The Political Economy of Islamic Charities and Terrorist Financing Robert Looney Professor, National...
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Transcript of The Political Economy of Islamic Charities and Terrorist Financing Robert Looney Professor, National...
The Political Economy of Islamic
Charities and Terrorist Financing
Robert Looney Professor, National Security
Affairs Naval Postgraduate School
CENTRA Technology Workshop onTerrorist Financing, Arlington, VANovember 29, 2005
Outline -- Main Issues Introduction: Islamic Charities -- A Political
Economy Approach.
Exploitation of Charities by Terrorist Groups.
Factors Likely to Affect Growth of Funding to Islamic Charities.
Case Study of Iraq.
General Problems in Controlling Islamic Charities’ Funding of Terrorism.
Approaches to Future Policy.
Political Economy Approach ToIssues Surrounding Terrorist
Financing
Political Economy Approach Focuses on How The Potentially Divergent Interests of The Key Actors in Raising, Distribution and Spending of Funds Might Affect Outcomes.
Also Important are The Institutional Settings in Which Decisions About Financing Are Made – How Do These Affect Outcomes?
Approach Sheds Light on Both The Evolution of Terrorist Diversion of Funds From Islamic Charities As Well As:
The Constraints the Funding Sources Might Impose on Future Terrorist Behavior.
The Constraints on Individual Countries in Controlling the Activities of Islamic Charities.
Introduction: Attractiveness of Islamic Charities to Terrorist
Groups One-fifth of all NGOs Conducting Humanitarian Work
Worldwide are Islamic – Active Presence in Every Country with Muslim Population.
Provide Excellent Cover and Global Reach.
Enable Al Qaeda and Like Groups to Radicalize and Mobilize Muslim Communities to Support their Aims.
Organizations Receive and Disburse Several Billion Dollars Per year.
Much Good Will -- Aiding Muslims in Distress is a Religious Duty While Idea of Defending Muslims from Perceived or Actual Persecution Appeals to the Vast Majority of Muslims.
Introduction: Attractiveness Islamic Charities to Terrorist
Groups (contd.) While Most Muslims Make Donations For Charitable
Purposes, A High Proportion of Islamic NGOs include Military Aid As Part of Humanitarian Package.
Perhaps One Third Islamic Charities Support Terrorist Groups or Employ Individuals Suspected of Terrorist Connections.
Neither the Authorities Nor Donors Are Easily Able to Determine or Control Ultimate Beneficiaries of Contributions – Especially if Overseas.
Unless There is a Direct and Immediate Threat to Domestic Stability or to Important Foreign Relationships, Governments Unlikely to:
Develop a Framework for Closer Monitoring. Actively Participate in International Efforts at Regulation.
Overview Charities and the
Terrorist Money Trail
Exploitation of Charities (Al Akhtar)
Al Akhtar Trust (Pakistan): Financed Radicalization of Local Muslim
Populations – Madrassas and Mosques.
Bought Good Will for Terrorist Groups Through Employment for Locals – Bread for the Poor.
Direct Financial Support Islamists in Chechnya, Kosovo, Taliban, Kashmir.
Supplied Weapons, Ammunition to Taliban.
Exploitation of Charities (AHF)
Al Haramain Foundation (S. Arabia).
Important for its Size – 50 Countries Promotes Wahhabi Islam. Spread of Militant Islamic Doctrine Through
Madrassas, Mosques. Al Qaeda Funding Source as well as other
Terrorist Groups. Post 9/11 Supported Taliban/Terrorism in
Afghanistan.
Many Branches Supposedly Closed, Only to Reappear Under Different Names.
Exploitation of Charities (BIF) Benevolence International (Saudi Arabia)
Fund Raising for the Mujahideen in Afghanistan.
Logistical Support Al Qaeda.
Funded Groups Intending to Kill U.S. Nationals
Funded Efforts to Develop WMD – Obtain Nuclear Weapons.
Perfected “Skimming” (Usually 10% from Charitable Projects) to be Deposited in Al Qaeda Accounts.
