Groundhog Day for Counterterrorist Finance: Time to Rethink the Response

At the G20 summit last week in Hamburg, Prime Minister Theresa May urged global leaders and financial institutions to come together to create a system that no longer offers ‘safe spaces’ for terrorist funding.

She also stressed that in the wake of attacks in London and Manchester, the focus must be on developing new technologies and enhancing public–private partnerships to detect the small transfers of cash used in such cases. Punxsutawney Phil would be proud; another summit and another call for terrorist financing to be ‘spotted’. If only it were that easy.

Terrorist financing remains a dominant topic in political narratives. Cut off the funding, and the threat will wither. The logic is attractive, but the reality has proved elusive since counterterrorist finance (CTF) was identified as a cornerstone in the global response to terrorism after the 9/11 attacks on New York and Washington, DC.

Recent terrorist financing narrative has been dominated by the purported state-sponsorship of terrorism; it features centrally in the current stand-off in the Middle East, where Saudi Arabia, Bahrain, Egypt and the UAE have isolated Qatar in response to its alleged support of Islamist groups (including certain al-Qa’ida affiliates, the Muslim Brotherhood and the Taliban).

It also appears in the criticism of Saudi Arabia suspected to feature in an unpublished British government report on foreign funding of extremism in the UK.

While a geopolitical assessment of state-sponsored financing of terrorism and extremism is important and countries should be held to account for failing to meet their international CTF obligations, the evolving nature of the terrorist threat calls for a rethink and broadening of the ways in which we approach terrorist financing.

The most immediate threat to the UK is from small groups and individuals with no clear links abroad or relationship to a designated terrorist organisation, financing their attacks with small, unremarkable – mainly legitimate – sums of money. The four attacks in the UK this year broadly support this picture.

A further challenge stems from the increasingly diverse profiles of terrorist actors. Take, for example, the Westminster bridge attacker Khalid Masood, who had not appeared on any terror-related watch-lists and who at 52 years old appeared anomalous to the demographic profiles of recent, similar terrorists.

Profiles of those convicted of terrorism offences relating to Syria and Iraq since 2014 demonstrate a widening of societal participation, including a growing number of women, former prisoners and even a hospital director.

What is common in the financial methodologies of these attacks is their overwhelmingly mundane nature, be it the purchasing of knives or the hiring of a vehicle. As observed in a RUSI report in January, cheap and easy-to-manufacture plots such as the use of vehicles, a strategy promoted by Daesh (also known as the Islamic State of Iraq and Syria, or ISIS) as an effective way of waging jihad for those unable to travel to the so-called caliphate itself, can still amass large casualties.

The ability of the authorities and private sector to identify and disrupt the limited – and often legal – financial activity of these actors is near impossible and almost certainly ineffective. How does one determine the planned nefarious spending of welfare payments and student loans or the intended murderous use of a hire vehicle?

Thus, although the prime minister’s recognition of the immense challenge that homegrown and returning foreign fighters pose the international community is correct, her rehearsing of previous high-level CTF rhetoric and calling for the financial system to be ‘an entirely hostile environment for terrorists’ is certainly not.

After fifteen years of effort to raise standards and increase capacity, a new approach that reflects the contemporary threats, financial system and responses is needed. Simply calling for the CTF efforts of banks and financial technology companies to spot small sums of terrorist financing among billions of daily transactions is wrongheaded.

The Hamburg G20 Leaders’ Statement on Countering Terrorism includes a call for both public and private sector actors to work together ‘to bridge the intelligence gap and improve the use of financial information in counter-terrorism investigations’.

This is where efforts must now be focused. Finance as a tool in tackling terrorism is often overlooked, yet ‘financial intelligence’ can offer insights as detailed and illuminating as communications and signals intelligence, providing valuable network and link analysis along with insights into locations and activities.

In the light of the mounting evidence of the increasingly indistinguishable financial behaviour of terrorist-related and genuine transactions, this is where greater CTF efforts should be focused. Financial institutions and security authorities need to collaborate to combine information from the former with intelligence from the latter.

Furthermore, a concerted effort must be made by leaders to exploit finance in a more strategic and intelligent manner, casting the net wider than just incumbent financial institutions that have been on the frontline of CTF efforts since 9/11.

This should include social media companies, which themselves sit on a wealth of financial information that should be captured via an increase in reporting and accountability.

As May rightly observed, the use of technology will also be critical. The current practices required of financial institutions are expensive and resource-heavy, and have limited effectiveness in preventing terrorists’ financial activity.

Conversely, the analysis undertaken voluntarily by financial institutions in partnership with, and support of, counterterror investigations offers much greater potential. For this reason, May is right to emphasise the value of public–private partnerships to advance the intelligence picture.

For decades, signals and communications intelligence has been a cornerstone of most nations’ security architecture, exploited by states as they seek to monitor the activities of those that represent threats or reveal indicators of emerging risks to national security.

The power of finance as a security tool lies in its analogous ability to contribute to the intelligence gathered by states. Calling for the financial system to be a hostile environment for terrorist financing sounds strong, but it is naïve and fails to recognise the reality of terrorist financing.

It is time to accept that ‘stopping terrorist financing’ is almost impossible, particularly when faced with the form of lone actor and small cell threat we face today.

There must be much greater emphasis on the use of finance to stop terrorists, employing financial intelligence to prevent terrorism in a more proactive way along with existing intelligence sources.

The UK’s global leadership in both finance and intelligence makes the nation ideally suited to promote a rethink of counterterrorist finance. This is the terrorist financing message the prime minister should have delivered.