The business of terrorism.doc

the business of terrorism w.a.tupman published in english and russian in goddard s, nikitin, a.t., fituni l.l. financial monitoring of cash flows aiming to prevent the financing of terrorism pp112 140 some of the argument is taken from an article previously published in the journal of money laundering control vol 1 no 4 pp.303-311 april 1998 and two short articles published in intersec : “the business of terrorism“ intersec, the journal of international security vol 12 no 1 jan 2002 pp 6-8 “the business of terrorism part 2“ intersec the journal of international security vol 12 no 6 june 2002 pp 186-8 this article explores such information as exists with regard to funding firstly in relation to the ira, and then to activities associated with osama bin laden and al qaeda. the purpose is to demonstrate the complexity of organizations that are called “terrorist” and to examine whether it can be demonstrated that there is convergence with organized crime groups. it begins by discussing gambettas work on organized crime as a business before recording the financial action task forces statement on sources of terrorist financing. it then looks at the variety of funding mechanisms known to have been used, first by the ira and secondly by osama bin laden and al qaeda. any study of a terrorist organisation raises questions about the legitimacy of the state and the morality of challenging it by violent means. although individual terrorists are charged before the courts with individual criminal acts, there is an acceptance that the phenomenon is primarily a political one and that a debate is possible over the relationship between a just cause and the employment of illegal means to achieve it. there is little study of terrorism as an economic phenomenon and the methods by which organisations fund themselves. elsewhere, this author has argued that successful terrorist groups survive by resorting to funding methods copied from organised crime tupman 1998. this raises several interesting theoretical and practical questions. if funding follows the organised crime model, how much effect has this had on the structure of the organisations concerned? gambetta and others have argued that organised crime is increasingly a business fiorenti and peltzman 1995. it follows the successful contemporary business model characterised by networks, or loose associations of individuals and groups. it is no longer dominated by centralised , hierarchical organisation. if a group such as the ira has gone down the same road then how “terrorist” is it? an organisation may be called “terrorist” because it engages in acts of paramilitary violence. those organisations that survive for a significant period of time, however, do so by engaging in many activities other than paramilitary violence. funding has already been mentioned, but they also have to recruit; they have to train; they have to engage in peaceful political activity and so on. the individuals that engage in these latter activities are much more loosely organised than the individuals that engage in the paramilitary violence, yet are associated with them in a non-hierarchical relationship. organised crime has also converged to some degree with “terrorist“ organisation, copying the cellular structure. increasingly it consists of networks of people who may only come together for a specific operation and the rest of the time may be engaged in completely different organisations and completely different and even legal work, especially where these individuals are lawyers or accountants. the same individuals engaged collectively in illegal activity may also simultaneously be engaged collectively in legal activity. this is equally true of the ira. post 1968 terrorism was based on 5 man cells, or active service units asus in the northern ireland context. these are operationally autonomous and may have been engaged in their own fund raising as well as other activities quite independently of the central army council, the body that allegedly “runs” the ira. we need to know the degree to which these operations were audited by a central body, or whether the ira has followed organised crime in becoming what van duyne has described as “non-organised”. van duyne 1993 p10. this would also provide those attempting to control money-laundering in this area with some clues as to where to look. gambetta has also argued that violence is itself a business; that it is a service that can be bought and sold. terrorist organizations are well placed to sell violence and to replace the traditional purveyors of violence to organized crime. terrorists also need weapons. in the process they have to set up smuggling services. they thus have a second business activity from which they can sell spare capacity. it is only a small step from that realization to the linked idea that it makes sense to smuggle small volume, high value goods in order to obtain the funds necessary for the weapons themselves. drugs and high value raw materials such as diamonds and other precious and semi-precious stones are obvious commodities. there is a third relevant aspect of gambettas analysis which began with a study of the sicilian mafia. where the state is weak, it is difficult for suppliers and purchasers of goods to enforce contracts. those who can sell violence can, in effect, become contract insures and enforcers. it is only a short step to becoming licensers of business activities. organised crime, too, has a problem of contract enforcement. it is no good taking someone to court for failure to pay for a consignment of illegal narcotics. terrorist movements that survive over a period of years can move into this role, particularly where they have effective control of neighbourhoods or regions. the fatf statement on terrorist financing in 2001, the financial action task force identified the following major