The Coup in the Kremlin
How Putin and the Security Services Captured the Russian State
Since September 11, 2001, an immense global network of laws, task forces, and regulatory bodies has mobilized to prevent terrorists from raising, storing, and moving funds. Just one month after the attacks, the Financial Action Task Force, an international body created to combat money laundering, issued a new set of guidelines that required all signatories to criminalize terrorist financing, freeze terrorist assets, and report suspicious transactions. In the intervening years, weeding out illicit financing has become its own field: Banks have spent billions of dollars installing monitoring systems and increasing staff, governments have created new departments, and countries are regularly checked for compliance with an ever-growing list of counterterrorism standards and norms.
For individuals and institutions that are caught financing terrorism, sanctions are swift and unforgiving. In the United States, for example, offenders are classified as “Specially Designated Global Terrorists,” a category created two weeks after September 11. The U.S. government is allowed to freeze the assets of -- and prohibit transfers of funds, goods, or services to -- any person or group in this category. Challenging these sanctions is all but impossible; in the Kafkaesque world of classified information and closed-door decision-making, appeals take years.
Despite all this, one form of terrorist financing, arguably the most profitable, has evaded the global counterterrorism effort: kidnapping for ransom. A recent New York Times investigation found that al Qaeda and its affiliates have made at least $125 million in revenue from kidnappings since 2008; the United States Treasury Department puts that number at $165 million. And according to the Times investigation, many of these ransom payments appear to be funded by European governments -- the same governments that are party to the global counterterrorism standards that prohibit terrorist financing. The impact of these payments cannot be understated and should not be ignored: According to the Times, al Qaeda now finances the bulk of its operations through ransom money that European governments pay to free their citizens.
Given these revelations, it seems odd that so few international bodies have explicitly addressed ransoms as a source of terrorist funding. In the official communiqué issued after the 2013 summit in Northern Ireland, G-8 leaders noted that the “international community has made significant progress in combating the flow of funds to terrorist organizations,” but drew attention to terrorist groups in the Horn of Africa and the Sahel, which derive substantial financial benefit from ransom payments. In their statement, G-8 leaders warned that paying ransoms to terrorist groups supports recruitment, fuels regional instability, incentivizes more kidnappings, and leaves everyone more vulnerable to attacks. Following the summit, the United Nations Security Council passed Resolution 2133, which called on member states to prevent terrorists from benefiting from ransom payments. Despite these declarations, and although private sector companies or individuals would face harsh punishment for making payments to designated terrorist organizations, no European government has faced sanctions -- or any other form of international censure -- for doing so.
A PRECARIOUS POSITION
As long as they evade official censure, European governments can continue to follow a double standard: sanctioning individuals and non-governmental organizations that finance terrorists while at the same time paying off terrorists themselves. Governments have been able to avoid blame by distancing themselves from such payments, by using intermediaries and brokers, and classifying the money as foreign aid. In this way, they have maintained plausible deniability. Furthermore, despite the exhortations of groups such as the G-8 and the United Nations, the Financial Action Task Force makes no mention of ransom payments in its latest list of international standards -- perhaps because its 36 members include most of the European countries in question.
To be fair, governments, in deciding whether or not to pay up, find themselves in a precarious position. The handful of countries that resist paying, most prominently the United States and the United Kingdom, believe that ceding to the demands of kidnappers perpetuates the kidnapping-for-ransom industry and places the public at greater risk. But refusing to pay is not without risks of its own. In 2009, for example, al Qaeda kidnapped a group of European tourists in eastern Mali. Following reported ransom payments from Germany and Switzerland, two of the hostages were released; British hostage Edwin Dyer, however, was reportedly beheaded. For some governments, therefore, securing the safe release of their citizens outweighs the harms of financing terror.
If ransom payments are ever to be stopped, the international community must act decisively. For starters, the Financial Action Task Force should explicitly add ransom payments to its list of prohibited actions. In addition, governments should work together to creatively resolve kidnapping situations without payment; after all, the United Nations Security Council, in Resolution 2133, urged states to “afford one another the greatest measure of assistance” in combating the financing of terror. Finally, if prohibitions against ransom payments are to be enforced, governments and international authorities must work quickly to find and freeze the assets of any individual, group, or institution that facilitates such payments.
In the end, the global effort to combat terrorist financing is only as strong as its weakest link -- and as this effort enters its second decade, the willingness of certain states to facilitate ransom payments is a point of vulnerability, putting citizens of all nations at risk.