The quote above, written by the late Walter Laqueur in 1977, still holds true today. Carrying out an act of terrorism not only requires intent but also a steadfast determination to collect the finance to further violent political ends. Like any walk of life, having intentions, no matter if they are good or bad, is not sufficient in achieving a goal. A terrorist with bad intentions will not succeed unless they also have the capacity to act. The essence of Laqueur’s thinking is this, without money, terrorism is extremely difficult to sustain.

The resonance of Laqueur’s words is, however, somewhat diminished with the inclusion of the clause, “A great deal of money.” This phrase is misleading to the nonterrorism finance expert since it paints an image of a terrorist organization needing extravagant financial sources to carry out an attack. However, this is not always the case. With that said, the term “great deal” is, of course, also very subjective. What may not be a “great deal of money” to ISIS, the richest terrorist group to walk the earth, may be a great deal to the US-based neo-Nazi Atomwaffen Division. Similarly, “a great deal of money” can go much further in purchasing the components of a bomb in Pakistan than it would in the United States.Footnote ¹ Fifty kilograms of calcium ammonium nitrate fertilizer, which can be boiled to separate the calcium from the explosive component, ammonium nitrate, and mixed with fuel oil to create two to four bombs, can be purchased in Pakistan for around $5, whereas in the United States, the same amount of ammonium nitrate fertilizer goes for around $31, albeit sold only in 1-ton (1,000-kilogram) bags.Footnote ²

As you’ll read in this chapter, terrorist operations have not always required a significant amount of funding to succeed. On the other hand, a terrorist attack successfully being carried out can be costly to the government.

The nineteenth-century anarchist-based Russian organization known as Narodnaya Volya, or more formally known by the English translation as the People’s Will, ran its operations on a small budget. Despite a lack of resources, the People’s Will remains one of the few terrorist organizations in history to successfully assassinate the leader of a country. On the day of the attack, the Tsar of Russia, Alexander II, planned to travel along Malaya Sadovaya StreetFootnote ³ to Mikhailovsky Manege, a riding school in Saint Petersburg.Footnote ⁴ The People’s Will was acutely aware of the tsar’s routine to attend roll call here every Sunday, thus not needing to spend additional costs on bribing the tsar’s Cossack guards for further details. Along the route, the terrorist organization planned to blow up the Sadovaya Street tunnel and throw bombs at the tsar’s carriage. However, Alexander II, upon advice from his second wife, decided to take an alternative route. Without hesitation, the People’s Will adapted to the alteration and deployed four individuals, each carrying a bomb, along the Catherine Canal to wait for his return from the riding school. As the tsar’s carriage appeared in the distance, the assassins got into position to carry out the attack. When given the signal, the first assassin lobbed his bomb at the tsar’s carriage, failing to meet the intended goal, but nonetheless halting the convoy. By doing so, it provided ample opportunity for the second assassin to successfully carry out the attack, consequently killing himself along with the tsar.

March 13, 1881, the day of the assassination based on the Gregorian calendar, provides valuable information about the cost of terrorist attacks. In dissecting this attack, one can divine that the People’s Will’s attack did not require significant funding. The People’s Will devoted minimal resources to the attack, and despite the group being ravaged to the brink of dissolution by the tsar’s repressive counterterrorism tactics, the group successfully assassinated Alexander II. The anarchists did not pay its members, and the cost of the bombs, probably nothing more than dynamite,Footnote ⁵ was also minimal. Due to the carriage route of the tsar being well-known, the People’s Will did not have the extra cost of bribing crooked government or police officials for information.

The success of the People’s Will in this case inspired revolutionaries and nascent anarchists everywhere. With limited financing, the organizations’ deeds lived on despite the group’s death shortly after the tsar’s execution. The People’s Will did not have the resources of the Russian Empire, yet it was able to strike the heart of the empire. Terrorist groups, with few exceptions, do not have the capability of states and therefore, logically, must do more with less. In the case of the People’s Will, human resources were used to strike a blow against tsarist Russia. This dependence on a human’s willingness to sacrifice everything for a cause has yet to diminish over the last century.

This concept is reinforced by Ramadan Shalah of the Palestinian Islamic Jihad (PIJ), who starkly noted, “our enemy possesses the most sophisticated weapons in the world and its army is trained to a very high standard. We have nothing with which to repel the killing except the weapons of martyrdom.”Footnote ⁶ Shalah is not only lamenting the power of its adversary but speaking to PIJ’s own capability. Shalah’s point is this, despite the PIJ’s lack of technical and financial resources, limited financing is needed to carry out an uncomplicated suicide attack. Simply put, the cost, in terms of material needs, is not great. The cost of martyrdom is often little more than the willingness to take one’s own life.

