Illicit Money: Financing Terrorism in the Twenty-First Century

  • Published

Illicit Money: Financing Terrorism in the Twenty-First Century by Jessica Davis. Lynne Rienner, 2021, 240 pp. 

Illicit Money by Jessica Davis is a critical pillar of financial terrorism research and may become a foundational text for the field. Its use of data strikes a perfect balance between being evidence-based while not blindly following what out-of-context numbers say in an area almost defined by incomplete information. If the author had chosen to go in-depth in some case studies instead of brief descriptions of how capital was used, the book would also have been excellent for those outside of the field. Even as is, Illicit Money is effective in showing how terrorists raise and deploy funds but falls short of being a text capable of generating more interest in a field unjustly written off as merely academic.

Davis’ Illicit Money discusses how terrorist organizations and actors acquire capital and use it to achieve various objectives. The book is broken down into three main parts—raising money (how groups collect resources), using money (how groups use, store, and obscure funds), and new frontiers (an analysis on financing methods and emerging tactics). It draws statical evidence from 55 terrorist organizations, 18 plots, 32 attacks, and the authors’ experience working on terrorism funding.

Multiple sections provide incredible insight into how money affects the operations of a terrorist group. One excellent example is the ransoming of hostages. As a summary, terrorist groups sometimes take people hostage to demand money for their release. While this traditionally happens to locals, the author’s analysis shows that the big bucks (and high-profile incidents) are when foreigners are traded. She discusses how nation-states are put in an awkward position, wanting to spend money to free their citizens while also needing to avoid breaking international laws. Sometimes, individual family members make the payments themselves, even if that means funding a terrorist group.

The author does an excellent job discussing the “overhead” costs associated with ransoming: setting up communications, keeping the hostage alive, and paying the appropriate middlemen to transfer the prisoners and payment back and forth. The whole system is much more complex than it first appears. Learning about how this prohibitive cost could turn less organized groups away from ransoming was an absolute joy to read.

Another fascinating chapter was managing, storing, and investing funds. The author describes how the Palestinian Liberation Organization (PLO) invested in banks, businesses, factories, and all sorts of legitimate business activities (144). These investments provided more than half of the funding for the organization in 1987. It was a bit surreal comparing how action-packed one would expect terrorist activities to be with the duller dimensions of generating a return on investment high enough to beat inflation.

While some authors rely too heavily on their data, Davis expertly avoids this trap. Data is used to back it up when a claim is made, along with the author’s expectation of it being over or underestimated. She explains her reasoning for her expectations. Given the lack of reliable data on terrorist funding, failing this crucial step would have compromised the entire text. Instead, the book goes above and beyond illuminating what the data suggests but never simply letting the numbers speak for themselves. The context she provides is critical to the conclusions which are drawn.

While many aspects of Illicit Money reconfirm preconceived notions about terrorist funding, the analysis also highlights truths that seem counterintuitive. One example is hawala, an informal method of money transfer that was vilified after the 9/11 attacks. A false raid against such an operation led to the seizure of immigrant remittances to families abroad. No one targeted in the raid was prosecuted for terrorist-related financing. Hawala can be used to fund terrorism but no more than any other source.

Another counterintuitive result is the volume of legitimate institutions which are used for the transfer of capital. To this day, traditional banking remains the dominant method by which money is moved for terrorist activities. New technologies, such as crowd sourcing through social media, can be adopted, but this is not always the case as cryptocurrency remains a small and niche corner of terrorism funding.

Furthermore, capital is used to provide social services with the goal of breaking state legitimacy through winning hearts and minds versus mere intimidation. At one point, Hamas was estimated to use up to 95 percent of its resources on social welfare programs. Some groups even have rudimentary taxation policies to track who has “contributed.” It is difficult to ascertain if people paying the tax are merely being extorted, truly believe in the organization’s mission or some combination of the two. While it seems easy to say that providing money to a terrorist group ought to be sufficient grounds for terrorism financing charges, this book paints a more accurate but less crystal-clear world. These examples show how commonly held assumptions about terrorist financing can be false.

The book serves as an excellent foundational text for understanding the world of financial terrorism. Unfortunately, many elements of the book can be a bit dull to read that seems difficult to believe given the espionage involved in moving large amounts of money around the world. Davis could have dropped in more interesting case studies in multiple places.

It is strange that this phenomenon is treated as an afterthought, considering the prevalence of state-funded terrorism. For example, the role of the Central Intelligence Agency in providing funds to the Mujahedeen is essentially a part of the public discourse. American-funded Islamist proxies in the Soviet-Afghan War could have been an excellent concrete case study for how states provide resources to terrorist groups. The way the capital was transferred, the nature of the relationships, and the conflicting interests of the two parties would have been fascinating to read through the financial lens. This could have flowed perfectly into today’s modern analysis of the modus operandi of Iranian-backed groups in the Middle East.

Another missed opportunity was when the author discussed legitimate political activities. Multiple groups attempted to use lobbying to achieve strategic objectives. For example, Davis mentions a law firm that the Liberation Tigers of Tamil Eelam (LTTE) hired to get its name off the State Department’s terrorist list. But there is no follow-up to such an interesting relationship. Not only would it have been an illuminating example, given that the book lists multiple other groups who have pursued similar strategies, but it would have generated much more interest in the terrorist financing field. Since terrorism is violence pursued in hopes of political change, directly spending capital on lobbying is crucial to such movements. Why dedicate so little time to what might be the most interesting and unexpected way terrorist groups deploy funds?

A final area worth exploring would have been the chance and impact of collateral damage from counterterrorism operations in the financial domain. While drone striking the wrong target is obviously terrible, one can imagine how angry an individual would feel if their bank accounts were frozen with no ability to appeal. The author briefly mentions this possibility and provides an example of laws being misused concerning hawala. While terrorist financing laws could be helpful in retrospect to prosecute a terrorist or terrorist sympathizer, the impact of unilaterally seizing capital, which can be moved internationally almost instantly, was not explored to the extent necessary.

Illicit Money ended up doing exactly what the author intended to do, but nothing more. Still, given that Davis acknowledges the need for interest in financing terrorism, it is disappointing that more in-depth case studies were not explored. Individual name drops and brief descriptions of incidents do occur but are insufficient to generate the desperately needed interest from those outside the field.

The flows of capital dominate our world. From the outsourcing of jobs to access to healthcare and even how marriage has become as much of a contract as an intimately personal choice, almost every aspect of the human condition has been captured by economics. Thus, any discussion that highlights the role of capital in political struggle is critical to understanding how such activities take place, even if terrorism seems to “break” the logic of calculated self-interest.

Readers looking for intimate case studies of how finances flow may find Illicit Money sorely lacking in those examples. Given that part of the problem is a lack of interest in terrorist financing, the author missed a major opportunity to develop that interest outside of the traditional terrorist financing community. Still, the book serves its function well, providing an unparalleled foundation for those who want to pursue this area more vigorously.

Vivek Thangam

"The views expressed are those of the author(s) and do not reflect the official policy or position of the US government or the Department of Defense."