Winning the Money War

Winning the Money War

America’s Evolving Efforts to Disrupt Terrorist Financing.
Kate Forde

U S. counterterrorism policy has been effective at cutting off funding to extremist Islamic organizations, but continued research and development of financial warfare tactics and regulation is essential to keep pace with the rising threats from low-budget, radicalized Western actors. Terrorist operations necessitate dependable revenue streams from illicit activities and sponsorships to carry out attacks, expand territory claims, and attract and retain followings of loyal soldiers. Implemented to a greater extent since the September 11th attacks, the efforts of U.S. federal law enforcement, with Intelligence Community and international cooperation, have succeeded in eliminating profitable infrastructure, applying diplomatic pressure, and targeting abuse of financial systems. Thus, as large groups suffer from want of resources, territory, and cash flow, there has been a redirection in focus to recruiting, directing, and financing low-tech terrorists with grassroots support from online platforms. [1]


Terrorist organizations rely on private, charity, and state donations, as well as self-funding through criminal activity and resources from conquered territory. The most prolific state sponsor is Iran, followed by Syria and Sudan. In 2016, Hezbollah leader Hassan Nasrallah claimed “…Hezbollah’s budget, its income, its expenses, everything it eats and drinks, its weapons and rockets, are from the Islamic Republic of Iran,” and thus U.S. sanctions would be ineffective against them. [2] In addition to the hundreds of thousands of dollars given to Hezbollah, weapons, training, and funds have been donated to Hamas and other Palestinian terrorist groups in Syria, Iraq, and the wider Middle East region. [3] Although officially in denial, Pakistan has provided safe havens, intelligence, and military support to both the Afghan Taliban and the Haqqani Network, resulting in the deaths of American soldiers and further political instability in Afghanistan. [4]
Terror groups profit significantly from existing infrastructure. Money enables terrorists to conquer territory, and the people and natural resources that come with the territory generate more revenue. For instance, terror groups are seizing mining operations. This enables them to tax, smuggle, and sell natural resources, especially oil, gemstones, and precious metals. According to a 2017 Europol report, about 40% of jihadist terror attacks in the EU are funded at least partly through criminal activity – most prominently theft and the sale of drugs and counterfeit goods. [5] Close to 60% of Taliban funding in 2018 is believed by U.S. and Afghan authorities to come from narcotics dealing. The Taliban and other groups also stage roadblocks to extort protection money, especially from commercial vehicles. In one case, a “customs tariff” receipt for an oil tanker shared on social media showed a charge of 50,000 Afghanis – $717. [6]


Terror groups also use criminal networks to access the black market and abuse the legitimate financial system. Exploitation of conquered peoples includes kidnapping for ransom and looting, as well as plundering cultural heritage sites for valuable art and historical artifacts to on the black market. This antiquities racket, one estimate states, could amount to $150-220 million per year in revenue for Islamic extremists [7]. In addition to conducting their own criminal activities, terrorists are developing increasingly closer relationships to transnational crime networks, despite differences in ideology, for the purpose of funding operations. Abuse of regulatory loopholes, primarily in U.S. financial systems, remains a key avenue in which terrorists are free to launder money. Anonymous shell companies afford terrorist groups another avenue of gaining revenue. The Taliban was able to divert at least $3.3 million of a $2.16 billion defense contract in taxpayer money through a network of shell companies and contractors to purchase weapons used against U.S. troops. [8]


Current U.S. Counterterrorism policy utilizes diplomatic, military, and financial tactics to eliminate the revenue streams of terrorist organizations. The State Department strengthens ties with foreign governments and private financial institutions to share intelligence and build regional capacity to “investigate, prosecute, and adjudicate” terrorist activities. [9] The Armed forces work in concert with regional and state militia to attack natural resource facilities linked to terrorists. In Afghanistan, the US Army, Air Force, Navy and Marine Corps, in cooperation with Afghan National Defense and Security Forces, carry out tactical strikes on narcotics processing labs that generate revenue in taxes for the Afghan Taliban. Similarly, Operation Inherent Resolve targets oil drilling infrastructure in Syria that, in 2015, generated a majority of the reported $2 billion budget of the Islamic State. [10]


