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The Organization and Financing of Terrorism
Chapter 3
Learning Objectives: Chapter 3
 Summarize rural, urban, and insurgent models of terrorism.
 Trace the evolution of terrorist organizational structures.
 Discuss the challenges involved in leading a terrorist group.
 Describe the issues involved in terrorist financing.
 Describe legal and illegal sources of income.
Learning Objectives: Chapter 3
 Explain the ways funds are disbursed in an underground economy.
 Describe the hawala system.
 Summarize views on the political economy of terrorism.
 Outline the manners in which drugs and terrorism overlap.
Models of Terrorism
 After 1945, the first wave of terrorism appeared in Africa and Asia
Nationalistic
Struggles for independence
 After 1965, a more urban model emerged
 1980s, Same urban model
Religious
Anticolonial movements (Kenya, Algeria)
Ideological
 Three models represent general trends from 1945 to the present:
Rural
Urban
Insurrection
 Models help to explain the evolution and practice of contemporary terrorism
 They embody the philosophy behind particular types of terrorist movements
Guerrilla Warfare
 Guerrilla revolutions based on the Cuban experience are typified by three phases
Phase one begins with isolated groups
Phase two merges groups into guerrilla columns
Phase three brings columns together in a conventional army
Che guevara
 Argentinian-born, medical degree
 Guerrilla warfare theorist
 Fidel Castro’s assistant
 Advocated revolutions throughout Latin America
 Reminiscences of the Cuban Revolutionary War
 Was killed in 1967 while trying to form a guerrilla army
Evolution toward Marxism
Revolutionary process in Cubs
Structure and strategy of Castro’s forces
Philosophy of the Cuban Guerrilla war
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Guerrilla Warfare
 Guerrilla revolutions based on the Cuban experience are typified by three phases
Phase one begins with isolated groups (revolutionaries) join indigenous population to form
guerrilla foco
Phase two merges groups into guerrilla columns and control rural areas
Phase three brings columns together in a conventional army to overthrow government
Guerrilla Warfare
 Commando-type tactic
 Main purpose of terrorism
Strike at the government’s logistical network
 Secondary purpose
Demoralize the government
REGIS DEBRAY
 French socialist who popularized Guevara’s work
 Revolution in the Revolution? (1967)
 Dominating issue in Latin America is poverty
 U.S. responsible for maintaining the inequitable class structure
Caused Latin American poverty
Revolution an affair for Poor peasants
Could only begin a rural setting
Terrorism had no payoff
Revolution begins with guerrillas fighting for justice
Revolution ends with a united conventional force
Urban Terrorism
 The model for modern urban terrorism was intellectually championed by Frantz Fanon
A Martinique-born psychiatrist
 Leading anticolonial thinker of the 20th century
 He produced two works as a result of his Algerian experiences:
The Wretched of the Earth (1961)
Indicts colonial powers
Calls on colonized to practice terrorism
A Dying Colonialism (1965)
Frantz Fanon
 Western powers have dehumanized non-Western people by destroying their cultures and
replacing them with Western values
 Decolonization was destined to be a violent process
 Achieving freedom was inherently violent
Frantz Fanon
 Guerrilla warfare and individual acts of terrorism as tools of revolution
 Fanon argued that terrorism should not be used against the native population in general
 His proposed two targets for terrorism:
White settlers
Native middle class
 Used brutality to bring on governmental repression, which would bring more natives to
the cause
 Carlos Marighella
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 Brazilian legislator
 Nationalistic Communist Party leader
 Revolutionary terrorist
 Designed practical guides for terrorism that have been employed for more than 40 years
The Minimanual of the Urban Guerrilla
 Wanted to move violence from the countryside to the city
Carlos Marighella
 Most original concept was that all violence could be urban-based and controlled by a
small group of urban guerrillas
 Two distinct phases
Bring about actual violence
Basic weapon of the urban guerrilla:
Armed revolutionary cells
“Firing Group”
4 to 5 terrorists each
Small size ensures both mobility and secrecy
Several groups need to construct a terrorist organization
Can join as necessary to concentrate power
Carry out the most deplorable acts of violence
Carlos Marighella
Give that violence meaning
Targets should have symbolic significance
Violence designed to be frightening
Those who supported the revolution would not need to fear terrorist violence
Revolutionary terrorism in an urban setting would destabilize governmental power
Psychological assault would convince the government and the people that the status quo no
longer held
Insurgency
 Focus on insurgency due to a small group of officers who began looking at military
failures during the Vietnam War
General David Petraeus, U.S. Army
General James Amos, U.S. Marine corps
 Impossible to fight insurgencies with military tactics designed for terrorism or guerilla
war
Insurgency
 At the end of the Cold War, various insurgencies began growing in the vacuums left by
the superpowers
 Technology and weapons helped many insurgencies grow
 New political atmosphere made the rise of organizations like al Qaeda possible
COUNTER INSURGENCIES
 The nature of counter insurgencies is paradoxical
 Security forces follow the model of community policing
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They need to be highly visible and embedded in neighborhoods
This puts security forces at risk
Creating a secure environment for military forces is counter productive
The use of force may increase the power of insurgents
IMPORTANT DEVELOPMENTS
 The invention of dynamite was one of the most important developments in the history of
modern terrorism.
