Al-Qaeda’s Cashflow: The Impact of Financing on AQ’s Capabilities

After September 11th, 2001, the American public was introduced to what has become the poster child for international terrorism, Al-Qaeda. With the deaths of approximately 3,000 American civilians and first responders, Osama bin-Laden’s terrorist network showcased its devastating capabilities to the world. This was, however, not the beginning of Al-Qaeda and its work across the world and it may have been the beginning of its downfall. This aside, since Al-Qaeda’s meager emergence from the Mujahedeen of 1980s Afghanistan, the funding strategies of the group have morphed in a variety of ways and these changing tactics and strategies have greatly influenced the operational capabilities of Al-Qaeda central and eventually its offshoot branches across the Middle East and North Africa. Essentially, Al-Qaeda’s effective movement of money pre-9/11 enabled it to fund a variety of ventures but counterterrorist financing strategies have been able to disrupt a significant portion of this funding. The effect on Al-Qaeda’s operational abilities, however, has been limited by Al-Qaeda’s reduced commitments and altered strategy. Al-Qaeda has proven to be the quintessential example of an organization evolving to confront new challenges and assaults from the counterterrorism regime in the west. Through each of its forms of existence, the terrorist network has maintained some unique and some well-known forms of financing and these changing methods and sources have contributed to the varying strategies we see today from the various branches in which Al-Qaeda currently exists. The financing operations for Al-Qaeda are clearly instrumental to understanding the organizations capabilities and future ambitions. Osama bin-Laden has repeatedly made it clear that money is an integral part of his war on the west and this has been reflected throughout the history of Al-Qaeda.

The Base, the English name for Al-Qaeda, was established sometime in during the late 1980s from the collection of foreign Arab fighters who expelled the Soviet Union from Afghanistan in 1989. These Mujahedeen, or holy warriors, were collected by the Saudi Osama bin-Laden to comprise what would become the base for Jihad around the world. Al-Qaeda was created as an army of traveling warriors who would join battles that pit Muslim forces against any non-Muslim forces. Bin-Laden, already a wealthy man from a wealthy family, had seen firsthand how important funding was to effective military operations. A windfall of funds to the Arab Mujahedeen in Afghanistan came from Saudi donors, charities, bin-Laden’s personal coffers, and covert CIA support. The sheer amount of financial support (and arguably American Stinger missiles) was instrumental in turning the tide of the war in favor of the holy warriors. This undoubtedly convinced bin-Laden of the extreme importance of finances in a holy war and as he planned his next steps after the Afghanistan conflict, he would surely place a great focus on developing an effective funding network for his global jihad. The beginning of Al-Qaeda as a true organization began in Sudan, where bin-Laden traveled after leaving Afghanistan and being expelled from Saudi Arabia. There, with assistance from Islamist ruler Hassan al-Turabi, bin-Laden established a network of infrastructure and service ventures in Sudan and the Balkans, among other places.[1] This was a unique time in the financial history of Al-Qaeda. Bin-Laden, still relatively obscure on the world’s stage, was able to parlay the financial support for Jihad from contacts during the Afghan conflict into very important and generous donors towards the growth of the Al-Qaeda organization. Al-Qaeda’s relatively small footprint made it easier for bin-Laden and his financial operatives to collect donations from both willing and unknowing donors. Even after the Saudi government convinced the bin-Laden family to end Osama’s multi-million annual stipend, Al-Qaeda was able to raise money very efficiently and quickly. From 1989-1996, Al-Qaeda received funds primarily through donations from religious zealots seeking to support a global Jihad as well as other Muslims simply donating to Islamic charities with dubious connections to Al-Qaeda. Prior to 9/11, the CIA estimates that Al-Qaeda required approximately $30 million to support its various operations worldwide. [2] Notably, much of this money came from donations from prominent Saudi religious zealots with the implicit approval of the Saudi government. Al-Qaeda was able to move this money through a variety of means. During its time in Sudan, Al-Qaeda did not need to move money away from its central base of operations frequently. Money from donors was used in Sudan to support training camps and other operational costs. Once bin-Laden was evicted from Sudan in 1996, the most frequently used method of moving money became the Hawaladar system common throughout the Middle East and South Asia.[3] These rather informal money exchange institutions presented counterterrorism operators with a difficult task as they were unregulated and difficult to track. These hawalas as well as the donors and charities that helped fund Al-Qaeda also used the formal financial system, however, Al-Qaeda was never directly involved with the formal banking system and the money being moved would have seemed as legitimate as the donations and hawala transactions that it was a part of. To physically move the money gathered from donations, Al-Qaeda used its own members as couriers in Sudan, Afghanistan, Pakistan, and the Gulf States. The nature of Al-Qaeda’s funding apparatus during the pre-9/11 period allowed the organization to grow, gain a base of support, and foster a corps of dedicated operatives and leaders. Al-Qaeda is not known to have carried out any notable operations while in Sudan, however, using the same framework as the courier money movement system, Al-Qaeda trained and sent fighters and advisors to Somalia after the United States deployed forces to the East African country and Osama bin-Laden issued a fatwa authorizing attacks against western interests. Once bin-Laden moved his operations to Afghanistan, the increased freedom of movement and support from the Taliban allowed Al-Qaeda to become more ambitious. The first major attack by Al-Qaeda occurred in 1998 at the U.S. embassies in Dar Es Salaam, Tanzania and Nairobi, Kenya. The attacks, which killed a combined 223 civilians, are estimated to have cost more than $30,000 to plan and execute.[4] Al-Qaeda was reportedly highly organized and thrifty with how money was spent during this time. Osama bin-Laden had a direct hand in the planning and authorization of attacks. Since Al-Qaeda was still a relatively obscure organization and most western intelligence services were not yet geared toward understanding and combatting Islamic terrorism, bin-Laden and his holy warriors were able to amass large amounts of funds so that even brief interruptions in financing operations would not limit their ability to plan and execute tactical operations. From 1998 to September 12, 2001, Al-Qaeda was able to launch the embassy bombings, the attempted shoe bombing, the successful attack against the USS Cole off the coast of Yemen (an attack that cost an estimated $10,000), as well as the $500,000 9/11 attacks. Most of the funds dedicated to these attacks were gathered from donations around the globe and moved via hawala, courier, as well as ATM cards in the case of the 9/11 attackers once they were in the United States. The highly structured nature of Al-Qaeda’s financial operations up until 9/11 allowed the group to operate as one entity conducting operations worldwide. Bin-Laden’s group was able to pull off a number of very successful operations against the west over a three year period.

