In their presentations and submissions to the Committee, witnesses discussed the costs associated with acts of terrorism and with the operations of terrorist organizations. As well, they commented on the various sources of revenue for terrorists and terrorist organizations, and the methods they use to transfer funds.

A. Costs

According to the Committee’s witnesses, the amounts required to finance terrorist attacks are highly variable. Matthew Levitt, who made a submission to the Committee as an individual, highlighted that the 11 September 2001 attacks on the World Trade Center in New York cost an estimated US$400,000 to US$500,000, and involved years of planning and dozens of people. In his submission to the Committee as an individual, Yee‑Kuang Heng stated that the 2004 Madrid bombings cost an estimated US$60,000, and that more recent terrorist incidents – such as the Charlie Hebdo attacks in France and the October 2014 shooting in Ottawa – required relatively smaller amounts. According to Matthew Levitt’s submission, one of the perpetrators of the Charlie Hebdo attacks funded the attack by obtaining a €6,000 loan.

Matthew Levitt’s submission to the Committee also noted that individuals who travel to join, or fight for, a terrorist organization require small amounts for travel, sometimes just the cost of airfare. In his submission, he also stated that individuals sometimes use petty crime and drug trafficking to pay for this airfare.

In speaking about the costs of financing a terrorist organization’s operations, MNP LLP and the Foundation for Defense of Democracies indicated that, although single acts of terrorism are inexpensive, maintaining a terrorist organization includes the financing of such activities as radicalizing individuals, operating quasi-governments, bribing individuals, and paying for salaries, transportation and safe houses.

B. Sources of Revenue and Methods to Transfer Funds

According to the Committee’s witnesses and submissions, sources of revenue for terrorists and terrorist organizations range from income legitimately obtained to complex funding models involving businesses, charities and supportive sovereign states. Various methods of transferring such revenue were also identified, such as through charities, shell companies, underground money transfer operations and electronic currencies.

1. Legitimate and Illegitimate Sources of Revenue

The Committee was told that terrorism can be funded through legitimate and illegitimate means. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) highlighted that funding for terrorism can be obtained globally, and can involve both legitimate and illegitimate sources; as well, Canada can be both a source of terrorist financing and a conduit for the transfer of funds. Furthermore, the Royal Canadian Mounted Police (RCMP) said that terrorist financing can involve extortion, fraud, theft and the use of illegitimate charities, and that individuals may finance terrorist activities by legitimately raising money on their own behalf to travel abroad or to purchase materials for terrorist attacks. For example, according to Matthew Levitt’s submission to the Committee, the October 2014 attacker in Ottawa worked in Alberta’s oil sector to raise money for his attempted travel to Syria.

In speaking about partnerships between terrorists and individuals involved with organized crime, Haras Rafiq – who appeared as an individual – noted that terrorists have to work in partnership with these individuals in order to sell oil and antiquities on the black market, and engage in drug trafficking, racketeering and kidnapping. He highlighted that terrorist groups are significantly involved in the drug trade, and use smuggling routes in South America. Similarly, the Clement Advisory Group stated that evidence suggests that organized crime groups and terrorist groups are collaborating in the raising of revenue.

Regarding the link between money laundering and terrorist financing, the Clement Advisory Group’s submission to the Committee indicated that, although money laundering and terrorist financing are distinct financial crimes, those who finance terrorism engage in money laundering to generate revenue.

2. Funding Models of the Islamic State of Iraq and the Levant and other Terrorist Organizations

According to the Committee’s witnesses, terrorist organizations have developed complex financing models to fund their operations. The Canadian Security Intelligence Service (CSIS) stated that terrorist groups obtain and transfer funds using global financial systems, including those that are online. It also said that the Islamic State of Iraq and the Levant (ISIL) raises funds through activities in Syria and Iraq; these activities include selling oil on the black market, taking over banks, extorting individuals, kidnapping people, taxing economic activity in areas it controls, smuggling and receiving funds from individual donors. In CSIS’s view, these diverse fundraising methods and complex financing networks make it difficult to investigate terrorist financing and to enforce related laws.

Loretta Napoleoni, who appeared as an individual, mentioned that ISIL’s funding is internal and its funding model includes: controlling regions that have strategic resources and are experiencing war and political anarchy; participating with the local population in joint ventures, such as the smuggling of oil; and taxing the use of critical infrastructure, such as electricity, water and the judiciary system. She noted that this funding model is used to raise most of ISIL’s revenue.

The Foundation for Defense of Democracies noted that ISIL makes between $1 million and $2 million daily by selling oil from refineries it controls in Syria and Iraq to buyers in Turkey, taxing the sale of goods and antiquities, and requiring businesses to pay fees for electricity.