By Alfred Nobel (a “pacifist”)
Patented in 1867
“Dyna,” from Greek word dunamis for “power”
The Evolution of Cells
Fraser and Fulton
 Top of the pyramid
Group responsible for command
Make policy and plans
 Second level
Active cadre or the people responsible for carrying out the mission of the organization
May have one or more specialties
 Third level
Most important level
Active supporters; critical to terrorist campaigns
Keep terrorists in the field
Maintain communication channels
Provide safe houses
Gather intelligence
Ensure logistical needs are met
The Evolution of Cells
Fraser and Fulton
 Last level
Passive supports; difficult to identify and characterize
Complements active support
Political support
The Evolution of Cells
 The Cell
The basic unit of a traditional terrorist organization
Composed of four to six people
Members of other cells seldom know one another
Usually has a specialty; may be a tactical unit or an intelligence section
 The Column
Semiautonomous conglomerations or groups of cells with a variety of specialties and a single
command structure
Primary function is combat support
ABU NIDAL GROUP
 Started in 1974
 Split from PLO
 Total liberation of Palestinian people only acceptable alternative
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Only method is armed struggle
Use hijackings and killing
Umbrella Organizations
 Several small pyramids gather under a sheltering group that manages supplies, obtains
resources, creates support structures, and gathers intelligence
 Northern Ireland Unionists & Republicans
Maintain legitimate political organizations
Violent paramilitary groups have operated under the umbrella of legitimate organizations
OTHER MODELS
 Virtual organizations
Created through computer and information networks
Developed through communications, financial, and ideological links
No central leadership
 Chain organizations
Small groups linked by some type of communication
Members periodically cooperate, come together for a particular operation, then disband
Modern Piracy
 Today’s pirates are armed with global positioning systems, satellite phones, machine
guns, rockets, and grenades
 Terrorist networks established links with maritime pirates
 Horn of Africa
Gripped by internal and external struggles
Piracy caused by the multifaceted conflict in Somalia accompanied by the breakup of legal
authority and social systems
(Battle of Mogadishu)
Modern Piracy
 http://www.marad.dot.gov/news_room_landing_page/horn_of_africa_piracy/horn_of_afri
ca_piracy.htm - Horn of Africa Piracy
 http://topics.nytimes.com/top/reference/timestopics/subjects/p/piracy_at_sea/index.html Piracy at Sea
Managing Terrorist Organizations
 It is possible to chart the structure of any organization
 Terrorist leaders have special organizational problems
 Terrorism demands secrecy
Secrecy prevents effective communication
While this is the greatest strength, it is also the greatest weakness
Subgroups have a high degree of autonomy
The larger the group the grater the degree of decentralization
Managing Terrorist Organizations
 Decentralization offers relative security
Very few people know many other members of the organization.
Decentralization paves the way for potential splintering or misunderstandings
 Managing Terrorist Organizations
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Another problem of terrorist management is that of gaining immediate tactical support for
operations.
There is a need for active supporters
Consequently, the majority of time is spent creating networks of active supporters, not
launching headline-grabbing operations.
INTERNAL DISCIPLINE
 Prevents factionalism and excessive autonomy
Commanders continually threaten to terrorize the terrorists
 Two Opposing Dynamics
One pushing for cohesion and cooperation through fear
One pulling for autonomy through decentralization and secrecy
PAKISTAN
 TRIBAL AREAS
Several differing organizations have been able to establish their presence in the border region
with Afghanistan
They are isolated and protected, so they can develop command structures
This facilitates better control of attacks
Seven different Pashtu tribes have control of the region by agreement with the central
government
Group Size and Length of Campaign
 The size of a terrorist organization affects its ability to operate over time.
Large groups last longer than small ones.
 Terrorists need to create a large following to conduct a lengthy campaign.
However, terrorism almost always involves violence from an unpopular political fringe
movement
Terrorists are often unable to form a large constituency to support the campaign.
Group Size and Length of Campaign
 A terrorist campaign promises the greatest opportunity for success
 Political revolutionary and radical groups, however, do not have the popular appeal
needed to gain support for their activities
Results in many terrorist activities remaining isolated – never growing into a campaign
 Radicalization
Ideology is one of the most important factors attracting recruits to a small group
Financing Modern Terrorism
 “Capone Discovery”
How the IRA entered into organized crime
Used organized crime networks to finance its operations
Petty crime
Money laundering
Transfer of illegal contraband
Financing Modern Terrorism
 A terrorist operation does not cost a lot of money
 The overall budget for a campaign is quite high
 It takes a lot of money to run a terrorist group for any length of time
(holding the organization, such as al Qaeda together)
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Financing Modern Terrorism
 Terrorists need money
 They use by legal and illegal mehtods to get it
 Forensic Accounting
One aspect of counter terrorism involves tracing money and using the information with other
intelligence to produce a comprehensive picture of terrorist operations.
