Families of 27 Egyptian Coptic Christians workers kidnapped in Libya hold pictures of their kidnapped relatives in Cairo, Januar
Families of 27 Egyptian Coptic Christians workers kidnapped in Libya hold pictures of their kidnapped relatives in Cairo, January 19, 2015.
Asmaa Waguih / Courtesy Reuters

Barely a month passes without another kidnapping at the hands of a terrorist group. Some have ended in death, others in release, which has called into question the way Western countries deal with kidnappings. Compare the December, 2014 deaths of Luke Somers, a U.S. citizen, and Pierre Korkie, a South African, with the recent successful return of two female Italian aid workers released after a reported payment (which the Italian government denies) of almost $14 million in ransom.

In 2001, the UN Security Council prohibited the financing of terrorists. In 2014, it called on member states “to prevent terrorists from benefiting directly or indirectly from ransom payments.”But evidence suggests that some states continue to pay for the release of their citizens. Others rely on negotiation, through intermediaries, to win freedom for their citizens. Press reports suggest that Pierre was hours from a negotiated release when U.S. special forces intervened. And that points to a third way that a very small number of countries, namely the United States and the United Kingdom, deal with kidnappings. They have special forces capable of mounting major rescue attempts.

Figuring out which strategy works best is more important than ever. Kidnapping-for-ransom has become a favored financing tool for terrorist groups across the globe, from the Abu Sayyaf group in the Philippines to al Qaeda. Recent high-profile cases involving ransom demands of millions of dollars for Western journalists, aid workers, and tourists may attract immense media attention, but many thousands of local people are taken too. Using a technique known as express kidnapping, originally a popular money-raising method in Latin America, which involves small ransoms that are easy to quickly pay, groups such as Boko Haram and al Qaeda have picked up scores of local officials and their family members, demanding a few thousand dollars at a time—which they usually get.

According to recent UN estimates, terrorist groups have earned $120 million in ransom payments between 2004 and 2012. The Islamic State of Iraq and al-Sham alone is believed to have raised up to $45 million in just the past year. According to the same UN report, between 2011 and 2013, al Qaeda in the Arabian Peninsula, is estimated to have earned $20 million from ransoms. No wonder, then, that the leader of the group, Nasser al-Wuhayshi, wrote in 2012 that “Kidnapping hostages is an easy spoil.” It is “a profitable trade and a precious treasure,” he said. In several recorded messages Ayman Al-Zawahiri, the leader of al Qaeda, has called for supporters worldwide to kidnap Westerners.

Kidnapping is not just big business for the kidnappers, it has also become an opportunity for insurance companies and negotiation and response teams. In the United States, insurance for kidnapping is longstanding. In 1932, the 20-month-old son of pilot Charles Lindbergh was kidnapped in from his nursery in the Lindbergh family home. The kidnapper left a ransom demand for $50,000. After two months of negotiations and several payments, the baby was found dead. This act gave birth to the kidnap insurance business, an industry that has evolved over the past 80 years as kidnap and negotiation techniques have developed.

That doesn’t mean that paying ransoms and ransom insurance is uncontroversial. Many argue that the payment of ransoms in response to kidnappings leads to further kidnappings with increased ransom demands. Payments have, in some cases, risen 50 fold from the average ten years ago, to reach $10 million a head. Payment by insurance companies that cover kidnappings-for-ransom is even more controversial. Insurance coverage is generally kept confidential for fear of encouraging kidnap. And in an attempt to avoid spiralling demands, ransom payments are only covered on a reimbursement basis, thus limiting payments to the size that can be raised by the hostage’s family or company.

In the view of many ransom specialists, the main reason demands have increased so dramatically is government involvement. Insurers and negotiators want to minimize payouts. The larger the sum, the more challenging payment becomes. Banks question multi-million cash withdrawals, and delivery to desolate locations is complex, time consuming, and expensive. Once a government gets involved, however, these barriers are removed, reducing the incentive to minimize payment amounts. For those working in the industry, payments in the “multiple millions” indicates the influence of governments, since most insured demands are only in the thousands or tens of thousands of dollars. Few payments reach six figures. Indeed, although some governments, namely the United States and United Kingdom have strict no-pay policies, recent cases involving Denmark and Germany suggest that several other governments are increasingly involved in ransom negotiations.

With kidnappings more frequent and dramatic than ever, it is time to reassess the policies and methods for dealing with terrorist groups. The Obama administration, for one, is undertaking a comprehensive review of how its departments and agencies address the kidnapping of U.S. citizens. And that, in itself, reveals a key difference between the position of Obama and those of most other national leaders. The United States has options that most other countries lack. It can trade captives: In May 2014, U.S. Army Sergeant Bowe Bergdahl was released in a swap for prisoners held at Guantanamo Bay. Most other nations don’t have captives with which to do the same. The United States can conduct high-tech night-time raids: In the summer, it was revealed that, in a vain attempt to find and secure journalist James Foley, U.S. military forces mounted a night-time raid in Syria. And in late 2014, the U.S. military also made two unsuccessful attempts to free Luke Somers. No matter the success rate of these tactics, they simply aren’t available to most other nations—the only tool they have at their disposal is cash.

There is no doubt that ransom payments by certain national governments have encouraged more kidnappings and higher ransom demands. But it is also undoubtedly the case that, if a nation’s citizens are held hostage, it is a brave (some would say heartless) government that turns its back on the only tool at its disposal and allows the murder of its citizens.

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  • TOM KEATINGE is a former investment banker at J.P. Morgan and Director of the Centre for Financial Crime & Security Studies at the Royal United Services Institute. Follow him on Twitter @keatingetom.
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