If we want to kill terrorists, we need to find out how they get paid

There are different ways in which terrorist groups raise funds to support their activities.

 |  6-minute read |   19-11-2015
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Speaking at the G-20 meeting in the immediate aftermath of the terrorist attack in Paris, Prime Minister Modi outlined a ten point plan. The very first issued underlined by him was the need to "curb and criminalise terror financing". Just two days later, he yet again reinforced the need for economic sanctions to curb the financing of terrorism from criminal activities. This raises some pertinent questions. Why is the finance of terrorism important? Why does this threat need to be reinforced? And finally, why have we not been able to stop it?

Financing of terrorism has been referred to as the lifeblood of terrorism. Taking this analogy further, one could say that if ideology is the soul of terrorism, finance is its lifeblood. One has to only look at some of the most potent terrorist organisations of recent years like the Islamic State (IS) and Lashkar-i-Taiba (LeT), to reinforce this reality. Both groups have succeeded in making a transnational impact beyond their immediate shores. The groups believe in the ideology of reprehensible violence and exploit and misinterpret religion to support their actions. Both terrorist organisations are also well organised, armed and led, with spectacular strikes having become their vicious calling card.

However, one of the most important factors, which reinforces their similarity, is the access to a very substantial funding, that is able to sustain their terrorist agenda. The reason finance is considered the lifeblood of terrorism, is its capacity to sustain an organisation as mammoth as the IS, which by some estimates is over a million dollars a day! Unlike popular perception, this funding is not as critical for actual terror strikes, as it is for sustaining an organisation that propagates the ideology of terror, recruits believers, pays for their sustenance, weapons, warlike material, travel and next of kin, after the death of terrorists.

In comparison, a terrorist organisation can be compared with a corporate body, which undertakes a large number of background activities in order to finally create a product which is introduced into the market. The cost of the product is not merely its market price, but the cumulative cost of its development. Just like a car company cannot produce new cars unless it can fund the life cycle cost of its product, a terrorist group will not be able to carryout strikes, unless it can generate funds for running the organisation.

There are different ways in which terrorist groups raise funds to support their activities.

In simple terms, the source of funding can be either external or internal to their base or location. It is rare for a terrorist group to physically control a geographical area and not only extract funds from it, but also administer it. The IS is one such example, which is why most of its funding remains internal. It has succeeded in extracting oil from both Iraq and Syria, tax the local people and businesses, employ kidnapping for ransom as a ploy, loot banks, sell antiquities, seek funding from supporters outside the region in the name of religion and the so called caliphate. The irony of the situation is their ability to sell oil at concessional rates, through and to neighbouring countries like Turkey, which are also fighting them on the battlefield. Both parties thus become beneficiaries of the economy of terror, having successfully quarantined their ideological differences for economic interests.

The LeT has an equally stable funding system in place, even if it is not as flush with funds as the IS. The group has successfully sold the idea of a jihad against countries like the US and India, to seek funds both from within and outside Pakistan. It has employed its front, the Jamaat-ud-Dawa, in the garb of a charity and welfare organisation to support its operations. The group has employed ingenious means like selling animal skins during Eid to raise funding, besides benefitting from zakat, a voluntary donation, which is collected at a rate of two and a half per cent of an individual's income, to support jihad. Most importantly, the LeT receives its financial muscle from the ISI, which funds it and coordinates its terror action plan.

The need to reinforce these realities stems from the fact that funding of such groups is no longer limited to the local confines of their area of sustenance. Terror groups, much like corporate bodies have well and truly embraced and exploited the benefits of globalisation. If the recent Paris attacks had their origins in Syria, planning in Belgium and execution in France, globalised terrorism is a phenomenon that is in full bloom. Much like the globalised operations of these terror groups, their funding too benefits from the tools of modernisation.

From legal banking channels to money transfer service scheme (MTSS) and fake Indian currency notes (FICN), printed inside Pakistan (as related to LeT) to hawala, every possible method of transit has been exploited by terrorist groups. Most of these transfers take place in a globalised, networked world, linking a large number of countries in a financial web.

Finally, if the sources and methods of transferring funds is so well known, why are we not able to stop it? The transfer of money is much like the flow of water. It tends to take the easiest available method to meander its way to its final destination. Again, just like water, which may change its course, direction and volume of flow, to eventually fill a reservoir, terror funding also follows this example. For terrorist groups, the channels employed are not as important, as the ability to ensure that funding remains consistent with their requirement.

Take the LeT for example. It began by openly collecting funds for its so called jihad against India. After being declared a terrorist organisation, JuD took on this role, circumventing international pressure. When the JuD also comes under pressure, the Pakistani state was always there, to fill its coffers and make sure that the "strategic asset" could be maintained at optimum efficiency. Similarly, the LeT has in the past moved money through every possible channel available. Whenever it finds strict norms being placed on cash or FICN smuggling, greater reliance is placed on hawala or through overvalued/ undervalued trade transactions.

Given the nature of sources and methods for moving funds, along with the backdrop of globalised instruments, which could well emanate far from the soil of an incorrigible Pakistan or an undermined Syria, the challenge to stop funding continues to affect counter terrorism initiatives. Combine this with the fragmented international resolve, wherein countries and blocs find it more convenient to pursue their parochial interests, the fight against the finance of terrorism remains a cherished ideal, yet a distant dream. Despite acknowledging the complicity of countries like Pakistan in funding terrorism and the US designating Hafiz Saeed as a terrorist, Pakistan remains a frontline ally in the war against terrorism.

The irony of this reality and the contradiction of competing interests, ensures that the globalised threat from terrorism is faced by a piecemeal and stunted response. While India has taken a number of steps to fight the contagion of the finance of terrorism, final victory is likely to elude agencies in the absence of much needed unity of approach at the international level.

Writer

Colonel Vivek Chadha Colonel Vivek Chadha @vivek_chadha

Colonel Vivek Chadha (Retd), is a Research Fellow at the Institute for Defence Studies and Analyses, New Delhi. He has authored the books, Even if It Ain’t Broke Yet, Do Fix It: Enhancing Effectiveness Through Military Change and Lifeblood of Terrorism: Countering Terrorism Finance.

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