Examples of terrorist financing

There are examples of terrorist financing. The funds used for terrorist financing can come from a perfectly legal and legitimate source and have an illegal and criminal background. Let us begin by exploring some practical examples of legitimate sources.

Examples 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 may face terrorist financing risks.

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

Legitimate sources

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.

There are certain similarities when you compare terrorist groups to European ones. For example, the Provisional Internationalized Resource Identifier and Loyalist groups in Northern Ireland and both of these were legally run drinking clubs or pubs. Or at least they were later legally run, when they got the right licenses and reported their income to the government. But they started out as illegal businesses.

Illegal sources

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 valued at an average of US$1.6 trillion to US$2.2 trillion annually – and terrorists certainly play their part in that.

Some terrorist groups are involved in drug trafficking to generate money. It is estimated that 80 percent of European drugs 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 smuggling goods. For terrorist groups, as for other money launderers, the attraction of gemstones and precious metals is that they are small but highly valuable, have their value secure, and are difficult to trace.

What is smuggling?

Smuggling creates profitable opportunities in places with different tax rates, and 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 of the more unusual cases of smuggling, the Provisional IRA smuggled pigs across the border from Northern Ireland to the Republic of Ireland. The IRA openly exported the pigs to the British side of the border, collected an export subsidy of eight pounds per pig, and then smuggled the pigs back to Ireland and repeated the operation with the same pigs. It made $2 million in one year and, as one scholar notes, “some very tired pigs.”

Final thoughts

Terrorist financing is often difficult to detect because it follows only a few consistent patterns. For example, an investigation into the financial transactions of several known terrorists and hijackers found that most individual transactions were not unusual. The account holders appeared to be international students who received money to finance their studies; therefore, the transactions would not be flagged as suspicious transactions that would require additional scrutiny by the financial institutions involved.