Commonwealth Director of Public Prosecutions (CDPP)

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

Date of Publication: 
12 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.