Understanding Terrorist Financing: Past As Prologue – A Statement By Dr. Rachel Ehrenfeld

By World Anticrime and Antiterrorism Forum, Washington Forum | by Dr. Rachel Ehrenfeld, ACD Director
Tuesday, September 24th, 2002 @ 3:31AM

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Mr. Chairman, members, and distinguished guests, it is my honor to contribute to these discussions on the subject of terrorist financing. I’m here to shed light on the past, with the hope that this prologue of terrorist funding can be used as a tool to hasten its epilogue.

Terrorism is about gaining power through violence, and money is the essential tool to that end. Clearly, disrupting the acquisition of money can help defeat terrorism.

The September 11 attack on the U.S. forced us to look at the intricacies of terrorist funding. Yet, the model of terrorist financing that is slowly being unearthed by international law enforcement is hardly new. In fact, it dates back more than three decades, to the establishment of what has now become the prototype for many of today’s terrorist organizations. That is the Palestine Liberation Organization (PLO).

Understanding the successes of the PLO’s model for funding terror is essential to understanding how other terrorist organizations – especially al Qaeda – currently operate, and how they will grow – unless they are stopped. The PLO was the first and wealthiest of the nationalist terrorist organizations. It has hardly deviated from its fundraising methods over the decades. The PLO has used drug trafficking, arms smuggling, money laundering and counterfeiting to amass a fortune estimated by the British National Criminal Intelligence Services in 1993 at about $10 billion. Its connections with international criminal organizations, drug cartels, other terrorists groups and every rogue state, from Libya, Iran and Iraq, to North Korea and the Sudan, has set the pattern for others to follow. The PLO’s reestablishment as the Palestinian Authority (PA) in 1993 as a result of the Oslo Accords did not impede the organization’s illegal activities. Instead, it enhanced them. Even as the world gave it legitimacy, the PA abused this status to expand its illegal activities.

With the current intifada, the PA has undergone another change, adding jihad to its agenda. As a result, like al Qaeda, the PA has gained even more support financially and politically within the Arab/Muslim world. According to a soon to be published report, in 2001, the first year of the current Intifada, the amount of money officially donated to the PA jumped 60%, from US $555 million to US $1.2 billion.(1)(Gil Feiler, forthcoming report, Info-Prod Research).

(THE PLO MODEL FOR FUNDING TERROR)

Originally, the PLO was established as a nationalist political organization by the Arab League in 1964. It became an international terrorist organization after its takeover in 1969 by Yasser Arafat and his Fatah organization. From the beginning, Arafat believed in armed revolution rather than political negotiations.(2)(James Adams, The Financing of Terror, Simon & Schuster, 1986). Since Arafat took over the reins, the PLO has become the umbrella organization for other Palestinian terrorist entities, such as the Abu Nidal Organization and the Popular Front for the Liberation of Palestine. Arafat seems to have understood early on that the PLO would become the most effective terrorist organization only when it commanded vast financial resources. This apparently was his thinking when he made investments in legal and illegal businesses around the world. The world’s willful blindness to the PLO’s – and later the PA’s – terrorist activities, money laundering, drug trafficking, arms dealing ,and counterfeiting, directly account for the growth and development of radical Muslim organizations that haunt us today.

Often “political priorities,” along with corruption and hypocrisy all over the world, have made illicit funds, including funds for terrorism, easy to launder and to hide. At the forefront of such activities was the PLO — now reconstituted as the Palestinian Authority. Long before the era of globalization, the PLO was already a global terrorist organization. And for decades, it was the richest. As such, it became the prototype for other terrorist organizations.

Historically, the PLO has had nine principal sources of income:
1. Official contributions from Arab states;
2. The Palestinian Liberation Tax Fund, which taxes Palestinians worldwide;
3. Income from legitimate and illegitimate investments;
4. Donations from wealthy Palestinians and international organizations such as the UN and the EU;
5. Extortion: “protection” charges from companies and states not to use terrorist activities against them;
6. Charitable organizations, such as are now used by al-Qeada, Hamas, and Hizballah;
7. Illegal arms deals;
8. Fraud, money laundering, counterfeiting, arms dealing, and other criminal activities, and;
9. Drug trafficking.

