• Where Do Terrorist Groups Get Their Money?

    Where Do Terrorist Groups Get Their Money?

    In recent years, the foreign policy news establishment has been saturated by claims from Western governments that Iran is the single largest funder and backer of global Islamist terrorism. As declared by former U.S. Secretary of State and CIA Director Mike Pompeo, “al-Qaeda has a new home base […] the Islamic Republic of Iran.” This claim, like all claims of the sort, was backed up by little data-driven evidence, and disputed heavily by the Iranian government, with Iranian Foreign Minister Javad Zarif calling it “more warmongering lies.” Zarif also added that all of the terrorists who carried out the attacks on September 11th were from “Secretary Pompeo’s favourite [Middle Eastern] destinations [meaning the Gulf States and Egypt]. NONE from Iran.” 

    One must not forget that Foreign Minister Zarif is at the helm of an allegedly brutal and repressive regime that goes against many of the values promoted by the West and Canada. Still, Mr. Zarif does correctly point out the United States’ double standard on counterterrorism. 15 of the 19 hijackers on 9/11 were reportedly from Saudi Arabia, and 2 were from the United Arab Emirates (both Western allies). The remaining two were from Lebanon and Egypt. Yet, the U.S. has done very little in response to tackle this. The Gulf States and Egypt are considered both strategic and economic allies of the United States. Israeli Prime Minister Benjamin Netanyahu and Foreign Minister Zarif had a similar interchange after Netanyahu called Iran “the pre-eminent terrorist state of our time,” while strengthening relations with other Gulf states. 

    This, then, leaves us with the question: where exactly does Islamist terrorist financing come from? Contrary to what is advertised by both Western governments and Iran, the Gulf States (including Saudi Arabia) are reportedly the primary sponsors of Islamist terrorism globally. Southeast Asian nations, Iran, and private funding also account for a significant amount. 

    State-Sponsors List 

    When one follows the ever-emblematic money, it is quite clear that some of the members of the U.S. State Department’s State-Sponsors of Terrorism Designation List are far from being the largest funders of global Islamist terrorism. On the list, we only find Cuba, North Korea, Syria, and Iran. The list is not exhaustive, but rather a compilation of states from which the United States can diplomatically disengage with very few repercussions. 

    In response to the list, Dr. Daniel Byman, a world-leading terrorism studies expert based out of Georgetown University, produced a list of his own. The list featured Saudi Arabia, Pakistan, and the United States. The United States was included for its past and current funding, arming, and training of various Islamist terrorist groups and actors. This includes the Afghan Mujahideen and rebel groups in Syria, many of which were revealed to be Islamist terrorist groups. Providing his rationale, Dr. Byman demonstrates that Saudi Arabia and Pakistan are the largest supporters of Salafi Jihadist terrorism. They have notably funded, armed, and even provided harbour to members of Islamic State, al-Qaeda, the Taliban, and others. 

    Saudi Arabia, for instance, has reportedly been the largest source of funding and arms for Salafist Jihadist groups. It has propped up terrorist groups in Yemen, Syria, and Afghanistan, namely the Taliban, al-Qaeda, and Islamic State. This has earned Saudi Arabia the epithet “fountainhead of Islamist terrorism.” Pakistan has also been accused of continuing to harbour al-Qaeda terrorists, including Osama Bin Laden. Bin Laden resided in Abbottabad, Pakistan, a few blocks away from Pakistan’s military academy. In regions of Kashmir, the Pakistani government, particularly the Pakistani Inter-Services Intelligence agency, has also been accused of harbouring, funding, training, and arming the Taliban for years.

    The Gulf Monarchies 

    The Gulf States have also reportedly funded Islamist terrorist efforts globally. As revealed by Jordan Cope at Newsweek, Qatar, a country with a population smaller than the state of Iowa, has provided at least 1.1 billion U.S. dollars in funding to Hamas since 2012. To provide some idea of the scale of this funding, the 9/11 Commission Report found that it took between U.S. $400,000 and $500,000 to fund, plan, and carry out the 9/11 attacks. According to a leaked U.S. embassy cable, the United Arab Emirates has also been used as a “funding base” for the Taliban, al-Qaeda, and the Haqqani Network. Various businesses based in the UAE have allegedly provided funds and cover to Islamist terrorist organizations and operations. 

