Economics of Terrorism Study Group NYC, New School, 5 May 2006

1. Economics of Terrorism Study Group NYC, New School, 5 May 2006 “Substantiating the Nexus Between Diaspora Groups and the Financing of Terrorism” Michel Hess, Ph.D. Director of Studies and Training

2. Master of Advanced Studies in Security Policy and Crisis Management (Senior Leadership Course III) www.spcm.ethz.ch • Security Sector Training www.isn.ethz.ch/edu/training

3. Synergy Police / Intell. Academic research CrimPolice Political relevance Analysis process Analysis process Case relev Operational-tactical analysis Intell. Law enforcement Strategic-operational analysis Strategic-political analysis Organizing Intelligence Analysis (Switzerland)

4. Caveats • the term NEXUS is politically and rhetorically (and politically) appealing, but analytically appalling • BUSINESS RELATIONSHIP between interested diaspora groups and extremist and terrorist networks • paper does not develop fully the use of diaspora funding for extremist and terrorist activities in countries where funds are raised • Focus on transnational financial flows to zones of conflict or insurgencies • paper conflates financing of insurgencies and financing of terrorism • paper does not deal with the anectodal business relationship between organized crime and terrorism … diaspora is not the main focus • paper does not deal with state sponsorship, private and corporate sponsorship … diaspora is not the main focus

5. The “Other Story”: Jamal Ahmidan • The drug dealer • “El Chino” or “Mowgli” • Family owns clothes shops in the Lavapies area of Madrid • A Moroccan radicalized in prison • Used a friend’s contacts to acquire explosives

6. Madrid 2003 Part 1 Madrid was most blatant example of use of profits from organized crime/drug trafficking to finance a major terrorist attack – superficially the organized crime-terrorist nexus at work • “Jamal Ahmidan was the central figure in relation to the funding of the attacks.” (Judge Juan del Olmo) • Ahmidan accumulated 1.6 million Euros in cash and drugs • No funds from abroad: “not possible to determine …existence of transnational transfers or financial transactions that might have contributed to the funding of the attacks.” (Juan del Olmo) • Financial cost was 41,000 to 54,000 Euros

7. Madrid 2003 Part 2 • Madrid bombing – not just cooperation with drug traffickers, but also other forms of organized crime (e.g., human smuggling) • Drug traffickers were radicalized • Drug traffickers became terrorists • Drug traffickers were integrated into the terrorist network • Radicalization and recruitment in European prisons • Expect more of this

8. Two lessons regarding the “nexus” radicalized second generation diaspora individuals carry a major terrorist threat potential: “Most immigrants are not terrorists, but most terrorists are immigrants…” (S. Bell) intelligence focus on diaspora groups absence of financial transfer or transaction which could have been tracked by financial intelligence: the counterterrorism meaning of FATF et al. is not to prevent specific attack (however desirable this may be), but to identify anonymous conscious and unconscious donors and supporters of more diffuse terrorist activities. focus not only on origin, but also on transfer of funding necessary, but not sufficient

9. Starting Points of the Argument There are 5 good reasons why we worry about diaspora-based financing of terrorist and extremist activities at the home front and abroad radicalization of second generation immigrants: potential fund-raisers counterterrorism objective 1: disrupt money flow, prevent specific attack counterterrorism objective 2: disturb money flow, disturb preparations transnational network dimension taking advantage of financial services exploitation of purchasing power disparities …

10. The Core of the Argument There is a NEXUS because… many terrorist networks and groups enjoy a material, spiritual, political support of sympathetic and well-organized diasporas in Western Europe and North America terrorist networks and groups use money which comes from sources that are close to their basic ethnic or cultural roots; there are culturally-specific practices political and legal(ized) branches give money to armed extremist factions informal transfer methods for humanitarian purposes are also used for terrorist sponsorship

11. For all possible forms of terrorism fundraising, an understanding of the functioning of diaspora groups is key.

12. HOWEVER,… • humanitarian assistance vs. financing of specific terrorist attack • money laundering vs. terrorism financing

13. Specific Forms of Diaspora-based Fund-Raising • Zakat (tax) • Membership dues of political or quasi-religious parties • Donations • Non-governmental fund-raisers

14. Specific Forms of Diaspora-related Transfer Systems • Islamic banking practices (transfer of legal funds) • Travel agencies, gold and diamond dealerships (transfer of illegal funds through illegal means for illegal end-use) • Hawala (“Afghani banking”) Western Union types of banking • cash couriers

15. Policy Recommendations money is not the root cause of terrorism: focus on origins, not symptoms replace excessive oversight responsibilities by government agencies of diaspora-based fundraising with ethical quality labeling, certification (e.g., “dolphin free tuna”, “child labor free carpets”, Max Havelaar, etc.) focus financial intelligence and oversight on institutions which do not fall under the classic notion of financial intermediaries (e.g., private foundations, diamond dealerships, private investment firms) focus financial intelligence on informal transfers of small sums of illegal money and cash couriers (risk profiling in border management) more systematic and more professional integration of financial intelligence in all criminal investigations

16. Conclusion specific terrorist attacks are relatively cheap, therefore multilateral and national legislative measures to combat terrorism financing will not be able to stop specific attacks anti-terrorism financing legislation has a long-term impact on general terrorist activities key decision-making consideration when it comes to civil liberties trade-offs