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Studies in Conflict & Terrorism

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How Do Terrorist Organizations Make Money? Terrorist Funding and Innovation in the Case of al- Shabaab

Ido Levy & Abdi Yusuf

To cite this article: Ido Levy & Abdi Yusuf (2021) How Do Terrorist Organizations Make Money? Terrorist Funding and Innovation in the Case of al-Shabaab, Studies in Conflict & Terrorism, 44:12, 1167-1189, DOI: 10.1080/1057610X.2019.1628622

To link to this article: https://doi.org/10.1080/1057610X.2019.1628622

Published online: 17 Jun 2019.

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How Do Terrorist Organizations Make Money? Terrorist Funding and Innovation in the Case of al-Shabaab

Ido Levya and Abdi Yusufb

aMcCourt School of Public Policy, Georgetown University, Washington, D.C., USA; bLauder School of Government, Diplomacy and Strategy, Interdisciplinary Center, Herzliya, Israel

ABSTRACT This paper examines the funding sources of the terrorist group Harakat al-Shabaab al-Mujahideen. Using existing research and ori- ginal interviews, this study outlines al-Shabaab’s history and funding sources. It theorizes that an organization’s capacity to operate in dif- ferent fields of economic activity drives innovation in funding. Applying a framework for terrorist innovation to al-Shabaab’s fund- ing sources, this study finds support for the theory. Development of intelligence and taxation capabilities is especially prevalent in the al- Shabaab context. Holding territory considerably increases organiza- tional ability to raise funds. Increasing reliance on criminality may compromise an organization’s ideological character and leave it more vulnerable to inter-group competition.

ARTICLE HISTORY Received 24 December 2018 Accepted 27 May 2019

The radical Islamist terrorist organization Harakat al-Shabaab al-Mujahideen has recently resurged in Somalia.1 Although the African Union Mission in Somalia (AMISOM) and the Somali military, with backing from the UN, EU, and United States, have been campaigning against the group since 2007, al-Shabaab has managed not only to endure, but also regain territory and carry out increasing numbers of attacks in East Africa. The 2013 Westgate shopping mall attack and 2015 Garissa University College attack killed over 67 and 147 people, respectively while the withdrawal of thousands of Ethiopian troops from Somalia has allowed al-Shabaab to easily take over towns in which Ethiopian forces were previously stationed. Al-Shabaab attacks over only the last two years have claimed hundreds, if not thousands of lives.2 The deadliest of these was a truck bomb in Mogadishu that killed over 300 and wounded hundreds more.3

A recent al-Shabaab ambush even killed one U.S. commando and injured four others.4

How has al-Shabaab persevered despite serious international pressure? Innovativeness and adaptability may be the answer. Having operated in different forms, first as an Islamist movement that rose to control most of Somalia’s southern cities, then as an organization that dominated Somali government, and now as a group with limited terri- tory, al-Shabaab has shown it can carry out diverse activities and survive despite persist- ent opposition. One area in which al-Shabaab has shown particular adaptability is funding. For example, al-Shabaab originally relied on donations from diaspora

CONTACT Ido Levy [email protected] McCourt School of Public Policy, Georgetown University, Washington, D.C., USA; Abdi Yusuf [email protected] Lauder School of Government, Diplomacy and Strategy, Interdisciplinary Center, Herzliya, Israel. � 2019 Taylor & Francis Group, LLC

STUDIES IN CONFLICT & TERRORISM 2021, VOL. 44, NO. 12, 1167–1189 https://doi.org/10.1080/1057610X.2019.1628622

communities and charcoal exports, but became limited in its ability to collect external contributions as a growing global effort to thwart terrorist funding increasingly closed international funding routes. In response, al-Shabaab has created internal revenue sour- ces through taxation, port fees, racketeering, and possibly piracy.5 Today, an al-Shabaab no longer in control of large cities and ports must find new sources of revenue, and it is demonstrating diabolical innovation. This paper examines al-Shabaab’s funding sources, with special attention to its latest

ones, namely extortion of nomadic pastoralists, tribal elders, and businesspeople outside al-Shabaab’s territory and importation of cars from Arab Gulf states for resale in Somalia. This paper seeks to answer the question: how does al-Shabaab develop new sources of funding? The next section presents a theoretical framework based on terrorist funding and innovation studies through which to understand al-Shabaab’s funding activities. It then describes the data and methodology this study uses to qualitatively test hypotheses derived from the theoretical framework. Next, it analyzes al-Shabaab’s new funding mechanisms through the lens of this framework to assess the hypotheses’ explanatory power.