The 9/11 attacks placed Al-Qaeda and Osama bin-Laden on the world’s stage. Western intelligence agencies and counterterrorism experts began to focus on how to subvert this highly capable group. With this increased scrutiny and attention, Al-Qaeda’s financing was assailed in a number of ways by western governments. As United States Treasury Secretary Timothy Geithner stated, Al-Qaeda once relied “on a thick rolodex and a simple bank transfer” in order to secure funds for operations against western targets.[5] Since the 9/11 attacks, various government entities have been established to address terrorist financing, including the Office of Terrorism and Financial Intelligence in the U.S. Treasury Department as well as the, while other existing entities, such as the Financial Action Task Force, have refocused their efforts towards Islamist organizations, specifically Al-Qaeda. As far as funding sources for the group, Osama bin-Laden sought to capitalize on the international recognition that the September 11th attacks brought to Al-Qaeda. In a speech on February 14th, 2003, bin-Laden appealed to Muslims worldwide saying that “financial Jihad, likewise, is an obligation today, particularly for those who have the resources…”[6] Like before, much of Al-Qaeda’s funding even post 9/11 consisted of donations from wealthy supporters of the Jihad as well as witting and unwitting donors to Islamic charities around the world. Actions by the western governments how been able to damage many of Al-Qaeda’s funding networks and severely reduce the amounts of money that Al-Qaeda has been able to raise. The organization still is able to collect millions of dollars through financial operations; however, this amount pales in comparison to its pre-9/11 capabilities. This shriveling up of funding avenues for Al-Qaeda has had a two-fold effect. First, the targeting of Al-Qaeda’s financial sources has limiting the effectiveness and intricacy of planned terror attacks. Since 9/11, Al-Qaeda has been declared responsible or claimed responsibility for 67 attacks. Most of these attacks have been rudimentary run-and-gun style attacks or simple bombings in Afghanistan and Pakistan. The only major attacks carried out by Al-Qaeda central have been the Bali bombings, which killed over 100 people, the Limburg tanker attack, and the Djerba mosque bombing, which cost a total of approximately $200,000 to conduct. Thus, over a period of 11 years, the group has conducted the same number of major attacks that it was able to launch in the three years from 1998-2001. Also, many of the smaller attacks that the group has been able to launch would not have required very much funding or support from a central financial apparatus within the organization. This leads to the second effect of the West’s operations against Al-Qaeda’s finances. Since 9/11, Al-Qaeda has devolved from a central organization with a highly structured financial apparatus into a number of semi-autonomous regional branches which have, in the face of differing challenges, developed their own methods of funding operations. This is important in understanding how effective Al-Qaeda can be in the future and how to further address concerns about its current and future capabilities.