Exploitation of Charities (QCS) Qatar Charitable Society (Qatar)
Terrorists Infiltrated Legitimate Charity and Exploited Funding Base.
Logistical Support to Al Qaeda.
Transferred up to $ 1Million to Chechen Rebels.
Developed Clever Way of Liquidating Charity Bank Accounts into Untraceable Cash in War-Torn States.
Exploited Ambivalent Attitude of Qatari Authorities on Monitoring Use of Funds – Tacitly Encouraged Transfers to Militant Groups in Conflict Areas.
Exploitation of Charities (GRF) Global Relief Foundation (U.S.)
Provided Money, Assistance and Equipment to Al Qaeda.
Distributed Propaganda of Known Terrorists.
Newsletter Advocated Armed Action Against Groups Perceived to be Un-Islamic.
Illustrates Difficulty in Tracing Charitable Funds Once They Leave U.S.
Exploitation of Charities (IIRO) The International Islamic Relief Organization (Saudi
Arabia).
Support of Al Qaeda Training Camps in Afghanistan Prior to 9/11.
At One Point Used Over 70% of Funds for Weapons.
Conspirator in 1993 World Trade Center Bombing – Plots to Destroy Tunnels and Bridges in New York, Blow-up 12 American Airlines Simultaneously.
Continues to Provide Direct Support to Hammas.
Exploitation of Charities by Al Qaeda – General Patterns Many Charities Deeply Embedded in the Social and
Humanitarian Fabric of Communities they Serve.
Provide Critical Services Not Easily Replaced.
Many Are Victims of Infiltration and Abuse – Others only Fronts to Hide Terrorism Related Financing.
Defenders Often Argue that Support for the Teaching and Preaching of Radical Islamic Theology or Jihadism is not Enough to Link them With Terrorism.
Often Difficult to Establish Necessary Evidence to Support Criminal Activity Against Them.
Legitimate Employment Provided by Charities Offers Terrorists Cover, Livelihood and Useful International Contacts.
Factors Affecting FutureCharity Funding of Terrorism
Growth in Non-U.S. Charity Finances -- Oil Boom in Gulf Regions. Effectiveness of Anti-Terrorism Efforts in
Formal Banking Finance Sector. Increasing Natural Disasters. Increased Scrutiny of U.S. Charities.
Diversion of Funds to Terrorist Groups -- Political Corruption. Absence of Effective World-Wide Regulation of
Charities. Muslim Outrage at U.S. Support of Israel, War
in Iraq and Afghanistan.
Factors Affecting Future Charity Funding of
Terrorism
Growth in Islamic
Charities
Corruption-Domestic-Oversight
Outrage at U.S.
Occupation of Iraq and Support for
Israel
Oil Boom in the Gulf Region
Effectiveness of Anti-
Terrorism Efforts in the
Banking/Finance Industry
Increasing Natural
Disasters
Growth in Islamic
Charities Facilitating Terrorism
Absence of Effective
World-Wide Approach to
Islamic Charities
Increased Scrutiny of
U.S. Charities
Corruption-External-Money
Laundering
Supply of Funds to Islamic Charities – Oil Rent Effects The Surge in Oil Revenues Has Created a Vast
Source of Funds for Private and Public Donors to Contribute to Charities.
In 2004 Saudi Arabia Earned 116 $ Billion up 35% from 2003. Expected to Stay at this Level for Several Years.
For Middle East, Net Official Capital Outflows, 5.5 $billion, 2002, 44.6 $billion, 2003, 49.2 $billion 2004 to $61.6 billion 2005
Private Middle East Capital Outflows, 2-4$ billion, 2002-3, 21 $billion 2004 to 31.2 $billion in 2005.
Diversion of Charitable Funds to Terrorist Groups – Corruption
Factor Corruption Affects the Flow of Funds into and out of
Charities.
Regulatory Oversight Often Compromised, Money Laundering, Diversion of Funds to Terrorist Groups Facilitated by Corruption.
Rate of Corruption Extremely High in Middle East and Not Improving.
Out of 145 Countries in 2004: Saudi Arabia (71), Syria (72), Iran (88), Iraq (129).