    Similarly, Kuwait has been shown to support Syrian-based terrorist groups, namely ISIS and al-Nusra Front. Kuwait has also been accused of providing banking privileges and funding to al-Qaeda terrorists in Pakistan and Afghanistan. Moreover, Qatar and Saudi Arabia have allegedly funded Islamic State, al-Qaeda and Lashkar-e-Taiba to the tune of billions of U.S. dollars. Finally, Bahrain, the smallest of the Gulf States in both population and size, has also done very little to combat terrorism financing. It has failed to comply with the Financial Action Task Force (FATF), the Anti-Money Laundering group, and other anti-terrorism financing frameworks. This has made Bahrain a de facto offshore financial sanctuary for Islamist terrorist groups. Measures to counter the financing and export of Islamist terrorism from Bahrain were only introduced by the crown prince of Bahrain in March.

    Southeast Asia

    Despite being a full member of the FATF and the Asia/Pacific Group on Money-Laundering (APGML), the Malaysian government has had a very hard time countering terrorist financing. As per the U.S. State Department’s 2019 report on terrorism in Malaysia, it “remained a source, a transit point, and, to a lesser extent, destination country for terrorist groups including ISIS, Abu Sayyaf Group (ASG), al-Qa’ida, and Jemaah Islamiyah.” The State Department, in a similar brief, also reported that Malaysia represents an opportune location for terrorist financing. It offers lax border security, ambiguous laws on counterterrorism and money laundering, and serves as an offshore financial hub. 

    Indonesia has served a similar role, though the Indonesian government has been more transparent regarding its action plan, especially since the start of the COVID-19 pandemic. Still, Malaysia and Indonesia have been accused of harbouring Islamist terrorist groups, most prominently Jemaah Islamiyah, an al-Qaeda ally with high activity in the region. As detailed by Sylvia Laksmi from the Global Center on Cooperative Security in Canberra, terrorist groups, through charitable organizations, have been provided a great deal of financial cover in Malaysia and Indonesia. These charities have either served as a front for terrorist activities or have served as a way to divert funds to terrorist groups

    The same could have been said of Singapore and the Philippines a few years ago, although both countries have heavily ramped up their efforts to counter terrorist financing, even resulting in a state-sanctioned hunt for suspected drug cartels and terrorist groups in the Philippines

    Iran

    One would be correct in challenging the claim made by the United States government that Iran is the number one state-sponsor of Islamist terrorism. The Iranian government and its apologists have been quick to dismiss all claims regarding its history of financing, arming, and training Islamist terrorists. Still, we would be remiss to completely omit Iran’s role in sponsoring Islamist terrorism worldwide. Iran’s Revolutionary Guard Corps and its Quds Force (IRGC-QF), both heavily involved in foreign military and intelligence operations, have armed, trained, and funded various Islamist terrorist groups. Groups supported are based in Bahrain, Lebanon, Iraq, Palestine, Syria, and Yemen. 

    In 2020, the State Department reported that the Islamic Republic of Iran, through the IRGC-QF and the Ministry of Intelligence and Security, gave Hezbollah, a very active Islamist terrorist group and revolutionary political party in Lebanon, over 700 million U.S. dollars per year. The same report also details Iran’s funneling of over 100 million U.S. dollars per year to Hamas and Islamic Jihad in Palestine and the Houthi rebels in Yemen. The report also outlines Iran’s support of the rogue Assad regime in Syria. The Assad regime has been documented to fund, arm, and train Islamist terrorist groups. It has also illegally detained, tortured, and killed its own citizens, including through the use of chemical weapons. The IRGC-QF has also been accused of carrying out acts of cyberterrorism against the U.S. and U.S. allies through various programs, including the MuddyWater program. These are highly concerning instances, which potentially makes Iran one of the largest state sponsors of Islamist terrorism. 