The Treasury Department’s Office of Terrorism and Financial Intelligence (TFI) is the center of US efforts to counter terrorist funding efforts. The TFI focuses on both protecting the financial system against illicit activity and targeting terror groups and their sponsors. [11] The department’s intelligence and law enforcement body is the Terrorist Finance Tracking Program (TFTP), which was initiated after the 9/11 attacks. The TFTP aids other agencies by using terrorist finance tracking as an intelligence tool to uncover insurgent networks. Under Section 311 of the USA PATRIOT Act, financial institutions must cooperate with Treasury Department directives to collect information on suspected terrorists and refuse to conduct business with them. [12] Furthermore, the Treasury Department is authorized to place known terror sponsors on the “Specially Designated Nationals” (SDN) list and to identify and sanction state sponsors of terrorism. The U.S. delegation to the international Financial Action Task Force (FATF) – which is comprised of federal financing regulators and officials from the Departments of Treasury, State, and Justice and the National Security Council – formulates U.S. positions, represents the U.S. in the FATF Plenary, and implements policy domestically to comply with the U.S. commitment to all FATF recommendations. [13] The 9 FATF recommendations, finalized in 2003, are recognized by over 180 countries as the international standard and undergird US counterterrorism policy on prevention, identification, and elimination of financial threats from terrorist organizations. [14]


Military force plays a significant role in waging financial war by targeting resource infrastructure. In only three weeks, military strikes eliminated 25 narcotics processing labs. These strikes deprived the Taliban of over $16 million in revenue [15]. In April 2018, a U.S.-led NATO raid on Taliban opium operations in Kabul wiped out $12.6 million [16]. The Islamic State’s total revenue fell from $81 million per month in 2015 to $16 million per month in 2017 due to military targeting of cash storage and oil refinement sites. [17]


In order to continue effectively countering terrorist financing, the U.S. must seek to further comply with FATF recommendations and be more aggressive in targeting state sponsors. The significant legal and regulatory issues identified by the 2016 FATF assessment of U.S. compliance included lax policy on “designated nonfinancial businesses and professions” (DNFBP’s) and shell companies. Although U.S. policy has been highly successful in targeting terrorist revenue sources and movements, the concealment and storage of funds behind seemingly legitimate businesses has not been fully addressed. It is necessary that the U.S. make a concerted effort to increase transaction monitoring and record-keeping to better identify suspicious transactions in DNFBP’s by requiring that accurate beneficial ownership information be collected on shell companies and be made readily available to law enforcement. [18]

Furthermore, the diplomatic approach to addressing terrorist funding is outdated and largely ineffective. Only recently has aid been entirely cut off from Pakistan, a known state sponsor of the Afghan Taliban. Likewise, US foreign policy has been weak on addressing states, such as Iraq and Yemen, that passively support terror by intentionally neglecting to prosecute terror financiers and providing legal safe havens for terrorist operations. The State Department must ramp up political pressure in coordination with further economic sanctions set by the Treasury Department. [19]
It is also essential to further research and develop means of monitoring and regulating cryptocurrency exchange platforms. Although cryptocurrency has not yet been widely adopted by terrorist organizations as it has been by criminal networks, the cyber sphere must be addressed in a current, comprehensive counterterrorism financial program. [20] Due to the overall effectiveness of targeted attacks on terrorist organization revenue sources, extremist actors are now increasingly seeking to raise funds online, including through cryptocurrency. In order to maintain an effective counterterrorism financial policy approach, intelligence and law enforcement should seek the same cooperation from cryptocurrency conversion platforms as the traditional financial institutions that are defined under Section 311 of the US PATRIOT Act. Furthermore, it is necessary to combat the anonymity afforded terrorists online by actively tracing digital footprints and bringing digital currencies in line with existing Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) laws. [21]


