GUERRILLA ENTREPRENEURS

The long history of warfare is dominated by military entrepreneurs. That dominance was overturned only recently (within an historical context) with the rise of the nation-state and its ideologically motivated armies. However, the trend is going in the other direction, and quickly. Military entrepreneurship is again on the rise. We can see the adoption of military entrepreneurs by the coalition in Iraq. Private military companies (PMCs) field the second largest military force in Iraq, after the US -- the UK is a distant third.

This shift towards military entrepreneurship is even more pronounced in the insurgency in Iraq. Almost all of the guerrillas we are currently fighting were formed through this process. This should come as no surprise to readers of history (and particularly readers of this author, since it appeared here first). Arab warfare, until late in this century, was driven entirely by entrepreneurship. For example: Lawrence of Arabia, the father of modern guerrilla warfare, used combinations of direct payments and the promise of loot to build his forces. Faith played a major part, but it was almost always secondary.

Recent reports confirm from the US military analysts confirm the financial nature of the open source bazaar in Iraq:

• "Unlimited amounts" of violence capital for guerrilla entrepreneurs is flowing into Iraq from ex-Baathists, relatives of Saddam Hussein, Saudi sources, and bin Laden. Given global guerrilla ROIs (returns on investment) of up to 100,000 x, this should be cause for alarm.
  
• Loot from convoy hijackings, theft of oil through bunkering, and ransoms play a major part of the motivation for attacks. Fully 80% of the attacks fall into this category.
  
• A granular competitive market. There are over 50 guerrilla groups active in Iraq. The sheer diversity of the effort indicates a process that is very similar to historical patterns of Arab warfare.
  
• Price schedules for attacks. The going rate for placing an IED is $100-$300 (more for an RPG attack).

A New Dynamic
The financial dynamic we see in action in Iraq is a hallmark of global guerrilla warfare. It also creates its own dynamic. The destruction of the pillars of globalization through attacks on systems (both infrastructure and markets) serve to keep Iraq a failed state. As a failed state, Iraq is unable to provide economic alternatives to the insurgency. Further, even though Iraq is a failed state, it is awash in money. Fortunes will be made through the perpetuation of its chaos (as we see with the Narco warlords in Afghanistan, who combined generate $2.5 billion a year in revenue).

Given this trend line, we will likely see more advanced forms of this in the future, particularly market-derived financing. Guerrilla entrepreneurs will use prior knowledge of attacks to generate revenue from global financial markets (NOTE: this fits the strategy of fourth generation warfare -- it turns the strength of an enemy into a weakness). These efforts will include:

• Assaults on individual corporations (more here and here). Attacks on resources (particularly oil infrastructure) will influence the oil market. Billions could be made through this process.
  
• Attacks on oil infrastructure. Global guerrilla methods make it possible for the rise of a "Shadow OPEC" and all the financial leverage that entails.
  
• Taking states hostage.Global financial markets control the world. States exist to compete within them (the US does too, but it often doesn't acknowledge the fact). If a state underpreforms it is harshly punished regardless of the reasons. It is likely we will see a nation state targeted/threatened with infrastructure disruption unless they make a large ransom payment. States are willing to pay (the recent payment by Italy for the release of hostages is an example). Many aren't, but after some well orchestrated examples, they will likely to reverse that stance.

Comments

[phil jones]

Crazy, left-field thought, but could you somehow engineer some kind of hyper-inflation to devalue the money so fast it crashed this market?

This piece suggests not,
http://mises.org/fullstory.aspx?control=1595 , but I'm wondering if it could inspire some ideas.

[bob d]

i recently saw a webpage arguing that private voip networks, challenging the centralized phone company business model, might consider creating a new currency for barter, bypassing the taxman and the security agencies, all in the name of freedom. i suppose these new currencies would cause alot of trouble and might as well be considered akin to the hawalla credit systems that funded terrorist attacks, but kept the governments and world trade organizations out of people's private lives.

[Jeremy Hartley]

Regarding the crazy left-field thought about devaluing the currency to some how dry up these kinds of attacks. I don't think there is any way that it would work. I assume that all of these attacks are paid for in US$ already. And if not, as and when the stipulated hyper inflation occured, people would switch to a nice safe currency like the dollar or possibly the Euro. The illegal economy would generally be the first to make the move.

A second thought, there is enough chaos in Iraq already without hyper inflation added to the picture.

[Watching Them, Watching Us]

It seems to me that there are several types of insurgents, guerillas, terrorists, freedom fighters, bandits, religous militias, separatist militias, Ba'athists, kidnappers, looters etc. operating in Iraq.

I really doubt that all of them are acting according to the "4th generation warfare" or "bazaar of violence" or the "oil market speculation" hypotheses, but some of them probably are, even if most of the people involved believe that their group is doing something more noble or religous.

Historically, before the widespread use of paper money, barter systems have been successfully taxed in kind (e.g. a tithe), and the modern day ones all interface with the money system at some point e.g. Saddam Hussein's corruption of the UN "Oil for Food" programme.

Who needs a primitive hawalla money transfer system or an untrustworthy (due to scams and spams) "e-gold" system, when the "legitimate" financial industry provides the infrastructure (for a price) for unlimited money laundering and tax evasion ? How many officals of the banks and other financial institutions which have been involved in terrorist money laundering have actually been prosecuted ?

When John Robb has been briefing the "smart money" people, I wonder if the thought crossed his mind that "some of the people in this room are actually making a profit from terrorist activities in Iraq and elsewhere".

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[Mohammed Yousuf]

THE HISTORIC ROOTS OF ISLAMIC MILLITANCY IN PAKISTAN, THE REGION AND CURRENT SCENARIO.
BY AMICUS
PART I

An Overview:
This paper is a humble endeavor to look at ascendancy of Islamic Militancy in Pakistan, with a cursory glance at its historic perspective and its evolution in the sub-continent. The study proceeds on the following premise:

(i) The Islamic militancy has its origin in a strong tradition of defensive reaction to intrusion by alien culture in Muslim value-system or attempts by forces hostile to Islam at political domination.

(ii) It assumes itself to be based on the concept of retributive justice.

(iii) It has adopted methods that are not always consistent with or warranted by Islam.

After Islam established its political ascendancy in India with the foundation of the Sultanate of Delhi in 1206 AD, the principal threat it faced was philosophical and not military. This came in the form of Hindu India’s endeavor to assimilate Islam or to develop a synthesis with it, if not to out rightly devour it. Islam had spread in India largely due to the efforts of the Sufi saints, a large number of who came after the Mongols sacked Baghdad in 1258.

The Sufi movement was prone to accepting influences from the revived Bhakti tradition that propounded identity of religions and emphasized monism in its teachings. However, the ulema (religious scholars) did not permit any flexibility in beliefs and shariah (Islamic law) and their uncompromising attitude, it seems, rescued Islam from getting polluted and corrupted by Hindu tenets.
Occasionally some ulema called for adoption of high-handed methods against the Hindu community but the Sultans of Delhi viewed political considerations as far more important and, except when there was a military threat or armed revolt, never invoked the doctrine of jihad (holy struggle) by way of Qital (holy war which is a form of jihad) to safeguard the political interests of Islam.

The shariah, remained supreme, irrespective of personal character of the Sultan (Ruler) and the religion of the majority was neither interfered with nor were forced conversions permitted.

Towards the end of the 16th century another challenge to Islam came in the form of religious policies of the Mughal Emperor, Jalaluddin Mohammed Akbar (1556-1605), who endeavored to evolve a syncretic religious order in India.

Akbar was initially an orthodox Muslim and had built an Ibadat Khana (House of Worship) in Fatehpur Sikri, his new Capital, to hold discourses on Islamic issues.

The quarrels and rivalries between the Ulema (Clergy) and the ugly scenes created by them during the debate prompted Akbar to invite scholars and divines of Hinduism, Buddhism, Jainism, Zoroastrians, Judaism and Christianity to make, himself, familiar with their views on theological questions. This profoundly influenced Akbar’s outlook on religion. He was by then, already fed up, with the Ulema’s capacity to interfere with his administration.

Akbar went on to undermine their authority by acquiring for himself the right to choose between different interpretations of shariah as `Sultan-e-Aadil’ (the Just Ruler), if the ulema failed to develop a consensus on any point of law.

Coercive measures of extreme nature, including executions, were employed to silence the dissenting Ulema. Akbar also wanted to expand the political base of the Mughal Empire by securing wider support of his non-Muslim subjects.

All these factors combined to make him proclaim a religious order that meant to dilute Islamic beliefs in uncompromising monotheism and prophet-hood of Hazrat Mohammad (P.B.H.U.) and to modify Islamic rites and social customs.
His religious order did not make any considerable headway but the heterodoxy reigned supreme in the court.