A theoretical framework for terrorist funding innovation

Scholarship has yet to integrate the literature on terrorist funding with that on terrorist innovation. Both fields remain predominantly descriptive, categorizing and taxonomizing known funding methods and innovation processes, and do not generally attempt to theor- ize about or predict trends. This section reviews and integrates scholarship on terrorist funding and innovation toward constructing a theoretical framework for understanding how terrorist organizations, al-Shabaab in particular, secure new sources of funding.

Terrorist funding

A large portion of the literature on terrorist funding focuses on “external,” or cross-bor- der acquisition of funds. Most external methods entail transferring money through dif- ferent types of intermediaries. The crudest method is via a personal courier who physically retrieves money from individuals and organizations through smuggling routes.6 Organizations may also exploit formal banking systems, building international financial networks capable of circulating funds through multiple states.7 Experts and public officials have designated acquiring funds through Islamic charities and front companies as another source of funding for Islamist terrorist groups.8 Terrorist organi- zations can use a number of online channels to solicit funds, such as crowdfunding9

and fraudulent front websites.10 For instance, one operative from the jihadist group Islamic State (IS) gathered funds through fraudulent eBay transactions.11 One funding method that has attracted particular attention in the context of jihadist organizations is “informal transfer” or “alternative remittance systems,” most notably the Islamic money transfer system, “hawala.”12 “Hawala” (Arabic for “change” or “transfer”) functions through an informal network of “hawaladars” who act as intermediaries between send- ers and receivers of funds. Hawaladars usually do not record transactions and offer faster and cheaper service than formal remittance systems.13 The increasing use of

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mobile phone money transfer has facilitated informal remittance, rendering the system more vulnerable to malicious exploitation. This is especially true for Somalia, where mobile money has superseded use of cash.14 An international legal regime has emerged to combat these activities, with the UN,15 Financial Action Task Force (FATF),16 and United States17 taking center stage on the issue.18

Discussion of “internal” funding sources focuses on terrorist involvement in crim- inal activity. Terrorist organizations may engage in illicit trade through taxation, import, and export of illegal goods, such as drugs19 and ivory.20 Extracting funds from pirate ransoms may also support terrorist activity.21 Additional internal funding sources include kidnap-for-ransom, extortion, human and organ trafficking,22 and racketeering,23 as well as bank robbery and other forms of outright theft.24

Terrorists may also engage in credit card and check fraud25 and use banks and char- ities to conduct illegal trade, converging with the aforementioned exploitation of for- mal banking systems.26 Smuggling of legitimate goods, including cigarettes,27 honey, diamonds,28 fuel,29 charcoal,30 and gold can support terrorist funding as well.31

Acquisition of territory opens another category of funding sources for terrorist organi- zations. The 2014-2015 rise of IS to control a large territory in Iraq and Syria invigorated research into this field. IS’s capture of oil granted it an estimated $1 million per day.32

Territory-holding organizations may also impose taxes on their populations for utilities, alms, and security and collect tolls and passage fees from those seeking transit through their territories. Control over dams and power plants further boosted IS’s income.33 Al- Shabaab’s control of ports facilitated its ability to export goods and interact with traders.34

IS even attempted creating its own money, minting gold, silver, and bronze “caliphate coins,” selling them for bitcoin cryptocurrency, and encouraging supporters to use these coins or cryptocurrency to avoid strengthening Western currencies.35

