Huge amounts of resources are required to finance terror operations, and this includes terrorist attacks. For a terrorist group to be financed, significant amount of resources are required, but a terror attack can be financed by a relatively lower amount of funds. Therefore, each dollar that is denied to terrorists by disrupting their sources of funds tends to diminish their abilities to carry out terrorism operations (Lormel, 2007). Studies have shown that finances of terrorist organizations can be starved by directly dealing with organizations that are responsible for raising these funds. Aggressive actions need to be taken against organizations that finance terrorists by freezing their resources. This document critically analyzes ways of disrupting terror group finances as a means of exploiting weaknesses in terrorist organizations.
Funding capacity refers to the ways finances are raised, transferred, and disbursed. Evidence suggests that it is very difficult to identify the sophisticated terrorist financing strategies and adequately deal with them. To understand different organizations, government agencies must consider their unique operations. Therefore, different financial infrastructures and agencies must be put in place to understand and develop specific methodologies that can be used to counter and disrupt flows of finances to terror groups (Anderson, 2013). Terrorist organizations need financial resources in order to carry out their operations. Therefore, they meticulously develop effective funding infrastructures. For a terrorist group to be successful, it should have the ability of raising funds, mechanisms of laundering the finances, and capacity to fund their operations. Over several years, terrorist groups have perfected their funding methodologies thus placing efforts of anti-terror financing agencies in a reactive posture.
Government agencies should develop strategies that enable financial investigators to track the point of origin of funds and forward the information to counter-terrorism units. One way is to understand the current ways that are used by terrorist groups to launder the funds, indentifying source points, and consequently disseminate terrorist operations. The Bank Secrecy Act (BSA) of 1970 and additional efforts to comply with anti-money laundering have strengthened the ability of financial organizations to curb illicit funds (Winchell, 2012).
It is important to develop methodologies and strategies that will protect privacy of financial information, including credit card information, from fraud and theft. Fundraising techniques of terrorist organizations tend to differ from the way their operations are funded. This implies that funds are raised from different sources and this is different from their expenditure mechanisms (IOS Press, 2013). Therefore, government agencies should modify ways of detecting and preventing the specific and collective sources of funds as well as their expenditure. In addition, the ways, in which these funds are raised and spent, tend to differ from one organization to another due to logistic and demographic considerations.
Financing processes of terrorist organizations can be simplified into three basic steps, namely funding sources, ways of laundering the funds, and availability of finances. To exploit the weaknesses in terrorist organizations, it is important to curb the ways used in money laundering. To launder funds, there should be a formal and informal banking system, non-financial institutions, and/or financial instruments, such as credit cards (Lormel, 2007). Second, a conduit should be present to filter the origin or source of these funds through a financial or non-financial institution. The conduit then makes these funds accessible and available to specific terrorist individual, entity, or cell at the point of use and distribution. The National Bulk Cash Smuggling Center (BCSC) was established in 2009 to investigate the transfer of bulk case (Winchell, 2012). On several occasions, financial organizations act as the middle ground or conduit points between the source of terrorist funds and the means of distribution. It is in this perspective that financial institutions serve two unique dimensions when it comes to financing terrorist organizations. Such an understanding is of huge significance since financial institutions can inform counterterrorism agencies when there is a suspicious financial activity, and this will consequently disrupt their terror activities.
On several occasions, terrorist financiers have become exceedingly proficient at harmonizing their operational and fundraising activities. Therefore, it is very crucial for financial organizations to come up with detective mechanisms that have the abilities of detecting terrorist financing from the two unique funding dimensions that have been mentioned above (IOS Press, 2013). The funding dimension comprises of all the sources of funds and funding mechanisms that range from charitable giving, donations, legal and illegal business activities, as well as illegal activities. Operational dimension is the second aspect and this can only be done with the presence and consequent disposition of finances. Terrorists use this dimension to deposit small amounts of funds depending on the intensions of their activities.