sources of terrorist funding: drug trafficking extortion and kidnapping robbery fraud gambling smuggling and trafficking in counterfeit goods direct sponsorship by states contributions and donations sale of publications legal and illegal legitimate business activities their pre-september 11th discussions concluded that with the decline in state sponsorship of terrorism, terrorist groups increasingly resort to criminal activity to raise the funds required. the world moved on with the attack on the twin towers. consequently, fatf decided to expand its mission to focus on combating terrorist financing as well as money-laundering.this makes redundant previous disagreement about funds raised by terrorist organisations from non-criminal activity and whether this could strictly be said to constitute money-laundering. there is still disagreement about the need for special legislation. some of the fatf experts believed existing legislation adequate for dealing with terrorist money-laundering while others thought terrorist money-laundering to be a distinct variety of money-laundering that required special measures. the origin of terrorist funds is often quite legal, but the purposes to which they are put are not. they thus can behave differently from funds derived from illicit business in that they do not have to be moved around quite so quickly. they can be invested and accumulate before being diverted to illicit purposes. this has led to the growth of perfectly legal business enterprises that in effect wholly or partly belong to terrorist organisations. when discussing terrorism, the definitional problem still remains central. what is a terrorist organisation and how is it to be distinguished from national liberation movements? it has become more acceptable to refer to “the paramilitaries” in the context of the northern ireland peace process. this has the advantage of being value-neutral. the un also continues to find this a political conundrum, especially where the arab-israeli dispute is concerned. the us has followed british legal practice of listing proscribed movements and includes hezbollah, hamas and the pflp, without whose consent a peace settlement in the middle east is simply unachievable. nevertheless executive order 13224 blocks their assets and property. the survivors only a small number of the hundreds of terrorist and paramilitary groups that have existed since the 1960s have survived into the third millennium. in northern ireland, there is the irish republican army ira and a number of protestant paramilitaries: the ulster defence association uda with which is associated the ulster freedom fighters uff; the ulster volunteer force uvf and its breakaway movement, the loyalist volunteer force lvf. of these, the majority are supposed to be on cease-fire and involved in the “peace process”, but all continue to maintain their organization and are alleged to be involved in various forms of violence. in spain, the basque separatist movement, eta euskadi ta askatasuna basque fetherland and liberty in corsica, the flnc front de liberation nationale de la corse. in colombia, the farc revolutionary armed forces of colombia in asia, the tamil tigers of sri lanka in the middle east, a number of paramilitary organizations associated with the plo and hezbollah. and perhaps the first truly globalised group, the afghan veterans association known to us as al qaeda. the article concentrates on the ira and al qaeda, because it is easier to document a variety of funding sources with which they have been involved. later studies will examine the other groups. ira fundraising following the gambetta school, i have attempted to produce an analysis of the finances of the ira in the form of a business prospectus. previous versions of the table that follows have appeared in the proceedings of international symposium of organised and economic crime and an analysis of the funding of all uk terrorist groups has been published elsewhere tupman 1998. an updated version of the prospectus follows: table 1 ira plc company activities a small international company providing executive and leisure services in the british isles and north west europe. overseas offices in the united states and australia. courier services available to various parts of he world. subsidiary companies provide construction and demolition services. ira plc also franchises clubs and a “get you home” service. private security services also provided for housing estates. insurance quotations against bomb damage can also be brokered. the company has recently secured a niche in the import-export market, particularly of livestock and cds. statement of income contributions from overseas subsidiaries 1,500,000 shebeen subsidiaries: bar and machines 4,275,000 import-export business 2,250,000 fire and bomb damage insurance protection plc 6,150,000 construction 5,000,000 involuntary bank and post office contributions 1,250,000 total cash 20,425,000 non-cash contributions demolition equipment and executive toystoo sporadic to quantify statement of expenditure executives in uk 4 salaries 80,000 warehouse and support staff uk 20 salaries 400,000 transport and accommodation 200,000 sub-total 680,000 executives in northern ireland 400,000 warehouse and support staff 600,000 sub-total 1,000,000 balance 1,680,000 pay-outs from executive family insurance fund 2,000,000 semi-retired staff in eire 50 1,000,000 balance 4,680,000 demolition equipment and executive toys depreciation 1,500,000 balance 6,180,000 investments 13,500,000 balance 19,680,000 petty cash fund 745,000 total 20,425,000 in discussing the income and expenditure of the ira one is immediately involved in propaganda. it clearly suits the security forces to portray the ira as no more than another organised crime group. this is of course to paint a distorted picture of the ira, who are not primarily in business for the