In the war of succession, the orthodox Ulema sided with Jehangir (1605-1627), the son of Akbar, on the condition that he would take steps to restore the power of orthodoxy in the court. Shaikh Ahmed of Sirhind (1564-1624), bestowed with the title of Mujahddid-i-Alf-i-Sani (the River of the Religion in the first millennium), set in motion a process that culminated in the reign of Aurangzeb Alamgir (1658-1707), the most orthodox, pious and practicing Mughal Emperor.

The Sheikhs (Divines) of the Mujaddidi order of Sufism, founded by Shaikh Ahmed of Sirhind, exercised tremendous influences on him. Not only Alamgir compiled Fatawa-u-Alamgiri, he re-imposed jizya (a tax on non-Muslims for protection under Muslim rule) that had been suspended by Akbar, destroyed some unauthorized temples and checked proselytizing activities of the Hindus.

Since the Sikhs, the Marathas and the Jats posed a formidable threat to the Mughal authority, Alamgir had no option but to resort to military means to restore the writ of the central government.

After the death of Alamgir, the Mughal Empire, faced with internal disorder, headed for disintegration. In the east, the British East India Company expanded its domain and, in the west, the Sikhs and Marathas got firmly entrenched and often devastated Muslim life and property. Indian Muslims were bewildered, demoralized and displayed all signs of decay.

It was in this backdrop that Shah Waliullah (1703-1762) launched his movement for the reformation of Muslim society and the restoration of Islam’s political ascendancy in India. A thorough pan-Islamist at heart, he invited the Muslim ruler of Afghanistan, Ahmed Shah Abdali, to overcome the growing Maratha menace. In the meantime, the Nawab of Bangal, Sirajudduallah, was defeated by the British intrigues in the Battle of Plassey 1757 and the East India Company made itself the master of Bengal. The British success in the Battle of Buxer 1764 brought the British closer to Delhi.

Shah Abdul Aziz (1746-1824), the eldest son of Shah Waliullah, was a witness to the establishment of de facto British authority in Delhi in early 19th century. Shah Abdul Aziz issued a Fatwa (Religious Decree) that; ‘since the real power was vested in the British and the Mughal Emperor was no more effective in his own domain, India had become a Darul Harb (land of war).’

The fatwa implied that it was obligatory for the Muslims either to wage jihad to restore the supremacy of Islam in India or to migrate to some place where shariah was supreme. The Britishers were discreet enough not to interfere with the day-to-day religious observances of the Muslims unlike the Sikhs who ruled the Punjab and parts of the NW.F.P.

Shah Abdul Aziz impressed upon Syed Ahmed Shaheed (1786-1831) to organize jihad against the Sikhs. Syed Ahmed Shaheed received wide spread support in Northern and Eastern India for the mission assigned to him. Making the Northwestern Frontier Region his base, he waged a jihad to liberate the Muslims of the Punjab from the Sikh yoke.

The military engagements continued from 1826 to 1831 but the misgivings between his Pushtoon and non-Pushtoon, disciples made him militarily weak.

His haste in imposing, the so-called `puritan’ version of Islam, without taking into consideration the local customs and sectarian differences undermined his appeal in the region.

He fell a victim to the treachery of local tribesmen and was martyred by the Sikhs along with hundreds of his troops in Balakot in 1831.

At about the same time, Haji Shariatullah (1768-1840) and Titu Mir (1782-1832) declared that Bengal had become ‘Darul Harb’ (Land of War) and raised the banner of jihad against Hindu landlords who persecuted the Muslim peasants and interfered with their religion.

The mujahideen were disheartened by the failure of these movements but the spirit of jihad was not completely extinguished. During, what is known as the Sepoy Mutiny of 1857, the remnants of the mujahidden of north India continued their mission to inculcate the spirit of jihad spirit. The British imprisoned, hanged or sent into exile several of the Ulema to overcome the threat.

The dichotomy in Muslim response to the establishment of the British rule was very conspicuous in the aftermath of the 1857 revolt. The traditionalist ulema, who derived inspiration from Shah Waliullah and Shah Abdul Aziz, decided to reconsider their tactics.

They founded a Dar-ul-Uloom (house of learning) in Deoband, a small town in northern India, in 1867, under the leadership of Maulana Mohammad Qasim Nanawtawi with a view to impart higher learning in Islamic theology and to work for the revival of Islam’s political fortune in India.

Witness to the failure of the zealots, Sir Syed Ahmed Khan a reformist, adopted an entirely different line. He advocated to the Muslims complete and unconditional loyalty to the British, repudiation of pan-Islamism, non-involvement in politics, emphasis on learning of English language and physical sciences and fresh interpretation of the Holy Quran in the light of scientific observations. Sir Syed declared India as Darul Aman (land of peace) where Muslim life and property were secure and they enjoyed religious freedom. India being Darul Aman, neither jihad nor migration to Darul Islam was obligatory. Encouraged by the British, Sir Syed Ahmed Khan was able to enlist the support of the upper class Muslims and exercised considerable influence till his death in 1898.

In the meantime, Maulana Nanawtawi, the head of Darul uloom Deoband, died in 1880 and was succeeded by Maulana Rashid Ahmed Gangohi. Maulana Gangohi issued a fatwa to the effect that in worldly matters cooperation with the Hindus was permissible provided it did not violate the fundamental principles of Islam.

In Islamic history, a notable example of cooperation with non-Muslims is the Charter of Medina 622, which recognized the composite character of the State of Medina under the Prophet of Islam. The followers of Deoband were encouraged by this fatwa to join the Indian National Congress and thereby come into mainstream politics.
The former associates of Sir Syed Ahmed Khan and other conservative Muslims formed the All India Muslim League in 1906.

In 1905, a more dynamic person, Maulana Mahmood-ul-Hasan, succeeded Maulana Gangohi as the head of the Darul Uloom Deoband. Maulana Hasan was a Pan-Islamist to the core and a staunch anti-imperialist.

In the wake of the First World War, he actively involved himself in organizing revolutionary activities against the British government in India. The revolutionary methods were not something entirely new for the Indians. B.G. Tilak, a Hindu extremist leader, had employed such methods between 1905 and 1911 to compel the government to annul the partition of the province of Bengal.

The political extremists were also familiar with the techniques used by the Russian revolutionaries. The Turks and the Germans also encouraged anti-British activities and assisted the government-in-exile of India set up in Kabul under the leadership of Raja Mahendra Pratap, Maulana Ubaidullah Sindhi and Maulvi Barkatullah.

After the First World War ended, the terms offered to the Ottoman Khalifa (Caliph) under the Treaty of Sevres were extremely harsh. The orthodox Muslims considered the Khailafat (Caliphate) as an institution that was divinely ordained and a product of ijma (consensus) of the companions of the Prophet of Islam. The continuation of the Khailifat, therefore, was an article of faith with the Muslims and they were obliged to make a common cause with the Hindus who, under the leadership of Mohandas Karamchand Gandhi, were already agitating for political rights and liberties.

In this backdrop, Jamiat-i-Ulemia-i-Hind (association of the religious scholars of India) was founded in 1919 with a membership that came predominantly from the Ulema of Deoband. In due course it assumed the role of political wing of the Darul Uloom Deoband.

The Khilafat Conference, a body exclusively formed to promote the cause of Khilafat, had a more diverse and varied membership. The Khilafat and Non-cooperation movements launched jointly by the Jamiat-I-Ulema-i-Hind, the Khilafat Conference and the Indian National Congress electrified the masses in a manner unprecedented in Indian history. Religious appeal led to mass mobilization and the British government found it next to impossible to contain the agitation. Some ulema revived the fatwa of India being Darul Harb and called upon the Muslims to migrate to Afghanistan.

After accepting a few thousand Indian Muslims, Afghanistan declined to give shelter to more. Hundreds perished due to the hardship of travel and weather. Gandhi called off the Khalifat movement when it turned violent and twenty-two policemen were burnt alive by a mob. During the agitation the Moplahs (an Arab community of peasant) of Malabar Coast proclaimed their local Khilafat and offered the Quran or sword to Hindu landlords and British officers.

The government had to deploy troops to crush the Moplah revolt. The ultimate casualty of the involvement of religion in politics was communal harmony in India with some Muslim and Hindu extremists urging the youth of their respective communities to get marital training.

In the aftermath of the Khilafat movement the Muslims League emerged as the principal political organization of the Indian Muslims and in 1940 demanded the partition of the sub-continent. It identified Pakistan slogan with Islam to capture the imagination of common Muslims and to mesmerize them with romanticism of Islam’s past glory.