    Flags of Convenience and the Hawala System

    A brilliant colleague and friend at Sciences Po by the name of Shravan Krishnan was gracious enough to explain one of Islamist terrorist financing’s central tenets: the flags of convenience problem. As explained by Shravan, several organizations behind the financing of Islamist terrorism have been using a “flags of convenience” tactic to circumvent finance and trade laws when performing illicit activities. This term comes from the notion that certain ships, often carrying out illicit activities, will fly the flag of the country that is most advantageous to their shipment, in order to prevent any legal recourse. In a broader sense, this means that, upon being required to present documentation of any kind to legal authorities when performing financial and trade duties, Islamist terrorist groups and their backers will use any alias, institution, or cover that is convenient to them in carrying out their activities, which can include the funneling of weapons. Moreover, said groups may register their activities with a country whose corruption and terrorist financing laws are quite lax, including Bahrain, Malaysia, Indonesia, and tax havens like Panama and a number of Caribbean islands. 

    Also at the heart of Islamist terrorist financing is the Hawala system. The Hawala system predates the Western banking system. In it, tasked brokers, also known as hawaladars, use an honour system to transfer funds between groups or individuals without raising suspicions. While the overwhelming majority of Hawala users do so to perform regular and legal financial activities, it has certainly been abused. Islamist terrorist groups actively recruit these hawaladars, giving them commission on successful transactions. The Hawala system has been used by Islamist terrorist groups to facilitate the funneling and exchange of funds through seemingly legal and legitimate means. So far, only the US, India, and Pakistan have banned the Hawala system.

    This situation makes it incredibly difficult for counterterrorism authorities to track and counteract Islamist terrorist support. 

    What Should Be Done 

    Still, there remain things that may be done to address issues and loopholes that are exploited by Islamist terrorist financiers. Primarily, we need to be honest about Islamist terrorist financing, regardless of partisanship, vested economic or financial interests, or any other phenomenon. Intelligence and counterterrorism strategies and policies should, first and foremost, be based on data and facts, not ideology and convolution. Without hard evidence and objectivity, intelligence efforts are rendered dangerously meaningless and ineffective. 

    To illustrate, much more should be done to tackle the Gulf Monarchies’ tacit and explicit support and export of Islamist terrorism. The U.S. and Canadian governments should cut ties with the Gulf Monarchies, especially Saudi Arabia, and add these states, at the very minimum, to their state sponsors of terrorism lists. The same should also be done with Pakistan. To undercut the large economic, social, political, and strategic consequential losses that would result from such a policy, relations should be re-established and reinforced with nations that show a lasting and genuine commitment to counterterrorism efforts, including Russia and China. This would, in turn, help the West push for better intelligence and counterterrorism practices from these nations, as their tactics have been quite extreme, as seen in the ongoing repression against Muslims in Chechnya and Xinjiang. While China and Russia have exaggerated the threat posed by alleged Chechnyan and Uighur terrorists, there has been some Islamist terrorist activity in both those regions. It would also help alleviate tensions with these countries. 

    While appearing popular, the West already has certain joint strategies, initiatives, and policies in place. Russia and China participate and host a number of joint counterterrorism training exercises. Moreover, Russia and China have acted in relative compliance with the FATF and other anti-terrorist financing frameworks. This proposal, while most probably highly unpopular and risky, would certainly help move things forward in countering Islamist terrorist financing. 

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    Joseph Bouchard

    Joseph Bouchard

    Originally from Quebec City, Joseph earned a BA in International Relations and Latin American Studies from the University of British Columbia. He is currently pursuing a Master's of International Affairs in National Security and Diplomacy at the Bush School of Government at Texas A&M. Joseph writes on the intelligence world and the dynamics and politics of modern warfare. He also hosts the monthly Realpolitik podcast, where he invites experts to discuss security issues. Joseph hopes to work in government or military intelligence analysis, focusing on national, regional, and hemispheric security in the Americas.

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