Abstract
Terrorism financing (TF) is a significant offense that supplies terrorists with resources. Being a rather resource-consuming activity, terrorism depends on multiple sources of TF, which means that the analysis and control of TF are of primary importance for combating terrorism. TF methods include both legal and illegal ways of obtaining resources. Apart from that, terrorism evolves, developing new methods of TF, especially those enabled by new technologies, which need to be studied to enable anti-TF activities. The latter can include national (legislation and regulations), international (guidelines and information sharing), and local (compliance culture development) efforts. There are limitations to anti-TF activities, including their insufficient effects on individual terrorists and their contribution to the increased significance of self-funding for TF; the latter outcome reduces the effectiveness of the anti-TF efforts that are aimed at external TF. These limitations should be taken into account to develop more effective anti-TF strategies, but these issues cannot undermine the significance of combating TF.
Introduction
Terrorism financing (TF) is an international offense, which is supposed to be criminalized worldwide, and it can be defined as a variety of acts (especially procuring and processing funds) that are aimed at supplying terrorists with various resources (Pok, Omar, & Sathye, 2014). Terrorist attacks and the maintenance of terrorist organizations are rather costly; as a result, the efforts aimed at combating TF are also a major part of combating terrorism (Brzoska, 2016; Cooper & Walker, 2016). The present paper establishes the significance of TF and reviews the major sources used by terrorists to obtain funds, the key approaches to combating TF, and some of the criticisms aimed at anti-TF activities to achieve a better understanding of the topic.
The Importance of the Issue
The aim of combating terrorism consists of preventing attacks, which, in turn, depend to a certain extent on funding. Indeed, terrorist organizations need funds for multiple purposes, including recruitment, training, and compensations; the maintenance of a terrorist organization is very costly (Financial Action Task Force [FATF], 2015). Moreover, individual terrorists and single terrorist attacks also require resources, although they are typically not as resource-consuming as terrorist organizations (Brzoska, 2016). It is widely acknowledged that anti-TF activities can succeed in making funds less accessible to terrorists, complicating their activities with various preventative measures and penalties (Brzoska, 2016; Cooper & Walker, 2016). As a result, the topic of TF is of importance for the people involved in combating terrorism as a major issue that needs to be researched, understood, and taken into account.
Terrorism Financing Sources and Methods
Understanding TF is instrumental in combating it. For example, FATF (2015), which is an inter-governmental body that, among other things, studies TF and develops policies for its prevention and control, suggests reviewing the sources and methods that are employed for TF. The FATF (2015) TF report, which is the result of the collaboration of analytical teams from all over the world, states that TF methods have been developing and expanding. As a result, it is possible to distinguish traditional and emerging sources of TF.
The traditional sources include direct donations from individuals, organizations, and even governments, as well as the extortion of such donations. Apart from that, TF can be the result of the exploitation of non–profit organizations and various illegal activities that can generate profit (for instance, smuggling or kidnapping for ransom). Moreover, a method of obtaining funds for TF is the establishment of legitimate businesses with the aim of supporting terrorism. In summary, the traditional methods of TF include the use of both legally and illegally obtained funds with the purpose of financing terrorism.
As for the emerging sources, FATF (2015) is especially concerned with the development of the “foreign terrorist fighters” phenomenon, which contributes to TF predominantly through self-funding. Apart from that, there is a trend for using social media either overtly or covertly for TF. An example of a covert social media-facilitated TF is charity fundraising, which can be exemplified by the project that had been established in 2012. It intended to use EUR 3900 of the raised funds to support foreign terrorist fighters, but the illegal activities were discovered, and the project was terminated with two people arrested for TF (FATF, 2015, p. 34). Finally, FATF (2015) reports that terrorist organizations can occupy territories and, subsequently, exploit the natural resources of such territories. The agency states that the issue is especially common in politically unstable countries, for instance, those of West Africa. In summary, the emerging methods of TF seem to have a tendency towards exploiting globalization and innovations but are not limited to it.
The methods of transferring funds to terrorists include the use of banks and physical cash transportation as well-established techniques. The new ones are the electronic approaches: various new technologies are a potential vulnerability that can be exploited for TF (FATF, 2015). The level of the exploitation of the newer methods is not known, but some of their features make them attractive to terrorism funders, which suggests that their consideration is of importance.
FATF (2015) highlights the fact that the traditional methods of obtaining and transferring funds for TF remain the most actively used ones for the time being, which emphasizes the importance of focusing on them. However, they are also relatively well-studied and are taken into account by law enforcement agencies. Emerging threats are not very well-researched, and it is necessary to pay increased attention to them in order to prevent their future exploitation. In particular, the topic of the movement of TF into virtual environments is understudied, which makes it difficult to assess the risks posed by virtual vulnerabilities.
