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Why the Fight Against Terrorist Financing Is Faltering

The financing of international terrorism is notoriously hard to stop. But according to political economist Friedrich Schneider, that's partly due to hypocritical western governments, who don't want to be team players.

Money laundering and the financing of terrorism go hand in hand

An international conference on combating the financing of terrorism is being held in The Hague on Wednesday and Thursday. DW-WORLD.DE spoke with political economist Friedrich Schneider from Johannes Kepler University in Linz, Austria, about the chances of successfully cutting off terrorists' money supplies and the obstacles preventing faster progress.

DW-WORLD.DE: Professor Schneider, seven years ago, the G7 countries initiated the international Financial Action Task Force, or FATF. It is meant to fight terrorist financing, but so far, the force hasn't had any significant success. Why are these international efforts failing?

Friedrich Schneider: On an international level, next to nothing is being done. It's that simple. Every country is doing its own work, there's no international cooperation that's working. Data isn't even being exchanged in the aftermath of a terrorist attack, let alone cooperation among various secret services.

Why isn't there more cooperation?

Taliban leader Mullah Omar: The US funded the Taliban in the past

I'll give you an example. If the French finance covert operations in Africa through their secret service, or if the Germans pay ransom in Iraq, do you think these governments want to publicly acknowledge this kind of financing? And good and evil can quickly change, as we know. Just take the Taliban in Afghanistan, for example. For a long time, they were financed by the United States when the US was against Russia. This is where hypocrisy comes in. If governments don't want to expose their own covert financing operations, then they can't have any real interest in more efficient uncovering of money laundering.

To what extent is money laundering linked to the financing of terrorism? Money laundering is mostly associated with the drugs trade and human trafficking.

Terrorist financing is, broadly speaking, the financing of terrorist operations, and not all that much money is needed. The September 2001 attacks cost just $500,000, including flight training. Much more money is needed for the maintenance of terrorist bases. To pull together this kind of funding, money from the drugs trade, illegal diamond trading or kidnapping is laundered.

So is it mainly through the tracking of money laundering that sources of terrorist financing can be found? With money from legal operations…

…you can't prevent the financing of terrorism. There are donations to terrorist organizations -- Hamas for example. It gets a lot of money from Arab states for hospitals and schools, but where there's no clear dividing line to show whether the money was used for terrorist acts.

What can really be done to stop terrorist financing then?

Drug money often ends up financing terrorist cells

The first question is, whether there is any desire to effectively fight money laundering. Only then can you really combat terrorist financing. To fight money laundering, you need international cooperation, and a task force that is just as agile and flexible as the terrorists. This would also require the regulations prohibiting data exchange to be loosened, but so far that hasn't happened.

What can financial service providers do to stop terrorist financing?

That depends firstly on the extent to which they want to do business with people from the mafia or other organized criminals. Investigators rely on insider information from banks which often have little knowledge about how clean certain transactions are.

As a political economist, you've called for combating poverty and promoting democratic values as a way to stop terrorism. Why?

Simply put, people who earn money don't throw bombs. If I have a house, a car, and a well-paid job, I'm less likely to become a terrorist. There will always be fanatics who resort to terrorism regardless of their income, but they'll be far fewer. It's about drying up part of the basis for terrorism, which is why fighting poverty is such an effective strategy. In addition to this, we have to fight religious extremism, and deal with religious differences in a peaceful manner, but there have only been half-hearted attempts at that so far.

That doesn't sound very optimistic. How do you think the financing of terrorism will develop in the future?

Unfortunately, I think Europe will have to experience two or three more attacks before we start to work more closely together.

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