike destroying up to $42 million. The vulnerability of physical cash storage sites has likely forced an adaptation in this practice to other methods, including banks, financial institutions, and even cryptocurrency.

AQAP also uses financial institutions to store and transfer money. Although many banks in Yemen have closed due to the ongoing regional instability, some money exchanges remained operational, processing Saudi riyals to pay AQAP's fighters. During AQAP's occupation of Mukalla, three banks and three exchange houses stayed open, facilitating international transactions. One such exchange, the al-Omgy Money Exchange, which has 95 branches across Yemen, held an AQAP account and was used by the group to manage funds from extortion and taxation, and to pay for AQAP’s organizational expenses. Entities linked to AQAP, including charities, have also publicly shared their Yemeni bank account details for fundraising purposes.

For large-scale money transfers, AQAP has depended on couriers and hawaladars. In a notable case involving the US, three individuals pleaded guilty in 2018 to concealing the provision of thousands of dollars to AQAP member Anwar Al-Awlaki.  They used a combination of bank transfers, money service business transactions, and physically transporting cash.

AQAP has also been linked to Bitcoin financing, with the Ghost Security Group reporting that AQAP funded the 2015 Charlie Hebdo attack through Bitcoin.  A Bitcoin wallet, allegedly containing $3 million in Bitcoin, was associated with financing the AQAP operation.  However, these claims have not been corroborated, and cryptocurrency use in Yemen is limited due to the lack of necessary technical infrastructure, raising further questions about the utility (and adoption) of cryptocurrency by AQAP.

Managing Funds

The group operates through a hierarchical framework, yet its operations are compartmentalized and decentralized, with various leaders overseeing specific subdivisions such as doctrinal, propaganda, military, security and financial subdivisions. The financial division was once headed by Khalid Al-Marfadi, and despite the disbandment of the finance committee due to leadership losses, AQAP has maintained financial operations by assigning responsibilities to individual roles and independent cells.

The group’s approach to security is cautious, with an increasing reliance on a decentralized structure that allows cells to function autonomously, connected through designated individuals responsible for security coordination. This structure extends to collaborative efforts in smuggling weapons, notably with Al-Shabaab, and even includes occasional alliances with disparate groups such as the Houthis and ISIL-Yemen.

AQAP's recent propaganda modernization efforts have been attributed to the leadership of Jawad al-Abi and Musab al-Adani, who stepped in following significant losses in their media wing.  The influence of AQ over AQAP is pronounced, with the son of a prominent AQ member, Khaled Mohammed Salahaldin Zidane, playing a vital role in delivering directives, overseeing recruitment, and managing internal conflicts within AQAP. His operations, especially in southern Yemen, are safeguarded by security leader Ibrahim al-Banna.

The financial network of AQAP also involves external actors. Nayif Salih Salim al-Qaysi, an influential political leader, has been instrumental in securing funds and facilitating the group's territorial expansion within Yemen, along with the transfer of arms. Similarly, Ghalib Abdullah al-Zaidi has been a key figure in providing weapons, funding, recruits, and even sanctioning AQAP-led terrorist operations in the Marib Governorate.

Obscuring Funds

AQAP uses various methods to obscure its financial activities, such as exploiting financiers and charitable organizations. Key figures such as Abdallah Faysal Sadiq al-Ahdal have been designated by the US for providing financial support to AQAP. Al-Ahdal operated the Yemen-based Rahman Charitable Organization (RCO), which was set up to raise and transfer funds for AQAP. Since 2010, Al-Ahdal has been implicated in using the RCO as a front to fundraise for AQAP, forming part of what is described as an AQAP "banking network" involved in money laundering.  He reportedly also used the al-Omgy Money Exchange to move money for foreign fighters. Furthermore, the US has also designated Yemeni politician Abdulwahab al-Humayqani, who used his status to fundraise through charities, which in turn allegedly channel funds to AQAP. This system of using charities and exchanges to move and launder money effectively conceals the flow of funds, making it more challenging for counter-terrorism efforts to track and intercept AQAP’s financial operations.

Beyond these fronts, AQAP does not necessarily require obfuscation techniques as the group engages in overt criminal activities, such as extorting import levies at key seaports. However, the financial flows can become obscured as the fuel often reaches northern markets controlled by opposing forces after being sold by a chain of intermediaries.

Dwindling Finances but Still the Strongest Terrorist Group in Yemen

Facing increased counter-terrorism pressure and leadership losses, AQAP is encountering significant financial and operational challenges, impacting its ability to pay members and finance operations. Despite the difficulties, the UN reports that as of January 2024, AQAP remains Yemen's strongest terrorist group. To diminish AQAP's threat, it is crucial to disrupt its financial networks through improved financial surveillance, stricter sanctions, and targeting online and external fundraising mechanisms. Disrupting procurement networks (for weapons and goods) would also be beneficial for disrupting AQAP operations. These targeted measures could severely limit AQAP's operational capabilities and reduce its capacity for future terrorist activity both in Yemen and on a global scale.

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