Financial self-sufficiency fuels terrorist climate

Financial self-sufficiency fuels terrorist climate
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The beginning of 2015 has been marked by further Islamic extremist activities with horrific attacks in Paris, Maiduguri, and Istanbul, to name a few. Aside from the mutual goal of extending their caliphate and killing “infidels”, these terrorist organizations have yet another thing in common: financially, they have all developed resilient models of self-sufficiency.

Despite operating outside of legitimate banking channels, their operations are robust and diversified. These groups receive a steady flow of cash from an assortment of lucrative criminal activities such as ransoms from kidnappings, robberies, the sale of drugs, donations and even the smuggling of antiquities.

Oil

The Islamic State, crowned the world’s wealthiest terrorist organization, relies heavily on oil fields it controls in northern Iraq, and especially Syria. It is believed that the group is capable of producing nearly 47,000 barrels of oil each day, (earning somewhere between $846,000 and $1,645,000 a day). Their incredible purchasing power allows them to maintain their lavish spending habits. For example, a recent report from the United Nations Security Council predicts that IS possesses enough weapons to carry on fighting for two more years. 

Donations

Besides revenue from oil smuggling, money is often donated from one like-minded terrorist group to another. These groups also receive substantial donations from wealthy sympathizers in countries like Qatar and Kuwait. Nigerian based Boko Haram allegedly received $250,000 from al-Qaeda in the Islamic Maghreb (AQIM) in 2012. Today, this group has an estimated annual net income of $10m. A December 2009 classified memo from Secretary of State Hillary Clinton stated that donors in Saudi Arabia were “the most significant source” of funding to Sunni terrorist groups, such as AQIM and AQAP. There are a handful of non-militant groups accused of donating money to Boko Haram, such as Britain’s Al-Muntada Trust Fund and Saudi Arabia’s Islamic World Society.

Tolls and Taxes

Terrorist organizations often operate a form of quasi-government in the areas they control. ISIS, for example, requires drivers to pay ‘road taxes’ in territories it controls. Al-Shabab raises taxes in exchange for services such as security and justice. In the past, Al-Shabaab has been known to collect about half of its entire estimated annual income (roughly $40 million) in tolls and taxes on businesses in Kismayo and two other ports higher up the coast. No longer localized, Boko Haram’s reign is growing at swiftly and now controls several local governments in northeast Nigeria which it regularly collects taxes from.

Robberies

In addition to the constant threat of “road taxes”, there is the anxiety of sudden robberies. Earlier last year, ISIS robbed the central bank of Mosul along with several other banks, pocketing an estimated $430 million dollars. Boko Haram has robbed hundreds of banks in its home province of Borno, as well as other northern regions of Nigeria, totaling close to $6 million. True to their Draconian nature, Boko Haram regularly extorts money from businessmen, politicians and government officials. A nearly quiescent Nigerian army in the wake of Boko Haram’s growing strength, it is often robbed as Boko Haram publicly steals from them, raiding many military bases and enjoying a selection of trucks, rocket-propelled grenades and assault rifles. The ICG warns that this group has cemented relations with arms smugglers throughout the vast and lawless Sahel region.

Kidnapping

Kidnap for ransom is another popular means for terrorist groups to raise an exorbitant amount of money in a short period of time. In fact, ransoms appear to be the main source of funding for Boko Haram, who, two years ago, was paid $3 million when it agreed to release a family of seven French tourists last year. According to certain US officials, this group can receive close to $1million for the release of a wealthy Nigerian. Integrity’s Jiyad believes that ransoms from kidnappings account for about 20 percent of ISIS’s revenue. Last March, two Spanish journalists held by ISIS were freed in March along with four French journalists the following month. It is a well-known fact that, contrary to the British or American government, some European governments will agree to pay in certain hostage-negotiation circles.

A Salafi-jihadist militant group that operates in the Sahara and Sahel, Al-Qaeda in the Islamic Maghreb (AQIM) has grossed roughly $100m over the past five years through the abduction of foreign tourists and workers. This group focuses largely on purging North African countries like Morocco, Algeria, Libya, Mali, and Tunisia of Western influence. Their goal is to remove any government deemed apostate and implement Sharia based fundamentalist regimes. AQIM has declared Spain and France its foremost “far enemies.” Al-Qaeda in the Arabian Peninsula (AQAP), centered in Yemen, is believed to have netted $20m this way between 2011 and 2013 alone.

Drugs

Europe’s cocaine trade appears to be funding Islamist terrorists in North Africa. It is estimated that 48 tons of cocaine, worth approximately $1.8 billion in Europe, are smuggled every year. There is considerable evidence that jihadists, especially in northern Mali, are profiting by charging smugglers a lofty fee for safe passage through areas they control. In Afghanistan, the growing of opium poppies is at an all-time high, supplying over 90% of global opium output and boasting approximately $150m a year in revenue. Somalian based group Al-Shabab has developed a highly effective charcoal export business which generates up to $80m a year, according to the UN. 

The Hawala Banking System- fostering a terrorist climate?

Hawala can be loosely defined as “money transfer without money movement” as it never physically moves, but instead is transferred by means of a telephone call, fax, or an email between dealers in different countries. The Hawala system, born in India long before the creation of Western banks, is a major remittance system used around the world.  Contrary to international wire transfers that often can take up to a week, a hawala remittance takes place in, at most, one or two days. This transfer system is under investigation in Kenya as it is believed that Al-Shabaab uses a network of ‘hawaladars’ to fund their operations. Boko Haram and ISIS are also frequent users of the Hawala system as part of their modus operandi. The heavy dependence on family relationships, but more importantly trust, sets this system apart from traditional remittance systems.

Somalia, Nigeria, Iraq, Syria and Yemen, while all very different countries, have one thing in common- the obvious need to address the growing threat of radical extremists. But in countries where governments have little or no control and corruption remains endemic, the question remains as to whether or not this is feasible.

 

 

About Author

Itziar Aguirre

Itziar currently works as a Research Consultant at JLL, a commercial real estate capital intermediary. She holds an MBA in Accounting and Finance from the University of St. Thomas and an MSc in Comparative Politics from the London School of Economics.