The US government has been attempting to starve terrorist groups of funds with some success, it seems, in the case of al-Qaeda. Simon Wilson reports.
What does the US Department for Terrorist Financing do?
As the US Treasury's David Cohen told a conference in Washington last week, "do not let my title fool you. Although I am the assistant secretary for terrorist financing, I am firmly against terrorist financing".
Cohen and his colleagues are tasked with formulating and co-ordinating the Treasury's strategy for choking off the flow of money to terrorist organisations. Their targets are the main sources of terrorist funding and their aim is "to put pressure on the assets of individuals and organisations" regarded by the US as suspected donors.
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What sort of pressure?
Official records show that the Treasury has 'designated' hundreds of people and organisations as 'terrorist'. The prime objective is to bar them from the international banking system. By presidential order, the US freezes the assets of 'designated' financiers and stops Americans from doing business with them. Other governments and banks frequently follow suit.
As it becomes harder for terrorists to get funding via donations, they are forced into conventional crime drugs, pirated films, music and software, extortion, arms trafficking in order to fund their campaigns. These activities make them more vulnerable to detection by international law enforcement agencies, who are helped by financial institutions on the look-out for money-laundering.
Is this strategy successful?
In the case of al-Qaeda, yes. According to security analysts, the terror network led by Osama bin Laden is strapped for cash. So much so that it has been forced to make four separate appeals for money in the first half of this year.
However, what isn't clear is how much of al-Qaeda's financial troubles are down to US pressure. In part, the funding crisis reflects the fact that its extreme ideology of global jihad is in decline throughout the Muslim world. And atrocities which often involve the deaths of large numbers of innocent Muslims are widely seen as ineffective.
Further, many of its core leaders have been killed by CIA officers and special operations undertaken by Western powers. However, al-Qaeda's decline contrasts with the fortunes of another major US foe the Taliban.
Are the Taliban hard up?
On the contrary, they appear to be the beneficiaries of al-Qaeda's decline. Traditional sources of terror funding in the Persian Gulf kingdoms appear to be switching their investment to the more successful Afghan insurgency. The US and allies including Britain have made concerted efforts over the past year to cut off funds to the Taliban through military and intelligence-based action. But according to US government sources cited by The New York Times this week, they have "barely made a dent".
Who funds the Taliban?
As the insurgency has grown in strength in recent years, the Taliban has pursued a successful strategy of diversification. "In the past there was kind of a feeling that all the money came from drugs," said US special representative Richard Holbrooke in June. But security analysts now believe that foreign donations, rather than opium, are the Taliban's biggest source of cash.
According to intelligence sources cited by The Washington Post last month, the CIA estimates that Taliban leaders and their associates have received $106m in the past year from foreign donors in the Middle East and Persian Gulf. These sources say there is no evidence that the Saudi, United Arab Emirates or other states are providing direct financing for the Afghan insurgency. Rather, the biggest contributors are said to be private citizens from Saudi Arabia, the Persian Gulf states, Iran and Pakistan.
Is drugs money still important?
Very. Although the Koran forbids Muslims from producing or imbibing intoxicants and the Taliban even banned opium-growing in 2000, the US-led invasion the following year resulted in the reintroduction of opium in areas liberated from their rule. So once again Afghanistan accounts for the vast majority of the world's opium production, and the Taliban (notwithstanding religious scruples) are believed to make money at every stage.
According to Cohen, the Taliban extort funds "from those involved in the heroin trade by demanding 'protection' payments from poppy farmers, drug lab operators and the smugglers who transport the chemicals into, and the heroin out of, the country". A US Senate Foreign Relations Committee report, published this August, says that the typical levy on poppy farmers is 10%.
The Taliban collects the bulk of this through regular payments to leaders based in the border city of Quetta in Pakistan. Overall, the US military thinks the Taliban make $70m a year from drugs the UN reckons the figure is closer to $100m.
Could the Taliban run out of cash?
From drugs at least, the Taliban's future revenue streams look ominously steady. According to a UN report published in August, opium-traffickers have stockpiled more than 10,000 tonnes of the stuff, with a street value of billions of dollars. That's enough to satisfy world demand for two years.
So even if the US is successful in cutting off donations altogether, the Taliban are likely to profit handsomely from the drugs business for some time. Indeed, given the strength of other revenue streams including donations, kidnapping ransoms and protection money, the Taliban in contrast to al-Qaeda look capable of staying in rude financial health.
Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published Customers.com, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.
Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.
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