Counter-Terrorist Financing: interim research results Tuesday 13th February 2018 Dr. Nicholas Ryder Professor in Financial Crime

Centre for Research and Evidence of Security Threats This work has been conducted under the Centre for Research and Evidence on Security Threats through an ESRC grant which is funded in part by the UK security and intelligence agencies. FYI: (ESRC Award: ES/N009614/1) Interim Research Findings

Interim Research Findings Introduction What is terrorist financing? Sources of terrorist Funding Cheap terrorism, International Legislative Measures What is the Financial War on Terrorism? Islamic State of Iraq and the Levant Terrorist Funding Models Recommended Reading Interim Research Findings 3

What is terrorist financing? Terrorist financing has been referred to as: ‘reverse money laundering’, is a practice whereby ‘clean’ or ‘legitimate’ money is acquired and then funnelled to support terrorism Interim Research Findings

Traditional Sources of Financing State Sponsors of terrorism: Sudan, Iran, North Korea and Syria Private terrorist moneys: legitimate, and unlawful funds Interim Research Findings 5

Sources of Terrorist Financing Corporate donations, Non-profit organisations, Drug trafficking, Extortion, Organised retail theft, Fraud, Kidnappings for ransom and Oil refining. Interim Research Findings

Interim Research Findings Cheap Terrorism Bishopsgate bomb (1993) £3,000, £1bn worth of damage to property World Trade Centre bomb (1993) $400, Ramzi Yousef said in his trial “we ran out of money to bring both towers down” Oklahoma City bombing (1995), $5,000 New York, Washington and Pennsylvania (2001) $400,000 Sari Club Discotheque in Denpasar, Bali (2003) $74,000 Interim Research Findings

Interim Research Findings Cheap Terrorism Madrid Bombings (2004) €8,000 (EU Commission) London bombings (2005) £8,000 (HMG 2005) Westgate Mall (2013) $5,000 (US Department of Treasury) Boston Marathon bombings (2013) $500 (several secondary sources)   Charlie Hebdo shootings (2015) €4,000 Sousse (2015) £500 Interim Research Findings

Interim Research Findings Cheap Terrorism Brussels Metro and airport attack (April, 2016) – funded by student loans? Nice (July, 2016) Westminster (April 2017) Manchester Arena, (June, 2017) – funded by student loans? Mogadishu truck bomb, Somalia, October 2017 New York City Truck Attack, November 2017 Interim Research Findings

International Legislative Measures International Community concentrated on money laundering: UN Conventions (Vienna, Palermo and Corruption) EU (2 AML Directives and one Convention) FATF (40 Recommendations) Other international best practices Profit driven model which has mistakenly been adopted for terrorist financing Interim Research Findings

What is the financial war on terror? International Convention on the Suppression of Terrorist Financing (1999) UN Security Council Resolutions: 1267 1269 1333 1373 Financial Action Task Force (February 2012) European Union: Council Resolution 2580/2001. Framework Decision 151 [2002] OJ L164/3. Council Regulation 881/2002 Council Common Position 2001/931/CFSP Interim Research Findings

What is the financial war on terror? “attacking, whether via criminalisation, confiscation, forfeiture, freezing, sanctioning the financial assets of known or suspected terrorists … [it] also contains the use of preventative methods … and the collection of financial intelligence from suspicious activity reports” (Ryder, 2015) Interim Research Findings

Islamic State of Iraq and Levant This terrorist organisation has been described as ‘the wealthiest terrorist organisation’, Matthew Levitt stated that “estimates put ISIL’s daily income at around $3m, giving its total value of assets between $1.3bn and $2bn” and It has more assets than many nation states. Interim Research Findings

Islamic State of Iraq and Levant By September 2014, ISIL had revenues of at least $2bn from internal and external sources (Duhaime, 2015), ISIL’s total assets exceed $2tn, with an annual income totalling $2.9bn and ISIL “approved a $2bn budget” for 2015” (Humud et al, 2015). Interim Research Findings

Islamic State of Iraq and Levant Funding Stream 1 – The Control of Oil Reserves: This involves selling what they have captured to local consumers and black marketers, ISIL has used the same smuggling methods and routes that were used by Saddam Hussein during the 1990s, that generate daily revenues between $1m and $3m, Interim Research Findings