A small faction of Jamiat-i-Ulema-i-Hind broke away from its parent organization to support the Pakistan demand whereas the main body opposed the partition on the ground that it would divide Indian Muslims without solving the communal question.

Jamaa’ at-i-Islami was founded in 1940, by Syed Abul Aala Maudoodi, which was in many respects, inspired by the Ikhwan-ul-Muslimoon of the Middle East. It too opposed the partition of the subcontinent and expressed the view that the leadership of the Muslim League lacked the essential qualities required to establish an Islamic State.

After the emergence of Pakistan in 1947, the break away faction of the Jamiat-i-Ulema-i-Hind, which adopted the name of Jamiat-i-Ulema-i-Islam, and Jamaat-e-Islami, became the harbinger of the movement to establish Islamic theocracy in the country.

In 1957 the Jamaat-e-Islami opted for electoral politics to implement its version of Islamic system through constitutional means. Jamaat-e-Islami’s appeal remained confined to a section of intelligentsia and student community and it performed very dismally in the national elections of 1970.

It was in the wake of military action in former East Pakistan that the Jama’at sponsored militant groups, Al-Badr and Al-Shams, fought along with the Pakistan Armed Forces against the Mukti bahini (Liberation Army) and Indian aggressors. The Jamiat-i-Ulema-i-Islam also failed to make its mark on national level and its appeal remained largely confined to the North West Frontier Province and Balochistan in the elections of 1970.

However, finest hour for the Jama’at came when marital law was imposed on 5 July 1977.

PART II

The War against Evil Empire and Islamic Fundamentalists:

The Soviet military intervention in Afghanistan on 27 December 1979 offered unique opportunity to the United States to weaken its principal adversary, and to General Zia to prolong his obscurantist rule. A resistance movement imbedded with Islamic fervor appeared to be the most effective counter-measure to bleed the Soviets.

Pakistan and the Americans masterminded the formation, logistics and action plan of the mujahideen outfits. They secured services of the Jama-at-i-Islami and Jamiat-i-Ulema-i-Islam for inculcating the spirit of jihad and recruiting rank and file to fight what was primarily an American war. Foreign elements, including Egyptians, Palestinians and Saudis, were inducted in the mujahideen groups.

The mujahideen movement thus became a meeting point for Islamic militants of Afghanistan. Pakistan and the Middle East. The United States, without any scruples, promoted and used Islamic militancy to defeat the Evil Empire. Generally the people from Pakistan and abroad, who were in the fore front of the Holy War against Soviet occupation of Afghanistan, professed and practiced the Puritan Schools of Islamic Shariah, where the Jehad is a practiced article of faith.

Unfortunately, after the withdrawal of the Soviet forces from Afghanistan in 1989, the United States consigned that country to oblivion and the Mujahedeen or Islamic Fundamentalist militants became a liability for Pakistan. With its almost entire western borders destabilized as Afghanistan was in turmoil and heavy burden of rogues.

Islam is a religion of peace but it is being projected as the principal source of international terrorism. The West must distinguish between militancy in the cause of national liberation and the use of force by states to extinguish the spark of freedom. With Muslims being persecuted, maimed and killed from Palestine to Kashmir to Philippines there can be no peace.

United States War against Terrorism:

In the after math of the most inhuman and barbaric acts of terrorism carried out in United States of America by the Al-Qaeeda, it seems, that country and the civilized world at large, were jolted and came to realize that the menace had grown out of proportion and was bent upon destroying the established order.

The US led coalition, after some preparations and requisite deployments, commenced the War against Terror. Pakistan, as neighbor of Afghanistan and a supporter of the Regime in Afghanistan was in a quandary. It was not left with any options but to support the US led effort against taking out that rogue regime in Afghanistan.

It may not be out of place to mention that, even before the September 11 impasse, the threat perception within the Defense Establishment of Pakistan was going through a rethinking and re-evaluation owing the activities going on inside Afghanistan under the tutelage of Taleban Regime and the Al-Qaeda Movement and its activities inside Pakistan like elsewhere in the world.

It was not left with any options but to support the US led effort against taking out the Taleban regime in Afghanistan, albeit, owing not only being part of the Civilized Society but its own threat perceptions, emanating via the covert and overt activities of Taleban and Al-Qaeda nexus inside Afghanistan, globally and more so within Pakistan.

If anything the event of September 11 only hastened the decision making process in the Pakistani Defense Establishment in as much as the defiant and rigid posture of the Taleban Regime on the issue of handing over UBL and his coterie to the Americans, despite persuasions by Pakistan, acted as a catalyst for Pakistan to arrive at a pragmatic decision.

The rigidity, defiance and self-serving stance of the Taleban Regime had placed Pakistan at a crossroad. It had to choose between its own National Interest and its place in the comity of civilized world OR Isolation, being branded as a state that was allegedly promoting militancy and terrorism.
Having said that, it would be wrong to assume that Pakistan just caved in under the pressure from Washington. The truth would be that the pace of Pakistan distancing itself from what was going on in side Afghanistan was hastened rather accelerated. It could also be said that may be, owing conducive international environment, was fortified in taking that vital decision.

This of necessity should have translated into moral and material support for Pakistan to with stand the fall out of annihilation of Taleban regime from Afghanistan and so also imminent reaction from with in Pakistan from the segment that is sympathetic or allied with the fundamentalist forces.

The short-term objectives set out by the International coalition were attained in matter of months and the Rogue Regime along with its partner Al-Qaeda was dislodged from Afghanistan. An interim set was brought in its place, headed by Karazai.

After being dislodged, the Taleban and Al-Qaeda Forces simply melted away and blended into the local population of Afghanistan and in side Pakistan. The pro-Islamic forces within these two countries, being quite sympathetic appear to have willingly absorbed these forces on the run.

Question is does dislodging the Taleban government from Afghanistan and dismantling the Al-Qaeda network in that country resolves the issue? No.

The ground realities show that the safe sanctuaries for these elements, on the run, are very much intact, alive and kicking. There is no dearth of sympathetic element within Afghanistan and Pakistan.

It means that immediate and constant threat emanating from Afghanistan may have been addressed. It would be nearer home instead, to say that for now it may be comparably diluted. The capabilities of International Islamic Militancy may have been in disarray and perceptibly its connectivity may also have been disrupted. It could not be said with any certainty that it has been qualitatively contained to an extent that it has been incapacitated.
The factual position is that there has been significant damage caused to the International Islamic Militants Groups. Their safe heaven has been neutralized. An environment has been created that has made the life difficult for the militants and its leadership in side Afghanistan, Pakistan and their respective countries and elsewhere.

However, it is equally true that all these significant achievements could at best be termed as containment. It is equally true that 9/11 has rudely awakened the world to the threat of this millennium. The state of alert is there. The commitment is also there. It is also equally true that militarily the preparation is also there to meet any potential threat.

The respite, if it could be termed as such, ought have been simultaneously put to use to address the causes, which have taken the things to such an impasse that that brand of militancy and terrorism has become the greatest threat to civilized world. With due deference one dares to say that in the long run the gains so far made would be wasted and the world may wind up with the same problem with more complexities and capabilities.

LONG TERM REQUIREMENTS:
Having said that, it would be in the fitness of things to peep in to the History of the Puritan Islamic Movements in the South Asia, Middle East and Far East and so also in the Balkans to understand its appeal to the Muslims.

It is also of paramount importance that Islam is viewed and understood as a World Religion, side by side with Christianity and Judaism, Revelation being a common source of these religions.

There should be a concerted effort to accept, high light and promote the pacific basis of Islam. The Sufi doctrine of Islam has volumes to offer to Muslims and World at large.

The Puritan Islamic Clergy has to be engaged via the proponents of peaceful, moderate and tolerant Islam, which abound through out the world.

A meaningful and qualitative dialogue over World Media may be in immediate order. The dialogue being conducted in the Vatican since the early sixties should on the one hand be accelerated and on the other projected globally. Let there be meeting of the minds globally.

Merely by saying that it is not a clash of Civilizations or that it is not a war against Islam would not do. The situation on ground dictates otherwise. The isolating Muslims and relying on the support of the governments in Islamic Countries would not suffice in the long term.

Besides, it also needs to be analyzed that time and again the West has tolerated and in some cases abetted or even promoted militancy in the name of Islam.

Wisdom of such acts at a given moment in the recent History should be called in question. It should provide a lesson for future course of action. In the case of Pakistan and Afghanistan it is the truth.

The menace or monster left by the West in the after math of Soviet defeat has to be neutralized and efforts made at the rehabilitation of its cadre. It has to be addressed not only through military means but more so by strengthening the moderate and peace loving citizens of these countries by giving them participatory democracy.

