Terrorist Groups as Entrepreneurs

Extremist groups and non-state actors are gaining enormous influence in crisis zones stretching from Africa across the Middle East all the way to Central Asia. They have reached new levels of efficiency thanks to their close ties to both organized crime and corrupt government structures, networks that in turn serve to highlight the cross-border character of such terror groups.

An equally dangerous aspect of such international networks are the high numbers of foreign fighters, for example those active in Syria on behalf of the so-called Islamic State (ISIS) and those on the move from conflict to conflict. They, too, are an important source of funding and donations and, after their deployment abroad, are more than capable of bringing the potential for violence back to their home countries. It is thus undeniable that Europe has become a key front in the fight against extremism.

The German federal government and Bundestag are currently working intensely to forge further anti-terror laws involving travel restrictions and preventative measures to curtail the financing of terrorism. The debate between political scientists and legal experts is therefore timely.

Louise I. Shelley is a professor at George Mason University in Fairfax, Virginia, where she is the founder and director of theTerrorism, Transnational Crime and Corruption Center. A leading expert on international terrorism and organized crime, she is engaged in global research on illegal networks and their connections. At the DGAP she presented her latest book, Dirty Entanglements: Corruption, Crime, and Terrorism (Cambridge University Press 2014).

Shelley’s book details the extent to which extremist groups today are operating strategically as businesses. They are networked to an unprecedented degree. Shelley deliberately borrows the term “entanglement” from particle physics: systems enter into interactions with other systems that, in turn, alter them. Extremist groups such as ISIS or Boko Haram are also able to draw on business models to secure funding through criminal activities. Shelley compared the Taliban business model, solidly based on the drug trade, to the decidedly more diversified business activities of ISIS. Only about half of ISIS income is derived from oil smuggling; other important sources of income come from cigarette smuggling, trade in counterfeit goods, fake passports, and looted art and antiquities. She noted, for example, that Hezbollah has made vast profits by trading illegal pharmaceuticals such as the amphetamine Captagon.

Of course money is not the only important factor driving the success of extremist groups. Administrative capacity is just as important, as it enables such groups to provide social services or, in areas that have been brought under their control, to take over the roles of the state within societies. A close relationship with corrupt state structures is therefore an important pillar in maintaining power.

For these reasons, Shelley believes that the fight against violent groups of this sort cannot simply be conducted with military means. Far more important is the West’s ability to undertake in-depth network risk analysis as well as its preparedness to put comprehensive counterstrategies into place that take economic aspects into account. A zero-tolerance approach to corrupt governments is equally important.

Professor Ulrich Sieber, one of the leading German criminal law experts, responded to this analysis by commenting on legal changes currently underway in Germany. The director of the Max Planck Institute for Foreign and International Criminal Law in Freiburg and professor in Freiburg and in Munich described the sensitive balancing act involved in incorporating new security law into the forthcoming Act on Monitoring Preparations for Seditious Acts of Violence (known by its German acronym, GVVG). This must take both the security needs of a society exposed to globalized risks (“risk society”) into account while at the same time leaving legal protective mechanisms in place. Such a sweeping challenge relates not only to criminal law but also to intelligence law, police law, and also in extreme cases, martial law.

Sieber noted that the development of preventative criminal law involves the forward displacement of punishability. Attempting to commit a criminal act, to procure related intelligence or material, or to support organized crime networks are already punishable offenses. But it is not possible to make the mere planning of a crime or the everyday activities associated with it into a criminal offense. Sieber noted here the international standards put forward by the United Nations, the EU, and the Financial Action Task Force on Money Laundering (FATF, an intergovernmental body whose secretariat is headquartered at the OECD). While these have some binding force, they nonetheless have little democratic legitimacy. Germany is in the meantime fairly well positioned in terms of implementing international standards, after having encountered problems for a period during FATF-conducted audits.

The current amendment of Germany’s GVVG involves making a punishable offense out of merely of amassing and collecting donations to finance terrorism, in the knowledge that criminal, terrorist actions will be undertaken with the donated money.

The discussion following the presentations largely centered on various activities undertaken by extremist groups, including those that are no longer limited to the criminal realm. Here, the hybrid character of an organization like Hezbollah, for example, makes it especially difficult to determine whether the act of financing involves an intent to support terror. Especially in terms of the civil wars in Syria and Iraq, there is considerable temptation to judge groups like the Kurdish PKK in affirmative terms, as they have had a positive role in the fight against Islamic State (ISIS). Various Kurdish groups, however, are also active in organized crime. As Professor Shelley pointed out, illegal networks can be used for various kinds of smuggling and illegal trade.

The fight against crime, corruption, and terrorism, also involves the personal responsibility of companies engaged in foreign trade, especially where this involves dealings with other companies that operate in the gray area between criminal organizations and corrupt state structures. Participants at the event discussed compliance as a self-monitoring instrument, based on the fundamental principle of “know your customer.” The notion of establishing a list of criminally active, or “taboo,” companies was dismissed as non-productive, since the ban on such companies can be easily circumvented by simply setting up new firms.

Henning Riecke, head of the DGAP’s program on transatlantic relations, moderated the discussion.

Philip Morris International provided funding for the event.

The discussion took place in two languages, German and English, and can be heard on the audio file below.

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