Terrorism financing: Current issues and challenges

Terrorism Financing: Current Issues and Challenges

PwC and Lexis Nexis Risk Solutions Breakfast Seminar on Lone Wolf Attacks

Dr. Nicholas Ryder

Professor in Financial Crime

Introduction

•

What is terrorist financing?

•

Sources of terrorist Funding

•

Cheap terrorism,

•

International Legislative Measures

•

What is the Financial War on Terrorism?

•

Islamic State of Iraq and the Levant

What is terrorist financing?

•

Terrorist financing has been referred to as:

– _{‘reverse money laundering’,}

– _{is a practice whereby ‘clean’ or ‘legitimate’ money}

Traditional Sources of Financing

• _{State Sponsors of} terrorism:

Sudan, Iran, North Korea and Syria • _{Private terrorist}

moneys:

Sources of Terrorist Financing

•_{Corporate donations,} •_Non-profit

organisations, •_{Drug trafficking,} •_Extortion,

•_{Organised retail} theft,

•_Fraud,

•_{Kidnappings for} ransom and

Cheap Terrorism

• _{Bishopsgate bomb (1993)} – _{£3,000, £1bn worth of}

damage to property

• _{World Trade Centre bomb} (1993)

– _$400,

– _{Ramzi Yousef said in his} trial “we ran out of

money to bring both towers down”

• _{Oklahoma City bombing}

(1995), – _$5,000

• _{New York, Washington}

and Pennsylvania (2001) – _$400,000

• _{Sari Club Discotheque in}

Cheap Terrorism

• _{Madrid Bombings}

(2004)

– _{€8,000 (EU Commission)}

• _{London bombings}

(2005)

– _{£8,000 (HMG 2005)}

• _{Westgate Mall (2013)}

– _{$5,000 (US Department} of Treasury)

• _{Boston Marathon bombings} (2013)

– _{$500 (several secondary} sources)

• _{Charlie Hebdo}

shootings (2015)

– _€4,000

• _{Sousse (2015)}

Cheap Terrorism

• _{Brussels Metro and}

airport attack (April, 2016) – funded by student loans?

• _{Nice (July, 2016)}

• _{Westminster (April}

2017)

• _{Manchester Arena,}

(June, 2017) – funded by student loans

• _{Mogadishu truck bomb,}

Somalia, October 2017

• _{New York City Truck}

Common Themes/Conclusions

1. evidence of a sophisticated terrorist support

network,

2. the use of low capability weapons and

International Legislative Measures

•

International Community concentrated on

money laundering:

– _{UN Conventions (Vienna, Palermo and Corruption)} – _{EU (2 AML Directives and one Convention)}

– _{FATF (40 Recommendations)}

– _{Other international best practices}

•

Profit driven model which has mistakenly

What is the financial war on

terror?

• _{International Conventio}

n on the Suppression of Terrorist Financing

(1999)

• _{UN Security Council}

Resolutions:

• ₁₂₆₇ • ₁₂₆₉ • ₁₃₃₃ • ₁₃₇₃

• _{Financial Action Task For}

ce

(February 2012)

• _{European Union:}

– _{Council Resolution}

2580/2001.

– _{Framework Decision 151}

[2002] OJ L164/3.

– _{Council Regulation}

881/2002

What is the financial war on terror?

•

“attacking, whether via

criminalisation

,

confiscation

,

forfeiture

,

freezing

,

sanctioning

the financial assets of known or suspected

terrorists … [it] also contains the use of

preventative methods

… and the collection of

Islamic State of Iraq and Levant

•

This terrorist organisation has been described

as ‘

the wealthiest terrorist organisation

’,

•

Matthew Levitt

stated that “estimates put

ISIL’s

daily income

at around

$3m

, giving its

total value of assets between

$1.3bn and

$2bn

” and

Islamic State of Iraq and Levant

•

By September 2014, ISIL had revenues of at

least $2bn from internal and external sources

(

Duhaime

, 2015),

•

ISIL’s total assets exceed $2tn, with an annual

income totalling $2.9bn and

•

ISIL “approved a $2bn budget” for 2015” (

Islamic State of Iraq and Levant

• _{Funding Stream 1 – The Control of Oil Reserves:} – _{This involves selling what they have captured to}

local consumers and black marketers,

– _{ISIL has used the same smuggling methods and}

routes that were used by Saddam Hussein during the 1990s,

– _{that generate daily revenues between $1m and}

Islamic State of Iraq and Levant

•

Funding Stream 1 – The Control of Oil

Reserves:

–

The international community has

threatened to impose sanctions on

countries that purchase oil from ISIL and

–

However, the effectiveness of sanctions on

this funding stream must be questioned (

Islamic State of Iraq and Levant

•

Funding Stream 2: Kidnapping for Ransom

– _{This has seen many nation states paying ISIL}

between $20m and $45m for the release of their citizens,

– _{The Congressional Research Services estimated that}

ISIL has amassed between $35m and $45m in ransom fees in 2014) and

– _{Kidnapping for ransom payments have been made}

Islamic State of Iraq and Levant

•

Funding Stream 3: Foreign and Private

Financial Benefactors

– _{ISIL are also able to acquire finances from foreign}

investors and private benefactors,

– _{ISIL receives funding from private donations or via}

non-profit organisations, thus adopting a similar funding strategy as al Qaeda (FATF, 2015)

– _{Sympathetic supporters in other countries appear}

Islamic State of Iraq and Levant

• _{Funding Stream 3: Foreign and Private Financial}

Benefactors

– _{Department of Treasury took the view that ISIL “derives}

some funding from wealthy donors” and it been estimated that ISIL has collected up to $40m from private donors (2014)

– _{However, it has been suggested that the amount of}

funding provided by private sponsors from has

Islamic State of Iraq and Levant

•

Funding Stream 4: Criminal Activities

– _{imposition of illegal taxation measures which}

raises approximately $360m per year,

– _{the sale of artefacts has become ISIL’s second}

largest funding stream (approximately $100m p/a)

– _{In February 2015, the United Nations Security}

Islamic State of Iraq and Levant

•

Funding Stream 4: Criminal Activities

– _Extortion

– _{Bank robberies (similarity with the domestic}

terrorist groups in the United Kingdom)

– _{The unprecedented evolution of the funding}

Terrorist Funding Models

•

Cheap and inexpensive model

– _{Significant threat posed by self funded terrorist}

cells,

– _{Evolution of ‘cheap’ and ‘inexpensive’ terrorist}

financing,

– _{Numerous examples including London (2005),}

Paris (2015) and Nice (2016)

– _{Has been used by al Qaeda and ISIL and}

– _{Renders key parts of the UKs counter-terrorist}

Terrorist Funding Models

•

Hierarchical or corporate:

– _{This has been used by the IRA (1970s and 1980s),} – _{Different funding model from that adopted by al}

Qaeda,

– _{This model has been utilised by ISIL (appears to have}

been adopted by Boko Harem and Al Shabaab)

– _{Development and publication of its own annual}

budget,

– _{Similar funding mechanisms as those adopted by the}

IRA and