Funding Global Terrorism

Updated March 2016

With the relatively low-tech mass terrorist attacks over the past year in mind, it is interesting to hear comments like these about ISIS/ISIL from various sources including former U.S. Defense Secretary Chuck Hagel:

"ISIL is as sophisticated and well-funded as any group that we have seen. They're beyond just a terrorist group. They marry ideology, a sophistication of strategic and tactical military prowess. They are tremendously well-funded."...


...in fact, there is a greater threat from terrorists that have extremely limited funding sources, terrorists that we should be far more concerned about because they have the ability to fly completely under the radar of the world's security agencies.  These terrorists are part of the "leaderless jihad", unlike al-Qaeda which was under the leadership of Osama bin Laden and his lieutenants.  Attacks from these terrorists have become increasingly common over the past six decades as shown on this graphic which shows the number of lone wolf terrorists attacks in the United States from 1950 to 2009:

As we will see, the growing combination of lone wolf attacks and low cost terrorist operations forms the perfect storm of terrorism.

A study by Emilie Oftedal of Forsvarets Forskninginstitut looks at how terrorist cells finance themselves, specifically, how they raise, move and spend money and how much money they spend to undertake a terrorist attack.  While the study focusses on European-based jihadi attack cells, the financial operations of jihadist groups is similar around the globe.  The report uses data from both court documents and media reports and examines the financing operations of 40 jihadi cells that have plotted attacks against European nations in the years between 1994 and 2013 with an in-depth look at four terrorist cells that operated after 2007.

Let's start by looking at funding sources followed by moving the money that is raised and finally, how the money is spent.

1.) Raising the Money:  Terrorist cells raise funds in many different ways including state sponsorship, illegal activities, legal activities and popular support from their followers/members.  As state sponsorship levels have dropped, terrorist cells are increasingly relying on both legal and illegal activities to fund their operations.  In some cases, Islamic clerics have supported criminal activities that target non-Muslims as a means to fund jihad.  Terrorist groups also acquire funds from legal activities including salaries and wages, social welfare payments, legitimate business actives, personal loans and funds from family members and friends.  This form of funding is far less likely to draw the attention of law enforcement when compared to illegal activities, allowing terrorists to operate undetected.  Terrorist groups are also reported to receive income from popular support including support from charities, donations from wealthy members, membership dues and "taxes".  Here is a graphic that shows the proportion of the 40 terrorist cells in the study that have raised money from 15 different sources:

  

Note that the single most common funding source is "personal assets".  It is interesting to see that, despite the attention that they receive, Islamic charities were a source of funding in only two of the 40 cases in the study.

Here is a pie chart showing the high percentage of cells that are completely self-financed versus those that are externally supported:

Note that nearly half of the cells were completely self-financed, requiring no outside funding whatsoever.  Keeping in mind that some of these cells are of the lone wolf variety, while these cells tended to be smaller in size on average, the concerning factor is that cells that are self-financed are more likely to actually execute their attacks than their larger, outside-funded "brothers in arms".  The author's calculations show that, of the cells that are entirely self-financed, 53 percent have managed to execute their plots compared to only 21 percent among those that required external financial support.  This could be related to the fact that involving fewer people and conducting less complex attacks presents fewer opportunities for both errors in execution and lowers the risk of detection by law enforcement.

Here is a graphic showing how terrorist cell funding has changes over the past two decades:

A substantial 73 percent of the 40 jihadi cells were involved in legal activities to generate funds for their operations.  Criminal activities and support from other terrorist cells were used by 38 percent of the cells.

As an aside, while it was not included in the study, a recent article by Tom Keatinge on the Centre for Financial Crime and Security Studies website suggests that jihadists could be using student loans (students in the United Kingdom can avail themselves of loans up to £8000 annually that is paid directly into their bank accounts).  As well, payday loans can be used to transfer up to £2500 to a borrower's bank account. 

2.) Moving the Money: Transferring these funds from the source to the region where they are to be spent is accomplished using cash (with or without the use of couriers), hawala (see definition here), money service businesses like Western Union and formal banking transfers.  While there are no examples in the European database, false trade invoicing, high value commodities (i.e. precious metals), internet systems including Paypal and virtual currencies like Bitcoin could also be used.  In most jihadist cells in Europe, support is provided in cash form, generally transferred from supporters directly to the terrorists rather than through the use of a courier system.  Many of these forms of monetary movement are difficult to track, particularly when small amounts of cash or electronic funds are involved.   

3.) Spending the Money:  The jihadi cells in the database appear to have very few expenses beyond the actual attack-related activities.  This is not terribly surprising given that many of the attacks are of the suicide nature and most are planned as one-time events.  The expenses of the European cells were generally limited to the living expenses of the cell members (housing and food).  Here is a table showing the estimated costs of the European terrorist plots that were planned and conducted by the 40 terrorist cells in the study and what proportion of the plots were disrupted before any costs were incurred:

Three-quarters of the plots were estimated to have cost less than $10,000 with the majority costing between $1,000 and $10,000.  Only three plots were estimated to have cost more than $20,000; the Madrid train attacks of 2004, the Strasbourg Cell Christmas Market plot of 2000 and the bombing campaign of the GIA Network in France of 1995 - 1996.  None of the plots that cost in excess of $20,000 were self- financed while six of the seven plots costing less than $1,000 were self-financed.  According to Tom Keatinge at RUSI, the 7/7 bombings in London were estimated to have cost less than £8000 including overseas travel.  

The report concludes by noting that the majority of the financial activities of terrorists appear to be very little different from the financial activities of the population as a whole, other than the purchasing of both weapons and bomb-making equipment.  This makes detection quite difficult, particularly since it appears that terrorists are able to operate on very small budgets and are capable of financing their operations through legal activities rather than through the external and traceable monetary support offered by other terrorists/terrorist groups.  That said, by better understanding how jihadist groups finance their operations, governments will be better prepared to implement an effective response.  Obviously, whatever it is that they are doing now, terrorists have been quite capable of operating without triggering any alarms.  As I noted above, the combination of a growing number of lone wolf terrorists and the large number of low cost terrorist plots is setting us up for the terrorism perfect storm.