FATF is an inter-governmental body responsible for developing policies to combat money laundering and terrorist financing, setting international standards for anti-money laundering and counter-terrorism financing (“AML/CTF”).335 FATF has issued forty recommendations
on anti-money laundering and an additional nine special recommendations on countering terrorism financing.336 These additional recommendations are aimed at complementing the
anti-money laundering recommendations. FATF has described the terrorist requirement for funds as:-
The costs associated not only with conducting terrorist attacks but also with developing and maintaining a terrorist organisation and its ideology are significant. Funds are required to promote a militant ideology, pay operatives and their families, arrange for travel, train new members, forge documents, pay bribes, acquire weapons, and stage attacks. Often, a variety of higher-cost services, including propaganda and ostensibly
335 FATF recommendations are not binding. It has been observed that they are “extremely persuasive soft law with
effect not only for OECD member states, but also for non-members.” Ilias Bantekas,‘The International Law of Terrorist Financing’, American Journal of International Law (2003) 97, 319.
legitimate social or charitable activities are needed to provide a veil of legitimacy for organisations that promote their objectives through terrorism.337
The terrorist requirement for funds falls into two areas, the first of which is funding specific terrorist attacks (eg the direct costs of terrorist attacks). The direct costs of terrorist attacks (improvised bomb-making components, maps, surveillance equipment, vehicles etc) are often very low comparative to the harm they cause. Even large scale attacks that kill hundreds of people can be funded with relatively small amounts of money.338
Terrorist attacks may be entirely self-funded. The 7th July 2005 attack on the London transport
system was entirely self-funded with the official government report into the attack finding the following about the group responsible for the attack:-
59. ..[It] appears the bombs were homemade, and that the ingredients used were all readily commercially available and not particularly expensive. Each device appears to have consisted of around 2-5 kg of home made explosive. …
63. Current indications are that the group was self-financed. There is no evidence of external sources of income. Our best estimate is that the overall cost is less than £8,000. The overseas trips, bomb making equipment, rent, car hire and UK travel being the main cost elements.
64. The group appears to have raised the necessary cash by methods that would be extremely difficult to identify as related to terrorism or other serious criminality. Khan appears to have provided most of the funding. Having been in full-time employment for 3 years since University, he had a reasonable credit rating, multiple bank accounts (each with just a small sum deposited for a protracted period), credit cards and a £10,000 personal loan. He had 2 periods of intensive activity – firstly in October 2004 and then
337 FATF, Terrorist Financing, 29 February 2008, p7
338 The estimated cost of the Bali bombings of 12th October 2002 which killed 202 people (including 88 Australians) is
USD $50,000, the Madrid train bombings of 11th March 2004 which killed 191 people is USD $10,000 and the London
transport system bombings of 7th July 2005 which killed 52 people is £8000. For further details of the estimated direct
costs of terrorist attacks see Financial Action Task Force, Terrorist Financing, 29 February 2008, p7. It is estimated
that the bombs used in the Boston Marathon bombings of 15th April 2013, which killed 3 people and injured 264
others, would cost less than USD $100 per bomb (manufacturing six bombs from pressure cookers, elbow pipes, nails, firecrackers and glue). http://usnews.nbcnews.com/_news/2013/04/30/17975443-adding-up-the-financial-costs-of- the-boston-bombings?lite
from March 2005 onwards. He defaulted on his personal loan repayments and was overdrawn on his accounts. Jermaine Lindsay made a number of purchases with cheques (which subsequently bounced) in the weeks before 7 July. Bank investigators visited his house on the day after the bombings.339
Direct costs represent a small proportion of the overall costs of financing terrorism compared to the second category of costs which can be described as the broader organisational costs of terrorist organisations. It is this latter category which requires the largest amount of financing. As FATF has recognized, “although individual terrorist attacks can yield great damage at low financial cost, a significant infrastructure (even if loosely organised) is required to sustain international terrorist networks and promote their goals over time”.340
The National Commission on Terrorist Attacks upon the United States (“9/11 Commission”) estimates that Al-Qa’ida spent USD$30 million per year prior to the September 11 attacks on funding operations, maintaining its training and military apparatus, contributing to the Taliban and other related terrorist organisations:-
The 9/11 attacks cost somewhere between $400,000 and $500,000 to execute. The operatives spent more than $270,000 in the United States. Additional expenses included travel to obtain passports and visas, travel to the United States, expenses incurred by the plot leader and facilitators outside the United States, and expenses incurred by the people selected to be hijackers who ultimately did not participate. The conspiracy made extensive use of banks in the United States. The hijackers opened accounts in their own names, using passports and other identification documents. Their transactions were unremarkable and essentially invisible amid the billions of dollars flowing around the world every day…Al Qaeda had many sources of funding and a pre-9/11 annual budget estimated at $20 million. If a particular source of funds had dried up, al Qaeda could easily have found enough money elsewhere to fund the attack.341
Those involved in carrying out the September 11 attacks were found to have received “significant operational funding from overseas…subsequent investigations allowed for
339 Report of the Official Account of the Bombings in London on 7th July 2005, HC 1087
340 FATF, Terrorist Financing, 29 February 2008, p10
341 Final Report of the National Commission on Terrorist Attacks upon the United States, National Commission on
tracking of the source of those funds and established critical links to other members of the terrorist infrastructure worldwide”.342
The broader organisational costs are to develop and maintain a terrorist organisation’s infrastructure (eg train members, acquire weapons) and to promote the ideology of the organisation (eg through propaganda or ostensibly charitable activities).343 FATF has
reported:-
Financially maintaining a terrorist network – or a specific cell – to provide for
recruitment, planning and procurement between attacks represents the most significant drain on resources. Beyond the funds needed to finance terrorist attacks and provide direct operational support, terrorist organisations require funding to develop a supporting infrastructure, recruit members and promote their ideology. In addition, this infrastructure spending may go to charitable organisations and media owned or controlled by the terrorist organisation.344
These non-direct costs of terrorist attacks include day to day expenses of the individuals involved, training, travel and logistics as well as the costs of communicating where the attack is being planned by a group. FATF has reported:-
The financial facilitation of training [both in terms of practical skills and ideology] and travel, which can include the procurement of false documentation, represents an important cost for many terrorist networks. Even in recent attacks where terrorist operatives were “home grown” and largely operationally independent of any overarching leadership structure, many operatives still travelled to receive training or other forms of indoctrination prior to the operational phase of a plot.345
The 9/11 Commission Report described these non-direct funding requirements of international terrorist organisations. The Report found that terrorist organisations need a logistics network able to securely manage the travel of operatives, move money and
transport resources (like explosives) where they need to go, reliable communications between coordinators and operatives, and the ability to “recruit, train and select operatives with the
342 Report of the Government of the United States called for under Security Council resolution 1455 (2003), 17 April
2003, (S/AC/.37/2003/(1455)/26) p3
343 FATF, Terrorist Financing, 29 February 2008, p7
344 FATF, Terrorist Financing, 29 February 2008, p8
needed skills and dedication, providing the time and structure required to socialize them into the terrorist cause, judge their trust-worthiness, and hone their skills”.346