According to the RAND Corporation, disrupting ISIL is a challenge for western countries because the organization raises most of its funding from the territories that it controls. It indicated that ISIL has modest operating costs; most of its costs are associated with operating its police state and paying wages, which are about $500 monthly per person.

Regarding the importance of oil to ISIL’s revenue, the RAND Corporation highlighted that the biggest success of the international coalition to counter ISIL in disrupting ISIL’s financing occurred when air strikes on the organization’s oil infrastructure significantly reduced oil extraction; in fall 2014, oil extraction was as little as 5% of the extraction rate in summer 2014, which was a peak. It found that, with declining oil prices and reduced oil extraction, ISIL’s oil revenue had fallen to about $2 million per week in May 2015.

Martin Rudner, who appeared as an individual, mentioned that one reason why the Organization of the Petroleum Exporting Countries did not reduce oil production was to maintain the price of crude oil and thereby reduce ISIL’s revenue.

According to Bill Tupman, who appeared as an individual, governments should identify where ISIL’s oil is being sold, track the oil when it is in transit and prevent the proceeds of its sale from being used by ISIL. He commented on ISIL’s oil being transported through Turkey and by tankers in the Black Sea to Romania and refineries owned by organized crime organizations in Eastern Europe.

The Royal United Services Institute said that it believes that smuggling routes for oil have existed in the Middle East since the 1990s, when sanctions were imposed on the Saddam Hussein regime; it now believes that the Assad regime in Syria is purchasing oil from ISIL.

In highlighting terrorist organizations’ trade in goods other than oil, the Foundation for Defense of Democracies pointed out that Boko Haram controls the importation of goods into Nigeria and parts of neighbouring countries, and taxes the trade in fish. It also said that, before charcoal exports from Somalia were banned by the United Nations (UN) Security Council, al-Shabab was earning $75 million to $100 million yearly through charcoal sales. It stated that local businesses are negatively affected when violent extremists control territories, as these businesses are subjected to excessive taxation and intimidation; these local business people may be potential allies in fighting terrorist organizations. The Royal United Services Institute emphasized that it is difficult to stop trade with bordering regions of a territory that is controlled by a terrorist organization, and referenced the ineffectiveness of UN Security Council resolutions in preventing trade in charcoal by al-Shabab.

According to Loretta Napoleoni, war or military intervention is not the solution to preventing terrorist organizations from raising revenue. In her view, residents in areas that border territories occupied by ISIL and who trade with the Islamic State should be provided with an alternative to trading with ISIL, such as through improving economic conditions in these areas.

The RAND Corporation advocated new and ongoing efforts to disrupt terrorist organizations’ internal revenue-generating capacity, including through the creation of local and regional security forces. It also proposed that operations against ISIL should include targeting the organization’s administrators and the financial facilitators who collect and distribute ISIL’s revenue. Bill Tupman highlighted that the accountancy profession is auditing businesses with a view to facilitating the collection of a revenue tax to finance terrorist organizations, such as Al-Qaida.

3. Charities

The Committee was informed that charities are used to raise and transfer funds for terrorist financing purposes. Haras Rafiq commented that a number of British charities belong to the Muslim Brotherhood network. In his opinion, non-governmental entities, charities and other organizations fund “strategic terrorism” through shell companies, some of which are involved in illegal activities. He suggested that examining the ideological values of the directors and trustees of organizations assists in identifying those who are involved in terrorist financing. The Foundation for Defense of Democracies proposed that a discussion is needed about greater transparency in public registers, as transparency would help to identify owners of shell companies and the beneficiaries of charities.

In the view of Edwin Black, who appeared as an individual and has studied international charitable organizations that he believed are working directly or indirectly with terrorist organizations, it is difficult to trace the funds that such organizations receive. He provided the example of the Union of Good charity, which is affiliated with Hamas. Similarly, Matthew Levitt’s submission to the Committee contained examples of charities in other countries with links to terrorism, including the Muslim Charities Forum in the United Kingdom and Pearl of Hope in France.

According to MNP LLP, charities are commonly used to fund terrorism because it is difficult to determine the types of transactions that are normal for a charity. It also stated that, as the amount donated to charities is variable over time, it is difficult for charities regulators and financial institutions to determine suspicious transactions.

4. Kidnapping and Smuggling

According to the Committee’s witnesses, kidnapping and smuggling are two criminal methods commonly used by terrorist organizations to raise funds. The Foundation for Defense of Democracies said that, since 2008, Al-Qaida in the Islamic Maghreb has received more than $90 million from governments in exchange for the release of hostages. It mentioned that other terrorist groups are involved in selling antiquities, robbing banks, stealing military equipment, threatening farmers in order to obtain livestock and food, and trading illegally in wildlife. As well, the Foundation for Defense of Democracies observed that terrorist groups choose their kidnapping targets based on nationality, as some governments are willing to pay a ransom; Canada and the United States have policies against paying for the release of hostages. It also said that the global concern about endangered species may facilitate the application of stronger economic sanctions against those who traffic in endangered wildlife.

