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Testimony

Terrorist Financing and the Implications for Canada

Testimony for Standing Committee on Finance, Canadian Parliament
5th May 2015

Download full testimony here

Mr. Chairman, members of the committee, thank you for giving me the opportunity to appear before you today to discuss terrorist financing.

Terrorist operations do not require much capital. Al-Qaeda in the Arabian Peninsula once touted how its failed plot to bomb a plane over North America in 2010 cost only $4,200. However, what is not captured in such amounts is the general cost of operating. This includes everyday meals, clothing, communication equipment and internet access, housing, salaries, ground transportation, basic training, safehouses – even paying bribes. These make up some of the “fixed costs” terrorist organizations incur.

We have identified four general typologies we see terrorist groups employing in order to meet these costs: Controlling territories and borders, participating in crime and smuggling, tapping wealthy private donors, and state sponsorship.

I will give an overview of examples we have observed in recent years, and for each method, I will identify vulnerabilities within these typologies that serve as opportunities for our governments in North America to disrupt and weaken terrorists’ ability to fund themselves.

Terrorists leveraging control of territories, borders, and ports

Terrorist groups in Africa and the Middle East are taking advantage of their military influence in the regions in which they operate in order to levy taxes and tolls and control trade on their behalf.

As you know, the Islamic State (IS) is trying to recruit Canadians, such as John Macguire, who attended the University of Ottawa and left Canada for Syria in late 2012 to join the group. IS makes between $1-2 million per day by selling almost 50,000 barrels per day of oil from refineries it controls in Syria and Iraq. It also levies taxes on the sale of goods in the territories it controls, and forces local businesses to pay fees for electricity or general security.

Boko Haram controls or has a strong presence in northeastern Nigeria and sections of Chad, Cameroon, and Niger, and has used its military strength to tax the fish trade in the region. The group’s presence in the region has directly impacted the Canadian military: in February 2015 for example, clashes between Boko Haram and government forces in Niger caused multinational troops, including Canadian special forces, to shift locations during a counterterrorism training exercise.

Al-Shabaab’s attacks in East Africa have taken the lives of Canadians, as in the Westgate Mall attack. Like IS, the group also has recruited Canadians to join its ranks as foreign fighters. The group also taxes trade in the areas it dominates in Somalia – although it has not controlled the highly-trafficked port of Kismayo since withdrawing from the town in 2012, it still levies taxes on charcoal and other goods which must travel to and from the port. Although the UN Security Council has banned charcoal exports from Somalia, the UN estimates that al-Shabaab still earns between $75 to 100 million a year through charcoal sales alone.

Opportunity:

The control of territories by violent extremists negatively impacts local businesspeople subjected to these groups’ excessive taxation and intimidation. Such locals may serve as potential allies in fighting terrorist influence.

Terrorists relying on crime and smuggling to support their operations

Since terrorist groups are often cut off from legitimate business markets, they commonly partake in crime and illicit trade to fund their operating costs.

For example, kidnapping for ransom is the leading method of terrorist financing, after state sponsorship. Since 2008, al-Qaeda in the Islamic Maghreb (AQIM) has received more than $90 million from various governments to release hostages it has kidnapped. In fact, al-Qaeda and all of its affiliates have received more than $125 million in ransom payments just since 2008.

The jihadist conflicts in Syria and Iraq have opened the floodgates for the illegal trade of ancient artifacts. After oil sales, the antiquities trade makes up IS’ next-highest source of funding. IS has taken advantage of the large swathes of land it controls in Iraq and Syria to profit from the selling of artifacts sometimes thousands of years old. The group does not necessarily pillage directly, but rather allows locals to dig for artifacts in exchange for taxing the proceeds. This practice systematically incentivizes cultural looting.

It is difficult to calculate the exact amount IS receives from the antiquitiestrade, but the Guardian has cited an intelligence source estimating that the group accrued $36 million through selling artifacts from a single region in Syria.

While Boko Haram secures major resources by robbing banks and stealing Nigerian military equipment and vehicles, the group also sustains itself by threatening poor farmers – and kidnapping their family members – in order to steal livestock and food.

The worldwide illegal trade in wildlife generates $7-$10 billion in revenue, and terrorists based in areas near protected and endangered wildlife are capitalizing on this market. 

For example, al-Shabaab has used its proceeds from the illegal ivory trade to fund terrorist attacks in Kenya. A 2012 non-profit group investigation showed that al-Shabaab was at one point was earning $200,000 to $600,000 a month trading ivory tusks. 