purposes of making money but who need to have ways of making money in order to stay in business. indeed, although “ira-plc” is a catchy title, it would be more correct to talk of “republican movement plc”. irish commentators prefer to use this latter term. the former title gives the impression that the ira controls all branches of the republican movement and this cannot safely be asserted. sinn fein, the womens movement, social clubs, gaelic sports associations, the catholic ex- servicemens association, prisoners support organisations and various businesses are all organisations within a broader movement. who controls whom, who interacts with whom and how are not only matters for research but occasionally matters disputed before the courts. the money-making ventures alluded to in the prospectus may or may not be under the control of the army council, may or may not pay a percentage to the army council and may or may not take place in areas considered to be under republican movement “control”. related problems must appear frequently on the agenda of ira army council meetings. how far should they engage in fundraising and how far in armed operations? should the same personnel be involved in both? should they be kept totally separate? how can they be used against the movement as propaganda? the essence of every act of terrorism is propaganda. terrorism could be said simply to be armed propaganda. so fundraising in itself presumably should be used as a weapon to undermine british state. fraud committed against the northern ireland housing department would be legitimate, as would fraud against the ministry of agriculture food and fisheries, customs duties evasion or similar. fraud against domestic irish credit unions would presumably be unacceptable. equally dealing drugs in the uk might be acceptable where dealing drugs in belfast would not be. in dublin, however there are strong suspicions that ira personnel are involved in trafficking in soft drugs, if not in street dealing. certainly the ira has taken a leaf out of the pages of their basque colleagues, eta, in gaining popular support by kneecapping or placing orders of exile on well known drug dealers in belfast, derry city and elsewhere. equally what the british security forces would call protection rackets the ira would say are in the nature of a revolutionary tax, following the basque model again. another problem in discussing this subject is the nature of the sources. various officers of the ruc and garda siochana have briefed study groups led by the author in the past, but where documentary material has been shown, it has been on a confidential basis. the figures given above have had to be justified by reference to press sources, and these are often dubious. at one stage the stories were all about security forces successes against the iras financial network. at another the iras links with the us were exaggerated to bring pressure to bear on visiting us politicians. at all times stories are exaggerated in order to sell newspapers and the sunday times clearly thinks ira scare stories keep its readers interested. nevertheless, it has received a number of major security forces leaks over the years and devotes more space and depth to northern ireland than its broadsheet rivals. the problem of verifiability needs to be borne in mind constantly when considering the pseudo data of which the ira- plc prospectus consists. returning to the prospectus: post office and bank raids throughout ireland are used as acceptable ways of blooding recruits and finding out how serious their commitment may be. unattributable briefings given the author allege that 50% of post office and bank raids in the south have some form of ira connection. the figure in the table above reflects the total amount stolen in post office and bank raids in ireland and 50% of that total has been calculated and entered in the table as income.unattrib 1995 the figure of contributions from overseas subsidiaries reflects published statements of the north american organisation noraid which vary annually from $160,000 to $800,000. bishop and mallie 1988 p297. see also mckinley pp203- 218. added to this are contributions from the uk, australia and canada mckinley pp201-3 analyses the canada connection in some detail. early in the 1970s contributions were also made by libya. bishop and mallie p305, mckinley p196 gives a figure of 5million by 1977 this is generally presented as being money raised for the welfare of prisoners families and is balanced in the statement of expenditure by an estimate that money to prisoners families costs the republican movement as a whole 2million. this illustrates the problem of distinguishing between legal and illegal aspects of the business of the republican movement. noraid would presumably claim that to support the families of prisoners is legitimate business and in no way relevant to the ira as an armed illegal organisation. these categories remain in my statement of income and expenditure because there have long been allegations that funds raised for prisoners families have been used for other purposes. mckinley p208 alleges that up to $4million per annum was actually being remitted from the us to ireland. contributions from overseas obviously fluctuate. when the british security forces have carried out high profile operations such as the killings in gibraltar contributions tend to rise significantly. collections are regularly made in various public houses in english and scottish cities as well as the more formal fundraising organisations in the united states, canada and australia. one and a half milllion pounds is probably on the low side for these contributions. the point needs to be made however that very little of this money would have anything to do with weaponry or bombmaking equipment in the 1980s and perhaps the 1970s because of the amount of munitions smuggl