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Taking Stock: Does the Borussia Dortmund Bus Bombing Open a New CTF Front?

Tom Keatinge
Commentary, 28 April 2017
AML/CTF, Terrorism
The Borussia Dortmund bus bomber was driven by a financial, rather than an ideological, motive. He brought the make-believe world of Bond villains and conspiracy theorists to life.

As he races across the airport tarmac to prevent the destruction of a Skyfleet jet, Daniel Craig’s James Bond is about to come between his Casino Royale nemesis ‘Le Chiffre’ and the significant financial gain he plans to make as a result of the jet’s destruction.  

In simple terms, Le Chiffre has made a $100 million bet that the jet's destruction will cause Skyfleet's stock price to take a nosedive and he will profit handsomely. Yes, if you know what you are doing, you can make just as much money when shares fall as when they rise.  

It is called ‘short selling’ and works on the same principle as any trade – ‘buy low, sell high’ – except that in this case, you do the selling first. It is possible to make a lot of money this way, but as Le Chiffre discovered, it is also extremely risky.

At the time of the 9/11 attacks – events that caused significant falls in equity market indices and specific stocks such as airlines – conspiracy theories swirled of terrorists benefiting from the market collapse.  

Anyone holding short positions in equity indices such as the S&P 500 (down over 10% in the week following 9/11) or individual stocks like United Airlines or American Airlines (down 35–40%) and banks including Merrill Lynch and Morgan Stanley (down over 10%) would have profited immensely.

Yet the 9/11 Commission, noting that claims had been made that ‘al Qaeda financed itself through manipulation of the stock market based on its advance knowledge of the 9/11 attacks’, reported that ‘exhaustive investigations [had] uncovered no evidence that anyone with advance knowledge of the attacks profited through securities transactions’.  

That is not to say no one did. As the 9/11 Commission revealed, ‘put options’ (market bets that pay off for the purchaser when the relevant indices or stocks fall in value) on United Airlines and American Airlines were purchased in the days prior to the attacks – positions that would have made significant profits given the collapse of the reference share prices – but this purchaser had ‘no conceivable ties to al Qaeda’.  

Putting aside the market technicalities and the precise details of the instruments used to make money from falling prices, the key point is that it is generally much easier to profit from declines rather than rises in value. This is because, on the whole, it is easier to affect a company or a market negatively than it is to create unexpectedly good news that leads to a rise.  

Ayad Akhtar’s play The Invisible Hand exploits this idea, with a kidnapped banker in Pakistan prolonging his life at the hands of his terrorist captors by teaching them how to make money in the markets until (spoiler alert) they blow up the Central Bank in order to profit from the subsequent fall in the Pakistani Rupee.  

All of which makes it surprising that the sorts of market-negative economic strategies beloved of playwrights, movie-makers and 9/11 conspiracy theorists are not a common reality.

Until a few weeks ago. According to Ralf Jaeger, the interior minister of the German state of North Rhine-Westphalia, the prime suspect in the bombing of Borussia Dortmund’s bus had spent €79,000 on the same day as the attack (11 April), buying put options on the club’s shares in the hope that it would lead to a sharp fall in the stock price from which he would profit.

Since 9/11, one strand of the international effort to disrupt terrorism has been focused on countering the finance of terrorism. Vast resources have been directed by the authorities and financial institutions at identifying, tracking and disrupting financial flows believed to be connected with sanctioned individuals and terrorist groups.  

Terrorist financiers have been designated by the UN and domestic sanctions agencies such as the US Office for Foreign Assets Control (OFAC). Some have been targeted by drone strikes and special forces; financial intelligence has proved invaluable in identifying and deterring those sympathetic to Daesh (the Islamic State of Iraq and Syria, or ISIS) who plan to travel to fight there.

Financial network analysis has also revealed supporters and facilitators of those who have conducted, or planned to conduct, terrorist attacks.

However, until now, counterterrorist finance responses have been predicated on the belief that ‘terrorists are not in it for the money’; they are simply aiming to raise, move and store the finance they need to support their operations.  

Little thought, at least publicly via bodies such as the UN Counter-terrorism Committee Executive Directorate or the global anti-money laundering and counterterrorist finance standard-setter, the Financial Action Task Force, has been applied to how terrorists might seek to profit from their actions.

The Dortmund attack is certain to inspire others with no ideological motivation to mount destructive, financially motivated attacks.

Bodies such as the US Securities and Exchange Commission monitor markets for suspicious trading patterns, and banks and other financial institutions are required to report suspicious transactions to their national financial intelligence units should they believe their customers are involved in criminal or terrorist activity.  

Yet the link between such activity and possible terrorist threats has, to date, been dismissed. Last week’s revelations suggest that what in the past was confined to Bond villains and conspiracy theorists is perhaps now becoming a reality, opening a new front for those involved in the constant effort to thwart the financial ambitions of terrorists.

Banner image: Borussia Dortmund players hold up the shirt of Marc Bartra, their teammate injured in the bus bombing. Courtesy of Ina Fassbender/dpa.

Author

Tom Keatinge
Director, Centre for Financial Crime and Security Studies, RUSI

Tom Keatinge is the Director of the Centre for Financial Crime and Security Studies at RUSI, where his research focuses on matters at... read more

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