In the Democratic Republic of Congo, the Lord’s Resistance Army poaches elephants to fund its violent operations across central Africa.

Opportunity:

Crime and extortion alienate the local populations that terrorist groups exploit, thus creating potential allies in the fight against extremists.

Regarding hostage taking, it is increasingly clear that terrorist groups choose their targets based on which national governments pay ransom. One U.S. Treasury official observed that al-Qaeda has apparently shifted in recent years from kidnapping Americans because the U.S. Government does not pay to release hostages. This may bode well for the Canadian Government’s similar stance against terrorist negotiations.

The global concern over endangered species can be leveraged to propose stronger economic measures against wildlife traffickers. Juan Zarate and Gretchen Peters, both board members for FDD’s Center on Sanctions and Illicit Finance, recently wrote an op-ed calling for “Earth sanctions” to target the assets of traffickers, shippers, and front companies that facilitate this trade.

Wealthy donors financing terrorist groups

Since the September 11th attacks, Canadian and U.S. officials have dealt terrorist financing a major blow by clamping down on the use of international charities to fund terrorist groups. Still, a considerable amount of funding, particularly in the Persian Gulf states, continues to elude financial oversight. Terrorist fundraising in the Gulf is a particularly challenging target because many of the regimes that cooperate with our governments in some military and diplomatic areas nevertheless continue to allow terrorist financiers to operate largely unabated. In fact, the U.S. Treasury Department has labeled Qatar and Kuwait as permissive jurisdictions for terrorism financing.

For example, at one point during the Second Persian Gulf War, a Qatari national named Abdulrahman al-Nuaymi oversaw the transfer of $2 million per month to al-Qaeda in Iraq. In 2013, the U.S. Treasury designated him for channeling money between Qatari donors and al-Qaeda leaders not only in Iraq, but also in Syria and Yemen, and to leaders of al-Shabaab in Somalia. However, his designation has not inspired Qatari authorities to act; he apparently still lives freely in Doha.

Various jihadist fighters in Syria are receiving funds from Kuwait through fundraisers who collect monies for ostensibly humanitarian purposes, but instead channel those funds to military groups.

Fundraisers in Qatar and Kuwait adroitly utilize social media to accommodate donors in other countries seeking to donate outside the constraints set by their governments, many of which have banned unauthorized charity campaigns for Syria.

Opportunity:

Gulf states’ reliance on military support from North America is a lever that Canada and the U.S. can use to pressure regimes to arrest terrorist financiers and seize their assets.

As more fundraisers rely on social media to reach donors for funding terrorist causes, Ottawa and Washington can track key facilitators and educate decision-makers at social-media forums like Facebook and Twitter about instances where their platforms are being used for illegal activities.

State sponsorship of global terrorism

State-sponsored terrorist financing poses unique challenges to our democracies because the funders typically have access to vast resources to support the costs of running large, sophisticated organizations. Governments that facilitate terrorism are able to provide training, weapons, and equipment under the full protection of sovereign borders, thereby making disruption more difficult.

Iran is the most active state sponsor of terrorism. Its Islamic Revolutionary Guard Corps, with its external arm the Qods Force, facilitates violent activities around the globe. Tehran funds hundreds of millions of dollars annually to terrorist organizations such as Hezbollah and Hamas.

Despite sharp ideological and sectarian differences between Iran’s leadership and al-Qaeda, Tehran has provided safe haven to high-ranking al-Qaeda members over the last 10 years, and the U.S. Treasury has designated several al-Qaeda leaders operating in Iran. These al-Qaeda leaders used Iranian soil to transfer funds and recruits between Middle East conflict zones and Pakistan. Notably, the two men recently convicted for plotting to bomb a Toronto-bound train from New York in 2013 received guidance from al-Qaeda members in Iran, according to investigators.

Opportunity:

The Canadian court decision in 2014 to seize $7.1 million in Iranian assets in Canada was a milestone for the families of victims of Iranian terrorism. The court noted that assets owned by Iran in Canada are often channeled through front companies, and this decision should serve as a precedent for further action to identify resources within Canadian jurisdictions that may be used for state-sponsored terrorism.

In conclusion, as terrorists vary their means for securing funds, it becomes more critical that authorities fully address the multiple strategies they deploy.    Although the above typologies for terrorism finance demonstrate our enemies’ adaptive nature, each of these methods comes with vulnerabilities which Canada can exploit.

Mr. Chairman and members of the committee, thank you very much for your time and for the opportunity to testify before you today.