Variation in terrorist funding sources has prompted researchers to produce typolo- gies. Loretta Napoleoni posits a “New Economy of Terrorism” has emerged in which terrorist organizations feed off Western economies and take control of economies in areas of less effective government to become self-sustaining “state-shells.”36 According to this theory, terrorist organizations evolve from relying on external sponsorship, often from states, to developing self-sufficient funding mechanisms by taking advantage of areas of weak government, such as Afghanistan following the Soviet withdrawal. Through predatory practices, such as ransom, extortion, and territorial conquest, terror- ist organizations develop their own sources of funding and become increasingly inde- pendent from external sponsorship. Similarly, the U.S. Department of State has distinguished between and “traditional” terrorist funding methods, including money laundering, hawala, and personal courier, and “new modalities.”37 Neumann categorizes terrorist funding sources under three broad factors and one “revolutionizing” factor: public support, access to illegitimate economies, and access to legitimate economies, and control over territory, respectively.38 Dobayev and Dobayev present an internal- external sources typology and combine the “origins” of a terrorist organization with its sources of funding to produce terrorist financing models.39 Freeman offers six criteria terrorist organizations consider when seeking funding sources: quantity, legitimacy, security, reliability, control, and simplicity, as well as four primary sources of funding: state sponsorship, illegal activities, legal activities, and popular support.40

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These typologies offer much descriptive power, but fall short in explanatory and pre- dictive ability. The Department of State and Napoleoni help put terror organizations on a spectrum from less to more advanced and older and newer financing methods, but do not explain what factors cause terrorist organizations to move up or down the spectrum or how to account for moments of change in terrorist funding. Neumann’s typology may explain some changes through his four indicators, but lacks the parsimony and generalizability necessary for prediction. While Freeman and Dobayev and Dobayev help understand and analyze different funding mechanisms, they fall short in explaining why and how terrorist organizations may seek to open or refrain from searching for new funding sources. This paper proposes an application of terrorist innovation theory to produce a more parsimonious, explanatory, and predictive framework for terror- ist funding.

Terrorist innovation41

Terrorist innovation refers to any change in the behavior of terrorist organizations. Economist Joseph Schumpeter’s analysis of “development” sets the groundwork for a better understanding of innovation in general and terrorist innovation in particular. Schumpeter defines “development” as a process of continuously creating “new combinations” of “materials and forces within our reach.” This process entails five phe- nomena: 1) “The introduction of a new good… or of a new quality of a good,” 2) “The introduction of a new method of production,” 3) “The opening of a new market,” 4) “The conquest of a new source of supply,” and 5) “The carrying out of the new organ- ization of any industry.” In addition, this process may proceed “discontinuously” or by “small steps,” i.e. radically or incrementally.42 This paper treats “innovation” as the phe- nomenon, rather than the process, of these occurrences. Scholarship conceptualizes innovation by types, drivers, and levels. Perhaps the best-

known work in terrorist innovation is Dolnik’s Understanding Terrorist Innovation, in which he defines innovation “an act of introduction of a new method or technology or the improvement of an already existing capability.”43 Through analysis of several case studies, Dolnik identifies various types of terrorist innovations, from use of primitive assaults, to bombings, to suicide bombings, to airplane hijacking, to chemical and bio- logical attacks. He finds as a key determinant of terrorist innovation “attachment to weaponry,” or affinity for a certain tactic or weapon due to its symbolic significance.44

Crenshaw, who defines innovation more broadly as “adoption of new patterns of behav- ior” or “new ideas,” points out that Dolnik’s study covers only “tactical innovations,” or “changes in method or operations” toward achieving constant objectives.45 She proposes in addition to tactical innovation “strategic innovation,” or changes in objectives, and “organizational innovation,” or “changes in group structure and institutions.”46 Dolnik and Crenshaw, hence, present different innovation types. In a thorough case study on the 9/11 plot, Moghadam posits “integrative innovation,”

a combination of “top-down” innovation by terrorist leaders and “bottom-up” innov- ation by mid- and low-level operatives. He notes innovation may emanate from mem- bers of an organization or from cooperation with outside forces.47 He also identifies five drivers of innovation: ideology, inter-group competition, pressure from problem