To exploit weaknesses in terrorist organizations, government agencies should understand that terrorists take precautionary steps in the funding streams to avoid detection. To start with, credit cards are used by terrorists both as operational and fundraising mechanisms (Anderson, 2013). As tools to raise funds, fraud and stealing of credit card information act as a lucrative stream of funding. Moreover, as an operational tool, terrorists use credit cards to support their terror activities. Since creation of BCSC, more than 500 criminal investigations have been done leading to 132 seizures worth $65.8 million (Winchell, 2012). One unfortunate reality is that terrorists always have different mechanisms of accessing financial resources despite of vigilance levels and detection mechanisms. Nevertheless, higher levels of preventive and detective efforts usually create a more robust and effective strategy of disrupting activities of terrorist organizations. Every terror disruptive mechanism that is effective tends to eradicate the operational ability of terrorists.
Formal and Informal Mechanisms
A critical mechanism of disrupting activities of terrorist organizations is to curtail two main means of money transfer, which include formal and informal transfer of funds (Sharma, 2005). Funds are transferred formally through commercial financial institutions while informal systems are the other means that do not involve financial systems (Lormel, 2008). Terrorists have enhanced their mechanisms of laundering money. The level of preference on a specific type of money laundering depends on different factors, including culture, accessibility, banking system sophistication in different countries, systemic vulnerabilities, timing, situational considerations, opportunities and situations to be exploited, investigative scrutiny, and other factors. Whatever technique is used to transfer funds, the main intention is to evade detection by intelligence, regulatory and law enforcement agencies.
Terrorists also put into consideration risks and benefits associated with each mechanism. Governments can disrupt operations of terrorist groups by establishing structures that scrutinize thoroughly the operations of banks, insurance companies, credit agencies, currency exchanges, casinos, loans and savings associations, and other formal institutions. Cornerstone Outreach Initiative is a partnership between the public and private sector to systematically eliminate vulnerabilities in the financial sector (Winchell, 2012). Terror groups use formal methods since the transaction will be legitimized, few people will handle the process, will be less exposure, and they are more secure.
The only setbacks include documentation trail, exposing other terrorist agents, risk of prosecution and forfeiture. It is important to note that investigative processes after the 9/11 terror attacks in the U.S. primarily relied on documentation from financial institutions. Informal mechanisms involve physical transfer of funds through bulk cash shipment and courier using ships, airplanes, vehicles, freight and main shipment (Anderson, 2013). The benefit of informal mechanism is that money cannot be traced on a paper trail. There is no third party, like a bank official, who will be aware of the money movement, and terrorist organization has full control on the movement process.
Over the years, the methodologies used to transfer terrorists’ funds have evolved and diversified to avoid detection. Formal systems are relied upon in Western societies while informal systems are used in less developed financial systems, such as Afghanistan (Sharma, 2005). Government agencies usually classify different functions and roles played by each agent in the transfer of funds. For instance, different stakeholders who have an interest in terrorist funds include fundraisers, donors, recruiters, facilitators, suicide bombers, and other foot soldiers (Lormel, 2008). Activities of each agent need to be scrutinized since they possess unique and specific funding requirements. Moreover, their sources of funding and their transfer techniques are usually different. For instance, terrorist operatives and foot soldiers operate at the retail level while wealthy donors use private banking.
In conclusion, this document has critically analyzed ways of disrupting finances from terror groups to exploit weaknesses in terrorist organizations. Evidence shows that terrorists have diversified their strategies of raising, transferring, and distributing money to avoid detection. With increased sophistication of money laundering techniques, counterterrorism agencies have been forced to rely on reactionary strategies to combat terrorist financial operations. Nevertheless, financial authorities are currently putting strict measures to ensure that all money transfer activities are scrutinized. Moreover, terrorist organizations use both formal and informal means of transferring their funds. A specific method of money transfer is preferred depending on the number of circumstances ranging from convenience, time, vulnerabilities, and present opportunities. Governments have developed investigative mechanisms that trace the sources of funds and identify the network of terrorist organization.