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The reach of terrorist financing and combating it: the links between terrorism and ordinary crime

Last updated 12th August 2003

Author: Bugg, D.
Date: 12/08/2003
Venue: IAP Conference, Washington

Given the time available I will confine my comments to a brief consideration
of the demonstrable dependence of terrorist organisations on traditional
criminal conduct for their financing, the co operative international
developments since September 11 2001 and their likely impact on that
recognised revenue source. I conclude that post September 11 developments,
if effective, will have an impact on the working lives of prosecutors.

In reality the reliance of terrorist organisations upon ordinary crime
as a source of finance is no different to the generation of revenue by
organised crime groups in that such “ordinary’” criminal
conduct is not random, it is structured and directed towards revenue
raising. Make no mistake, it has been and will be organised.

I cannot speak of these matters from first hand experience. Australia’s
relative isolation and its history of stable government have provided
us with a limited exposure to violent terrorist acts.

The only significant terrorist incident which has occurred in Australia
took place in February 1978 when the Commonwealth Heads of Government
Regional Meeting in Sydney was disrupted when a bomb concealed in a garbage
can, at the rear of the Hilton Hotel where the meeting was being held,
exploded after the can was dumped in a garbage truck. Two employees of
the local municipal Council were killed and a policeman died of injuries
sustained in the blast. A number of other persons were injured as a result
of that blast. The source of this terrorist act was the religious sect
Ananda Marga which, at the time, was said to be involved in attacks upon
Indian Diplomats.

The attacks of September 11 2001 and, even closer to home, in Bali in
2002, demonstrated to us all the appalling reach and determination of
the terrorist organisations of today. Geographic isolation and stable
democratic government no longer provide a measure of protection from
terrorist acts.

The Al Qaida and Jemaah Islamiah organisations involved in September
11 and Bali respectively have not, to my knowledge, been directly involved
in any ordinary criminal conduct aimed at raising revenue in Australia.
I say directly because one cannot assert with any confidence that, for
example, drugs sold on our streets do not have a link to a revenue base
for a terrorist organisation.

Reports from around the world agree that terrorist organisations are
using theft, cheque forgery, credit card fraud, counterfeiting, extortion,
arms smuggling, drug trafficking, and any number of other crimes to finance
terrorism.

It has long been known that bodies like the IRA have used crime to finance
their operations including smuggling, armed robbery, drug dealing, racketeering
and extortion. The IRA has also raised considerable amounts, through
direct donation, from overseas sympathisers. The PLO is said to have
raised money from drug trafficking since the 1980’s. (1)

None of this should be surprising. Terrorists need funds to operate
and people who are prepared to hijack planes, kill innocent people without
compunction and sacrifice their own lives are not likely to have any
qualms about committing fraud, bank robbery or drug dealing to finance
their activities.

The use of traditional criminal activity to fund terrorism is probably
best demonstrated in the US by the intriguing case of Patty Hearst and
the Symbionese Liberation Army (SLA).

The SLA, a small leftist group, was intent on overthrowing the government
of the USA. It was funded by various means but primarily by bank robbery.
The SLA came to international prominence when it kidnapped newspaper
heiress Patty Hearst. Hearst subsequently joined the SLA. That became
apparent when she was recorded on a security camera participating in
an armed holdup. She was carrying a semi automatic weapon.

The sequel came on the 17th of May 1974 when the Los Angeles Police
Department (LAPD) located six SLA members in what they seem to have thought
was a safe house in downtown LA. The house was surrounded by a SWAT team
plus 200 police officers. There was then a one hour gun battle, in which
police fired over 5,000 rounds into the house. The occupants fired about
3,700 rounds of their own and threw half a dozen explosive devices at
police. The battle ended when the house caught fire and all six occupants
died.

The case shows that there is nothing particularly novel about terrorists
using crime to fund their operations. The question is whether it is becoming
more common and that is a difficult question to answer. The organised
nature of such criminal conduct, and the extent of the sympathetic links
these organisations have established globally, ensure that we cannot
be confident that all profit driven criminal conduct in our countries
is not terrorist linked.

As noted it is generally accepted that terrorists are using traditional
crime to raise money. However, it also seems to be generally accepted
that the bulk of terrorist funding still comes from donations. It is
said that Al Qaida raised between US$300 million and US$500 million over
a ten year period up until 2001 through a web of charities and front
companies. It is reported that it relied heavily on the Zakat religious
taxation system to raise money (2). A considerable part of the funding
for bodies like the IRA has come from overseas sympathisers. We must,
without becoming complacent, accept that only part of the funding for
terrorism has come from traditional crime.

We have not yet seen a rush of cases in Australia where people have
committed traditional crime in order to raise funds for terrorism, or
if we have seen them we have not recognised them as such. However, we
are likely to see a growth of activity in this area. Countries like Australia
cannot afford to be complacent.

