paris attacks

Stemming the Financing of Terrorism

IS in Raqqa Source AP
A photo released by an Islamic State militant site showing the reading of a court verdict in Raqqa City, Syria.
  • Why it matters

    Why it matters

    In the aftermath of the Paris attacks on November 13, security experts seek to understand – and stop – the sources of financing of terrorism.

  • Facts

    Facts

    • Leaders of the G20 countries have agreed to work more closely together to stem terrorism financing, tighten border controls and share intelligence.
    • The OECD’s Financial Action Task Force is an intergovernmental group fighting terrorism financing, which has criticized European governments for not moving faster to freeze the bank accounts of known terrorists.
    • Experts say terrorists fund attacks through sources ranging from donations to money laundering.
  • Audio

    Audio

  • Pdf

Tom Keatinge, an expert at the Royal United Services Institute, a think tank focusing on the financing of terrorism, explained in an interview with Handelsblatt how terrorists get money for attacks. Mr. Keatinge spent two decades working for JP Morgan and now heads the Centre for Financial Crime and Security Studies in London. He estimates that the Paris attacks likely did not cost very much – and probably were funded through a combination of sources, not using established banks but other institutions.

 

Handelsblatt: The terrorist attacks in Paris seem to have been well organized and well funded. Where do terrorists get the money from?

Tom Keatinge: This is unclear. We do not know the source of funding. We assume it was a mixture – that some actors in the group used their own funds and others used funds provided by the IS or supporters of IS. We think it was a reasonable amount of money which did not come from petty crime but we are not talking about huge amounts of money.

What’s your guess? How much money was needed?

We don’t know it but from what we know about terror attacks in the past we’d probably say it was a €25,000 operation. They rented a car, they had weapons, suicide vests, they surely spent time in planning which would have needed a rental apartment and whatever. But that’s just a guess based on previous attacks. 9/11 cost $500,000, the bombing in London in July 2005 probably cost 10,000 pounds.

Tom Keatinge source HB
Security expert Tom Keatinge. Source: own

 

According to estimates by the United States, IS makes $2 million a day from oil sales. They also have other sources of financing such as taxes from the areas under their control. How do they transfer the money where it’s needed? What role do Western banks play?

IS operates a very closed system; I don’t think the international banking system is helping IS move money. They are well aware of the risks. No bank wants to deal with a terrorist organization. The system that’s almost certainly in use are informal money transfer networks. Companies like Western Union are at risk of playing a bigger role and the hawala system. Family members, friends and supporters are using those networks to send money to fighters in Syria. There’s good evidence that informal money transfer networks are moving money in support of IS.

Do big international banks play any role at all in this?

Where the major international banks could help is of course that they host the bank accounts of those people who are traveling to Syria to fight. Monitoring those accounts could produce useful intelligence for security services. The banks have been put on the front line by the authorities and if you do that, it would help to provide them with more guidance about how to identify suspicious activity, saying these are the kind of things to look out for.

Can you say more about that?

National agencies do connect with banks but that only works when the authorities have identified a particular person of interest. It would be useful to work together with banks at an earlier stage. They might be able to help identify people to watch.

But banks are already obliged to get in touch with authorities when they find something suspicious.

Yes, but a lot more could be done if national security agencies shared more information. This isn’t really happening systematically yet.

Where would this kind of information sharing be useful?

There are cases I am aware of but I can’t tell you about them, so I’ll keep it a bit vague. But it would be useful for authorities to tell banks if they’re investigating a particular situation – whatever it might be. In those situations, you can see people involved leave a specific financial footprint as they plan a terrorist act. Banks should be alert and look more closely, maybe something like whether someone booked a flight to Turkey or something like that. And it would also be useful if banks could share information between one another – that isn’t allowed at present.

Do you think there are ways to make the hawala system – in which an agent is paid in one place and an associate pays out the recipient in another place – more transparent and prevent it being used to fund terrorism? 

It’s extremely efficient but not transparent – but hawala is based on a trust system. There is nothing stopping people from setting themselves up as informal hawalas. So you can’t fully control it. But there are ways to prevent the large amounts of money from moving through the legal banking system, and you can gain more intelligence from the money that moves from the formal system. There is plenty that can be done to make the system stronger. But at the end of the day, money is like water – it will find its way through the smallest crack.

 

Katharina Slodczyck is a London correspondent for Handelsblatt. To contact the author: slodczyck@handelsblatt.com 

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