Bringing in qualitative and quantitative socio economic in puts in the areas of education, health, economic opportunities and moderate, democratic and good governments in the the volatile regions of Middle East, South and Central Asia is imperative. It is a daunting task. But there are no short cuts.

Spreading the Islamic Message of Peace, Tolerance and coexistence on Gods earth could only do this. Islamic History is replete with examples of peaceful coexistence and Freedom of Faith.
Even a small allocation of funds in the area of high lighting the message of Islam that, ‘ Islam literally means Peace ‘ could do wonders, albeit side by side with the consistent and persevered efforts at promoting the democratic values in these heated societies, where the populace is consistently being denied the means and level playing field by totalitarian regimes of various hues and colors, those are supported by predominantly vested interests of the Western Societies.
While concluding it may be stressed that unless there is realization in the comity of nations, particularly the Developed World, that in the post Bi-polar World of Twentieth Century, there is a void, a void that has left the majority of the fellow human beings in the so-called developing or non-developed world, devoid of any meaningful and representative leadership, particularly in the regions where Muslims are concentrated.

It is of paramount importance that the volatile issues like, Palestine, Kashmir, Afghanistan, Iraq and Chechnya are addressed and resolved.

One may say with some degree of confidence that the threat of militancy is only skin deep. It is very much there. It is regrouping and reorganizing. It will surface with new tactics, strategies and ideology.

Posted on www.newscentralasia.com
Pen Name: Amicus.
Article: Financial Arteries of Islamic Extremism.
Four Parts.

[Mohammed Yousuf]

SYSTEM OF MONEY TRANSFERS BY MEANS OF HAVALA
AND ITS USE IN FINANCING MILLITANCY IN SOUTH ASIA.

BY
MOHAMMED YOUSUF ADVOCATE

Introduction

This paper attempts to address the questions:

1. What is terrorism?
2. Why, by whom and how is terror financed?
3. What measures have been taken to check money transfers for terrorist purpose?

At the outset one must concede that due to perceptual differences it is extremely difficult to define “terrorism.”

According to Chambers Concise Dictionary, terrorism is “an organized system of intimidation, esp. for political ends.” The Oxford English Reference Dictionary refers to terrorism as “the systematic use of violence and intimidation to coerce a government or community, esp. into acceding to specific political demands.”

UN Convention for the Suppression of the Financing of Terrorism, 1999, includes in the definition of terror any act “intended to cause death or serious bodily injury to a civilian, or to any other person not taking an active part in the hostilities in a situation of armed conflict, when the purpose of such act, by its nature or context, is to intimidate a population, or to compel a Government or an international organization to do or to abstain from doing any act.”

The international community has failed to agree on a definition of terrorism to the full satisfaction of all states. However, there is an emerging consensus since 9/11 that systematic violence in which civilians are targeted ¬¬¬____ even if the ends are apparently legitimate ____ should definitely be considered as terrorism. This broader definition of terrorism encompasses Islamic militancy as well as many violent movements that are essentially for national liberation or for securing political or fundamental human rights. Despite some serious reservations, for the present paper we shall adopt this wider connotation of the term.

Every act is motivated by some idea. To identify the sources of terror finance, one has to understand different motives of terror.

In this regard, terrorism perpetrated for political ends needs to be differentiated from terrorist acts performed for criminal purposes. Most of the mafia and drug syndicates aspire to have a flourishing business with profit as the sole motive, and they mainly target government functionaries, including judicial officials, to remove obstacles from their way or to hinder investigation into their crimes or to soften government attitude towards their illegal activities. A very pertinent example is that of Columbia where these types of crime are common occurrences. Drug cartels are directly involved in politics and money from narco- trafficking has even financed presidential election campaigns. The terrorism attributed to organized crime is limited in its purport and scope and essentially self-financed. This is not to deny the fact that the criminal groups at times collaborate or cooperate with different terrorist outfits having political motives for mutual benefits.

The terrorist organizations with political objectives do not consider the acquisition of money as an end in itself. For them money is a means to achieve certain objectives. They require financial resources to:

1. Recruit members and supporters.
2. Arrange for facilities to impart military and other training to perform terrorist acts.
3. Provide for purchase of weapons, arms and ammunition, equipment and a variety of gadgets.
4. Spend on travel and movement for operational purposes.
5. Pay for obtaining information and intelligence to execute the mission.
6. Use media for publicity and propagation of views.
7. Cater to other miscellaneous expenses required for undertaking terrorist missions.

On its part, political terrorism is generally perpetrated for such negative objectives as:

1. Ethnic cleansing and liquidation.
2. Political or cultural subjugation of a particular community or national group.
3. Acquiring submission from a particular community to an unjustified policy.
4. Strengthening of a dictatorial regime.
5. Economic exploitation.
6. Destabilization of an enemy state or territory.

On the positive side, it is also a weapon in the hands of the weak that resort to it to:

1. Reinforce the struggle for national liberation from foreign domination.
2. Secure fundamental human rights or fulfill political aspirations, including that of secession.
3. Retaliate against and resist alien attempts at cultural and political hegemony or encroachment.
4. Highlight the wrongs being perpetrated against them.
5. Take revenge of any other perceived wrong committed by the ‘would-be-victims’ of terror.

All the present centers of terrorism would provide the testimony to the above mentioned thesis: Israel, Palestine, Lebanon, Afghanistan, Iraq, Kashmir, Chechnya, Daghestan, Sri Lanka, Sierra Leone, Angola, Democratic Republic of Congo, Xinjiang, Tajikistan, Uzbekistan and the Philippines, and not in the distant past, Cambodia, Bosnia, Albania, Kosovo, East Timor, Somalia and Ethiopia. The United States becomes a target of the Islamic militants worldwide because of its direct involvement with Israel, occupation of the Arab lands and support to perpetrators of injustice at other places.

There are a variety of sources through which terror is financed. These include:

1. States, directly or through, front organizations.
2. Welfare associations / relief organizations, including charities.
3. Individual donors.
4. Legitimate business enterprises.
5. Drug trafficking and other illegal operations.
6. Extortions, thefts, robberies and dacoities.
7. Abduction of people for ransom.
8. Money / credit card counterfeiting etc.

The transfer of money from the source to the end user takes place through:

1. Commercial Banks and other legitimate financial institutions
2. ‘Havala’ and ‘Black Market Peso Exchange System’
3. Money changers
4. Individual carriers etc

In the process of money transfer, if required, organized crime also plays its role for making profit. It is to check criminal transfer of money that international community has taken a number of measures that include strict monitoring of banking system and a watch on suspicious accounts.

Sources of Terror Finance:

The state is the basic political entity and primarily responsible for the welfare of its citizens and, according to the United Nation Charter, for the maintenance of international peace and security. Paradoxically the manner in which “national interest” is perceived and articulated has converted the state into the foremost financier of terrorism. Throughout history, the state has either employed its apparatus directly or used proxy entities to perpetrate terrorist acts. The persecution and killings of the Jews in Hitler’s Germany, of the Communists in Suharto’s Indonesia, (not to mention of Bengalis in Yahya Khan’s Pakistan) and of Bosnian Muslims in Milosovic’s Yugoslavia represented the most horrible reigns of terror let loose with the state-resources. These acts in fact amounted to pogroms and genocides of unarmed civilians who were the citizens of the same states. Similarly Indian, Israeli and Russian military operations and gross human right violations in occupied Kashmir, Palestine and Chechnya respectively are ghastly examples of state-terrorism. The resources allocated in the name of defense, internal security and maintenance of law and order, running into billions of dollars, are spent by these states to terrorize civilians into submission and to perpetuate their control over the territories mentioned, which they can not morally lay a claim on. Ironically the perpetrators of state-terrorism have no qualms in referring to their extreme measures, including bombardments of residential buildings, as counter-terrorism.

Terrorism is also used as an instrument of policy by the states to promote their national interest vis-à-vis other states. Reportedly Pakistan financed and trained the Sikh militants who were active in Indian Punjab for freedom during the 1980s despite the fact that Indian Punjab was never a disputed territory between the two countries. These Sikhs were responsible for targeting Hindu civilians in the province. Perhaps Pakistan wanted India to remain engaged in East Punjab so that it could concentrate on its Afghan frontier where jihad against the Soviet forces was in progress. From 1989 up to quite recently, Pakistan had been recruiting, organizing, training, equipping, guiding and otherwise financing Kashmiri mujahideen outfits, particularly Hizb-ul Mujahideen, Harkat-ul Ansar and Lashkar-i-Taiba, engaged in a legitimate liberation struggle. Pakistan also intended to bleed India and to bog down its armed forces in a protracted and costly conflict. Apart from military installations and Indian troops, these mujahideen targeted and terrorized the local Hindu pandits who were forced in large numbers to leave their ancestral homes in the Kashmir Valley. The mujahideen were accused of massacring hundreds of Hindus on their way to pilgrimage of shrines in the mountainous region of Indian occupied Kashmir. Pakistan is said to have “misused” American aid for its ambitions in Kashmir and had worked with Osama bin Laden to impart military training to Kashmiris and to induct Arab-Afghans in the Kashmir jihad. For its role in Kashmir and support for the Taliban regime, Pakistan was on the verge of being declared a “rogue state” on the eve of 9/11.

