Financial Crime: What is Terrorist Financing?

What is terrorist financing? Most definitions of terrorism focus on the attacks. However, some definitions look at individuals involved in terrorist attacks. A common definition of terrorism is “the premeditated use or threatened use of extra-ordinary violence or brutality by subnational groups to achieve a political, religious, or ideological goal through intimidation of a large audience, usually not directly involved in the policymaking that the terrorists are trying to influence.”

What is terrorist financing?

Terrorist financing involves the international transfer of funds, primarily through wire transfers and electronic payments. Terrorists commit crimes and collaborate with criminals to generate funds and obtain weapons. Terrorist financing does not necessarily involve money. It can involve an exchange of goods and, even if money is used, it may not reach the terrorist or the execution cell if it is exchanged for goods.

Terrorists destroy economies, nations, and human lives using simple and relatively cheap technology. In order to successfully carry out their attacks, terrorists need financial resources. They usually use different sources of money, depending on what is available, their motivations, and the barriers they face in law enforcement. The goal of terrorism is not financing, but the pursuit of their ideological goals. Financing is used only as a means to an end.

Terrorist financing refers to the provision of funds or financial assistance to individual terrorists or non-state actors. Most countries have implemented counter-terrorist financing (CTF) measures, often as part of their anti-money laundering legislation. Some countries and multinational organizations have established lists of terrorist organizations, although there is no consistency in which organizations are designated as terrorist by each country. The Financial Action Task Force on Money Laundering (FATF) has issued CTF recommendations to its members. It has compiled a blacklist and a greylist of countries that have failed to implement adequate CTF measures.

Similar aspects involved in transnational crime

Terrorist financing is similar to transnational crime because it has similar aspects, including:

• The involvement of rational actors;
• The use of extreme violence, such as murder, blackmail, kidnapping and threats of retaliation;
• In violation of the rules established by public institutions and the state; and
• Usually operating covertly.

What is Terrorist Financing? Terrorist financing can involve the international transfer of funds, through wire transfers and electronic payments. In most cases, terrorists commit crimes and collaborate with criminals to generate funds and obtain weapons. It is also common for terrorists to engage in drug trafficking, arms trafficking, smuggling large amounts of cash and other illegal substances, gemstone trading, or kidnapping to generate money.

Terrorist networks are often flexible and decision-making is decentralized. Unlike transnational criminals, whose primary goal is to make a profit, terrorists are driven by ideological goals and have arbitrary objectives.

Terrorist Financing Routes

To successfully carry out their attacks, terrorists need financial resources. They usually use different sources of funds, depending on the available sources of funds, their motives, and the barriers they encounter with law enforcement. Terrorists rely on funds from both legal and illegal sources. Funds from legal sources include charitable contributions and donations. Funds from illegal sources are mainly linked to criminal activities.

Financing of terrorist organizations

The purpose of terrorism is not financing, but the pursuit of ideological goals. Financing is a means to an end. Financing can be direct or indirect.

Carrying out the attacks naturally requires both direct and indirect costs. Direct costs are used to carry out the terrorist attacks, while indirect costs are used to finance the terrorist organization and further promote its ideology.

In addition to the focus on the major attacks, money is also needed for other activities, such as purchasing weapons, training new terrorists, paying bribes, forging documents and seeking support through the media in the form of propaganda.

Money laundering

What is Terrorist Financing? Terrorist financing and money laundering are conceptual opposites that are often linked in legislation and regulation. Money laundering is the process of making money obtained from criminal activities appear legitimate so that it can be reintegrated into the financial system, while terrorist financing is concerned with the use of the funds rather than the source of the funds.

The forensic literature has published an in-depth study of the symbiotic relationship between organized crime and terrorist organizations that have been discovered in the United States and other countries, referred to as crime-terror nexus points. The article by Perri, Lichtenwald, and MacKenzie emphasizes the importance of multi-agency task forces and the tools that can be used to identify, infiltrate, and dismantle organizations operating along the crime-terror nexus points.

One type is to smuggle large amounts of money and place them through companies that use large amounts of money. They are now also transferring money through the new online payment systems. They are also using trade-related schemes to hide money. However, the older systems have not collapsed. Terrorists continue to move money through MSBs/Hawalas and international ATM transactions.(19) Charities are also used in countries where controls are less strict.

Final thoughts

What is Terrorist Financing? AML and CTF both use the concept of Know Your Customer (KYC), which requires financial institutions to perform personal identification and ensure the legality of the transaction in question. However, this methodology is not preferred by banks, lawyers or other professionals who may witness a money transfer or legal assistance taking place, due to the business and client relationships that can be jeopardized by the process of personal identification. This can strain relationships between long-term clients who need to prove their identity and respected members of society who do not want to be asked for personal identification every time.