Relationship between terrorism and financial/economic systems is multifaceted

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

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.

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)

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

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

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?

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).

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)

• 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

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