On its part, India has never missed an opportunity to harm Pakistan. During the crisis in East Pakistan in 1971, it trained and armed the Mukti Bahini (liberation army) that perpetrated worst terror on non-Bengali Pakistanis, particularly Biharis and Punjabis, residing there; and after the creation of Bangladesh, massacred several thousand of these hapless civilians. Throughout, India has also remained involved with regional, ethnic and linguistic parties and groups in Pakistan in Sindh, N.W.F.P. and Balochistan. Behind many terrorist acts, including bomb explosions at busy spots in Pakistani cities, one can detect the hands of India’s Research and Analysis Wing (RAW). During 1980s and 1990s, India was unmistakably involved in ethnic violence in the cities and towns of Sindh, particularly Karachi. India had set up camps in its provinces of Gujarat and Rajhestan to impart military training to disgruntled Pakistani youth who were then sent back to Pakistan on terrorist missions.

The Arab states have financed PLO and Hamas to mount pressure on Israel. Although the PLO entered into an agreement with Israel in expectation of acquiring a Palestinian state, Hamas continued to resort to terrorist attacks on buses, restaurants, commercial centers and other public places with civilian casualties. Israel on its part has been perpetrating worst form of state terrorism on Palestinian civilians with impunity due to US protection. Iran’s support for Hizbullah in Lebanon is too well known. Perhaps Iraqi resistance against the US, British and allied occupational forces is receiving men and money from other Muslim countries, albeit to a limited extent. In fighting between the armed bands and American led coalition forces in Iraq, civilian casualties have become routine occurrences. The United States has admitted to resorting to abuses (read terrorize) of civilian inmates in prison houses in Iraq on mere suspicions.

Saudi Arabia is the principal financier of Islamic welfare organizations. In the aftermath of the Islamic Revolution in Iran, the Saudi government was particularly concerned with its spillover effects in the region and throughout the Muslim world. The Saudi sponsored International Islamic Relief Organization (IIRO) extended financial assistance to several Wahhabi groups in the Middle East and Central Asia. Although terror financing was not on IIRO’s agenda, some Western analysts believe that a considerable part of its donation meant for education, health, housing and other welfare activities ultimately went into the hands of the terrorists. The Saudi governmental organization namely the Muslim World League (MWL) is considered as the biggest relief organization in the Muslim world with over 100 branches in more than 30 countries. Egypt and some other Arab governments have accused MWL of assisting Islamic terrorist groups.

According to a working draft, dated May 30, 2004, and prepared by the Center for Strategic and International Studies, Washington D.C., entitled Saudi Internal Security: A Risk Assessment:

“The government did not oppose foreign and domestic efforts to raise money and obtain support for ‘pro-Islamic’ movements in Bosnia, Kosovo, Afghanistan, and Central Asia when these represented extreme and sometimes violent causes. Little or no effort was made to monitor the extent to which foreign ‘charities’ raised money for political movements in Europe, the Middle East and Asia, that were far more extreme (and sometimes violent) than would have been tolerated in Saudi Arabia.”

The madrassahs and charities are traditional Islamic institutions. In countries like Pakistan they serve as the largest non-governmental network for social welfare. The madrassahs impart religious education to the students hailing from the lower strata of the society who otherwise might remain illiterate. They also provide boarding and lodging to the poor students. The charities are involved in a variety of relief works. Dependent on donations, the charities provide food, clothing, shelter and medical services to the needy. During the 1980s the madrassah network was used to organize jihad against the Soviet occupational forces in Afghanistan. According to one estimate, the United States and Saudi Arabia contributed some $ 6 billion in military aid to the mujahidin during the decade of the Soviet occupation of Afghanistan. It was in the wake of Afghan jihad that Osama bin Laden and Dr Abdullah Azzam founded Makhtab al Khidmat (MAK) or Afghan Service Bureau in Peshawar, Pakistan, in 1984, to provide relief and welfare services to the mujahidin and later conceived the idea of Al-Qaeda. After the Soviet withdrawal in 1989, Pakistan continued to benefit from the madrassah system in its grand design to have “strategic depth” by indirectly controlling Afghanistan through the Taliban. Pakistan also recruited mujahidin for its Kashmir venture from the madrassahs and arranged for their training in the camps situated in the Pakistani tribal areas, Afghanistan and Azad Kashmir. Since the jihad was also funded through charities, after 9/11, the madrassahs and charities emerged as prime suspects in American “war on terror”.

The US authorities contended that some private charities also financed the madrassahs, wherein radical Wahhabi theology was taught with its tremendous emphasis on jihad as an article of Islamic faith. The students of these madrassahs considered waging of jihad against the infidels as obligatory for Muslims and as such from here a large number of Muslim terrorists were recruited.
It was, owing to this line of reasoning, that immediately after 9/11 the United States targeted a number of charities including Al-Rasheed Trust (Pakistan), Al-Akhtar Trust (Pakistan), Makhtab al Khidmat (Pakistan) and Al–Harmain Foundation that was based in Saudi Arabia, but had worldwide presence. The Office of Foreign Assets Control, United States, acted swiftly to identify associations and individuals whose assets were to be frozen on suspicion of having links with Al-Qaeda and within a month US and foreign financial institutions froze assets valued about $ 100 million on this count. (Rohan Gunaratna, Inside Al-Qaeda, Karachi: Vanguard, 2002. p.66).

Since 9/11 terrorism and Al-Qaeda have become synonyms for the Western world, in particular the United States. The violence related to Islamic militancy is almost invariably attributed to Al-Qaeda and its global network without proper investigation. Reference is made to Declaration of War by Osama bin Laden, together with the leaders of the World Islamic Front for the Jihad Against the Jews and the Crusaders that said:

“We – with God’s help – call on every Muslim who believes in God and wishes to be rewarded to comply with God’s order to kill the Americans and plunder their money wherever and whenever they find it. We also call on the Muslim Ulema, leaders, youths and soldiers to launch the raids on Satan’s US troops and the devil’s supporters allying with them and to displace those who are behind them so that they may learn a lesson.” (Quoted in Rohan Gunaratna, p.01)

The Western governments and media have been making wild speculations about the financial resources of Al-Qaeda. Different Western analysts cite the figures ranging between $30 million and $300 million as Osama’s personal fortune. His family is very influential and owns a prestigious group of construction companies in Saudi Arabia. It was due to his opposition to stationing of US troops in the Holy Land in the wake of the Gulf War of 1991 that Osama had to leave Saudi Arabia in 1994.
It is understandable that Bin Laden contributed to Al-Qaeda’s funds in a big way that was commensurate to his income and status. But apart from Bin Laden, wealthy Sheikhs from Saudi Arabia, UAE, Kuwait and Qatar also poured their money into the cause of Al-Qaeda so that Bin Laden was able establish a welfare services network in all over the Muslim world that included orphanages, schools, study centers, mosques, hospitals dispensaries and refugee camps parallel to his military training camps in the Sudan and Afghanistan. Perhaps a number of these sheikhs did not know that a part of their contribution would be used to mount attacks on American interests in retaliation of its “anti-Islam” policies. In fact in many cases these wealthy sheikhs and businessmen left the task of donating funds to the junior staff that did not care much about who were the recipients. As stated above, in the aftermath of 9/11 the US government made efforts to identify the money trail largely through charities, introduced strict monitoring of their banking transactions and froze assets of a large number of individuals and associations suspected of terrorist links.

Public fund raising has been one of the most important sources of financing of Islamic militancy. Who can deny that despite all out efforts by the West there is a considerable sympathy for Bin Laden and his mission in the Muslim world. American double standards in the Middle East and support for Israel has cultivated a firm belief in the Muslim masses that there is a global conspiracy against Islam and its culture and value system. The stationing of the US forces in Saudi Arabia and occupation of Iraq and Afghanistan have created unmistakable feeling that Islam is under siege. The Muslim settlers, in particular the youth, in the United States and Europe also share the same perception. As early as August 1996, soon after Bin Laden returned to Afghanistan, Al-Qaeda had issued an edict that said:

“It should not be hidden from you that the people of Islam have suffered from aggression, iniquity and injustices imposed upon them by the Zionist-Crusader alliance and their collaborators to the extent that the Muslims’ blood has become the cheapest in the eyes of the ‘world’, and their wealth has become a loot, in the hands of their enemies. Their blood was spilt in Palestine and Iraq. The horrifying pictures of the massacre of Qana, Lebanon, are still fresh in our memories. Massacres in Tajikistan, Burma, Kashmir, Assam, the Philippines, Fatani, Ogaden, Somalia, Eritrea, Chechnya, and Bosnia-Herzegovina have taken place, massacres that sent shivers through the body, and shake the conscience.”

