Good Money, Bad Outcomes

Charities and Nonprofits Can Be Co-opted to Fund Terrorism, So Vigilance and Monitoring Are Crucial

ADF STAFF

About 10:30 a.m. Nairobi time on August 7, 1998, a truck loaded with more than 900 kilograms of TNT trundled up to the back entrance of the U.S. Embassy in Kenya. Seconds later, the truck exploded, damaging the embassy, destroying the Ufundi Cooperative House nearby, and ravaging the Cooperative Bank building. The explosion killed 213 people and wounded thousands, with hundreds of them maimed or blinded.

Minutes later, a bomb detonated outside the U.S. Embassy in Dar es Salaam, Tanzania. That explosion killed 11 and injured 85. In all, 224 were killed and more than 4,500 were injured in the dual attacks. They soon were attributed to Osama bin Laden’s al-Qaida terrorist network. But another force also was behind the attacks, according to the United States Treasury Department: a Saudi Arabia-based charity called the Al-Haramain Islamic Foundation (AHIF).

A former director of the AHIF branch in Tanzania helped the advance team that planned the bombings, and the charity’s Comoros Islands branch was used “as a staging area and exfiltration route for the perpetrators,” according to a Foreign Policy article that quoted the Treasury Department. Before the 9/11 attacks three years later, al-Qaida was funded “to the tune of approximately $30 million per year, by diversions of money from Islamic charities and the use of well-placed financial facilitators who gathered money from both witting and unwitting donors,” according to a study for the 9/11 Commission.

The nexus of charities and terrorist groups continues to be a problem today. In countries such as Tunisia, says Foreign Policy, nongovernmental organizations (NGOs) and charities “are providing the infusion of funds that have allowed extremist groups to undertake the hard work of providing food, social services, and medical care. Jihadists, meanwhile, have discovered that they can bolster their standing within local communities, thereby increasing support for their violent activities.”

Al-Qaida in the Islamic Maghreb (AQIM), Nigeria’s Boko Haram terrorist group and Somalia’s al-Shabaab are among the biggest exploiters of charities and NGOs on the continent, observers say. With many groups come many methods for exploiting charities.

CHARITIES AND TERRORISM

The Financial Action Task Force (FATF), an international watchdog, lists four ways in which charities and nonprofit groups can be co-opted or used to finance terrorism:

Front charities. In these organizations, everyone — from donors to workers to aid recipients — knows that the “charity” is a fraud that exists only to fund terrorism.

Organizations that defraud donors. The charities tell donors that money will be used for legitimate programs. The money is then diverted to fund terrorism.

Charity branch offices that defraud headquarters. Small satellite offices mislead an umbrella group or headquarters about how money is being used.

Charity workers who abuse their positions. Individual workers distribute aid to terrorists without anyone else knowing.

FATF drafted Special Recommendation 8 to help countries determine when a terrorist organization is posing as a nonprofit. The recommendation calls for financial transparency, oversight, and enforcement through police, regulatory bodies and government agencies.

“This is very serious,” Henrique Dominguez, vice president of EFG Bank Luxembourg said. “The purpose [of the FATF recommendation] is to ensure that nonprofit organizations are not misused by terrorist organizations.” Dominguez said oversight authorities should check that a charity has a physical address and a Web presence, and also look for a donations history and large cash donations. Authorities also should scrutinize foundations set up after a tragedy, such as an earthquake or tsunami, when governments are preoccupied and donors are eager to provide funds.

Ira Morales Mickunas, who analyzes organized crime and terrorist financing for Milersen LLC, said that it’s unclear how much money filters through nonprofits and charities on its way to terrorist groups because some of these organizations have two sets of books. But she said money laundering accounts for trillions of dollars globally.

Zachary Scott-Singley, Counter Threat Finance Branch chief for U.S. Africa Command, told ADF that all four methods identified by FATF exist in Africa. Most efforts occur through the use of front charities and organizations that defraud donors, he said. The other two methods of co-opting charities are difficult to quantify because illicit activity occurs on such a small scale.

A WIDE-RANGING PROBLEM

A case connected to Somalia offers an example of the smaller extreme. In 2012, a court in the United Kingdom sent identical twin brothers to prison for three years after they admitted raising money for terrorism in Somalia. Mohammed Shabir Ali and Mohammed Shafiq Ali, 25 at the time, were part of a network that supported their older brother while he attended a “terrorist training camp” in Somalia.

Prosecutor Timothy Cray told the court that taped phone conversations between the two men and their brother indicated they planned to collect donations under the guise of being a charity. The brothers reportedly raised money at a street stall like legitimate fundraisers.

Large-scale charitable financing of terrorism has been linked to AQIM and Boko Haram. North African terror groups in the Sahel and Sahara rely heavily on revenue sources such as trafficking in cars, cigarettes and weapons. Even so, charities continue to fund extremists. Qatari and Saudi charities have provided support to jihadists in Mali such as Ansar al-Dine and the Movement for Oneness and Jihad in West Africa.