Islamic State of Iraq and Levant Funding Stream 1 – The Control of Oil Reserves: The international community has threatened to impose sanctions on countries that purchase oil from ISIL and However, the effectiveness of sanctions on this funding stream must be questioned (Ryder, 2018). Interim Research Findings

Islamic State of Iraq and Levant Funding Stream 2: Kidnapping for Ransom This has seen many nation states paying ISIL between $20m and $45m for the release of their citizens, The Congressional Research Services estimated that ISIL has amassed between $35m and $45m in ransom fees in 2014) and Kidnapping for ransom payments have been made despite the approval of UN Security Council Resolution 2133 (Ryder, 2018) Interim Research Findings

Islamic State of Iraq and Levant Funding Stream 3: Foreign and Private Financial Benefactors ISIL are also able to acquire finances from foreign investors and private benefactors, ISIL receives funding from private donations or via non-profit organisations, thus adopting a similar funding strategy as al Qaeda (FATF, 2015) Sympathetic supporters in other countries appear to have also provided ISIL with financial support. Interim Research Findings

Islamic State of Iraq and Levant Funding Stream 3: Foreign and Private Financial Benefactors Department of Treasury took the view that ISIL “derives some funding from wealthy donors” and it been estimated that ISIL has collected up to $40m from private donors (2014) However, it has been suggested that the amount of funding provided by private sponsors from has “diminished and is at most only a tiny percentage of the total income that flows into ISIL coffers in 2014” (Ryder, 2018) Interim Research Findings

Islamic State of Iraq and Levant Funding Stream 4: Criminal Activities imposition of illegal taxation measures which raises approximately $360m per year, the sale of artefacts has become ISIL’s second largest funding stream (approximately $100m p/a) In February 2015, the United Nations Security Council passed Resolution 2199, which prohibited the trade of artefacts illegally removed from Syria (since 2011) and Iraq (since 1990) Interim Research Findings

Islamic State of Iraq and Levant Funding Stream 4: Criminal Activities Extortion Bank robberies (similarity with the domestic terrorist groups in the United Kingdom) The unprecedented evolution of the funding streams of ISIL is also illustrated by the creation of its own currency (Ryder, 2018) Interim Research Findings

Terrorist Funding Models Cheap and inexpensive model Significant threat posed by self funded terrorist cells, Evolution of ‘cheap’ and ‘inexpensive’ terrorist financing, Numerous examples including London (2005), Paris (2015) and Nice (2016) Has been used by al Qaeda and ISIL and Renders key parts of the UKs counter-terrorist financing regime are ineffective. Interim Research Findings

Terrorist Funding Models Hierarchical or corporate: This has been used by the IRA (1970s and 1980s), Different funding model from that adopted by al Qaeda, This model has been utilised by ISIL (appears to have been adopted by Boko Harem and Al Shabaab) Development and publication of its own annual budget, Similar funding mechanisms as those adopted by the IRA and evolution is unprecedented. Interim Research Findings

Interim Research Findings Suggested Reading Ryder, N. ‘Out with the old and … in with the old? A critical review of the Financial War on Terrorism on the Islamic State of Iraq and Levant’ (2018) Studies in Conflict and Terrorism, 41(2), 79-95. Ryder, N. The Financial War on Terror: A review of counter-terrorist financing strategies since 2001 (Routledge, 2015) Interim Research Findings

Interim Research Findings Suggested Reading Ryder, N. ‘Banks in Defense of the Homeland:  Nexus of Ethics and Suspicious Activity Reporting’ (2013) Contemporary Issues in Law (Special Issue on Law, Ethics and Counter-Terrorism), 12(4), 311-347, with Turksen, U, Ryder, N. ‘Islamophobia or an important weapon? An analysis of the US financial war on terrorism’, (2009) Journal of Banking Regulation 10(4) 307-320, with Turksen, U. Interim Research Findings

Interim Research Findings Suggested Reading Ryder, N. ‘A false sense of security? An analysis of legislative approaches to the prevention of terrorist finance in the United States of America and the United Kingdom’, (2007) Journal of Business Law, November, 821-850. Interim Research Findings