Following the Money Trail: The Importance of Monitoring Terrorist Funding
We often hear of the phenomenon of “money laundering,” and as it has become more common in practice, there is increasing focus on this topic. However, there is another financial crime that is not spoken about as often but has an equally big and negative impact on society: the financing of terrorism.
This article will take a deep dive into the definition of the financing of terrorism and why it is so important to monitor transactions that may be facilitating the financing of terrorism.
What falls under the scope of terrorism?
In order to understand what the financing of terrorism is, we must first answer the question: what falls under the scope of terrorism? When thinking of terrorism, our thoughts drift toward bombings or shootings, which may be true; however, the term terrorism is much broader.
Even though there is no specific definition, it boils down to this general description: the unlawful utilization of violence or force against persons or properties to coerce a government or its citizens to further certain political or social objectives, which may include other acts such as kidnapping or cybercrime.
Small amounts, big impact
The financing of terrorism refers to the act of providing financial support or resources to individuals or groups involved in terrorist activities. This may include the provision of money or resources required in the fulfillment of terrorist activities, such as weapons or electronic accessories.
There are various terrorist expenses, which can be divided into four groups: direct costs of attacks and conflicts; general expenses (day-to-day living expenses, e.g food and housing); organizational expenses; and lastly, training, travel, and logistics.
These expenses are funded by different means, and may involve funds generated through crime, but also through legitimate sources. Shockingly, non-profit organizations (NPOs) are one of the sources that are sometimes misused for the financing of terrorism. These are cash intensive businesses that may operate in conflict zones or in areas that are also targeted by terrorist organizations. Cash flow typically seen as unusual for other businesses, for example, between a business and a high-risk country, may appear normal for NPOs. NPOs are therefore an ideal vehicle for the financing of terrorism.
NPOs are often perceived as altruistic entities dedicated to helping those in need. However, the sad truth is that NPOs can also be vulnerable to misuse for financing terrorist activities. In a recent high-profile case, a Gaza aid worker was sentenced to 12 years in prison for embezzling $50 million from the charity ‘World Vision’ and diverting it to fund Hamas. This shocking revelation highlights the need for increased scrutiny of NPOs and their financial transactions, as even seemingly legitimate organizations can be manipulated for illicit purposes.
In contrast to money laundering, the financing of terrorism often happens in small amounts of money, which makes it more challenging to detect whether the transactions bear the red flags associated with the funding of terrorism. This can be donations from supporters or even their own funding. In 2016, two women were convicted of funding al-Shabab by sending seemingly small amounts of money, ranging from $50 to $100, in a series of transactions. The fact that even such seemingly insignificant amounts of money can be used to support terrorist activities highlights the crucial importance of monitoring financial transactions for signs of terrorist financing. It is a stark reminder that every contribution, no matter how small, can have a significant impact on the ability of terrorist organizations to carry out their deadly operations.
The financing of terrorism and money laundering are two distinct but related financial crimes, however, contrary to money laundering, the focus of the financing of terrorism is rather on the destination of the money as opposed to its origin. Terrorist organizations may use money laundering techniques to conceal the origin of their funding and to move money across borders without detection. Similarly, criminal organizations engaged in money laundering may provide financial support to terrorist groups as part of their illegal activities.
You may wonder, if terrorist financing is not happening on a daily basis, why is it crucial for us to scrutinize and continuously monitor these possible fundings?
The threat of terrorist attacks has always been present and is slowly increasing, which is the result of an accumulation of events. An example is the fact that ISIL and Al-Qaeda, two of the largest terrorist organizations currently active, have increased their online propaganda since 2020, either to incite individuals to launch attacks or to raise funds.
The immediate impact of terrorist attacks on society is devastating, as shown by the 2015 shooting in France that left 137 people dead, 416 injured, and caused residual trauma, fear, and economic consequences. It is therefore crucial that we remain vigilant in countering the funding of these terrorist organizations.
By doing so, we can prevent future attacks and safeguard the safety and security of our communities. Let us not wait for tragedy to strike before taking action. Together, we can make a difference in the fight against terrorism.