Terrorist Financing: Legitimate and Criminal Sources - Essay Sample

Introduction

Terrorist financing describes the act of providing financial support to people or groups involved in terrorist activities. The funding may be from legitimate sources like business profits, personal donations and charitable organizations. The funding may also be from criminal sources like extortion, drug trade, kidnapping, fraud, and smuggling of goods and weapons (Kaplan, 2013). In obtaining this kind of funding, terrorists use money-laundering techniques to avoid any attention from the authorities to ensure their sponsors' identity is protected as well as the beneficiaries of the money. This paper provides a detailed discussion of the terrorist financing by identifying the issue with tracking the finances and provides measures to combat this vice.

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Problem Statement

The transactions meant for financing terrorism activities usually happen in small amounts compared to money laundering to evade any attention from financial institutions and governments. In a situation, the terrorists raise money from genuine sources; they use a complicated process that makes it hard to detect and track these funds (van Es, 2019). Through these processes, terrorist sponsors create huge and complex networks which are untraceable to the general public. Both the financial institutions and authorities need to identify and track the terrorist funding to help in fighting and combating terrorism.

Discussion and Background

Terrorism financing is a global concern that may threaten the security of member states as well as destabilize the economic progress and financial stability. Involvement in terrorism requires vast amounts of money to run the operations. Sufficient financing ensures that terrorists can procure equipment, weapons, supplies and even services. According to Kaplan (2013)., most of the terrorist operations have an estimated cost of up to five hundred thousand dollars, while others have more than this amount.

The money used for these activities is transferred through the official banking, informal money-transfer schemes, hawalas and physical transfer of cash. However, people involved in these activities have advanced their financial system, an element that makes it hard for the authorities to track (Kaplan, 2013). The terrorists are well aware of the strategies put forward by the authorities and hence they are continually adjusting their operations. The financing is continuously mutating, making the terrorists be a step ahead of the authorities every time.

The financing process for terrorists involves stages. The first step is the collection of funds from various sources meant to support the terrorist organization. The second stage is finance storage while planning and determining their use. The third process involves transferring the money when required. The final step involves finance usage to carry out terrorist activities.

Source (Organisation for Economic Co-operation and Development, 2019)Another factor that makes it hard for governments to track these financial patterns relates to the high reliance on cash, which leaves a tiny paper trail. Most of the funding to terrorist organizations are brought in vast sums of money whose origin cannot be traced. Furthermore, new systems of payment such as the online-based and crypto-currencies are more predominant and hence create a loophole for financing the terrorists. Additionally, the people involved in terrorist activities are involved in trade-based money washing to move funds across international borders, thus making it hard for the authorities to track down.

Potential Solutions to Mitigate the Effects of Terrorists Funding

Banks and other financial institutions should screen their clients more thoroughly and collect more information about these customers concerning their accounts. With this information and screening, it is possible for financial institutions to ensure their clients are not involved in any financial crimes, including terrorist funding (van Es, 2019). The institutions can also ensure that their clients are not involved in money laundering outside the borders.

Tax auditors and examiners should take serious consideration on the international flow of funds connected to worldwide and local crime. Tax administrators in different countries should develop a strategy that facilitates the exchange of information to help battle tax crimes and remove any possibilities for money laundering and funding of terrorists (United Nations Counter-Terrorism Committee, 2018). In situations where legal instruments allow information exchange between countries, tax auditors and examiners should ensure that information about strange transactions about a specific country is conveyed to the other nation in a timely routine.

Thirdly, regional and international member states need to cooperate to ensure that the issue of terrorist financing is handled. Through cooperation, member states share operational information through relevant organizations like the financial intelligence units (FIUs) to ensure that any terrorism operations are reported and tracked. Moreover, terrorism investigations at the domestic level should involve the terrorist-financing component.

Conclusion

International and regional corporations should develop joint task forces that are tasked with the responsibility of maintaining lists of groups, people and entities involved in terrorist activities. These groups and organizations should be subjected to restrictive measures. The assets of listed terrorists should be freeze to cut on the flow of finances to other members. The move will also serve as a blockage to prevent further involvement in terrorism activities.

References

Kaplan, E. (2013, April 4). Tracking Down Terrorist Financing. Council on Foreign Relations. https://www.cfr.org/backgrounder/tracking-down-terrorist-financing#chapter-title-0-8

United Nations Counter-Terrorism Committee. (2018). Terrorism Financing. United Nations Security Council Counter-Terrorism Committee. https://www.un.org/sc/ctc/focus-areas/financing-of-terrorism/

van Es, A. A. (2019, April 23). Why We Need More Than Sanctions to Stop Terrorists Accessing Funds. Vision of Humanity. https://visionofhumanity.org/news/combating-the-financing-terrorism/

Organization for Economic Co-operation and Development. (2019). Money Laundering and Terrorist Financing Awareness Handbook for Tax Examiners and Tax Auditors [Ebook]. OECD. Retrieved from https://www.oecd.org/tax/crime/money-laundering-and-terrorist-financing-awareness-handbook-for-tax-examiners-and-tax-auditors.pdf