When Boko Haram started in 2002 and its focus was northern Nigeria, the group was financed mainly by Islamic charities in Saudi Arabia and the United Kingdom. It also relied on extortion at home. International investigations have since pushed Boko Haram to adopt methods similar to its ally, AQIM, such as kidnapping for ransom. As al-Qaida has morphed from a central, monolithic organization to a decentralized group of affiliated groups, fundraising also has shifted to local and regional activities, according to the American Center for Democracy.

It’s not uncommon for charities to support and fund extremist groups in Africa from abroad. Scott-Singley said charities that support illicit activity like to operate in ungoverned spaces, but they prefer to have their headquarters in places where they can have access to legal protection. They want to be able to use the legal system, if necessary, to protect the money they collect, and having a physical address in a major world capital tends to give donors confidence.

STRIKING A BALANCE

When considering a response to charities’ support of terrorist organizations, one-size-fits-all countermeasures may not always be best. Regulations must be structured so that they don’t harm legitimate nonprofit efforts. Sometimes, this can be difficult. One example of this is

evident in the practice of hawala, which means “transfer” in Arabic. In this system, money can be transferred through bartering, wire transfers and between relatives. Hawala is an informal value transfer system, and such accounts can remain open and active for years. They also can be difficult for law enforcement agencies to monitor.

The difficulty in regulating hawala without harming legitimate commerce is illustrated by a 2011 case in the U.S. state of Minnesota. Banks there announced that they would halt wire transfer services to Somalia. The banks were concerned that continuing the service would violate government rules prohibiting the financing of terrorism. Minnesota is home to a large number of Somalis, and many of them send money — typically $50 to $200 per month — to family members in Somalia who rely heavily on the remittances. In fact, according to the United Nations Development Programme, Somali emigrants living in North America and Europe send back about $1.6 billion annually. Somali Abdirashid Duale, chief executive of Dahabshiil, one of the largest money-transfer businesses in Africa, told Africa Renewal in May 2013 that the money is a “lifeline for many Somalis.”

When the last Minnesota banks stopped transmitting remittances, Somalis there worried about how their family members would survive. “They don’t know what to do. They live on money we send monthly to buy food, and they will not have money next month,” Amina Hassan, an American of Somali descent told Twin Cities Daily Planet in January 2012. “We don’t know what we’re going to do; we’re just waiting for Allah, for God.”

Somali President Hassan Sheik Mohamud told The New York Times in September 2013 that his country must replace its informal money transfer business with a banking sector. But acting too quickly could have dire consequences. Mohamud said that if Somali expatriates suddenly lose the ability to send money to relatives, it could actually help al-Shabaab recruit more disillusioned youths. “We need to break that vicious circle of generations losing hope,” he said.

FATF’s Recommendation 8 states that it wants to “safeguard and maintain the practice of charitable giving and the strong and diversified community of institutions through which it operates.” The organization offers some guiding principles for oversight of nonprofit organizations and charitable efforts:

• Cooperation. Government, charities, donors and recipients should work together to oversee nonprofits. Both seek transparency and accountability, despite “a degree of institutional tension.”
• Proportionality. Oversight by government and financial institutions should be “flexible, effective, and proportional to the risk of abuse. Mechanisms that reduce the compliance requirements without creating loopholes for terrorist financiers should be given due consideration.” Small, local organizations may not require specific oversight.
• Flexibility. International standards should allow for differences in the way individual nations approach legal and regulatory matters while staying committed to accountability and transparency.
• Consistency. Different countries may have different ideas about what constitutes a charity, but there should be agreement that such activity does not include anything that supports terrorism in any way.
• Self-regulation. Nonprofits in many countries have watchdog organizations or accrediting institutions. Nations should encourage and strengthen self-regulation to decrease misuse of charities by terrorist groups.

WHAT SECURITY FORCES CAN DO

Prevention of terrorist financing often starts with a review of financial and banking sectors so that money flows can be detected and tracked. Those efforts depend on African countries having sufficient laws and enforcement frameworks in place. Scott-Singley said his office has worked with U.S. Treasury officials to bolster training and help countries approach compliance with FATF standards. Some countries are in the beginning stages of the process, and the hope is that they can serve as a model for engaging other willing nations.

Even though those efforts occur on a legislative and government level, there are steps African military and security professionals can take to address the problem from the ground up. When Soldiers and police officers capture or arrest terrorism suspects, they need to understand that their work does not stop there. “The other important piece is follow-through,” Scott-Singley said.

Once suspects are in custody, security forces should sift through information and materials they find — phone records, financial ledgers, laptops — “and if they see any kind of mention of certain groups, nonprofit organizations, any illicit ties to other companies, front companies, that’s something that they should start taking note of and using for further operations,” he said. Doing that can help security forces work information “up the ladder” to find the kingpins and organizations behind lower-level criminals.

“Nobody is too small,” Scott-Singley said. “If you see something, you need to say something.”