It clearly requires substantial financial resources to operate a terrorist
organisation. I have already referred to the amounts that have been raised
by Al Qaida. Other organisations may be smaller, and less costly to run,
but all of them need money to operate.

It is often said that it doesn’t cost much to undertake a terrorist
operation. Estimates of the costs of the 9/11 operation varied from US$200,000
to US$500,000 (3). Either way it is not a lot of money given the amount
of damage that was done. The cost of the Bali bombing has been estimated
at the fairly precise figure of US$74,000. The bombing of US Cole probably
cost between US$5,000 and US$10,000. The cost of a suicide bombing may
be as low as US$1500 (4). The Bishopsgate bombing in the City of London
in 1993 caused £1 billion worth of damage to property yet cost
only £3000 to mount (5).

However, the direct operational costs are only part of the costs of
running a terrorist organisation. It is estimated that Al Qaida spends
about 10% of its income on operational costs. The other 90% goes on the
cost of administering and maintaining the organisation, including the
cost of operating training camps and maintaining an international network
of cells. So called ‘sleepers’ must also cost significant
sums to establish and maintain.

The 1993 attack on the World Trade Centre is an example of how important
money can be in these cases, even at an operational level. In 1995 Ramzi
Yousef, a confessed organiser of the operation, admitted that the terrorist
had wanted to build a bigger bomb but were not able to due to lack of
funds. A key break in the investigation came because the terrorists attempted
to recover a deposit fee they paid on a hire truck used to transport
the bomb.

However, we are seeing an international move to restrict the flow of
funds to terrorist organisations with the International Convention of
the Suppression of the Financing of Terrorism (9 December 1999), UN Security
Council Resolution 1373 (2001), and the FATF Special Resolutions on Terrorist
Financing (October 2001). In the wake of September 11 countries are moving
to give effect to the rhetoric.

Since September 11, over 175 countries and jurisdictions have taken
concrete action to freeze terrorists assets and some US$112 million has
been frozen worldwide. Over 200 countries have joined in expressions
of support for the fight against terrorist financing (6).

Australia, for example, moved to create a range of new anti-terrorism
offences in the wake of the September 11 tragedy. I am attaching a schedule
which sets out in brief summary form the legislation introduced by the
Attorney General, the Hon. Daryl Williams AM, Q.C. MP, and passed by
the Australian Federal Parliament in response to the September 11 tragedy.
[See attachment below – Ed.]

In addition to this legislation (1) a monitoring facility, through AUSTRAC,
maintains oversight of banking transactions within Australia involving
sums in excess of $10,000.00, (2) the requirement for Financial Reports
on sums imported by travellers, and surveillance at points of entry
coupled with (3) the examination powers then available under the Proceeds
of Crime legislation, provide further checks to and greater scrutiny
of the movement of funds into and out of our country.

Australia has also enacted legislation which provides for the confiscation
of proceeds of terrorism, instruments of terrorism and money which is
intended to be used to finance terrorism. The provisions appear in the
Proceeds of Crime Act 2002 which came into operation on 1 January 2003.
That Act sets up a regime under which action can be taken to recover
the proceeds of crime on the basis of civil proceedings irrespective
of whether there is a criminal prosecution.

The Act is a law of general application but it has special provisions
which give it an extended operation when dealing with the proceeds and
instruments of terrorism. The normal six year time limit which applies
to civil based proceedings under the Act does not apply to cases involving
terrorism and the distinction which normally applies between the proceeds
of crime and instruments of crime does not apply if the relevant crime
involves terrorism.

Many other countries have enacted similar laws. At the same time Afghanistan
and Iraq are no longer reliable sources of funds nor safe havens for
terrorist organisations. There is unprecedented international co-operation
and considerable pressure everywhere on countries to tighten upon the
flow of funds to terrorism.

Australia has also participated in the worldwide move to freeze the
assets of suspected terrorists and terrorist organisations. In the United
Kingdom, for example, authorities have frozen the assets of over 100
organisations and over 200 individuals. In response to UN Security Resolutions,
particularly those targeting Al Qaida and the Taliban, both before and
after 11 September 2001, the UK froze a total of $100 million of terrorist
assets. Following the liberation of Kabul the bulk has now been unfrozen
and made available to the legitimate government of Afghanistan (7).

If these measures have the desired effect, and there does not appear
to be any lessening of the initial support for them, we are likely to
see a reduction in the flow of funds from donations and other basically
lawful sources. This in turn will, in all probability, produce a greater
resort to unlawful sources to raise money for terrorism. There is no
clear set of rules for sourcing the funds used to conduct terrorist activity,
but the post September 11 combined efforts will, I am sure, constrict
the donations/sympathiser sources of funding.