The use of illicit drugs as a tool to fund terrorism was developed by the former Soviet Union as part of its unconventional warfare doctrine. The PLO simply adopted this use of the illegal drug trade as an excellent source of funding. Other terrorist organizations, such as the IRA, the Basque ETA, the Colombian FARC, and radical Muslim organizations like Hamas, Hizballah and al-Qeada, have understandably followed suit.

The PLO has a long, sordid, and continuing involvement in narco- terrorism. In the early 1970s, when it operated as a state-within-a-state in Lebanon — much as Al Qaeda later did in Afghanistan — the PLO established the Palestine Martyrs’ Work Society, or SAMED, as its economic arm. SAMED’s commercial connections and shipping company were utilized to traffic drugs. A study published in 1989 estimated that until 1982, when the PLO was expelled from Lebanon, it earned $300 million per year from the narcotics trade — three times more than it collected from supportive Arab regimes.

The official decision to use the drug trade for funding was made under the chairmanship of Yassir Arafat, six months after the PLO was expelled from Lebanon, at a secret emergency session of the Finance Committee in Algiers, in 1983. As stated by Sallah Dabbagh, then PLO treasury chief, “…the entire future of the PLO operation for liberation, may hinge on our exporting more drugs throughout the world.”

For decades, the West has turned a blind eye to this, allowing the PLO to continue operating both legitimate and illegitimate businesses. These ventures, in turn, laundered money for the group and used the revenues to further the PLO’s terrorist agenda. This established a precedent that surely did not escape bin Laden when he set out to create the financial infrastructure of Al Qaeda. Indeed, U.S. and British law enforcement agencies have by now detailed how the al Qaeda organization has also been reaping huge profits from the illicit drug trade.

Why are illegal drugs the terrorists favorite tool? The illegal drug trade is a triple-pronged weapon.

  • First the drug trade helps terrorists to finance their activities, providing the funds necessary for buying weapons and corrupting officials;
  • Second, the drug trade helps to undermine the political institutions, economy and health of the targeted countries; and
  • Third, the drug trade enables the terrorists to highlight the social degeneracy of the people that use them. It enables them to argue the necessity of destroying Western societies and also to recruit new members to their ranks.

The PLO’s traffic in arms and drugs has been assisted by airport- related investments. The PLO owned duty-free stores at the Jomo Kenyatta Airport in Nairobi and the Murtala Mohammad International Airport in Lagos, Nigeria. The PLO also purchased interests in airlines from the Maldives to Nicaragua. These gave it a base for the procurement of forged travel documents and airline tickets, as was documented by the Task Force on Terrorism and Unconventional Warfare in October 1991.(3) (US House of Representatives’ Republican Resource Committee, October 4, 1991).

In 1993, Britain’s National Criminal Intelligence Service (NCIS) issued its first report assessing the “threat and impact by organized/ enterprise crime upon UK interests.” This report included a section on terrorist groups. The report recognized the growing cooperation between international criminal organizations and international terrorist organizations. The report also recognizes the fact that terrorists were using more and more criminal methods to enrich themselves.

The PLO was the most successful of these organizations, and the report describes it as the richest. The brief emphasized that “despite denials to the contrary, it is estimated that they have worldwide assets approaching $8-10 billion USD and an annual income of about $1.5-2 billion. Whilst the target of their attention has been Israel and Israeli interests, their activity has frequently turned to European cities and London has not escaped various outrages often financed and assisted by maverick states such as Libya and Iraq.” It indicated that “the financial centers of London and Frankfurt are, ironically, not only targets, but are used to handle the resources of these groups.”