Today, Al-Qaeda exists more of a brand name than a centrally organized and capable single organization. In the aftermath of 9/11, the increased focus on terrorist financing led to a number of victories against Al-Qaeda on the funding front. Al-Qaeda’s increasingly difficult funding situation forced the group decentralize into regional branches. The Al-Qaeda Central, made up of Al-Qaeda’s most seasoned leaders such as Osama bin Laden and Ayman Al-Zawahiri, found itself in dire straits in terms of financial support. Unusual methods of attempting to raise funds, such as charging conscripts for their own training, suggest that Al-Qaeda central had lost much of the financial support it received before 9/11.[7] Al-Qaeda Central has maintained solicitation of donations and use of Islamic charities as a primary source of funding. They have also shifted towards requesting and receiving support from other sympathetic groups such as the Lashkar-e-Taiba in Pakistan as well as other Al-Qaeda branches that have been more successful in developing their own funding apparatuses.[8] Essentially, Al-Qaeda Central’s financial difficulties have caused a shift in focus from actual planning and execution of attacks to merely acting as the firebrand and symbol of global Jihad. Al-Qaeda Central has had little involvement in any major terrorist operation against Western interests in recent years.

As Al-Qaeda decentralized into regional branches, one of the areas considered paramount to the success of the global jihad was the Arabian Peninsula. Comprised of Saudi Arabia, a source of major funding for Al-Qaeda, and the Arabian Gulf states, sources of eager recruits and mujahedeen, the Arabian Peninsula became home to AQ-AP (Al-Qaeda in the Arabian Peninsula). AQAP is very similar to Al-Qaeda Central in a variety of ways. This branch carries many of the same ideological goals as AQ-Central due to AQAP’s leadership coming from the same area that spawned Osama bin-Laden and much of AQ-Central’s lower leadership. AQAP maintains a similar hierarchical structure with compartmentalization to limit the effects of arrests of members. Another similarity between AQ-Central and AQAP is that they both rely heavily on funding from donations and support from other organizations. As AQAP is geographically located on the Arabian Peninsula, closer to sources of funding, it is able to move money from wealthy Saudi donors much more easily than AQ-Central. These Saudi donors provide financial support both in genuine support of a global Jihad and also to deter terrorist attacks taking place in Saudi territory.[9] AQAP is known to use this funding for the operation of a number of terrorist training camps on the peninsula. The group has also been responsible for a number of foiled plots to attack Western targets including the 2009 Christmas Day bombing, the 2010 Times Square bombing, as well as a 2012 plot to blow up an airliner headed towards the United States. While each of these plots was successfully foiled, AQAP has also conducted a number of successful attacks against Western interests in the Arabian Peninsula including attacks against U.S., British, and Italian embassies, the bombing of a Japanese tanker, and the targeting of Korean and Belgian tourists in the area.[10] Receiving funding in order to conduct operations such as these has been much less of a problem for AQAP than it has for AQ-Central. As a result of the more successful fundraising of AQAP, they have been able to maintain a focusing on the actual planning and execution of attacks. Their more fruitful financing scheme allows them to be a much more threatening and capable group. Fortunately, U.S. intelligence and security have been able to stop plots directed against the American homeland.

Another of Al-Qaeda’s offshoots, Al-Qaeda in Iraq, emerged from the post-9/11 decentralization of Osama bin-Laden’s global jihadist organization. It’s important to note that AQI is the group that is most dedicated to conducting a regional jihad as opposed to attacking Western targets. Originally composed of Sunni fighters dedicated to removing American forces from Iraq, AQI has shifted its focus towards targeting Shiite targets in Iraq in the hopes of deposing the Shiite Iraqi Prime Minister Nouri al-Maliki. As far as funding, AQI follows a different trend than the previously mentioned branches of Al-Qaeda. While AQI receives funding from donors in Saudi Arabia as well as Syria and Jordan, AQI has also looked to extortions, kidnapping, and smuggling in order to provide financial support for operations. It has also relied on members own personal financial holdings as a form of support.[11] While crime as a source of funding has proven successful enough for AQI to maintain day-to-day operations, these funding methods have limited the sophistication and magnitude of operations that AQI is capable of. Even so, AQI has managed to carry out dozens of small-scale attacks against targets in Iraq killing hundreds in the process. According to AQI’s goals, which prescribe a regional Jihad against the Shiite leadership, the group’s funding strategy has allowed it to remain operationally effective despite Western counterterrorist financing efforts.