Out of 158 Countries in 2005: Saudi Arabia (70), Syria (71), (Iran (88), Iraq (137).
Corruption in Iraq Has Been A Particular Hindrance in Combating Insurgency/Terrorism in that Country.
Iraq: Sources of Terrorist/Insurgency
Finances External
Islamic Charities. Former Regime Sources. Oil Rent-Based Contributions From Private
Individuals in Gulf.
Internal Criminal Activities—Black Market, Kidnappings. Mosques Islamic Charities (Diversion from Humanitarian
Activity).
Country Currently Experiencing The Most Terrorist Activity.
Charities and Iraqi Dynamic Extent of Islamic Charity Role In Iraqi Insurgency and
Terrorism Difficult to Assess – Many Other Factors Also Contribute:
Massive Unemployment – Failed Expectations: Failed Economic Policies Demographic Bulge. Ba’athist and Military Firings.
Widespread Insecurity Corruption Inability of Government to Respond to Problems Organized Crime, Criminal Activity. Failed Expectations Humiliation over Occupation.
Result: Breeding Ground For Terrorism – Easily Exploitable.
Iraq: Factors Facilitating Terrorist Financing --
Corruption Corruption At All Levels of Government.
Political – Starts at Top, Facilitates Other Types. Administrative – Incompetence, Lack of
Professionalism Financial – lack of transparency, Fraud, Bribery Easy Moral – Lack of honesty, Deception Common,
Integrity Not Rewarded.
Former Defense Minister Embezzled $500 Million After only 6 Months on the Job.
Much of Former Regime Funding of Insurgency Derived from Corruption.
Iraq: Islamic Charities, Extremism and the
Insurgency
General Approach Toward Countering
Terrorist Finance in Iraq Corruption Undermines Efforts At Countering Terrorist
Financing.
Massive Amounts of Terrorist Funding Available Due to Oil Boom.
Corruption a Major Source of Popular Dissatisfaction.
At The Present Time Attacking Underlying Problems of Unemployment, Corruption, Providing Security, May be More Effective at Combating Terrorism Than Direct Actions on Islamic Charities.
In the MENA Countries, Political Stability And Increased Economic Freedom Have Proven to Be Most Effective Forces in Combating Corruption. -- Explain 90% of the Differences in Corruption Across the Region.
Summary: General Problems Controlling Islamic Charities
Internationally -- General Reluctance to Act Against Charities – Higher Standard of Proof Demanded. Little U.S. Control Outside U.S.
Terrorist Financial Support Structures are Not Static Adapt in a Variety of Ways Even When Included on the UN List.
Close Branches, Open New Offices, Change Names.
Support terrorists Less Through Direct Contributions Than Through Gray Areas – Employment, Logistic Support, Propaganda.
Summary: General Problems inControlling Islamic Charities
(contd.) Humanitarian Nature of Most Places Their Offices
and Employees on the Ground in Conflict Zones of Interest to Terrorist Groups Without Raising Undue Suspicion.
Charities Not Only Raise Significant Amounts of Money but Are Also Ideal Vehicles for Laundering and Transferring Those and Other Funds.
Massive Amounts of Oil Based Funds Available.
Pervasive Corruption in Donor and Recipient Countries Make Regulatory Controls Easy to Circumvent.
Unique Difficulties Associated With Saudi Arabian Charities
Relatively Small Amounts of Money Required for Terrorist Acts Can Easily Pass Unnoticed.
Structure of the Saudi Financial System Makes Financial Transfers Difficult to Trace. Personal Income Records Not Kept for Tax Purposes – Many Citizens Prefer Cash Transactions.
Contributions to Charities are Often Given Anonymously and Donated Funds May be Diverted From Otherwise Legitimate Charities.
Saudi Funding of International Islamic Charities Reportedly Derived from Both Public and Private Sources Often Overlapping – Further Complicating Efforts to Identify Sources and the End Recipients of Donations.
Problems Posed by Globalization
Points Stressed by Moises Naim – Why Governments Have a Hard Time Winning Against Terrorist/Criminal Groups:
Are Not Bound by Geography. Defy Traditional Notions of Sovereignty. Pit Governments Against Market Forces. Pit Bureaucrats Against Networks.
