When people discuss combating terrorism, the images that flash into public consciousness are drone strikes abroad, or armed police raids at home. While this is a necessary component of counter-terrorist action, there is another equally vital aspect which is frequently overlooked. This is the financial component. That is to say, squeeze terrorist groups of funding and sanction their state sponsors.
Starving them directly of funds is likely to even more effective in constricting and dismantling extremist groups. Many, but not all extremists in the world today are Islamists. They are seen by governments across the world as potent threats because of their capability to infiltrate into Western societies in the aftermath of mass immigration as well as the potent radicalising power of their internet outreach on ‘vulnerable’ youth.
Islamist insurgencies and terrorist groups often gain their funding from state actors who frequently look the other way at how their cash is being used. Saudi Arabia is increasingly prominent in any list of such actors, as is protégé Pakistan and neighbouring Iran. How can these states be dissuaded and eventually deterred from funding ‘non-state actors’ that further their geopolitical goals?
The answer to that question lies in financial sanctions. If state sponsors of terrorism are forced to confront the spectre of sanctions, they may find their willpower to continue with their destructive policies sagging. Empirical evidence suggests that sanctions are in fact highly effective in ensuring compliance, especially in situations where military actions by the West may be counterproductive. For example so-called ‘smart sanctions’ on Iran forced the Iranian regime to begin negotiations over its nuclear programme, long believed by analysts to be aimed at acquiring nuclear weapons. That resulted in the Joint Comprehensive Plan of Action, which limited Iran’s uranium reprocessing program in exchange for financial sanctions relief. Sanctions may also have impacted on Iran’s ability to fund terrorist organisations such as Hezbollah to at least some extent.
Another example of strategic effectiveness with regard to enforcing compliance is the role of the powerful Financial Action Task Force. This UN empowered multinational group has the power to put whole countries on a watchlist for terrorism, nuclear proliferation and money laundering. The drive by Great Britain and the United States to put Pakistan on a watch list for sponsoring terrorism appears to have shaken the Pakistani Army, forcing the government to at least temporarily ban extremist groups. By combining FATF sanctions with a rapid drawdown in financial assistance the United States – joined by the Conservative British government- is developing a paradigm where a program of sanctions is used to compel, dissuade and eventually deter Sunni Islamist terrorism, even from former ‘allies’.
A similar comprehensive program aimed at every known terrorist sponsor in the MENA region, while perhaps politically unfeasible, could nonetheless yield great benefits in shrinking the political space that terrorist groups have in which to operate. The path to such a policy is arguably being opened by the increasingly intolerant stand toward terrorism and its support networks by Western governments. Many of the most extreme groups such as al-Qaeda are often funded by unofficial and unmonitored methods such as hawala transfers of non-banked cash from the Arab world. This is a system where cash is transferred between agencies by professional non-bank operators. Needless to say the lack of an electronic trail makes it hard to track. This is difficult even for modern intelligence agencies to follow. Monitoring and intercepting these is the next big strategic challenge as far as cutting terrorism funding goes.
I think an infrequently discussed aspect of countering terrorism funding is the role of charities. This is a salient aspect of CT strategy for Britain especially, which faces a grave terrorist threat that is exacerbated by a (still) poorly regulated charities sector. It is not uncommon for bogus charities to collect for items for the poor only to send the money abroad to terrorist groups in conflict zones. A more robust response is still required. Often it is smaller ‘charities’ staffed by a handful of people which pose the biggest risk. It is good that large banks are closing down the bank accounts of large charities with proven links to extremism, but that oversight and execution needs to be expanded to the smaller charities.
A comprehensive plan of action based on financial sanctions should be jointly instituted by all major Western powers, in partnership with Russia and China if possible. (Both of them are threatened by extremist Salafi groups, in Chechnya and Xinjiang). Ideally the plan should be threefold aimed at tackling state sponsored funding, ‘charity donation’ funding and the shadowy cash transaction networks which dot the Middle East and South Asia. This will severely squeeze the ability of extremist organisations to recruit, arm and train, not to mention conduct terrorist outrages. That can then create a framework for their dismantlement over time by a series of precise and effective military interventions.