The group geographically farthest from AQ-Central is also the group that has altered its funding strategy the most in order to remain viable, Al-Qaeda in the Islamic Maghreb. As a result, AQIM is often considered the wealthiest branch of Al-Qaeda. AQIM was born from the Salafist Group for Preaching and Combat (GSPC) after it broke away from the Algerian Insurgent group known as the Armed Islamic Group (GIA). In searching for more support and seeking to broaden its goals beyond Algeria, the GSPC established a relationship with Ayman al-Zawahiri, then second-in-command of Al-Qaeda, and eventually became the AQIM branch. Operating out of North Africa, AQIM maintains regional goals, such as establishing control over territories like Mali, and intentions to eventually turn their sights towards Europe just across the Mediterranean. Al-Qaeda in the Islamic Maghreb is unique in that it obtains significant portions of its funding from criminal activities rather than simple donations. AQIM has become deeply involved in various criminal networks throughout North Africa. Much of the group’s funding is derived from kidnappings for ransom, trafficking of contraband, including arms, cigarettes, etc., and drug trade. AQIM regularly kidnaps Western tourists and holds them for ransom. European countries have been keen to pay the ransoms which usually stand in the millions of dollars. The fall of Muammar Qadhafi in Libya also created a windfall of weapons both for use by AQIM and its affiliates as well as for use in trafficking as a means to raise funds. The group has also established ties to other terrorist groups including the FARC in Colombia as a means of entering into the international drug trafficking arena. All of these methods of fund-raising have been vastly more successful in collecting money than the methods used by the other branches of Al-Qaeda. In fact, Kidnapping For Ransom is considered “the most significant terrorist financing threat today” by United States Department of Treasury.[12] The combination of the release of Qadhafi’s weapons and the overall effectiveness of AQIM’s fund-raising strategy has allowed the organization to not only carry out operations against Western targets in the region, but to also conduct semi-conventional warfare in the effort of seizing Malian territory. AQIM has been the most active branch of Al-Qaeda over the past two years, conducting operations across North Africa against the regional governments. Prior to French intervention, AQIM, with the help of Tuareg rebels, was able to seize control of Northern Mali and were a serious threat to capture all of the country. Today, AQIM remains the most dangerous branch of Al-Qaeda due in large part to the ease with which it is able to raise funds.

Although the common rhetoric in Washington is that Al-Qaeda is on the run and badly beaten, a simplistic view such as this would be better suited in describing efforts against Al-Qaeda pre-9/11. Today, the group has broken into various branches, each with its own strategies and advantages. The focus on counterterrorist financing has produced tangible effects in limiting the capabilities of Al-Qaeda Central, however, the 3 other major branches have been able to weather these efforts and continue to conduct operations. This is because they each rely less on the movement of money through easily monitored sources. AQAP operates in the region where most donor money originates, thus moving the money is physically much easier and the lines of movement are much shorter. AQI conducts small-scale operations in country. This does not require much funding and what funding is gathered originates in-country as well. AQIM, Al-Qaeda’s wealthiest branch, has delved into criminal networks across North Africa. These revenue sources are both lucrative and unmonitored. Thus, AQIM has been able to operate at a much higher level of capability and intensity. In fact, AQIM’s preferred choice of attack is the KFR which also produces funds for future operations. As counterterrorist finance efforts have evolved to address the Jihadist threat, the terrorist groups have also evolved. The current stage of evolution seems to be this nexus between criminal organizations and terrorist groups, exemplified by AQIM. If the CTF regime does not evolve to seriously confront this lucrative revenue stream, more groups may begin to engage in it in various areas. The success of AQIM and the lack thereof from AQ-Central shows that financing influences not only capabilities, but also targeting, focus, and to an extent, the ideology of a group, as the windfall of revenue from drug trafficking in Africa seems to have convinced AQIM to focus on acquiring territory to further open trafficking routes. Thus, Al-Qaeda represents a quintessential example of how disrupting terrorist finance networks successfully causes splits in a group, and also how these new groups can evolve to escape the tactics previously used and potentially become more of a threat than the original group.


[6] Osama Bin Laden. Messages To The Worlds. P.203.

[11] Council on Foreign Relations.


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