20-Apr-20 Terrorist Financing

Photo by Pixabay at Pexels

It is difficult to mount a terrorism operation and certainly to run a terrorist organisation, without people, knowledge and money.  Indeed, there is much in common between licit and illicit organisations.  It’s why both management experts and criminologists have useful insights to offer on organised crime such as county lines, human trafficking operations or the funding of Far Right groups.  To grasp terrorism financing, Lormel (2018) says that we need to visualize funding flows and understand how money laundering works:

The terrorist funding cycle is to raise, move, store and spend money. Money laundering is a three-step process consisting of placement, layering and integration.

Placement involves putting the money raised somewhere in the financial system – for example, buying an asset or placing funds in an off-shore account. (If you are wondering how money is raised, see: https://www.rand.org/blog/2018/10/isiss-new-plans-to-get-rich-and-wreak-havoc.html).  The money then needs to be moved, possibly several times, to layer over the original money source.  At some point, this money becomes integrated and its original source is obscured: the laundering is ‘complete’.

For example, Millie steals £1000 from the cash till where she works; she buys an electric bicycle on Gumtree for cash and then sells the bike for £900 on Ebay (changing the amount is always useful to cover tracks), which she asks the buyer to transfer to her bank account; she then puts £400 of that in an ISA; asks her Nan to look after £400 (Nan doesn’t trust banks and keeps money around the house) and spends the remaining £100 on hair straighteners.  When questioned by police, she can explain that the £900 paid into her bank relates to an Ebay transaction and is unrelated to the missing money at work.  Once things cool down, she can combine and move the two lots of £400 and deposit or invest them elsewhere. 

Lormel’s funding flow visual is helpful and see also this NCA brief. You can see why it takes so long nowadays to open a new bank account!

Now imagine the Millie example in terms of a large terrorist network, operating across multiple countries, using complex financial instruments including digital cryptocurrencies, taking advantage of tax havens (including free ports, which the UK Government is currently very keen on promoting) and exploiting the regulatory differences and freedom of information laws between countries.  It is a very complex picture. 

Of course, it is important to remember that the rich and powerful ‘non-terrorists’ use many of the same methods to extract and store their wealth, away from the public eye and tax authorities.  So while academic and expert commentary on this topic may guide us to look at the activities of ‘bad guys over there’; we should keep an eye on activities close to home too. 

© Natasha Mulvihill and Criminology Tales, 2020. 

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