How are Terrorist Organizations Financed? Photo Courtesy of Personal Finance

How are Terrorist Organizations Financed?

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The Atlantic recently published an article about how all ISIS has left today is money – and a lot of it. How do terrorist groups obtain so much money? Traditionally, groups received funds from wealthy individuals or states who sponsor terrorism. But in the last few years, terrorist organizations have become largely self-dependent through taxation, illegitimate businesses, and kidnapping for ransom.


Donations and State-Sponsored Terrorism

Al-Qaeda is an example of a group funded through individual donations. Al-Qaeda was originally financed by Osama bin Laden, who supplied money and weapons using family wealth gained from his father’s multimillion-dollar construction company. In the 1990s, Bin Laden “relied on ties to wealthy Saudi individuals that he had established during the Afghan war in the 1980s.”

Various states have also supported terrorist groups over the years. Iran is seen as the leader of state-sponsored terrorism. The country went as far as helping to “create the terrorist group Hezbollah in Lebanon in the early 1980s in order to expand its influence in the region.”

Pakistan and Saudi Arabia have also supplied money to terrorist organizations. A 2012 NATO report explained that the support and training from Pakistan’s Inter-Services Intelligence was “critical to the survival and revival of the Taliban after 2001 just as it was critical to its conquest of Afghanistan in the 1990s.” Similarly, in the early 2000s, “Saudi Arabia became a source of private funding for the Taliban” and “provided hundreds of millions of dollars to Hamas.”

Today, donations still aid terrorist organizations, but to a much smaller extent than they did a decade ago. Terrorist groups have become more self-reliant, and in return have seen their profits expand immensely.


Extortion and Taxation

There are several ways terrorist organizations collect money in areas they control. ISIS taxes a variety of activities, including using roads, smoking, and attending school. The Taliban taxes electricity bills, salaries, marriage ceremonies, and harvests.

Taxing is extremely profitable. In 2015, ISIS made about $360 million from taxation and extortion alone. At one point, Al-Shabaab was generating almost $100 million a year solely from taxes, fees, and extortion. Some groups even tax people for not joining. In fact, “some Afghans have reportedly been forced to pay $1,000 to the Taliban for refusing to join.” As such, these groups have managed to expand their membership as well as their funding.

Many terrorist groups also charge protection taxes. In its most extreme, “Governors of some Nigerian states have purportedly paid Boko Haram monthly fees to avoid attacks.” The Taliban charges too, offering protection in exchange for large sums of money. These “terror taxes” are not optional – if refused, the Taliban may kill you or your family.


Illegitimate Businesses

In 2015, ISIS brought in approximately $500 million from oil and gas. ISIS took control of oil wells and refineries within Iraq and Syria, and at its peak produced 50,000 barrels a day. As international sanctions prevent ISIS from legally selling the oil, most of it is sold illegally in Turkey, where it is extremely expensive. It was partially through this business that ISIS was able to become so wealthy.

Groups also use the drug trade to finance their activities. Estimates suggest that in 2014/2015, ISIS “made up to $1 billion annually from Afghan heroin trafficked through its territory.” The Taliban has also gained much of its funding from trafficking heroin and producing hashish. In 2017, the U.S. military estimated that 60% (about $200 million) of the Taliban’s budget came from drug trafficking.


Kidnapping for Ransom

Boko Haram has employed kidnapping for ransom against school children, tourists, and wealthy individuals. Boko Haram’s ransoms range between $10 and $3 million. ISIS received millions more from kidnapping Western journalists and tourists. Although some states refuse to negotiate with terrorists, other, including France, Italy, and Spain, will pay.


The Bottom Line

Individuals and states still support groups by providing weapons, training, and equipment, but terrorist organizations today are becoming increasingly independent and wealthy. They are also seizing and controlling territory, which has allowed them to expand their operations. Taxing people in these regulated territories, engaging in illegal businesses, and kidnapping for ransom have provided terrorist groups with billions of dollars. The diversity of funds across vast regions makes it particularly challenging to combat. And as the groups earn larger profits, there is an incentive to stay or join.

It is vital for us to realize where terrorists garner so much financial support, so we can better focus our resources on cutting it off. After all, a group can’t flourish and carry out activities if it can’t pay for its members to stick around.