For example, Irwin, Slay, Choo, and Lui (2014) conduct experiments to determine the feasibility of employing virtual environments for TF under a wide variety of circumstances and conclude that certain features of these environments facilitate TF, including aspects like anonymity and lesser chances of detection. Moreover, electronic vulnerabilities are less controlled by the governments when compared to the traditional ones, which may be the result of the lack of research and attention that is dedicated to emerging issues. Therefore, the electronic means of funds transfer may indeed be viewed as a significant vulnerability that can be employed by terrorists. However, Irwin et al. (2014) also highlight the fact that virtual TF is more complicated and effort-consuming than the more traditional methods. The authors find that this statement is especially true if a perpetrator wants to successfully remain anonymous (ensure that their location and electronic identity remain unknown) and protect the transferred funds, for example, through the use of multiple accounts. As a result, only the careful use of electronic TF can result in terrorists exploiting the above-mentioned benefits of the virtual environment.
In summary, the presented information suggests that globalization and innovation are important factors for terrorism development (Brzoska, 2016). For example, the former can be viewed as a facilitating factor for foreign terrorist fighters, and the latter provides terrorists with new means for obtaining and transferring funds. These features also demonstrate the fact that terrorism is evolving. Naturally, the traditional methods of TF, including both legal and illegal approaches to obtaining funds, still dominate the field but in order to be able to respond to the emerging and under-researched threats and vulnerabilities, it is necessary to pay increased attention to them.
Combating Terrorism Financing
As shown above, TF has multiple sources, which complicates the development of the strategies for its monitoring and control, but several key approaches can be found in modern literature. In particular, the Financial Action Task Force [FATF] (2017) offers guidelines on combating TF. The guidelines can be viewed as the international standards that should be integrated into a country’s legal framework and adjusted to fit the specifics of its financial and administrative systems. Some of the key considerations presented in the guidelines are discussed below.
FATF (2017) focuses on the risk-based approach to TF combating. In particular, it involves the analysis of the risks that a country may face and the use of the resulting information for prevention and response, which allows customizing anti-TF activities to the specific needs of a community. When defining the risks of TF, FATF (2015) states that risk can be described as “a function of three factors: threat, vulnerability, and consequence” (p. 8). Threats are the phenomena or events (for instance, terrorists and their activities) which may cause any form of harm. Vulnerabilities are the phenomena that the terrorists can exploit for TF-related aims (for example, the mechanisms of fund transfer). Finally, the consequences element refers to the outcomes of TF. All these elements need to be taken into account when assessing the risks that a country experiences with respect to TF in order to plan appropriate interventions.
The recommendations of FATF (2017) suggest that the key measure which can prevent TF consists of adjusting secrecy and transparency laws to enable the monitoring of vulnerabilities and the reporting of suspicious events (for example, transactions). Also, national legislation should include appropriate sanctions that can effectively dissuade TF, and there should be laws in place that can disrupt TF, for instance, through freezing the assets that have become available to terrorists. Finally, national bodies are expected to collaborate in the process of TF combating, and FATF (2017) views this requirement as one of the key principles of anti-TF activities.
However, the national level is not the only one in terrorism combating. FATF (2015) states that international efforts that can help to combat TF include intelligence sharing and other forms of collaboration. As for local levels, there are certain activities which, for example, individual businesses can undertake to contribute to combating TF. In particular, Cooper and Walker (2016) and Pok et al. (2014) mention the concept of organizational culture, suggesting that it can be modified to include security considerations, helping an organization to address the risks of TF.
Pok et al. (2014) point out that assessing and monitoring compliance culture is very difficult for outsiders, which is why the majority of TF-combating policies are aimed at reviewing the documentation that can provide some information on compliance rather than compliance itself. At the same time, the authors demonstrate that a well-developed compliance culture is a major predictor of the effectiveness of the adoption of anti-TF guidelines and their effective employment. Therefore, the development of compliance culture can only be performed locally and may be viewed as the responsibility of individual institutions. Pok et al. (2014) report that the activities which can help to develop compliance culture include training and leadership; they should focus on the significance of countering TF.
