Examples of terrorist financing: guidelines for risk assessment

What are the examples of Terrorist Financing? A recent article from the International Centre for Counter Terrorism explained how slavery became important in contributing to the political, military and financial growth of terrorist organisations.

Slavery, along with human trafficking, is seen as one of the main sources of financing for terrorist organisations.

But first the most important thing. The funds used for terrorist financing can come from a perfectly legal and legitimate source or from an illegal source.

Examples and definitions of terrorist financing

Any crime that generates profit can be used to finance terrorism. This means that even if the risk of a terrorist attack is low, a country can face terrorist financing risks and there are examples of terrorist financing.

Terrorist financing can come from a variety of sources, including (but not limited to) small-scale fraud, kidnapping for ransom, the exploitation of non-profit organizations, the illicit trade in commodities (such as oil, charcoal, diamonds, gold, and the narcotic drug ‘captagon’), and digital currencies.

We can help prevent future attacks by disrupting the flow of terrorist money and gaining insight into the financing of previous attacks.

Let’s start by exploring some practical examples of legitimate sources and examples of terrorist financing

Terrorist financing through legitimate companies

Terrorist groups often operated legitimate businesses. Some of the largest Islamic terrorist groups operated farms that grew peanuts and produced honey. They also operated trading companies, tanneries, furniture-making businesses, and even bakeries.

Other examples of terrorist activity from the past decade include a construction and plumbing company, a used car dealership and workshop, a fishing company and a manufacturing company.

Even professional services firms are not happy about being hired by terrorist groups. There are examples where they have operated investment companies and even an accounting firm.

If you compare terrorist groups to European ones, there are certain similarities. For example, the Provisional IRA and Loyalist groups in Northern Ireland legally operated drinking clubs or pubs. Later they became legal when they got the right licenses and reported their income to the government. But they started out as illegal businesses.

Terrorist financing through illegal activities

This brings us to the illicit and criminal sources of terrorist financing. In one way or another, most terrorist groups rely on transnational crime. Transnational crime is a global business worth an average of $1.6 trillion to $2.2 trillion annually – and terrorists certainly have their share of that.

To generate money, some terrorist groups are involved in drug trafficking. It is estimated that 80 percent of drugs in Europe have a connection with terrorist groups. Certain terrorist groups are also involved in the smuggling of people from Asia to Europe.

Terrorist groups are also heavily involved in the smuggling of goods. For terrorist groups, as for other money launderers, the attraction of gemstones and precious metals is that they are small but very valuable, have their value secure and are difficult to trace.

Smuggling creates lucrative opportunities in places with different tax rates. It is also used directly by terrorist groups in countries subject to sanctions. In one case, a member of a terrorist group bought cigarettes in North Carolina, where taxes were low, and then sold them at a discount in Michigan, where taxes were higher. The scheme generated an estimated $3.7 million over several years, with at least some of the profits sent back to the Middle East.

Smuggling also has a history in terrorist groups that originated in Europe. In one rather strange smuggling case, the Provisional IRA smuggled pigs across the border from Northern Ireland to the Irish Republic. The IRA openly exported the pigs to the British side of the border, collected an export subsidy of eight pounds per pig, then smuggled them back to Ireland and repeated the whole operation with the same pigs. This generated $2 million in one year and, as one scholar notes, “some very tired pigs.”

Countering terrorist financing

Terrorist financing has been a common financial crime for over a decade and authorities are keen to crack down on it at all costs. After the September 11 terrorist attacks in the United States, it became a major political issue and has weighed heavily on the minds of those involved in the financial sector ever since.

A series of laws and regulations have been enacted to curb terrorist financing, and these are collectively referred to as counter-terrorism financing policy (CTF). Under these policies, most financial institutions must comply with a number of strict requirements, including monitoring transactions and behavior, conducting proper customer due diligence, and maintaining appropriate records.

Final thoughts

Terrorist organizations require funds to operate and carry out terrorist acts. Terrorist financing refers to the means and methods that terrorist organizations use to finance their operations. This money can come from legitimate sources, such as corporate profits and charitable donations. Terrorist organizations can also raise funds through illegal activities such as arms, drug, or human trafficking, or kidnapping for ransom. To be aware, examples of terrorist financing are important to know.