Terrorist networks are adapting their financing methods to circumvent new anti-terror laws passed after 9/11, say Michael Jacobson and Matthew Levitt of the Washington Institute for Near East Policy.
Both are also former officials with the Treasury Department’s Office of Terrorism and Financial Intelligence. In their report released this month, The Money Trail: Finding, Following, and Freezing Terrorist Finances (downloadable here), the pair argue that terrorist networks like Al Qaeda are increasingly relying on criminal operations, private donations, and informal transfers of cash to avoid the extensive methods of electronic surveillance enacted after 9/11.
The report was discussed in a Sunday RFE/RL interview with Jacobson, who was also a counsel on the 9/11 Commission. (Levitt wrote a concise summary of the report in his Counterterrorism Blog last week.) Jacobson warns:
[I]n that period after 9/11, when there was greater international willingness and cooperation on counterterrorism, a lot of countries took steps to improve their own capabilities. As you’ve gotten further away from 9/11 – as the threat seems less clear, and along with some specific feelings in foreign governments and in the private sector wondering about the importance of combating terrorist financing – I think you’ve seen the international effort slipping.
That’s one of the ironies of the success since 9/11. You’ve seen as the United States and the Europeans and other governments have cracked down on the use of the formal financial system of banks, you’ve seen a shift away from banks to terrorists using cash, to terrorists using cash couriers, to terrorists using Hawala and other informal financial-transfer mechanisms.
One interesting point raised was the idea that some countries are “passive supporters” of Al Qaeda. Iran, for instance, actively supports Hezbollah and Hamas, but maintains a mistrustful tolerance of Al Qaeda:
Iran has a very tenuous relationship with Al-Qaeda. It is a balancing act for them. They do not trust each other. They do not really like each other. But I think, at times, enemies of the United States can find things to agree on. And so I think even before 9/11 you’ve actually seen Iran let Al-Qaeda members go through Iran on the way to Afghanistan and Pakistan and not stamp their passports so they wouldn’t have a record of going into Afghanistan and Pakistan.
Additionally, on top of the lucrative opium trade in Afghanistan, terrorists are beginning to use other criminal means to raise money for operations. For example, the cell in Madrid responsible for the 2004 train bombings raised most of their money by selling hashish, while one of the UK cells behind the 7/7 attacks acquired part of their funding by defaulting on a bank loan. Well, what about the efficacy of freezing financial assets?:
This is one of the misunderstood areas of terrorist financing, where the public and the media tend to view the public designations, the public blacklisting and the freezing as the sum total of what is being done in the terrorist financing area. To use that as the metric, I think, is misleading. It has to be coupled with a really aggressive and effective intelligence – a “following the money approach.”
One of the difficulties the U.S. has encountered in this area has been in terms of the Gulf countries where they have made a lot of improvements since 9/11 but where a lot of improvements still could be made. There are a few problems in this area. One of them is that a few of the Gulf countries – like the United Arab Emirates and Qatar and Bahrain – are very focused on trying to make themselves international financial centers. Obviously, in that respect, it is very important to draw in capital from around the world and be an attractive place for money to come. But at the same time, you’ve got to make sure that the money coming in is clean and that you’ve put adequate controls in place to regulate. So I think that has been a hard balance to strike in the Gulf.
Jacobson also echoed what CIA Director General Michael Hayden stressed last week in a speech at the Atlantic Council: Al Qaeda has constantly been on the run since the Taliban were toppled in Afghanistan and now spends much of its resources strictly on securing the safety of its leadership. As such, “a lot of the cells, for example in the United Kingdom and elsewhere, have been raising the funds themselves at this point. So you really have seen a shift from central control of the funding for terrorist cells and terrorist plots.”
In a recent piece for the New Atlanticist, my colleague James Joyner discussed Hayden’s remarks on the recurring trend of Al Qaeda establishing a base in a country, being chased out, and reconstituting elsewhere. Under the Taliban’s Afghanistan, Al Qaeda’s fundraising activities were definitely more centralized than they are now. However, it would be very interesting to look at whether the organization’s financing methods in the transitional period between Yemen and Afghanistan mimic its present methods. If parallels do indeed exist, it would seem that this knowledge could be used to improve laws aimed at stopping terror funding.
[T]he reality is that if you don’t know what you are looking for – if you don’t understand terrorist financing – then you are not going to stop it. One of the things we recommend, now that they have this good rules-based structure in place, is that they have got to shift to more of a risk-based structure. You’ve got to figure out whether countries are actually stopping it. That would be an important shift.
Knowing what to look for may be half the battle.
Peter Cassata is an assistant editor with the Atlantic Council.