Financing Modern Terrorism
ILLEGAL
 Criminal enterprises
 Drug trade
 Conducting illegal business activities under a legal cover
 Smuggling money
 Identity theft
 Security fraud
 Extortion
LEGAL
 Charitable contributions
 Nongovernmental organizations
 Banks
 Wire transfers
 Normal employment
Financing Modern Terrorism
 Terrorists need money
 They use by legal and illegal mehtods to get it
 Forensic Accounting
One aspect of counter terrorism involves tracing money and using the information with other
intelligence to produce a comprehensive picture of terrorist operations.
Financing Modern Terrorism
 “Expropriation”
Carlos Marighella believed that “urban warfare” begins with a campaign of expropriation—
robbery
 Shining Path of Peru
Practiced extortion and protection rackets
Taxed farmers for protection
Networks and Systems
 FBI estimates that the underground economy produces $500 billion per year
 Terrorists not only move funds but also smuggle stolen goods and contraband
 Globalization terrorism has created opportunities for profits in diamond trade
“conflict diamonds”
 Terrorists take advantage of political instability in regions like central Asia and the
Triborder region
 Hidden Transfers
 Black Market Peso Exchange
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Drug dealers sell their products in the US and accumulate large amounts of US currency
The drug dealers end up with “clean” Colombian pesos, and the US currency accumulated
from illegal drug sales is hidden from formal audits
Hidden Transfers
 Hawala System
A network based on long-term trust relationships and the knowledge that each dealer is
reliable for all debts
Caravan leaders would visit merchants and pay for goods with a promissory note
When the caravan reached its destination, the leader sold goods and the distributors would
pay the caravan leader with promissory notes
The leader returned home, presented the note, and the local chit dealer paid the debt
HEZBOLLAH
 Most of its funds comes from state funding
Iran acts as the principal sponsor
It receives an estimated $200 million per year from Iran
 It receives money from direct donations from members of the Lebanese diaspora
A scattered population
 It has an extensive protection racket
Legitimate businesses are forced to pay a “Hezbollah tax”
 Also involved in narcotics trafficking and cigarette smuggling in North America and
Africa
Political Economy of Terrorism
 Globalization is based on the belief that international trade barriers should be removed so
that commerce and industry can develop in an international free market
 New economy of terrorism produced after the fall of the Soviet Union and subsequent
globalization
 Modern Jihad has evolved as an economic entity
Political Economy of Terrorism
 ETA tried to gain control of the economy
They forced Spanish businesses out of the Basque areas of northern Spain
Basque region became a failed state
An area outside a government’s control
Operating under warlords, criminal groups, or competing governments
ETA established an illegitimate economy in a shell state
Nominal government control
Large regions are anarchic or under the control of others
Government is unable to enforce law or provide other forms of social order
Political Economy of Terrorism
 Macroeconomic theory
Suggests that counter terrorism policies should be aimed at providing the world’s peoples
with economic stability, opportunity and participation in the mainstream economy
 Barber
When economic globalization threatens the ability of ordinary people to meet their needs,
they will find other ways to survive
Narcoterrorism
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Terrorists using either terrorist tactics to support drug operations or drug-trade profits to
finance terrorism
Terrorists are involved in the international production and distribution of drugs
Narcotics trade is one of their primary sources of money
Drugs and Terrorism
 Hezbollah and Hamas use the Latin American drug trade to raise funds
 Islamic groups get most of their money through the drug trade in central and Southeast
Asia
 Seven drug trafficking organizations dominate the political landscape in Northern Mexico
 Los Zetas uses Hezbollah to launder drug profits while Hezbollah uses the payoffs from
Los Zetas to finance terrorist operations
Narcoterrorism Controversies
 Critics say combining drug problem with terrorism confuses two different issues
 The 9/11 Commission dismisses that drugs were linked to al Qaeda’s attack
 Saudi money can be traced to violence; spread of militant Islam is not about drugs
 al Qaeda’s use of heroin to finance the jihad ranges from believable to fantastic
 Chapter Take Aways
 Terrorist organizations are as complex as any other social organization designed to
accomplish a mission.
 They are hampered in their effectiveness due to the secret nature of their operations.
 Most organizations are designed to either support guerrilla movements or to operate as a
terrorist movement.
Chapter Take Aways
 The former organizations use terrorism selectively while terrorist groups simply terrorize
as a strategy.
All groups require funding.
 This caused some analyst to focus on the fiscal aspects of terrorism, believing that
terrorists used money in the same way as other organized criminals.
Chapter Take Aways
 Investigations revealed that the money trail in terrorism differs from the flow of funds in
other criminal enterprises because special structure of terrorist operations.
It is important to understand the financing of terrorism because it is an important intelligence
tool.