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How Terrorists Raise Money
Illicit Money launched in September! As part of the lead-up to the launch, I’m doing short excerpts from the book specifically focused on the six financing mechanisms that I identify and explore in Illicit Money. I hope you find this interesting, and don’t forget to order your copy of the book today!
And to celebrate the launch and thank you all for your support, I’m giving away a copy of my book to one lucky subscriber. To participate in the give-away, you have to upgrade your subscription to a paid subscription before the end of October. If you’re already a paying subscriber, you’re automatically entered into the draw.
Raising Funds - Donations
Terrorists need money to buy weapons, conduct attacks, and sustain their organizations (among many other needs), and they raise some of this money from donations from state sponsors, wealthy individuals, and support networks. Terrorists also receive donations from members—cells and individuals donate personal funds to support the group, cell, or activity (self-financing). Terrorist organizations obtain donations from a diverse spectrum of supporters; these donations form the backbone of many groups’ funding strategies and are often the first type of funding these groups generate as they set up their terrorist organizations. The various categories of donors are not always entirely distinct. For instance, a wealthy donor might be part of a broader support network or might also be within a government funding terrorism (taking part in state sponsorship of terrorism). Despite this overlap, these categorizations remain useful because they provide a typology to explain the mechanisms through which terrorists obtain funds. This understanding assists in designing effective measures to counter terrorist financing.
Donations alone rarely suffice to support a terrorist organization for long. Terrorist organizations might receive some of their initial funding from donations, be they from state sponsors, wealthy individuals, support networks, or self-financing, but their fund-raising methods diversify quickly. Terrorist actors seek to diversify their sources of funds and enhance their resilience to counterterrorist financing efforts, while at the same time ensuring they are not beholden to any particular donor. The type of terrorist entity matters in terms of donations: organizations receive all types of donations, whereas terrorist cells and individuals primarily benefit from self-financing. There are no structural impediments to cells and individuals receiving state sponsorship or support from a donor network, but in practice this is rare.
Terrorist organizations, cells, and individuals use all means at their disposal to raise funds, including donations from state sponsors, wealthy donors, support networks, and self-funding. Determining which groups have used specific methods can help to assess how diversified their fund-raising methods are and where their financial vulnerabilities lie; this might assist in prioritizing counterterrorist financing activities. Identifying terrorist donation sources can also provide critical leads for counterterrorist financing investigations and actions. For terrorist organizations, state sponsors are the top source of donations, followed by wealthy donors. Identity-based support networks are also important for organizations, whereas self-financing is less of a factor.
As part of their strategy of diversification, terrorist groups, cells, and individuals raise money by exploiting different types of organizations and organizational structures. Terrorists divert funds from legitimate and criminal enterprises including other terrorist groups (through patronage), nonprofit organizations including charities and charitable causes writ large, businesses and investments, and cultural activities and groups. The use and abuse of these organizational structures facilitates terrorist fund-raising through the provision or diversion of funds and obscures the sources and destinations of funds for both operational and organizational purposes.
Terrorist organizations invest money in and start businesses related to the economic activity in the area of their operations. If farming is a significant source of funds in their area, they invest in and run farming businesses. If economic activity is more oriented toward the financial sector, real estate, or other types of businesses, then that is what the terrorist groups pursue. Businesses with several different benefits to the terrorist organization are likely to be more appealing than other types of businesses. Determining the main sources of economic activity within an area of operations for a terrorist group, along with focusing on businesses with multiple benefits for terrorist groups, might allow for the proactive identification of the types of businesses terrorist groups invest in and manage. The LTTE is illustrative. It had one of the most well-diversified fund-raising strategies in terms of the use of businesses. Part of the reason the group was able to diversify to this extent is that it had members is a wide variety of countries, which meant the group was able to take advantage of local economies around the world, finding fund-raising opportunities in a wide variety of sectors. This spread out, diversified financial portfolio might well be something that other terrorist organizations seek to emulate.
Criminal Business Models
Terrorists have also developed or exploited a variety of criminal business models to raise funds for their activities. Many of these business models also have peripheral benefits that allow for the movement of goods and personnel. These business models include taxation, extortion; and protection rackets; kidnapping for ransom; drug trafficking; piracy; illegal gambling; and counterfeiting of goods and currency. In some cases, terrorist organizations have also developed trafficking and smuggling networks of people and other goods and have been involved in maritime piracy, gambling, and prostitution rackets. These business models are more elaborate, sustained, and organized than the other criminal activities terrorist groups, cells, and individuals engage in, described in detail in Chapter 5 of Illicit Money. Criminal business models allow the terrorist actors to raise funds but, by and large, also require existing criminal networks or the development of parallel criminal networks, supplemental to their main terrorist activities. These business models are primarily the purview of terrorist organizations, but cells and individuals can occasionally be involved in these activities as well.
Fundamentally, terrorists, regardless of whether they are organizations, cells, or individuals, raise money from the economic activity in their area of operations. For some, this involves criminal activity, while for others, this involves legitimate funds diverted for terrorist purposes. Understanding the structure of the economy where terrorists operate, and what sources of funding they can exploit, can help predict the avenues that terrorists might use to raise funds.
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