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solving, opportunity, and organizational capital.48 Moghadam, therefore, presents agents and drivers of innovation. Christensen coins the term “disruptive innovation” to describe introduction of prod-

ucts that are “cheaper, simpler, smaller, and… more convenient to use” than more sophisticated ones. The simplicity of these products can give them advantages over more advanced ones.49 He says that because “terrorism is at the bottom of the market,” a disruptive innovation itself, it is more difficult for the larger, more sophisticated con- ventional forces of states to combat.50 Cheung, Mahnken, and Ross elaborate on seven “degrees of innovation,” ranging from duplicative imitation - simple copying of an existing innovation - to radical innovation - innovations causing major breakthroughs.51

Disruptive innovation and degrees of innovation constitute analysis of levels of innov- ation. Applying these concepts to terrorist innovation provides rich frameworks for scrutiny of innovation types, drivers, and levels. Scholars have discussed organizational learning as an important component of innov-

ation. A RAND study outlines terrorist organizational learning, examining how terrorist organizations acquire, store, distribute, and interpret knowledge as well as different fac- tors that affect learning processes.52 The study presents five case studies to illustrate ter- rorist organizational learning in practice. For example, Jackson’s case study on the Provisional Irish Republican Army shows how organizational capital, ideology, and engineering experience contributed to its effective learning and resulting technological innovation.53 U.S. Army Field Manual 3-24 describes “counterinsurgency” as a “learning competition” in which the “side that learns faster and adapts more rapidly—the better learning organization—usually wins.”54 In the case of terrorism, as groups learn new tactics and strategies, counter-terrorism forces must learn ways to combat them. For example, Ariely and Bitzer show how terrorists operating in the Sinai Peninsula became increasingly adept at smuggling materiel and knowledge across the Israeli, Egyptian, and Gaza borders to support terror activities. In 2005, Israeli security forces withdrew from the Sinai and built barriers in response along the Gaza border. Smugglers adapted by building tunnel networks in more vulnerable areas and studying the activities of Israeli border guards, thus perpetuating a learning competition.55 The learning competition framework defines the nature of conflict as a function of a group’s ability to adapt and innovate more proficiently than its adversary. Hence, organizational learning and learn- ing competition feature prominently in terrorist innovation.

Theory and hypotheses

This paper defines terrorist innovation as any change in the behavior of a terrorist organization. The word “new” may seem conspicuously absent, but the literature on ter- rorist innovation has developed such a rich, nuanced set of variables that together may show that no two terrorist behavioral changes are exactly alike, i.e. all have an element of newness. The acquisition of a new weapon may be a radical innovation by an organ- ization that developed it itself or simply an imitation by one that appropriated the know-how from another entity. It can drive tactical innovation for an organization that begins to employ it in attacks or strategic innovation for one that decides to select dif- ferent types of targets with its new capability. The assumption that any change in

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behavior is novel emboldens scholarship in this field by allowing more nuanced analyses and shifting focus away from deciding what constitutes novelty in the first place. In addition, the focus of innovation on phenomenon rather than process allows for less cumbersome analysis. Applied to terrorist funding, terrorist innovation produces an explanatory, predictive

framework. This paper theorizes that organizational reach drives innovation in terrorist funding. Because this theory does not confine itself to a field of economic activity, such as banking or criminality, it is generalizable to all such activities of terrorist organiza- tions and reserves ample space for predicting the introduction of new funding sources. Its application to all terrorist funding activities not only frees it from confinement to certain kinds of activities, but also makes for a more parsimonious theory. Its explana- tory power derives from its focus on reach. Reach refers to a terrorist organization’s capacity to operate in different fields, specifically economic in the context of this study. Reach has four main components: extent of territory, access to different markets and resources, level of public support, and number of network ties. The authors derive four hypotheses from this theory:

H1: Territoriality. Territorial conquest increases a terrorist organizations’ number of funding sources.

