Terrorist Financing

by

Michael Freeman

• LAST REVIEWED: 21 January 2016
• LAST MODIFIED: 21 January 2016
• DOI: 10.1093/obo/9780199743292-0153

Introduction

Terrorism costs money. While individual terrorist attacks are relatively inexpensive, terrorist groups need money for weapons, salaries, bribes, stipends to family members, travel documents, safe havens, media outlets and propaganda, social services, and more. The estimated yearly operating budgets of terrorist groups vary tremendously. Some small groups, like November 17 and the German Red Army Faction, raised and spent a few million US dollars per year while others, like Hizballah and the Revolutionary Armed Forces of Colombia (FARC) in Colombia, have budgets in the hundreds of millions of dollars. Before the attacks on 11 September 2001, very little attention was paid to terrorist financing by policymakers or academics. Since those attacks, terrorist financing has become an important subfield of terrorism studies. Furthermore, countering the financing of terrorism has become an important tool for states trying to defeat terrorist organizations. New laws have been passed, new organizations have been created, and new techniques have been applied. The study of terrorist financing can be broken up into the following themes: how terrorists raise funds, how terrorists move funds, terrorist ties with organized crime groups, and the countermeasures states use to disrupt terrorist financing. In addition to these cross-cutting themes, the literature on terrorist financing also contains numerous case studies of terrorist groups.

General Overviews

Two of the earliest publications on terrorist financing are Adams 1986 and Ehrenfeld 2003. For probably the best single source to comprehensively describe the topic, see Levitt and Jacobsen 2008, which discusses all aspects of money and terrorism. Financial Action Task Force 2008 also provides an overview of the sources and movement of terrorist funds as well as some countermeasures and challenges. Vittori 2011 is a more detailed, and longer, overview of sources, movement methods, and case studies. Naylor 2004 provides an interesting counterargument to much of the conventional wisdom, arguing that the activities of terrorist and criminal groups are, at their core, little different from legitimate actors. Wittig 2011 challenges many of the conventional wisdoms of terrorist financing. Romaniuk 2014 provides a comprehensive meta-level critique of the scholarship on terrorist financing.

• Adams, James. The Financing of Terror. London: New English Library, 1986.

  One of the first publications on the topic, with still useful chapters on state sponsors, and case studies of the Palestine Liberation Organization (PLO) and Irish Republican Army (IRA).

• Ehrenfeld, Rachel. Funding Evil: How Terrorism Is Financed—and How to Stop It. Chicago: Bonus Books, 2003.

  One of the first works after 9/11 with some good overviews of several groups, like al-Qaeda, Hizballah, and groups involved in “narco” terror. At times polemical, but it has been an important work in pushing awareness of the topic.

• Financial Action Task Force. “Terrorist Financing.” A FATF Report, 29 February 2008. Paris: Financial Action Task Force.

  Descriptive overview of terrorist expense, how they raise funds, how they move funds, and how states have responded. Examples come from FATF member states.

• Levitt, Matthew, and Michael Jacobsen. “The Money Trail: Finding, Following, and Freezing Terrorist Finances.” Washington, DC: Washington Institute for Near East Policy, 2008.

  Best single primer on all aspects of terrorist financing, with sections on sources, countermeasures, as well as some informative case studies on al-Qaeda, Hizballah, and Hamas.

• Naylor, R. T. Wages of Crime: Black Markets, Illegal Finance, and the Underworld Economy. Ithaca, NY: Cornell University Press, 2004.

  Challenges the conventional wisdom on the topic. Explores the world of black markets, smuggling, gun running, illegal narcotics, and money laundering.

• Romaniuk, Peter. “The State of the Art on the Financing of Terrorism.” RUSI Journal 159.2 (April–May 2014): 6–17.

  DOI: 10.1080/03071847.2014.912794

  A critical look at the scholarship within this subfield. Notes that much of the work is at the exploratory, rather than explanatory level. Highlights key findings in the literature about the multitude of ways terrorist raise, store, and move money; agreements and disagreements on the effectiveness of countermeasures; and the dangers of unintended consequences of those measures.

• Vittori, Jodi. Terrorist Financing and Resourcing. New York: Palgrave Macmillan, 2011.

  DOI: 10.1057/9780230117716

  Comprehensive look at the financial needs of terrorist groups; the methods they use to acquire, move, and store funds; resourcing trends over time; and multiple case studies of groups.

• Wittig, Timothy. Understanding Terrorist Finance. New York: Palgrave Macmillan, 2011.

  DOI: 10.1057/9780230316935

  Argues that terrorist financing is about exchanges of value more than just financial transactions. Also shows how terrorist financing is not a self-contained illicit activity; rather, it takes place within the broader context of all economic activity. Challenges many conventional wisdoms within the field, but also excessively “problematizes” some issues.