Opens Up Many Opportunities for Terrorist Financing Through Corruption – Criminal Activities.
Greatly Complicates Debates Over Nature of Terrorist Organizations, Dynamics of their Funding and Effectiveness of Government Response
Debates Ongoing Because Open Source Data Does Not Provide Sufficient Grounds for Definitive Answers --
Policy Debates Concerning Charities
Freezing Charity Assets – Advantages. Denying Terrorists Access to Assets Needed for Further
Attacks. Reducing Inclination of Private Individuals to Contribute
to Questionable Charities. Raising Public Morale.
Freezing Charity Assets -- Disadvantages. Limited Number of New Freezing Actions in Recent Years. Need to Gather Actionable Intelligence May Have
Undermined Cooperation Do To Limited Convictions. Hurts Public Sentiment in Middle East – Partners Less
Willing to Share Information. Terrorists Need only Small Amounts of Money for Attacks
– Easy to Avoid Triggering Suspicions.
Political Economy Approach Provides Some Insights for Policy.
Political Economy ApproachIslamic Charities and Terrorist
Funding Political Economy Approach Provides Framework For
Assessing Issues Associated With Islamic Charities:
Difficulties in International Coordination of Anti-Terror Policies -- Due to Diversity of National Interests.
Why Terrorist Groups Increasingly Exploit Sources of Funds That Do Not Require the Ideological Sympathy or Consent of the Provider – Lessons Constraints on Actions.
Why Terrorists Rely on Variety of More Impersonal and Self Contained Mechanisms Like Diversion of Funds From Charities, Independent Criminal Ventures and Legitimate Business Ventures – Reduces Uncertainty.
Why Islamic Charities and Terrorist Groups May Have a Convergence of Interests -- Radical Islam Spreading and Infiltrating Charities.
Possible Future Policy Approaches
Political Economy Approach Suggests the Need to Develop a Broader- Longer Term Approach Towards Charities:
Expand Policy to Include a Demand/Supply Framework Aimed At Reducing Pool of Potential Contributors to Terrorist Causes. Encourage Those Who Offer Alternatives to Radical Islam.
Adopt An Approach That Views Money as a Tool of Terrorism and a Source of Information to be Studied, Not Just Seized.
Place More Emphasis on International Coalition Building With Much Focus on Diplomacy Rather than on Seizing Assets.
To Combat Corruption – Multilateral Efforts at Economic Reform – WTO Might Be Most Effective – Iran, Saudi Arabia and Many Middle East Countries Not Yet Members.
Possible Future Policy Approaches (contd.)
Giving Matter of State Sponsorship of Terror a Harder Look. To What Degree is Current Focus on Al Qaeda Type Networks Drawing Attention Away from Saudi Arabia, Iran and Syria Directly Funding, or Facilitating Terrorism Through Charities.
Develop More Active Policies. How Might We Assure the Legal Right to Contributors Worldwide To Demand an Accounting of How Charitable Contributions are Used?
How Might the Funding of Militant Madrassas Throughout the World Better Be Discouraged?
Develop Models To Assess How Terrorist Organizations Respond to Shutting Down a Particular Source of Funding Such as a Particular Islamic Charity -- How Can We Anticipate Their Responses?
For Further Reading Jeanne K. Giraldo and Harold A. Trinkunas, eds. The Political
Economy of Terrorist Finance and State Responses: A Comparative Perspective (forthcoming Stanford University Press, 2006).
Robert Looney, “The Business of Insurgency: The Expansion of Iraq’s Shadow Economy,” National Interest, Fall 2005.
Robert Looney, “Profiles of Corruption in the Middle East,” Journal of South Asian and Middle Eastern Studies (Summer 2005).
Rachel Ehrenfeld, Funding Evil (Chicago, Bonus Books, 2003).
Moises Naim, “The Five Wars of Globalization,” Foreign Policy Magazine (January/February 2003).
Matthew Levitt, “The Political Economy of Middle East Terrorism,” Middle East Review of International Affairs,” (December 2002).