Terrorist financing is the process by which terrorist organizations receive funding for operations. This major security concern has been a focus of national, banking, and international law changes in the 21st century, primarily due to an increase in high-profile terrorist attacks since the turn of the century. There are many different ways terrorist financing can take place, including through the channels of smuggling, charitable or non-profit groups, and the use of Middle Eastern and African money transfer systems known as hawalas.
One of the most common ways terrorism is financed is through money garnered by illegal activities. Drug trading, arms deals, and the smuggling of goods are common types of illegal trades that may be used to fund terrorist operations. Often, the origin of the money gained through illegal enterprises is disguised through money laundering, which slips illegal money into an account via a dummy corporation or legitimate business. Since the origin is disguised by the laundering business, it can be difficult to trace this type of financing.
A somewhat unexpected source of terrorist financing involves charitable organizations. Preying on the goodwill of unwitting donors, fake or falsely advertised charities may set up in developing nations, asking for money to build infrastructure, schools, hospitals, and even anti-terrorist initiatives. Instead, the money may be diverted into the accounts of terrorist groups to fund their operations. Since the connection between charities and terrorist financing was first illuminated in the early 21st century, many nations have created stronger laws regarding the formation and management of non-profit foundations, especially those with an international purview.
A third form of terrorist financing takes place through the use of a large system of money transfer operations known as hawalas. Centered in South Asia, Africa, and the Middle East, this long-standing system allows the transfer of money without the physical movement of funds from one place to the next. A hawala allows a person in one city to deposit funds that can then be picked up by a contact at another hawala in the same network. Since hawalas are private enterprises, they are not subject to government financial strictures, and thus may be less exposed to scrutiny by anti-terrorist initiatives.
Knowingly participating in terrorist financing of any kind is illegal in many countries. While donors to false charities may be considered victims, businesses who assist in money laundering or individuals that knowingly donate to terrorist funding organizations may be prosecuted and sentenced harshly. Many nations continue to regularly revise laws that can affect all forms of terrorist financing, in order to better seek and stop financing operations and uncover terrorist cells worldwide.