H2: Access. Terrorist organizations’ increased access to markets and resources increases their number of funding sources

H3: Public support. Terrorist organizations’ level of public support has a positive relationship with the effectiveness of their financing methods.

H4: Network ties. Terrorist organizations’ number of network ties has a positive relationship with their number of funding sources.

Methodology and data

This paper conducts a case study of al-Shabaab’s funding sources through the lens of the above framework to qualitatively test the hypotheses. It bases its qualitative approach to theory and hypotheses on King, Keohane, and Verba’s Designing Social Inquiry.56 The authors choose to study al-Shabaab due to its particular diversity in funding sources. Further, al-Shabaab has operated in different forms as the extremist wing of a larger Islamist group (as part of the Islamic Courts Union, 1994-2006), an independent insurgent terrorist force, the governing power in southern Somalia (2008- 2011), and a criminal entity. Al-Shabaab’s diverse activities enable study of a wide array of terrorist innovations in funding. Moreover, its funding sources are understudied in scholarship despite the group’s rising power and adaptability, particularly in recent years. This study examines all of al-Shabaab’s known funding sources and conducts a focused analysis of al-Shabaab’s newest funding innovations: extortion of tribal elders, farmers, and businesspeople outside its territory, illegal importation of cars from the United Arab Emirates (UAE) for resale in Somalia, and theft of pastoralists’ livestock.57

For each funding source, it indicates the innovation types and drivers. This study relies on academic, think tank, and news sources for its analysis of al-Shabaab’s historical

1172 I. LEVY AND A. YUSUF

funding sources and interviews with Somali government officials for scrutiny of al- Shabaab’s new funding sources. To protect interviewee identities, the paper refers to all interviewees in the masculine regardless of their true genders and does not refer to them by name. This study’s theory and hypotheses derive inductively from the case of al-Shabaab.

A short history of al-Shabaab and its funding sources

Al-Shabaab originated as part of a group of sharia courts known as the Islamic Courts Union (ICU). In 1991, the government of Somalia collapsed, beginning the ongoing Somali Civil War. In 1994, the ICU emerged in Mogadishu to provide security and services in the absence of a functioning government. The courts based their style of government on Islamic law (sharia) and originally did not intend to expand their control. However, fol- lowing disagreements between “moderate” and “radical” elements within the group, as well as growing tensions with secular clan-based warlords, the group began operating out- side of its bases in Mogadishu.58 Between 2004 and 2006, al-Shabaab emerged as one of the ICU’s more radical militias, espousing the overthrow of the secular Somali government and creation of an Islamic state in its place. By mid-2006, the ICU took over most of south and central Somalia, including Mogadishu. Ethiopian and African Union (AU) interven- tion pushed the ICU out of its major strongholds and the group dispersed into smaller organizations. In 2008, al-Shabaab resurged as the strongest of the ICU’s successors, rap- idly regaining the territory it had lost two years earlier and setting up quasi-governmental administrative bodies. In 2011, the group again began losing ground as intra-organiza- tional strife led to conflict between al-Shabaab’s leaders, partly fueled by a 2012 decision the group’s amir (leader) Ahmed Godane to formally affiliate al-Shabaab with al-Qaeda.59

Since 2014, al-Shabaab has lost its hold over Somalia’s major cities and ports, retaining control over mostly rural areas. During its early years, al-Shabaab received its funds from both external and internal

sources, namely diaspora contributions, charcoal exports, taxation of local businesspeo- ple, and international jihadist support. Since the mid-90s, some Somali diaspora com- munities have viewed the ICU as the most effective option for maintaining law and order in Somalia and staving off warlordism and foreign powers like Ethiopia. The fall of the ICU and subsequent rapid growth of al-Shabaab caused many of these diaspora communities to shift toward the latter, sending money via hawala and courier.60 In add- ition, many of al-Shabaab’s founders maintained strong relations with al-Qaeda leaders, having spent time in al-Qaeda’s Afghan training camps. Their ties to the global jihadist movement generated income through the Arabian Peninsula and Kenya.61 Thus, during its early years, al-Shabaab seems to have relied on public support from Somali diaspora communities and ties with al-Qaeda for its funding sources. Al-Shabaab’s conquest of territory in 2008-2011 coincided with the group’s shift to