In Countering the Financing of Terrorism, Susan Eckert and Tom Bierstecker provide essential details regarding the cost of higher-profile attacks carried out over the past few decades. According to their research, the first attempt to bomb the World Trade Center in 1993 by al-Gama’a al-Islamiyya only cost 18,000 USD. To finance the attack, most of the funds were derived from a combination of credit and check fraud, along with charitable donations.Footnote ⁷

Eckert and Bierstecker also examined al-Qa’ida’s bombing of the US Embassies in Kenya and Tanzania and found that it cost less than 50,000 USD.Footnote ⁸ In later research, the costs associated with the financing of that attack were further reduced following a Central Intelligence Agency analysis, as cited by Bruce Hoffman, to less than 10,000 USD.Footnote ⁹ While it may seem shocking that it can cost so little to kill 301 people and wound more than 5,000, the price of that attack goes beyond the immediate death toll and the true long-term impact is difficult to calculate. Al-Qa’ida’s 1998 attacks would change the way the United States would carry out its foreign policy mission. Prior to the attacks in Dar es Salaam and Nairobi, diplomats abroad worked inside buildings with little fortification near city centers. After 1998, US embassies would move and become less accessible, and this resulted in diplomatic business being carried out in isolated parts of capital cities within hardened fortresses. The increasing isolation of these embassies, along with the battery of security protocols visitors must clear before meeting with US foreign service officers to secure a visa; or to discuss possible commercial partnerships, is incalculable. Al-Qa’ida, in one attack, single-handedly changed the way US embassies operate and are fortified for a fraction of the cost of those fortifications.

Only a few years after the 1998 embassy attacks, in 2000, al-Qa’ida successfully carried out a maritime operation against the USS Cole in the Gulf of Aden for a cost of no more than 10,000 USD, according to Rifa’i Ahmad Taha.Footnote ¹⁰ With this funding, the organization purchased C4 explosives and a boat with a specially outfitted motor. Although the equipment was sparse, the attack resulted in the death of 17 sailors and more than 250 million USD worth of repairs on the Arleigh Burke class destroyer.Footnote ¹¹

Non-US targets, of course, have also been the focus of terrorist vitriol. The October 12, 2002, bombings on the Indonesian island of Bali reportedly cost between 20,000 and 35,000 USD.Footnote ¹² The attack, carried out by Jemaah Islamiyah (JI), resulted in the death of more than 200 people. Three years later, on July 7, four men detonated fertilizer bombs on the London transport system, killing fifty-two people and injuring several hundred others.Footnote ¹³ Following the attack, the United Kingdom House of Commons investigated the variables involved in carrying out the terrorist attack to determine the cost and method of financing used. Accounting for transportation, the equipment used to make the bomb, rent, and car hire, the United Kingdom reported the overall cost to be no greater than $14,000.Footnote ¹⁴ When looking into how the operatives financed the attack, the analysis showed that one of the bombers, Mohammad Sidique Khan, defaulted on his personal loan repayments and overdrew on his bank accounts. Another bomber, Jermaine Lindsay, used checks to purchase items within the weeks prior to the attack.Footnote ¹⁵

Like many of the attacks previously cited, the funding of al-Qa’ida’s 9/11 attack was relatively inexpensive, albeit it cost more than all of the other attacks combined. According to the findings of the staff monograph on terrorist financing of the National Commission’s report on Terrorist Attacks Upon the United States, the 9/11 attack cost al-Qa’ida between 400,000 and 500,000 USD. Of that amount, 300,000 USD passed through the formal financial system of the United States.Footnote ¹⁶ Al-Qa’ida operatives had US bank accounts, made wire transfers and ATM transactions, used traveler’s checks and credit cards to move and spend money. Much of that was used for nonoperational costs, like to pay for general living expenses and flight training in the United States. Al-Qa’ida abused the US financial system and the group built its wealth, according to the 9/11 Staff Monograph, by diverting money from Islamic charities primarily based in the Persian Gulf. The other significant finding was that the financiers in the Gulf and in Germany facilitated the movement of money. As you’ll read in Chapter 2, successful terrorist organizations must diversify income streams if they are going to remain stable. This funding is necessary to support recruitment, train members, establish bases and safe houses, pay for transportation, and acquire supplies, in addition to weapons and explosives. Remarkably, in 2003, the Australian commonwealth of Director of Public prosecutions estimated that Al-Qa’ida only used 10 percent of its income on operations. The other 90 percent went to the cost of administering and maintaining the organization, including the cost of operating training camps and maintaining an international network of cells.Footnote ¹⁷ Due to the diverse range of needs and overhead costs, terrorists will use legitimate businesses and manipulate unwitting nongovernmental organizations to raise funds, as well as engage in criminal activity, such as the drug trade, weapons smuggling, fraud, kidnapping for ransom, extortion, and theft.

Cost-effectiveness

Another important aspect of terrorist financing is how terrorists think about the costs related to their attacks. After 9/11, Usama bin Laden lauded the cost-effectiveness of the attacks in a videotaped message released in 2004.Footnote ¹⁸ Estimates of the costs of 9/11 to the United States vary widely, but the lowest estimate is 500 billion USD. Bin Laden noted in his 2004 video that “every dollar of al-Qa’ida defeated a million US Government dollars.” Bin Laden had a reputation for taking credit for budget-deficit problems and job losses.

