09 Sep Terrorist Financing and the Difference with Money Laundering

What is Terrorist Financing 

By definition Terrorist Financing is the collection or provision of funds for terrorist purposes. 

Terrorist activities or attacks can occur in many forms from isolated individual acts such as the 2017 Westminster Bridge attack in London to carefully planned attacks which take months of planning by organised criminal groups. 

When talking about Terrorist Financing it is easy to think about Money laundering, however there is quite a difference between the two. 

The Difference between Terrorist Financing and Money Laundering 

The most basic difference between terrorist financing and money laundering involves the origin of the funds.  

Terrorist financing uses funds for an illegal purpose, but the money is not necessarily derived from illicit proceeds. On the other hand, money laundering always involves the proceeds of illegal activity and the purpose of laundering the funds is to enable the money to be used legally. 

The fact that terrorist money often has a legitimate source raises an important legal problem as far as applying anti-money laundering measures to terrorist financing. In several countries around the world, terrorist financing may not yet fall under the definition of money laundering or serve as a predicate offense for money laundering and it may be impossible therefore to apply preventive and repressive measures to combat this problem.  

Some of the legal sources used for funding is taken under the name of charity works where a charity is created to help people from a certain country or to assist with special humanitarian projects.  

Due to the cash-intensive nature of charities and the fact they enjoy the trust of the general public it has made it easier to raise funds from individuals who don’t know how the money will be ultimately used. 

Other more violent methods used by some criminal organisations to raise funds are racketeering or exploiting natural resources such as stealing natural gas & oil and selling them to generate funding. 

Once the terrorists have their hands on the money they initially use the funding for spreading the criminal ideology online via propaganda videos where they are able to recruit individuals who will later become terrorist themselves. Once individuals buy into the ideology they will use the funds for training and execution of their plans.  

One-point worth mentioning is that money raised for terrorist groups is also used for mundane expenses like food, rent, travelling and is not always strictly used for just the terrorist acts themselves which makes it much harder to detect when attacks are being planned. 

From a technical point of view, the laundering methods used by terrorists and other criminal organisations are similar as terrorist groups need to disguise the link between them and its legitimate funding sources. Cash smuggling, structuring via legal transactions, purchase of monetary instruments, wire transfers are just a few of the methods used. 

Since 1997 an organisation abbreviated MONEYVAL has been working against the financing of terrorism actively. It spreads awareness among member states and territories for the implementation of terrorist financing rule but also addresses particular issues to identify potential difficulties in their implementation. Moneyval monitors measures put in place on a national level against the payment of ransoms. 

Another organisation which also has been raising awareness against Terrorist Financing are the Financial Action Task Force, better known as F.A.T.F. Which as of the 24th of October 2019 only listed two countries in the blacklist for terrorism financing: North Korea and Iran; while their greylist has 12 countries: Pakistan, Bahamas, Botswana, Cambodia, Ghana, Iceland, Mongolia, Panama, Syria, Yemen, and Zimbabwe. 

Some of the Biggest Terror Groups as of today 

Al Qaeda 

Al Qaeda the terror group responsible for the destruction of the World Trade Center on Sept. 11, 2001, the first foreign attacks on U.S. soil since Pearl Harbor in 1941. 

Founded by Osama bin Laden in the late 1980s, Al Qaeda had been an enemy of the United States since the 1990s, and that remains the case today. At the same time, Al Qaeda and IS are becoming more enemies than allies, with Al Qaeda publicly stating that IS’s tactics are too extreme and that it’s not acceptable to burn a man alive in any religion. 

The Islamic State   

Believed to have been started after the U.S. invaded Iraq, Abu Musab al-Zarqawi pledged allegiance to Osama Bin Laden and formed AQI (Al Qaeda in Iraq). Abu Musab al-Zarqawi died in 2006, and a U.S. troop surge weakened ISIS considerably. However, when U.S. troops were pulled from Iraq, ISIS rebuilt itself. After taking Mosul and Raqqa, it declared itself the Islamic State. 

Boko Haram 

Boko Haram was founded in 2002 by Mohammed Yusuf, but it didn’t launch an insurgency in Nigeria until 2009. Boko Haram uses similar tactics to IS. Its goal: to overthrow the government and create a traditional, Islamic state. 

The term “Boko Haram” in the native Hausa language translates as “Western education is forbidden.” Broadly speaking, the group subscribes to a version of Islam that forbids Muslims from practicing or participating in anything Western, from politics to education. But it wasn’t until 2013 that the United States designated Boko Haram as a terrorist group.

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