Regarding extortion and the smuggling of cigarettes, Christian Leuprecht – who made a submission to the Committee as an individual – suggested that Mokhtar Belmokhtar is thought to have smuggled cigarettes to fund the 2013 hostage-taking incident at the Tigantourine gas facility in Algeria, and the kidnapping of Canadian diplomats Robert Fowler and Louis Guay in 2008.

5. State Sponsorship

The Committee’s witnesses indicated that terrorist organizations may obtain revenue from sovereign states. According to the Foundation for Defense of Democracies, state-sponsored terrorism has unique challenges, as states have significant resources with which to support the operations of large and sophisticated terrorist organizations through the provision of training, weapons and equipment within sovereign borders. It mentioned that ISIL receives funds from sovereign states and that, in its opinion, Iran is the state that most actively sponsors terrorism; it sends hundreds of millions of dollars annually to terrorist groups, such as Hezbollah, Hamas and Al-Qaida.

Bill Tupman and Edwin Black remarked that terrorist organizations and their activities are state-funded. Edwin Black also claimed that the Palestinian Authority has financed terrorism in Israel and other countries through payments to the families of martyrs of suicide attacks and prisoners captured in relation to terrorist activities; the United States, the European Union and Qatar are the sources of those funds.

6. Wealthy Supporters

According to the Committee’s witnesses, wealthy donors in certain regions have historically been a source of funds for terrorist organizations. The Foundation for Defense of Democracies noted that wealthy donors to terrorists and terrorist organizations are prevalent in the Persian Gulf states, particularly Qatar and Kuwait. It suggested that Canada can use the Persian Gulf states’ reliance on North American military support to pressure these states to arrest individuals who finance terrorism. In its view, Canada and the United States should track key facilitators of terrorist financing, and should educate decision makers at social media fora about instances in which their platforms are being used for illegal activities.

Martin Rudner commented that wealthy donors to terrorists and terrorist organizations reside in Saudi Arabia, Kuwait, Qatar and the United Arab Emirates. He also mentioned that radical mosques were originally funded by Saudi Arabian sources but that, in the past five years, the Saudi Arabian government has focused on halting this funding.

Haras Rafiq explained that, in the past, terrorists used to collect funds from wealthy donors in certain Middle Eastern countries; some donors in these countries have stopped donating due to threats to their reputation in their own countries.

7. Other Sources of Funding and Methods to Transfer Funds

In addition to the revenue sources mentioned earlier, witnesses told the Committee that terrorist organizations may use shell companies and new technologies to raise funds; as well, they may be supported by diaspora communities. Martin Rudner stated that shell companies can raise funds in Canada and transfer them to terrorist organizations in other countries. He also noted that Hezbollah is known to use shell companies to raise funds and transfer them to terrorist organizations and to the families of Hezbollah supporters killed in terrorist attacks. The Clement Advisory Group’s submission to the Committee highlighted that, as a result of sanctions, terrorists and terrorist organizations have used shell companies to hide beneficial ownership, and have used correspondent banking and wire transfers to move funds.

Martin Rudner commented on the influx of funds into Canada from abroad to fund terrorist activities, and pointed out that prepaid travel payment cards have been used to fund foreign fighters and other terrorist operatives, and that funding from outside Canada has been provided for extremist clergy, terrorist network sleeper cells, and activities targeting Canada’s oil and gas sector. In its submission to the Committee, the Clement Advisory Group mentioned that ISIL raises funds by selling international prepaid phone cards to supporters.

The Clement Advisory Group’s submission to the Committee indicated that economic sanctions against Iran resulted in Canadian banks closing money services businesses that had Iranian clients, and funds from Iran then began to flow through underground money transfer operations. It suggested that these funds may be related to terrorist financing, and proposed that money services businesses should be allowed to accept funds from sanctioned countries; in this way, the funds can be monitored in a way that cannot occur when they are transferred through underground money transfer operations.

The Royal United Services Institute indicated that terrorist organizations can receive funds from members of diaspora communities, and Loretta Napoleoni supported more research about the funds sent by diaspora communities to their country of origin; this research could help to identify the legal framework that is needed to ensure that such funds are not used for terrorist purposes.

Loretta Napoleoni also highlighted that, in the past, Hamas used electronic currencies to transfer small amounts. In her view, individuals who regularly send money to families and friends should be profiled so that transfers for terrorist purposes may be identified.