It is noteworthy that Cooper and Walker (2016) criticize top-down approaches to combating TF, highlighting the significance of the local level of anti-TF activities. The authors also point out the fact that the TF combating needs to find a balance between the interests of the society and individual rights, ensuring the existence of safeguards that would protect the latter. They suggest that this outcome can be achieved with the help of “soft” laws that provide recommendations rather than requirements, but they also admit the fact that such an approach offers more opportunities for FT to take place as compared to the top-down strategy. In summary, it is apparent that the process of searching for appropriate anti-FT measures is rather complex, and all the levels of anti-TF activities are significant for success, which emphasizes the importance of international and intranational collaboration.
Alternative Views
Certain concerns have been raised in the discussion of the significance of TF and its control. For example, Brzoska (2016) reports that the use of external TF is declining, which may be attributed to the development of a variety of policies for their prevention and control (p. 7). This factor limits the effectiveness of these policies, and their ongoing development may indeed result in increasing reliance on TF on self-funding, further diminishing their significance. Still, it can be suggested that this effect indicates the success of the policies since they effectively manage to make the use of particular TF sources increasingly difficult for terrorists. Also, as stated by FATF (2015), all the traditional methods of TF are currently widely employed, and they include outside funding. Therefore, while the tendency for more extensive self-funding may be present, the significance of monitoring and controlling the threats and vulnerabilities related to external TF is still acute. The tendency highlights the limitations of anti-TF activities, but it does not suggest that TF is not an important element of combating terrorism.
Apart from that, Brzoska (2016) points out the fact that single terrorist attacks can be relatively cheap. FATF (2015) also reports that individual terrorists do not require many resources. As a result, TF may play a greater role in organized terrorism and be less important for singular cases of terrorism. Naturally, organized terrorism is more likely to present an extended threat of attacks, which highlights the significance of addressing the issue of TF on various levels. Still, the argument of the scant resources employed by individual terrorists can be used to demonstrate the fact that terrorism combating is a complex process, in which the anti-TF effort is only one of the required activities. This idea does not directly undermine the importance of TF, but it indicates certain limitations of anti-TF activities. In turn, the determination of these limitations is necessary to assess the effectiveness of TF management: Brzoska (2016) uses this strategy to critique the best practice-based expansion of anti-TF measures, devising and promoting a more feasibility-based approach that would take into account the potential effectiveness of the employed methods.
In summary, the criticisms of the efforts aimed at monitoring and controlling TF do not undermine their importance; rather, they indicate the limitations of these activities. This information is essential to recognize because it can be used to improve the presently used approaches to TF control. Thus, the criticisms of anti-TF activities need to be taken into account by the bodies involved in combating TF.
Conclusion
TF is of great importance for terrorism, especially large terrorist organizations that require substantial funding to support their operations. The specifics of TF need to be examined in order to develop appropriate control methods; in particular, the emerging TF methods are not very well-researched, which needs to be rectified. It is noteworthy that the new techniques employ the trends of globalization and innovation to succeed in TF.
The approaches to TF that are used by terrorists nowadays are rather diverse, but there still exist some general strategies for TF control and management. In particular, nations tend to develop laws and guidelines which enforce monitoring and controlling activities, as well as sanctions, in a top-down manner. However, individual institutions can also contribute by establishing compliance cultures. Finally, there are international efforts, including FATF (2015), which include sharing recommendations, guidelines, research, and intelligence to combat the global threat of terrorism with the help of anti-TF activities.
There exist criticisms of the above-mentioned anti-TF methods, but they cannot undermine the significance of combating TF. Instead, they merely highlight the limitations of anti-TF activities and illustrate the fact that anti-TF efforts are only a part of combating terrorism. The criticisms, however, are especially important for improving anti-TF activities due to the critical analysis of the advantages and disadvantages of specific strategies.
References
Brzoska, M. (2016). Consequences of assessments of effectiveness for counterterrorist financing policy. Administration & Society, 48(8), 911-930. Web.
Cooper, K., & Walker, C. (2016). Security from terrorism financing: Models of delivery applied to informal value transfer systems. British Journal of Criminology, 56(6), 1125-1145. Web.
Financial Action Task Force. (2015). FATF report: Emerging terrorist financing risks.
Financial Action Task Force. (2017). International standards on combating money laundering and the financing of terrorism and proliferation: The FATF recommendations.
Irwin, A., Slay, J., Choo, K., & Lui, L. (2014). Money laundering and terrorism financing in virtual environments: A feasibility study. Journal of Money Laundering Control, 17(1), 50-75. Web.
Pok, W., Omar, N., & Sathye, M. (2014). An evaluation of the effectiveness of anti-money laundering and anti-terrorism financing legislation: Perceptions of bank compliance officers in Malaysia. Australian Accounting Review, 24(4), 394-401. Web.