Financing Terror

An Analysis and Simulation to Affect Al Qaeda's Financial Infrastructures

by Steve Kiser

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Despite the centrality and level of activity in the financial war on terrorism, little data, analysis, or other serious inquiry into the effectiveness of this activity exists. This dissertation develops a model that enables policymakers and analysts to understand how terrorist financial networks work, how current policies targeting those networks will affect them, how terrorist organizations are likely to react to those policies, and what more can be done. Given the centrality of Al Qaeda and its affiliates in the global war on terror, the dissertation specifically explores the questions of how U.S. and international counter-terrorism policies affect those organizations’ financial support networks, and how Al Qaeda and its affiliates are likely to react to those initiatives. The author makes the following recommendations: (1) Fully integrate counter-finance strategies into a comprehensive strategy; (2) view finances as not only a target subject to disruption but also as a lucrative intelligence source; (3) expand the focus of counter-finance policies from exclusively first-order effects to include second-order effects; (4) craft counter-finance strategies and policies with clear long- and short-term desired effects in mind; (5) given terrorists’ creativity at raising funds, ensure that all levels of law enforcement have some counter-financing awareness; (6) continue to exert strong pressure on off-shore banking havens and help build capacity abroad to enforce such laws; (7) properly inform well-meaning donors, perhaps through a Transparency International organization for charities.

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This document was submitted as a dissertation in September 2004 in partial fulfillment of the requirements of the doctoral degree in public policy analysis at the Pardee RAND Graduate School. The faculty committee that supervised and approved the dissertation consisted of Charles Wolf, Jr. (Chair), James Quinlivan, and Peter Chalk.

This report is part of the RAND Corporation dissertation series. Pardee RAND dissertations are produced by graduate fellows of the Pardee RAND Graduate School, the world's leading producer of Ph.D.'s in policy analysis. The dissertations are supervised, reviewed, and approved by a Pardee RAND faculty committee overseeing each dissertation.

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