A new Swedish report examines the modi operandi of terrorist finance and looks at the national systems and regimes that have evolved to cope with it.

Despite the huge sums that governments require banks and other financial institutions to spend on rooting out terrorist finance, there are relatively few studies on the subject, so the report makes an effort to collate them. It tries to provide the reader with a broad insight into the ways and means by which terrorist groups (especially salafi-jihadists) generate funds and move them across national borders. It also focuses on the lessons that financial crime officers can learn from the regimes of the United Kingdom and Canada, which draw on some of the most developed thinking and experience on the subject.

Draining the ocean to catch a fish

The report is not entirely truthful; at one stage, jumping illiterately into a sentence with a gerund at the beginning, it makes the dubious assertion that "detecting terrorist financial transactions is a crucial counter-terrorism activity." Later on, however, it admits that "it is clear that terrorist activities do not require substantial funding."

The sums are, indeed, puny. In total, the report estimates that the network surrounding the Basque terrorist group ETA managed at least €28.1 million a year between 1993 and 2002 but then the total went down to around €8.8 million thereafter. Even the provisional Irish Republican Army only has a fund-raising capacity of around $7-10 million. One is reminded of the words of the 9/11 Commission Report: "Trying to starve the terrorist of money is like trying to catch one kind of fish by draining the ocean." This is especially true whenever one talks to anti-terrorist policemen about the means by which they caught terrorist cells; nearly all victories involved old-fashioned gumshoe detective work, including infiltration and the interception of telephone calls.

The sources of terrorist finance

Nevertheless, banks are obliged to undertake this mammoth and thankless task and the report gamely lists the main sources of terrorist funding. Drawing from analysis of 40 jihadi cells by the Norwegian Defence Research Establishment, it shows that salaries and savings of terror cell members were the most common source of income and that 73% of terror cells in the study had acquired part of their financing from legitimate means, with few drawing funds from a single source. More than one-third of cases, however, involved criminal activities that raised money, with self-financing cells more likely to carry out attacks. There was no evidence of hawala transfers to jihadists among the 40 cases. Most of the plots cost almost nothing; three-quarters of them cost less than $10,000.

Charitable contributions are an integral part of Muslim solidarity and jihadist terrorist sometimes abuse them for their own ends. The report points a finger at Muslim Aid in the UK, under whose name terrorists collected up to £14,000. It quotes the Charity Commission’s chairman William Shawcross as saying that “terrorist abuse is one of the greatest risks facing the charitable sector today.”

The securing of loans with no intention to pay them back is another source of terrorist funds onshore, as is value-added tax fraud and social insurance fraud.

Crowdsourcing is also evident in Jahed Bimalak (Make Jihad with Your Money) which is a fundraising campaign for Jabhat al-Nusra (JN or Nusra Front), the official al-Qaeda branch in Syria, under the supervision of the Saudi JN-affiliated scholar Abdallah al-Muhaysni and his JN-affiliated civil organization, The Jihad's Callers Centre. The campaign has been running since 2014 and the mobile applications used by Jahed Bimalak are the mobile messenger application Telegram and WhatsApp.

Another emerging trend is the use by ISIS of the 670-or-so digital cryptocurrencies (Bitcoin, etc) and the 'invisible web' (Dark Web) as a market area for arms sales as well as document forgery.

Red flags for the compliance officer

'Red flags' that might apply to the high-net-worth market are as follows.

• High account activities and frequent withdrawal of funds from international destinations near 'foreign terrorist fighter' (presumably 'foreign' = not American) destinations.
• More than one airline ticket and broken-up travel arrangements with Turkey emerging as final destination combined with travel costs.
• Travel to places near 'foreign terrorist fighter' destinations in combination with purchases of outdoor equipment or military supplies.
• Loans with no security or leasing arrangements to purchase specific SUVs (Toyota Hillux or equivalent (often in white/black). Often buyers have not pre-owned vehicle.
• Unexpected sale of personal belongings and assets combined with travel to areas near FTF destinations.
• Receiving multiple funds to same FTF account from multiple senders.
• Flurry of activity in account and then dormant with withdrawals from areas near FTF destinations.
• Identifying areas along border, border towns and associated ATMs and known crossings into Syria.
• Upgrade of credit limit combined with questions about cashpoint withdrawals in Turkey, Jordan and Lebanon.
• Complete clean-out of account combined with airline ticket purchase to areas close to FTF destinations.
• Social media profiles (open) revealing sympathy for terrorist causes.   

All the terrorist finance to which the report refers is so-called 'retail terrorism' and not the infinitely more murderous 'wholesale' terrorism carried out by the great powers and funded from taxpayers' money, government borrowing and, in the case of the United States, the Central Intelligence Agency's illegal drug-running businesses. The report can be uploaded at http://www.fi.se/upload/90_English/20_Publications/10_Reports/2016/understanding-terrorist-finance-160315.pdf