Bin Laden is not the only terrorist to laud the cost-effectiveness of his attacks. On October 20, 2010, two bombers were found in toner cartridges on two separate cargo planes. These cartridges were filled with military-grade explosives similar to that found in the underwear of Abdulmutallab, a member of al-Qa’ida in the Arabian Peninsula (AQAP), who tried to detonate a bomb on a US commercial aircraft on December 25, 2009. In a separate case that occurred in 2010, AQAP attempted to down cargo planes and lauded the cost of the operation in its online publication named Inspire. AQAP claimed that the attack cost 4,200 USD to carry out and that its intent was to disrupt global air cargo systems. AQAP dubbed the attempted attack, “Operation Hemorrhage” and cataloged the cost of the operation as follows: two Nokia phones at 250 USD each, two HP printers at 300 USD each plus shipping, along with transportation and other miscellaneous expenses that add up to a total bill of 4,200 USD.Footnote ¹⁹

AQAP went further and noted that the attempt reflected its new strategy of low-cost attacks designed to inflict broad economic damage, noting that it did not need to carry out a 9/11 like attack to destroy the United States, but rather would destroy it by a death of a thousand cuts.

The leaders of terrorist groups think deeply about the cost-effectiveness of their attacks and the lasting impact an even failed act of terrorism can have on society. The AQAP attack changed the way the world screens commercial cargo – increasing the costs of doing business for governments and the private sector. At the same time, the costs of successful attacks are severe. The 9/11 attack changed the way the US government structured itself to counter not just terrorist financing but counterterrorism as a whole. New bureaucracies were created, to include the creation of the Office of the Director of National Intelligence, the National Counterterrorism Center, the Department of Homeland Security, and many other government agencies. At the same time, simple things people took for granted, such as going to the airport, have inalterably changed. The Transportation Security Agency relentlessly screens for bad actors trying to evade aviation security protocols. Privacy, by virtue of walking through body-scatters to better detect anomalies that may be indicative of a terrorist smuggling box cutters onto an aircraft, at the airport no longer exists. Society, privacy, commercial enterprise, and how governments organize themselves are on the minds of terrorist operators and financiers. That’s not going to change. Yet, the study of how terrorists finance themselves and how governments counter that financing remains important.

How This Book Is Organized

This book is a natural evolution of my career. I spent nearly twenty years in the US government, the bulk of which my time was spent on countering the financial activities of terrorist groups. The bulk of this book is devoted to the manner in which governments, such as the United States Government, private sector, and the multilateral community, such as the United Nations (UN), counter the financial activities of nefarious actors. First, though, Chapter 2 is devoted to defining the phrase “Terrorist finance,” and the methods terrorist groups accrue wealth. Chapter 2 also examines how terrorists generally move, use, and store wealth. Chapter 3 examines how the surging threat posed by violent extremist radical right actors fund their activities. The challenge of a growing transnational set of violent right-wing actors became the focal point of the world’s attention because of the January 6, 2021 insurrection that threatened to usurp US democracy. Chapter 3 also examines the range of licit and illicit activities far-right actors engage in to fund themselves and some of the difficulties governments have encountered in challenging far-right financing. Chapter 4 looks at the financing of the terrorist group ISIS, and how the United States and international community responded to its significant fundraising activities. Chapter 5, among other things, examines the key programs and types of intelligence collection, such as financial intelligence, that inform the decisions to be taken to counter illicit activity associated with terrorist groups. Chapter 6 examines the oft-most used tool in the counterterrorism financing arsenal, targeted financial sanctions. Based on the author’s direct experience of leading the State Department’s office charged with sanctioning terrorist groups under the Secretary of State’s legal authorities, Chapter 6 attempts to demystify the terrorist designations process by examining several controversial terrorist designations that took place between 2008 and 2018. Chapter 7 reviews the role state’s place in providing support to terrorism and how governments, such as the United States and Canadian governments, use broad-base sanctions to penalize rogue country’s support to terrorism. Chapter 8 looks at the world of multilateral counterterrorism financing, specifically the roles the United Nations and the Financial Action Task Force (FATF) play to counter terrorism financing. Chapter 9 examines the importance of the private sector, such as banks, money service businesses, and designated nonfinancial businesses and professions, in countering illicit financing. Chapter 9 also examines how the public and private sectors can cooperate to counter terrorist financing and money laundering. Chapter 10 explores the world of virtual assets, such as cryptocurrency. Chapter 10 also looks at how governments are working with the private sector to counter illicit actor use of virtual assets. Finally, Chapter 11 concludes with a recap and look toward the future of terrorist financing. With the Trump Administration rapidly changing laws and interrogating the utility of regulations, the enforcement environment is going to rapidly change. What could that mean for terrorist financing?