“All of this ___ and the world watched and heard, and not only did they not respond to the atrocities, but also, under a clear conspiracy ___ between the USA and its allies, under the cover of the iniquitous ‘United Nations’ ___ the dispossessed people were even prevented from obtaining arms to defend themselves. The people of Islam awakened, and realized that they were the main targets for the aggression of the Zionist-Crusader alliance. And all the false claims and propaganda about ‘Human Rights’ were hammered down and exposed for what they were, by the massacres that had taken place against the Muslims in every part of the world.” (Quoted in Rohan Gunaratna, pp. 89-90).”

It is a situation in which the common Muslims believe that everything ___ including acts of terror ____ is justified. Terror in self-defense and for the sake of sheer survival when Islam is under attack has become legitimate in their eyes, hence greater the assurance that donations would reach the jihadis (for the West the terrorists), greater the ability of the front organizations to raise the funds.

The terror organizations also rely on legitimate business operations to generate funds. Some terrorist groups have construction firms, restaurants and even stores as sources of their income. For example, Al-Qaeda has a finance and business committee as a part of its organizational structure that manages a very sophisticated global financial network. This committee comprises of professional bankers, accountants and financiers, and looks after investment of funds and generation of revenue. According to one estimate, Al-Qaeda has a core membership of 3,000 that costs $ 36 million a year whereas it spends a substantial amount on weapons, technology, infrastructure, camps, offices, houses, vehicles. It also has to bribe police, military bureaucracy, customs and immigration officials and even politicians to secure concessions. The exact amount needed on recurrent basis is not known.

It emerged during a trial in the United States that, apart from construction firms, Al-Qaeda had investments in manufacturing and trading companies that dealt in such diverse sectors as agricultural products (including processing and export of fruits and vegetables), sea food, dairy products, sweetmeats, leather, furniture and fixtures, bicycles, cars, trucks, machinery, machine tools, hospital equipment, fertilizer, sugar, iron and steel, insecticide, wood, cattle and even diamonds and precious stones. These business ventures were set up at different places including many European countries.

Al-Qaeda has divided its funds into i) investment for financial return and ii) funds for operational purposes. It has clandestine operational cells to disburse operational funds. While disbursing from feeder to operational accounts the fund passes through several other accounts to disguise the real motive of transfer.

The actual role of narcotic trade in terror finance is difficult to assess. Although the involvement of “organized crime” in drug trafficking is not disputed, as already seen in the case of Columbia, one opinion, though not confirmed and may not be true, is that Al-Qaeda has never used drug money to finance its operations. The argument runs thus: drugs are prohibited in Islam and Al-Qaeda did not want to earn a bad name for itself in the Muslim world. Nevertheless, it may not be ruled out that some Islamic Groups believed that in a “do or die” conflict it was permitted to sell drugs to the infidels and to use the proceeds from narcotic trade against the “crusaders.” This seems particularly true of the Taliban, paradoxically an ally of Al-Qaeda.

Testifying before the State Department in December 2000, Michael Sheehan- the US Coordinator for Counter –Terrorism, said “the Taliban admitted to imposing the same rate of Ushr (religious tax) i.e., 10% on poppy as they imposed on other agricultural crops”. Given the nature of the Taliban ideology, nothing was beyond them.

According to one estimate, under the Taliban the narcotic trade had flourished to reach the figure of $ 8 billion per year and, due to Bin Laden’s influence on the Taliban, Al-Qaeda received a substantial share out of it. (Website: David N. Bessie & Christopher M. Gray, “Al-Qaeda’s Revenge: Its Methods and Nation-State Allies,” Citizens United States, Volume II, Issue 2) It is further alleged that, in order to produce high quality heroin, laboratories were set up with latest equipment in under ground shelters particularly in Khost and Jalalabad. Local and foreign chemical experts oversaw the working of these laboratories that earned a substantial amount of money for Al-Qaeda.

Addressing a Symposium in Vienna on June 4, 2002, A. V. Zmeyevsky, one of the Directors of the Russian Ministry of Foreign Affairs, contended that the Taliban, who had hold, over about 90% of areas where opium poppy was cultivated in Afghanistan, used the proceed from the sale of poppy to purchase arms and ammunition and for training the combatants and providing assistance to different terrorist groups in the region. The beneficiaries of Afghan narcotic trade, according to him, were the Islamic Movement of Uzbekistan, the United Tajik Opposition, the Front for the Liberation of East Turkestan (in the Xinjiang Uigar Autonomous Region of China) and some Chechen warlords. Narcotics, he alleged, were also produced in the Chechen Republic for export to Russia and some other European countries by the Chechen terrorists.

Yet another source of terror finance is interestingly mining and sale of diamonds. The Revolutionary United Front, a rebel force in Sierra Leone that subjected thousands of people to torture, mutilation and indiscriminate killings, took advantage of its military control of diamond fields in the country to engage in illegal diamond trade. This terrorist rebel force earned millions of dollars by selling diamonds to different parties, including Bin Laden and his Al-Qaeda. The terrorist groups in Angola and the Democratic republic of Congo also indulged in mining and sale of diamonds. The amount so earned was spent on procuring weapons and making payments to the troops of the terrorist organizations.

In order to devise methods to check the illegal trade in diamonds, the South African government convened a conference in Kimberley in 2001. Attended by government officials, representatives of diamond industry and human right activists from 38 countries, the conference initiated a process to develop a comprehensive trade system that was meant to exclude what were referred to as “blood diamonds” from diamond industry.
After several meetings that finalized the details, the participants formally launched what came to be known as the Kimberley Process in January 2003. The Kimberley arrangement provided for a sort of a voluntary and self-regulating system that envisaged checks by the concerned governments and the diamond industry at every stage from the points of origin of diamonds to retailers’ shelves. This required international monitoring, audited chains of custody, tamper-proof packaging and standardized and public record-keeping system.
Still due to conflict of interests within the industry the arrangement is not likely to prevent terror financing from “blood diamonds.” A lot depends on how watchful are the NGOs because they were largely responsible for highlighting the issue and pressurizing the governments and the industry to reach the understanding.

Other sources of terror finance include robberies, dacoities, extortion, abduction, and kidnapping for ransom etc.
Generally Islamic groups are reluctant to engage in such activities; nevertheless, isolated incidents of robbing of the Jews in Palestine and of the Christian Copts in Egypt have been reported. Similarly the Abu Sayyaf Group in the Southern Philippines is involved in many incidents of kidnapping of Western tourists, Christian missionaries and wealthy locals for ransom purposes. The Abu Sayyaf Group was once a part of the Moro National Liberation Front, an Islamist organization. Some Islamist Groups in North Yemen and Chechnya have also engaged themselves in kidnapping for ransom business. There is no Islamic ruling to encourage this sort of activities, but probably the local culture or declaration issued in February 1998 by Bin Laden and others has provided justification for such crimes.

The Al-Qaeda manual, Declaration of Jihad Against the Country’s Tyrants, contains instructions concerning the production and use of counterfeit money, counterfeit credit cards and forged documents. Algerian members of Al-Qaeda settled in Europe are well versed in credit card frauds. According to an estimate of security and intelligence agencies Al-Qaeda raises $ 1 million every month in this manner. (Rohan Gunaratna, p. 65) Several cells have been found working for this purpose in Britain, France, Spain, Belgium and the Netherlands. Interestingly they used to send money, so raised, to different countries of the Middle East and Pakistan. Reportedly there was a special camp in Afghanistan where Al-Qaeda experts trained its European members in credit card frauds. Al-Qaeda acquired equipment to encode and decode credit cards and machines to produce fake credit cards on the basis of information gathered from commercial establishments and through Internet. (Rohan Gunaratna, p.65)

Once the fund is raised the next important step is that of money transfer and, if required, of money laundering. It is here that we sometimes find close collaboration between organized crime and terrorist groups. The former can assist the latter through their established channels.

Money Transfer and Money Laundering

Before 9/11, the terrorist organizations mainly relied on normal banking channels for transfer of money to and from different countries in the Middle East, Europe and North America. For this purpose, a number of accounts were opened in the names of individuals and associations and after passing through several accounts money used to reach its final destination. This system was also followed by Al-Qaeda for its operations. Accounts were opened in the names of Al-Qaeda-controlled companies and trust-worthy individuals whose identities were not publicly known.