Almost a decade later, we find that the same activities continue to fund not only the PLO, but also al Qaeda and its related entities. Just last month, U.S. authorities presented evidence that illegal drugs operations within America were funding a host of Middle East terror organizations linked to Palestinian groups and al-Qaeda.

Similarly, like the PLO in Lebanon in the 1970s, al-Qaeda’s move to Afghanistan in the 90s created a state-within-a-state — with disastrous results. According to the UN and U.S. reports, the Taliban’s control over Afghanistan, the biggest heroin producer in the world, provided billions of dollars in drug revenues to fund Al Qaeda’s activities.

(THE PLO’s CONTINUING RELEVANCE)

The fall of the Soviet Union helped the politicization of Islam and gave rise to global terrorist-criminal organizations. These are composed of many factions with different ideologies, but they all share a bedrock determination to undermine America and what it stands for: democracy, tolerance and the free market. The PLO planted the seed of this process. The current threat to the free world posed by the al Qaeda organization and its affiliates can be traced to the world’s earlier willful blindness and self-delusion toward the PLO.

Al-Qaeda has followed the PLO pattern, bringing together rival Shiite and Sunni organizations to carry out its jihad against the West. As you know, the PLO was classified as a terrorist organization from its inception in 1964 until the Oslo Accords in 1993. Yet, throughout this entire time, it continued to receive financial and political support from the Soviet Union and its satellites in Europe, Latin America and Africa, and from members of the Arab League, as well as other Third World countries. This legitimization, and the accompanying financial backing, allowed the PLO not only to continue its terrorism and criminal activities with impunity, but also allowed the organization to fund a world-wide propaganda campaign, win great popularity and increase its influence.

All along, the relationship between the PLO and radical Islamic groups has been interdependent. The rise of radical Islamic movements in the last three decades won popularity because these groups presented themselves as fighting the oppression, corruption, and distortion of social justice by the ruling elites.(4) (Reuven Paz, Targeting Terrorist Financing in the Middle East, October 23, 2000; ICT). The PA leadership exploits arguments of oppression by the U.S. and Israel as an excuse for their continuing violence. At the same time, radical Muslim groups like Hamas, Hizballah and al-Qaeda have adopted the Palestinian banner of defending the Muslim holy sites, to justify their support of the Palestinians and to declare jihad against the U.S. and Israel.

We have learned recently of al-Qaeda’s presence in Lebanon and the Palestinian territories. In August 2000, Israeli raids uncovered a joint venture between Hamas and al-Qaeda in the West Bank, in the form of a bomb-making factory, while Hizballah and the Islamic Jihad continue to provide weapons and training to other Palestinian terror groups. And despite religious differences between the Shiite, Iranian-supported Hizballah, and the Sunni Hamas and al-Qaeda, all three organizations met in Lebanon in March 2002 to coordinate their strategy against the U.S. and Israel. (5)(Ilan Berman, The New Front, National Review Online, July 12, 2002).

The PLO embrace of homicide bombing can be traced to their involvement with the Hizballah attack on the U.S. Marine barracks in Beirut in 1983. Since then, the PLO, now the PA, has adopted homicide bombing as the preferred weapon to destroy as many civilian lives and businesses as possible. The PA, supported by Iraq and hundreds of millions of dollars from Saudi Arabia, continues to fund homicide bombing and incitement against the Israel and the U.S.

In conclusion, the PLO and its successor, the PA, have played an indispensable role in creating the intellectual and operational model for today’s terrorist organizations. Understanding the instruments of the PLO’s success can help us to better identify how Al-Qaeda and other terrorist organizations operate financially., More importantly, it can ensure that history will not repeat itself — unless we let it.

Thank you.

Rachel Ehrenfeld is director of the New York­-based Center for the Study of Corruption and the Rule of Law (www.public­integrity.org), and the author of the forthcoming book Funding Evil: Follow the Money Trail (Bonus Books).


Categories: ACD/EWI Blog, Anti-Corruption, Articles and Presentations on Economic Warfare, Terrorist Financing

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