Through diplomatic, financial, and military tactics, efforts to cut off the flow of donations and illicit business profits to terrorist organizations have largely been successful. Since the expansion of the Department of Treasury’s role in U.S. counterterrorism policy after 9/11, maintaining American economic dominance has only become more crucial to national security. Although the U.S. has substantially damaged terrorist coffers, the financial war is far from over. It is imperative that Treasury continue to develop and implement financial safeguards and weapons at a faster pace than our enemies can adapt to and evade. ▪

Furthermore, the diplomatic approach to addressing terrorist funding is outdated and largely ineffective. Only recently has aid been entirely cut off from Pakistan, a known state sponsor of the Afghan Taliban. Likewise, US foreign policy has been weak on addressing states, such as Iraq and Yemen, that passively support terror by intentionally neglecting to prosecute terror financiers and providing legal safe havens for terrorist operations. The State Department must ramp up political pressure in coordination with further economic sanctions set by the Treasury Department. [19]
It is also essential to further research and develop means of monitoring and regulating cryptocurrency exchange platforms. Although cryptocurrency has not yet been widely adopted by terrorist organizations as it has been by criminal networks, the cyber sphere must be addressed in a current, comprehensive counterterrorism financial program. [20] Due to the overall effectiveness of targeted attacks on terrorist organization revenue sources, extremist actors are now increasingly seeking to raise funds online, including through cryptocurrency. In order to maintain an effective counterterrorism financial policy approach, intelligence and law enforcement should seek the same cooperation from cryptocurrency conversion platforms as the traditional financial institutions that are defined under Section 311 of the US PATRIOT Act. Furthermore, it is necessary to combat the anonymity afforded terrorists online by actively tracing digital footprints and bringing digital currencies in line with existing Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) laws. [21]


Through diplomatic, financial, and military tactics, efforts to cut off the flow of donations and illicit business profits to terrorist organizations have largely been successful. Since the expansion of the Department of Treasury’s role in U.S. counterterrorism policy after 9/11, maintaining American economic dominance has only become more crucial to national security. Although the U.S. has substantially damaged terrorist coffers, the financial war is far from over. It is imperative that Treasury continue to develop and implement financial safeguards and weapons at a faster pace than our enemies can adapt to and evade. ▪