One bank that became very notorious for money transfer and laundering and was particularly involved in criminal practices was BCCI. After its collapse in 1991, a thorough investigation was made by different agencies that brought forth some startling revelations:

From the very beginning, the whole structure of, BCCI was designed by its founder Agha Hasan Abedi and his number two Swaleh Naqvi with the purpose of serving criminal interests and engaging in clandestine activities. Made up of several layers of entities that were related to each other through holding companies, subsidiaries, affiliates and nominees, BCCI was able to conduct a massive exercise in money laundering in Europe, Africa, Asia and Americas. In order to prevent detection of illegal practices, BCCI fractured its corporate structure, record keeping and audit system. It appointed two auditors, none of whom had the authority to audit the BCCI operations in totality. It successfully manipulated bank confidentiality and secrecy laws to promote business.

By indulging in money transfer and laundering activities, BCCI facilitated terrorism, narco-trade, smuggling, sale of nuclear technology, illegal immigration, financial corruption, kickbacks and other such crimes. It bribed high government officials and prominent political figures to obtain concessions and favors in securing business like getting deposits from the given country’s Central Bank. BCCI operated in 73 countries of the world and infiltrated even the US banking system by purchasing certain banks despite regulatory barriers.
Even Americans were on its pay list. It was in 1988-1989 that Bank of England came to know of BCCI’s involvement in terror finance. Some of BCCI’s major operations included clandestine support to Pakistan’s nuclear programme, laundering of money of Pakistani drug barons, facilitating General Noriega’s drug trafficking, links with Iraqi arms dealer Sarkis Sarkenalian and Syrian arms dealer, terrorist and drug trafficker Monzer Al-Kassar. The investigations that began in 1989 ultimately led to the closure of BCCI on 5 July 1991.

Apart from normal banking channels, on which the terrorist organizations rely less after 9/11, there exists a traditional system of international capital transfer generally known as ‘Havala.’ Although illegal, it is a trust-based and relatively cheap system that is very popular in South Asia and the Middle East. The service is very quick and without any documentation.
The networks of havala agents and brokers exist in different countries. The sender deposits the money with the broker and the designated person in another country receives the same. For identification of the recipient a password is used or necessary detail provided by the sender. The brokers use code words and communicate via telephone, Internet or e-mail to arrange for payments. The charges are less than commercial banks and service efficient and hassle free.

In South Asia, the havala system had its beginning in 1940s when a considerable number of people from certain villages migrated to Hong Kong, Britain, Canada and the United States. These people devised the method of transferring money through private networks.
Subsequently, during the partition of the Subcontinent in 1947, the largest migration in human history took place. According to one estimate, nearly ten million people left their homes in India and Pakistan as a result of communal riots that gripped the two countries. The Hindus and Sikhs from Pakistani provinces of (West) Punjab, (East) Bengal and Sindh, and the Muslims from all over India but particularly (East) Punjab, the United Provinces, Gujarat, (West) Bengal, Bihar, Madras and Delhi were uprooted.
These refugees and migrants who did not have sufficient time to properly and legally transfer their wealth/assets opted for havala system to salvage what they could. Initially the havala system worked through extended families whose members served as couriers or carriers for transfer of money between India and Pakistan.
Interestingly, following the independence, some British companies also relied on havala system to ensure flight of their capital from India.

The requirement of business classes that were engaged in commercial activities further strengthened and institutionalized the havala system into a full-time profession.
In this regard, the Memon, Bohra and Khoja Muslim communities and Banyas (Hindu Traders) played a pioneering role. Their commercial interests and need for over- and under- invoicing of commodities to evade taxes became a major incentive in the development of the havala practices.
By 1960s and 1970s, the multinational corporations and foreign companies that operated in the Sub-continent needed to bribe politicians and bureaucrats to influence government policies and to secure lucrative contracts. The havala system came to their help in making illegal payments in the form of bribes, commissions, kickbacks etc. to those who mattered, in promotion of their interests. Some foreign entities also used the system for under- and over- invoicing like local business houses.

After the Arab-Israel War of 1973, the Arab oil-producing countries made swift increases in the price of crude oil. In the bonanza that followed, a large number of skilled and unskilled workers from South Asia found jobs in construction and other sectors in the Arab world. These workers very much preferred to send their earnings home through havala, which gave great boost to the system.
During early 1980s, Pakistan government announced that remittances from foreign countries that came through banking channels would be immune from inquiry or scrutiny for taxation purpose.
Instead of discouraging havala, this facility promoted the system because an unscrupulous businessman or a Drug Baron would deposit a certain untaxed and/or proceeds of drugs consignment with the havala dealer, who would, in turn then arrange for remittance of equivalent amount from Dubai in the name of that businessman or Drug Baron or his nominee through normal banking channel on payment of about 4 to 5 percent charges for the service.
The remittance received by the businessman/Drug Baron would not be scrutinized even if invested in business or used for purchasing some property. In this manner a businessman/Drug Baron would whiten his black income for a nominal charge thereby evading higher tax rate and laundering the proceeds from smuggling of drugs.

Due to its relaxed laws concerning investment and transfer of money, Dubai has become an attraction for havala dealers. Since under the policy of deregulation Pakistan government has permitted carrying of an amount not exceeding $10,000 to a foreign country without any restriction, the transfer of money through carriers by airways has become a daily feature. The havala brokers send dollars and other currencies like pounds, UAE dirhams and Saudi, Omani and Qatari riyals in the sums equivalent to $ 10,000 or less through carriers via low-fare airlines like Aero-Asia and Shaheen.
Until quite recently the carriers were paid ½ percent of the amount they transferred to Dubai; now the rate has fallen to ¼ percent. If the carrier is able to invest his own money, he can earn considerably more.

As stated earlier, in South Asia, the havala system developed during the partition of the Subcontinent into India and Pakistan when illegal money transfers were required due to migration of population between the two countries. In the Middle East, although the practice was there under local conditions, the Afghans who indulged in narcotics trade, particularly during the Afghanistan war, popularized it. Presently havala transfers run into billions of dollars, because due to convenience, often even legally earned money is transferred through this source.

B.W. Kumar, an Indian analyst, has identified several purposes for which this system is used:

1. Tax evasion.
2. Capital flight due to uncertain political, economic or cultural conditions.
3. Smuggling and evasion of exchange control regulations.
4. Transfer of funds acquired by corrupt politicians and government officers usually in major international deals; for example purchase of aircrafts, ships, arms or project contracts.
5. Securities transactions.
6. Transfer of funds acquired by fraud/ thefts.
7. Drug trafficking, organized crime, gunrunning.
8. Undercover activities of intelligence agencies, clandestine operations including supporting terrorist outfits.
9. Financial resources received covertly by ethnic, resistance or terrorist groups.
10. Payments to politicians, political parties, media men, lobbyists etc.
11. Under invoicing and over-invoicing.

Kumar has rightly concluded:

“Parallel banking was born because there was a need to be filled. Havala (underground banking) will cease to exist when smuggling, drug trafficking, tax evasion and black money cease to exist. This will never happen so long as the demand for secret money exists.”

The acceptability of havala system can be gauged from the fact that according to an estimate nearly $ 2.5 to $ 3 billion used to come to Pakistan through havala as compared to $ 1 billion via formal banking system at the time when 9/11 took place.
It is said that in Pakistan alone there are more than 1,000 havala agents. Amongst the unregulated financial institutions, two namely Al Taqwa and Al Barakat have been suspected by the US State Department of having links with Al-Qaeda. (Rohan Gunaratna, p.63).

Another system of money transfer akin to havala in some respects is the ‘Black Market Peso Exchange System’, mostly used by drug dealers but also availed by terrorists to transfer funds earned through narcotics trade.
Under this system a terrorist organization receives the peso equivalent in its account in a country, through a broker after the sale of drugs owned by that terrorist organization by the broker’s partner, for dollars in another country. In simple language drugs are sold in one country and the payment by the terrorist organization is received in another.

The terrorist organizations also depend on moneychangers for transfer of funds. The moneychangers usually have ordinary bank accounts in many countries. Tempted by the chances of making good profit, they indulge in criminal practices and serve the interests of organized crime and terrorist organizations.

Another method of money transfer is through individual carriers or couriers. Although this method is slow, some terrorist organizations consider it relatively safe for their purpose. Much depends on the amount to be transferred and the country to which it is to be transferred. Al-Qaeda is said to employ individual carriers some times even transferring large amounts and that is why it is quite difficult to destroy Al-Qaeda finances.

