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As banks crack down, terrorists update their fundraising tactics

Since the Sept. 11, 2001, terrorist attacks, the U.S. and its allies have made great strides to stem the flow of money to terrorist organizations. And their enemies have responded by diversifying their portfolios. (iStock Image)

Since the Sept. 11, 2001, terrorist attacks, the U.S. and its allies have made great strides to stem the flow of money to terrorist organizations. And their enemies have responded by diversifying their portfolios.

Earlier this week, a feature in the New York Times revealed the extent to which terrorist organizations have adapted to the squeeze of Western financial institutions. From the Times:

While European governments deny paying ransoms, an investigation by The New York Times found that al Qaeda and its direct affiliates have taken in at least $125 million in revenue from kidnappings since 2008, of which $66 million was paid just last year. In news releases and statements, the United States Treasury Department has cited ransom amounts that, taken together, put the total at around $165 million over the same period. These payments were made almost exclusively by European governments, who funneled the money through a network of proxies, sometimes masking it as development aid.

This change should not be too surprising given the international crackdown on terrorist financiers in the wake of 9/11. The U.S. Patriot Act and the multilateral Financial Action Task Force, whose standards were later adopted by bodies like the International Monetary Fund and the World Bank, have shut down terrorist revenue streams in the Gulf states and elsewhere.

With its assets frozen and its financiers cooling their heels for “material support to terrorism,” al Qaeda was soon in arrears. The 9/11 Commission estimates that the group had an operating budget of $30 million before the attack in 2001, but its leadership was soon releasing frequent video pleas for money — leading Forbes to ask plausibly in 2010, “Is al Qaeda bankrupt?

Still, terrorist groups are well suited to adaptation. They are stateless, shapeshifting entities that exist outside the traditional framework of financial institutions. (The Times describes an al Qaeda affiliate entombing its shrink-wrapped spoils in the desert sands.) This is particularly true since the emergence of the al Qaeda network, a hydra of regional affiliates coordinated loosely by Ayman al-Zawahiri’s general command in South Asia.

Affiliates like al Qaeda in the Islamic Maghreb and al Qaeda in the Arabian Peninsula have singled out skittish European governments for extortion — jihad by other means.

As the Times reports, their kidnapping operations have grown more sophisticated and lucrative over time. “While in 2003 the kidnappers received around $200,000 per hostage, now they are netting up to $10 million, money that the second in command of al Qaeda’s central leadership recently described as accounting for as much as half of his operating revenue.”

Upstart terrorist groups like ISIS have utilized conventional revenue streams, establishing an online donor network and funneling money from humanitarian relief organizations and Islamic charities.

The group’s territorial gains in Syria and Iraq have given it other opportunities, however, from “taxation” to criminal enterprise.

Its biggest windfall came in June, when it knocked over the Central Bank of Mosul, netting $429 million. This one-off sum was enough to vault ISIS into first place as the world’s wealthiest terrorist group.

According to Voice of America, ISIS has made longer-term investments by tapping Iraq’s oil wealth, “selling siphoned petroleum from the output of the huge Baiji refinery north of Baghdad and elsewhere.”

Armed robbery and black-market trade are, of course, the least of ISIS’s crimes and ambitions. The United States and its allies will need to update their strategy to thwart terrorist groups from using new wealth for its intended purpose.

The prospect is daunting: It only took $500,000 to orchestrate 9/11.