Lecture 8: Financial and Criminal Dimensions

1. Lecture 8: Financial and Criminal Dimensions • Relationship between terrorism and financial/economic systems is multifaceted

2. Terrorists need money . . . Terrorism is relatively cheap . . . ? By some estimates: • 2001 attacks in NYC and DC cost around $500,000 • 2002 bombing of a Bali nightclub cost about $50,000. • 2004 Madrid train bombing cost between $10,000 and $15,000 • 2005 attacks on London's mass transit system cost about $2,500 In contrast . . . "The cost of financing terrorist activity cannot be measured by the cost of a primitive destructive act. The maintenance of those terrorist networks … is expensive”- Stuart A. Levey, Undersecretary of Treasury for Terrorism and Financial Intelligence Bottom line: To run a terrorist group over a long period of time requires a significant amount of cash

3. Operational Costs Costs of terrorist operations can include: • Subsistence for the perpetrators as they prepare for their actions. • The cost of special training and the development of expertise that is critical to the successful completion of the mission. • The purchase of any weapons or explosive materials that are to be used in the attack. • The cost of travel for meetings related to the plan. • The cost of communications among those involved.

4. Funding Sources Funding sources have included: state sponsorship, diaspora support, charities (intentional or by diversion), criminal activity STATE SPONSORSHIP • Active vs. Passive • U.S. list of state sponsors: Cuba, Iran, Sudan and Syria • Iraq, North Korea and Libya were on this list until recently Saudi Arabia and other oil-rich “friends of the U.S.” have provided support to: • Mujahideen in Afghanistan during 1980s and beyond • Palestinian “freedom fighters” (incl. Hamas)

5. Diaspora Support • Tamil communities in Canada, elsewhere (often through extortion rackets) supporting LTTE • Pakistani communities in the UK, Denmark, elsewhere in Western Europe supporting Kashmir separatist groups • Algerian communities in France supporting GIA, GSPC, AQIM • Moroccan communities in Spain supporting AQIM • Kurdish communities in Germany supporting PKK/Kongra-Gel separatist guerillas in Turkey/Northern Iraq • “For the children” jars in Irish pubs in Boston; Irish Freedom Committee soliciting funds from roughly 40 million Irish-Americans to support IRA/PIRA

6. Criminal Activity • Terrorist engage in an array of criminal activity, including: • Trafficking in drugs, weapons, humans, diamonds, precious metals, etc. (Madrid: 66 lbs. hashish = 440 lbs. explosives) • Armed robbery (including piracy) • Kidnapping for ransom (Algeria, Nigeria) • Extortion and protection rackets (Sri Lanka, N. Ireland) • Including among diaspora members (PKK, LTTE) • Oil bunkering (Nigeria) • Fraud and embezzlement (including phony companies) • Cigarette smuggling (Hizballah in the U.S.) • Production/distribution of counterfeit DVDs/CDs, software etc. • Counterfeiting documents, currency • ID theft, credit card theft (especially online) • Money laundering

7. Financial Dimemsions Money Laundering = process by which proceeds derived from criminal activity are disguised in an effort to conceal their illicit origins and to legitimize their future use. How does it work? Laundering schemes fall within the three phases of the “money laundering cycle”: • Placement of illegal monies and currency (cash) into the financial system; • Layering (structuring) transactions to disguise the source of the funds; and • Integration (reinvestment) of the funds into legitimate businesses. What is Hawala; how does it work, and how is it different from money laundering?

8. Why is money laundering hard to detect? • Because the criminals: • Are experts in their schemes to disguise $ billion per day; • Cooperate to thwart law enforcement efforts while expanding activities; • Utilize multinational jurisdictions and offshore accounts to break audit trails; • Coerce some of the best lawyers, accountants, bankers and officials (“Gatekeepers”); and • Are experts in their use of new technologies and systems (like M-Payments).

9. Financial and Criminal • Similarities among criminal and terrorist networks • Major differences? • Motives matter . . . • Are Mexican cartels terrorists? Phil Williams suggests: • Violence as strategic competition • Violence as factionalism, subcontracting • Violence as anomie, degeneration of norms & inhibitions • Nexus, confluence, continuum, “blurring lines”, transformation, hybrid networks . . . Note: March 2012, Terrorism and Political Violence 24(2), special issue on intersections of crime and terrorism (J. Forest, guest editor)

10. Hybrid network linkages • Upon what grounds are criminal-terrorist linkages established? “Trusted handshake” of Hybrid Networks established by • Ethnic ties, often within a diaspora (e.g., Algerians in France, Spain; Pakistanis in UK; Tamils in Canada; Turks in Germany) • Record of successful black market transactions • Shared prison experiences • Shared anti-government sentiment • Mutual friends/acquaintances who vouch for you with their life • Family ties, clan, tribe, etc. • Where do we see increasing chances of forming “trusted handshakes”? • Prisons • Black market transaction centers, esp. in weak or failing states • Ethnic enclaves related to a diaspora

11. Summary • Complexity involves legal and illegal funding methods employed by terrorist groups • Recent increase in criminal network linkages, mostly transactional and temporary, based on asset transfers, trafficking, money laundering • Various political and socio-economic conditions can motivate and facilitate these kinds of activities

12. Questions?