A very good example of collaboration between organized crime and terrorist organizations is that of Ibrahim Dawood, who has been enlisted as a terrorist by the United States for financing attacks in Indian Territory by the Lashkar-i-Taiba and for involvement in large-scale shipment of narcotics to the U.K. and Western Europe. Ibrahim Dawood is also suspected of having shared his smuggling routes in South Asia, the Middle East and Africa with Al-Qaeda network for financial benefits. It is no more a secret that he has been working for Pakistan’s I.S.I., also.

Measures to Combat Money Transfer

As early as 17 December 1996, the UN General Assembly had adopted a resolution that called upon all states “to take steps to prevent and counteract, through appropriate domestic measures, the financing of terrorists and terrorist organizations, whether such financing is direct or indirect through organizations which also have or claim to have charitable, social or cultural goals or which are also engaged in unlawful activities such as illicit arms trafficking, drug dealing and racketeering, including the exploitation of persons for purposes of funding terrorist activities, and in particular to consider, where appropriate, adopting regulatory measures to prevent and counteract movement of funds suspected to be intended for terrorist purposes without impending in any way the freedom of legitimate capital movements and to intensify the exchange of information concerning international movement of such funds.” In 1999 was finalized UN Convention for the Suppression of the Financing of Terrorism and in 2000 UN Convention Against Transnational Organized Crime.

After 9/11 the international community realized the importance of taking immediate measures to combat terror finance as recommended by the United Nations. The high level representatives of the Group of 20 countries (G-20) decided in their talks held in Ottawa to take the following measures:

1. Freeze the assets of ‘terrorist organizations’ and deny them access to international financial system.
2. Inform the world about the terrorist whose assets were frozen and the worth of such assets.
3. Ratify the UN Convention for the Suppression of the Financing of Terrorism (1999) and the UN Convention Against Transnational Organized Crime (2000).
4. Share intelligence and information on terror finance.
5. Assist the countries that could not afford to enforce anti-terrorist investigative system.

The Group of 20 countries accounted for 88% of global economic output and 60% of the world’s poor population. (Website: Mark Bourrie, “Targeting Terrorists War Chests,” Asia Times).

On the occasion of the Ottawa Conference the Joint Ministerial Committee of the Boards of Governors of the World Bank and International Monetary Fund expressed the commitment of the two institutions to “help countries identify and address abuses such as money laundering and terrorist financing.” On the other hand, the Financial Action Task Force (FATF) of OECD, which originally dealt with money laundering only, was activated to combat terror funding also.

Since then the banking laws in most countries have been suitably changed to bind the commercial banks to know who their customers are and to report to the respective governments about suspicious accounts and transactions. Some largest banks of the world, including Citi-group, Bank of America and J P Morgan, have worked on the idea of creating their own investigating body, Regulatory Data Corp (RDC). Although extraordinarily large transfers are to be reported to the governments by the banks, the problem is that the terrorist organizations can split large transfers into several small ones to evade suspicion. Besides most terrorist acts can simply be performed by small amounts of money, say between $ 50,000 to $ 1,00,000 and are, therefore, extremely difficult to detect.

The report of the General Accounting Office, the investigating arm of US Congress, issued in December 2003, says that the Internal Revenue Service has failed to develop a formal plan for sharing financial information with state authorities about charities under investigation. It also laments that the Treasury and Justice departments have lagged behind a year in developing a plan for attacking money laundering and dealing with issues like the use of black-market gems and gold by the terrorists. (Eric Lichtblau and Timothy l. O’Brien, “Efforts to Fight Terror Financing Reported to Lag,” The New York Times, 12 December 2003)

The General Accounting Office has recommended that the FBI work with other government agencies to collect and analyze information about alternative financing mechanism by the terrorists.

Although the US authorities have continued to investigate from suspected people within the country and overseas, they are finding it difficult to gain a clear understanding of innovative methods ____ like laundering money by selling cigarettes and household appliances on the black market or using baby formula _____ developed by the terrorists to move money. That terrorists are able to provide resources for their missions is amply proved by attacks at different places for example recent ones in Pakistan, Saudi Arabia and Turkey.

Nevertheless, the Federal Bureau of Investigation, the Department of Homeland Security and the Treasury Department have committed more agents to trace the terrorist resources. Some high profile successes and arrests have been made in recent months. Presently the US authorities are concentrating on Muslim charities and organizations in particular those operating in Northern Virginia. Reportedly the Department of Homeland Security has identified some $100 million in the New York City and New Jersey that were transferred through non-banking channels, like havala system, to countries suspected of having links with terrorist groups.

In its 16 January 2004 news release, the U.S. Treasury Department has enumerated, inter-alia, the following measures that have been accomplished:

1. 1,447 accounts, containing more than $ 139.1 million in assets, frozen worldwide___ including $ 36.7 million in the United States.
2. $ 64 million in additional terrorist related assets seized by authorities globally.
3. 345 individuals and organizations listed as Specially Designated Global Terrorists (SDGTS)
4. Over 200 countries and jurisdictions have expressed their support in the financial war on terror.
5. 173 countries have issued blocking orders freezing terrorist assets.
6. More than 100 countries have passed new laws strengthening their safeguards against terrorist financing.
7. 84 countries have established Financial Intelligence Units to share information on terrorist financing.
8. The U.N. Security Council has approved Resolutions 1373 and 1455 that compel action by member states to combat terrorist financing.

The Bush Administration has decided to increase the funding of the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) by 12.7 percent in the financial year 2005. Presently FinCEN has a budget of $ 57.2 million; if the contemplated increase were approved, its budget would be $ 64.5 million. FinCEN is said to be in the forefront of the U.S. efforts to check the flow of money to terrorist organizations. With the proposed increase in budget, it plans to upgrade its technology and hire new personnel to combat money laundering and related crimes.

Another country that appears to be very active in combating terror finance is no doubt Saudi Arabia, for it has to compensate for the past neglect. It has reformed its internal security apparatus and conducted a detailed review of Saudi- based companies and charities operating in Pakistan and Central Asia.
The Saudi government has established a High Commission for the Oversight of Charities with a view to introduce financial control mechanism and to conduct audit. It has also set up what is called Higher Saudi Association for Relief and Charity to oversee the distribution of donations and to ensure that they are provided to the needy.
The Saudi government has frozen the funds and financial assets of the Taliban as required by the UN Security Council Resolution 1267. The Saudi Banks have taken measures to identify and freeze all assets belonging to terrorist suspects and entities as per the list issued by the United States.
Saudi Arabia has joined hands with the Finance Ministers and Central Bank Governors of the G-20 to formulate an aggressive plan to rout out and freeze terrorist assets worldwide. There is now greater coordination between the Saudi Arabian Monetary Authority (SAMA) and other banking supervisory authorities and law enforcement agencies, including foreign ones.
The Saudi government has provided a list of 750 people, including 214 Saudi nationals, to Interpol for arrest. A number of these people are suspected of involvement in money laundering, drug trafficking and terror-related activities. A very laudable achievement is helping in identification of more than 50 shell companies, located in the Middle East, Europe, Asia and the Caribbean, that Osama Bin Laden used to transfer money.

Conclusion

Terrorism is a historical phenomenon but it has acquired new dimensions in the present day world. Depending upon the nature of its objectives, the financiers of terrorism can be identified. The efforts of international community, notably the United States, have reduced the instances of money transfer for terrorist purposes but have failed to completely curb the practices. There is a need to make more concentrated efforts under the auspices of the United Nations at global level to combat terrorism. Simultaneously, it is far more important that the root cause of terrorism i.e., injustice in international political and economic system, is addressed.
To make the world safe, it is imperative that international disputes are resolved in a fair and just manner. The World Bank and IMF must consider measures to reduce poverty and consequent social chaos that is prevalent in many countries.

The focus of the Western countries is on what may be referred to as Islamic terrorism. The origin of this brand of terrorism can be traced to the United States’ double standards and Israel’s arrogance and rogue behavior in the Middle East. Without a just and peaceful resolution of the Palestinian dispute and withdrawal of the United States forces from Muslim lands no one will be able to completely eliminate terrorism or fully plug the sources of its finances. In this regard Bin Laden’s views expressed in a widely distributed seminal document entitled Join the Caravan reflect the position of the Islamite:

“When the enemy enters the land of the Muslims, jihad becomes individually obligatory, according to all the jurists, mufassirin and muhaddithin . . . When jihad becomes obligatory, no permission of parents is required . . .. Donating money does not exempt a person from bodily jihad, no matter how great the amount of money given. . jihad is the obligation of a lifetime. . . .Jihad is currently individually obligatory, in person and by wealth, in every place that the disbelievers have occupied. It remains obligatory continuously until every piece of land that was once Islamic is regained.”
(Quoted in Rohan Gunaratna, p.87)

Posted: www.newscentralasia.com

Pen Name: AMICUS.

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