  1. Jeb Hensarling, “Combating Financial Backing of Lone-Wolf and Small-Scale Terrorist Attacks,” U.S. House Financial Services Committee, 06 September 2017. https:// financialservices.house.gov/news/ documentsingle.aspx?DocumentID=402289.
  2. AFP, “Hezbollah brushes off US sanctions, says money comes via Iran,” AL-Monitor, 24 June 2016. https://www.al-monitor.com/ pulse/afp/2016/06/lebanon-hezbollahbanks.html#ixzz5QHZ k8wz2.
  3. “Chapter 3: State Sponsors of Terrorism,” U.S. Department of State Bureau of Counterterrorism and Countering Violent Extremism, 2016. https://www.state.gov/j/ct/rls/ crt/2016/272235.htm
  4. Vanda Felbab-Brown, “Why Pakistan Supports Terrorist Groups, and Why the US Finds It So Hard to Induce Change,” Brookings Institute, 05 January 2018. https:// www.brookings.edu/blog/order-fromchaos/2018/01/05/why-pakistan-supportsterrorist-groups-and-why-the-us-finds-it-sohard-to-induce-change/
  5. “2017 EU Terrorism Report: 142 Failed, Foiled, and Completed Attacks, 1002 Arrests, and 142 Victims Died,” Europol, 15 June 2017. https://www.europol.europa.eu/newsroom/ news/2017-eu-terrorism-report-142-failedfoiled-and-completed-attacks-1002-arrests-and -142-victims-died
  6. Khalil Noorzai, “Taliban Looking for New Means to Support Insurgency in Southern Afghanistan,” Voice Of America News, 07 January 2018. https://www.voanews.com/a/talibanlooking-for-new-means-to-support-insurgencyin-southern-afghanistan/4197161.html
  7. Michael Fitzpatrick and Stephen F. Lynch, “Stopping Terror Finance: Securing the U.S. Financial Sector,” U.S. House of Representatives Task Force to Investigate Terrorism Financing, 20 December 2016. https:// financialservices.house.gov/uploadedfiles/ terror_financing_report_12-20-2016.pdf
  8. Jodi Vittori, “How Anonymous Shell Companies Finance Insurgents, Criminals, and Dictators,” Council on Foreign Relations, 07 September 2017. https://www.cfr.org/report/howanonymous-shell-companies-financeinsurgents-criminals-and-dictators.
  9. Nathan A. Sales, “U.S. Department of State Counterterrorism Bureau: The FY 2018 Budget,” U.S. Department of State, 07 September 2017. https://www.state.gov/j/ct/rls/ rm/273854.htm
  10. “Combined Joint Task Force Operation Inherent Resolve Fact Sheet,” U.S. Military, 17 October 2014. http:// www.inherentresolve.mil/Portals/14/ Documents/Mission/20170717-%20Updated% 20Mission%20Statement%20Fact% 20Sheet.pdf?ver=2017-07-17-093803-770.
  11. “Terrorism and Illicit Finance,” U.S. Department of the Treasury, N.d. https:// home.treasury.gov/policy-issues/terrorism-and -illicit-finance
  12. “Fact Sheet: Overview of Section 311 of the USA PATRIOT Act,” U.S. Department of the Treasury, 10 February 2011. https:// www.treasury.gov/press-center/pressreleases/Pages/tg1056.aspx.
  13. “Financial Action Task Force,” U.S. Department of the Treasury, N.d. https:// home.treasury.gov/policy-issues/terrorism-and -illicit-finance/financial-action-task-force.
  14. “FATF IX Special Recommendations,” FATFGAFI, October 2001. http://www.fatf-gafi.org/ media/fatf/documents/reports/FATF% 20Standards%20-%20IX%20Special% 20Recommendations%20and%20IN%20rc.pdf.
  15. “Department of Defense Press Briefing by General Bunch Via Teleconference from Kabul, Afghanistan,” U.S. Department of Defense, 12 December 2017. https://dod.defense.gov/ News/Transcripts/Transcript-View/ Article/1395077/department-of-defense-press -briefing-by-general-bunch-via-teleconferencefrom-k/.
  16. “Afghan Special Operations Forces Seize Taliban Revenue in Helmand,” NATO Resolute Support, 22 April 2018. https://rs.nato.int/ news-center/press-releases/2018-pressreleases/afghan-special-operations-forcesseize-taliban-revenue-in-helmand.aspx
  17. Camilla Schippa, “This is How Terrorists Finance Their Attacks,” World Economic Forum, 15 November 2017. https:// www.weforum.org/agenda/2017/11/terrorattacks-are-increasingly-self-funded-how-canwe-stop-them/
  18. “United States’ Measures to Combat Money Laundering and Terrorist Financing,” Financial Action Task Force, 1 December 2016. http://www.fatf-gafi.org/countries/u-z/ unitedstates/documents/mer-united-states2016.html
  19. Daniel L. Byman, “The Changing Nature of State Sponsorship of Terrorism,” Brookings Institute, 29 May 2008. https:// www.brookings.edu/research/the-changingnature-of-state-sponsorship-of-terrorism/
  20. “European Union terrorism Situation and Trend Report 2018,” Europol, 2018. https:// www.europol.europa.eu/activities-services/ main-reports/european-union-terrorismsituation-and-trend-report-2018-tesat-2018.
  21. Nikita Malik, “How Criminals And Terrorists Use Cryptocurrency: And How To Stop It,” Forbes, 31 August 2018. https:// www.forbes.com/sites/ nikitamalik/2018/08/31/how-criminals-andterrorists-use-cryptocurrency-and-how-to-stop -it/#1dfc3ca73990

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