The final question is what are the implications if there is an increase
in the use of traditional crime to raise money for terrorism. It seems
to me that there are two, and both can be illustrated by the example
of the Patty Hearst case, which I commented upon at the outset. It is,
in a temporal sense, sufficiently neutral to use in this way.

The SLA was a fairly ragged band of terrorists, but they were able to
hold police at bay for over an hour. A well trained terrorist cell is
likely to be better armed and equipped and is likely to put up a far
more effective resistance if detected committing normal criminal conduct
within a jurisdiction. A law enforcement agency which detects the presence
of a terrorist cell in the course of conducting what it thinks is a routine
police investigation is likely to be confronted with a serious situation
requiring significant para military style support.

Police forces across the world need to be aware that what may appear
to be a relatively straight forward crime could be an operation conducted
by a terrorist cell. They need to have procedures which enable them to
identify cases that have terrorist implications and which allow them
to respond in an appropriate way if they come across cases of that kind.

The second implication can again be illustrated by the Patty Hearst
case. The LAPD became aware that Hearst had joined the SLA because she
was filmed on a bank security camera. Other members of the SLA were also
caught on that film.

There are opportunities for our jurisdictions as well as dangers if
terrorist organisations are forced to make greater use of traditional
crime to raise funds. The terrorists will have to come out of the shadows
to commit those crimes and they are at risk of leaving clues about their
identity and their activities. I suspect that the wider and more effective
international net which has been cast, post September 11, may also produce
helpful responses from traditional crime bases, mindful of likely intrusion
of these broader investigative strengths, when terrorist based activity
encroaches on their domain.

There are challenges ahead for the traditional law enforcement agencies,
but there are also opportunities for them to play a real role in combating
and defeating international terrorism.

Endnotes

(1) “Funding evil, how terrorism is financed and how to stop it” Rachel
Ehrenfeld 2003.

(2) “Terrorism financing” roots and trends of Saudi terrorism
financing" Jean-Charles Brisard December 19 2002.

(3) Jean-Charles Brisard (supra) “Combating the financing of terrorism” A
Report on UK action October 2002 HM Treasury and Home Office Report.

(4) “Terrorism financing” roots and trends of Saudi terrorism
financing Jean-Charles Brisard December 19 2002.

(5) Combating the financing of terrorism A Report of UK Action October
2002.

(6) Combating the financing of terrorism A Report of UK Action October
2002.

(7) Combating the financing of terrorism A Report of UK Action October
2002.

Attachment – NEW LAWS (AUSTRALIA)

Security Legislation Amendment (Terrorism) Act 2002

The Security Legislation Amendment (Terrorism) Act 2002 has created
a number of new “terrorism” offences: committing a terrorist
act; training or possessing things in preparation to commit a terrorist
act; and being a member of or supporting a terrorist organisation. While
Australia had legislation that prohibited terrorist connected activities
such as plane hijacking, we did not have comprehensive legislation relating
to any form of terrorist act and, in particular, we did not have legislation
dealing with membership of, training with and supporting terrorist organisations.

The legislation also provides that an organisation can be listed as
a terrorist organisation. Identifiable consequences flow to persons becoming
involved with such organisations. So far, 13 organisations have been
listed as terrorist organisations, including Al Qaida, Jemaah Islamiah
and, on 27 March 2003, Ansar Al-Islam. Ansar Al-Isam is an example of
the sorts of organisations that have been listed. It is a Kurdish Sunni
Islamic extremist group, based in north eastern Iraq, it forms part of
the Al Qaida network.

Supression of the Financing of Terrorism Act 2002

The Suppression of the Financing of Terrorism Act 2002 implements obligations
under United Nations Security Council Resolution 1373 and the International
Convention for the Suppression of the Financing of Terrorism. The Act
creates a new offence proscribing the provision or collection of funds
to facilitate a terrorist act. (Maximum penalty :- life imprisonment.)

Criminal Code Amendment (Suppression of Terrorist Bombings) Act 2002

The Criminal Code Amendment (Suppression of Terrorist Bombings) Act
2002 makes it an offence to place bombs or other lethal devices in prescribed
places with the intention of causing death or serious harm or causing
extensive destruction which would cause major economic loss. (Maximum
penalty for each of these offences is life imprisonment.)

Border Security Legislation Amendment Act 2002

This Act deals with border surveillance, the movement of people and
goods and the controls Customs has in place to monitor such activities.

Criminal Code Amendment (Anti-Hoax and Other Measures) Act 2002

The Criminal Code Amendment (Anti-Hoax and Other Measures) Act 2002
makes it an offence to use postal and similar services to perpetrate
hoaxes, make threats and send dangerous articles.

The new anti-hoax offence carries a maximum penalty of 10 years imprisonment.

Part III AAA, Defence Act

This amendment was passed before the Sydney Olympic Games in
2000 and clarifies and facilitates the use of the Australian Defence
Force in
a terrorist situation.