internal funding sources. Perhaps most notable is its construction of an elaborate tax- ation system. Al-Shabaab finance officers collect detailed records on businesses and agri- cultural lands under its control.62 Its “Finance Office” imposes a “zakah” tax on traders and corporations of 2.5% as well as tolls, fees, and taxes on agricultural produce and land.63 The office also imposes provisional taxes, or “Infaaq” toward emergency funds

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or specific military campaigns.64 The “Zakawaat Office” handles non-monetary taxes, namely taxes in-kind on livestock.65 Those who do not pay face severe punishment by al-Shabaab’s intelligence wing, “Amniyaat.”66 Thus, the access to large population areas al-Shabaab gained through its acquisition of territory between 2008 and 2011 allowed it to implement a sophisticated taxation system that has accounted for much of its revenues. Conquest of Somali ports and trade routes gave al-Shabaab access to illicit markets.

Charcoal smuggling has proven especially lucrative. A UN estimate claims al-Shabaab makes $15-$50 million per year overall from illegal trade.67 Al-Shabaab exploited char- coal smuggling routes by taxing coal bags en route to Somali harbors, forcing traders to pay multiple taxes and bribes before reaching port. This practice reportedly continued through corruption after Kenyan troops took over Kismayo, leading the UN to ban importation of Somali charcoal. Al-Shabaab has identified major sugar smuggling routes and charged up to $1,000 per truck. In 2011, the illicit sugar trade generated between $400,000 and $800,000 for the group.68 Kenyan officials are reportedly involved in this trade as well. In addition, reports indicate al-Shabaab’s involvement in illegal mining and export of minerals in East Africa in conjunction with a Ugandan militant group.69

Finally, al-Shabaab forces aid agencies to pay commissions in exchange for permission to operate inside Somalia.70 Therefore, it acquired the ability to tax illegal trades by con- quering the territories through which they pass and gained access to markets and resources through its involvement in illicit dealings outside of Somalia. Following its 2008 resurgence, al-Shabaab began losing popularity with the Somali dias-

pora, largely due to its terrorist attacks outside of Somalia, increasingly hardline stances, and the retreat of foreign forces.71 Internal fracturing, battlefield defeats after 2011,72 and the arrest of al-Shabaab supporters outside Somalia further compromised the group’s sup- port.73 Until circa 2009, Eritrea began providing financial and material support to al- Shabaab to undermine its strategic rival, Ethiopia.74 In 2010, piracy became an increasingly common occurrence off the Somali coast and al-Shabaab allegedly imposed taxes of 15- 20% on pirates generating revenues from al-Shabaab-controlled ports, most notably Haradheere, which the group seized in 2010.75 Further, between 2007 and 2011, al- Shabaab developed ties with other jihadist groups, namely al-Qaeda in the Islamic Maghreb,76 al-Qaeda Central, al-Qaeda in the Arabian Peninsula, and Nigeria-based Boko Haram, receiving official al-Qaeda sponsorship in 2012.77 Despite loss of public support and diaspora funding due to its strategic reorientation, al-Shabaab compensated by forging ties with other jihadist groups and accepting state sponsorship. Following the ouster of al-Shabaab from Mogadishu and Kismayo, the group began

relying increasingly on its taxation system and criminal activity. Between 2011 and 2012, AU and Somali government forces succeeded in forcing al-Shabaab out of Somalia’s major population areas, relegating the group mostly to rural areas in south and central Somalia.78 Al-Shabaab has boosted illegal imports and solicited Kenyan traders and corrupt officials to secure buyers.79 Further, al-Shabaab has become involved in the illegal ivory trade through maintaining ties with poachers in Kenya, the Democratic Republic of Congo, and Central African Republic and buyers in Asian and Gulf markets.80 It has reduced its involvement in charcoal as the trade began signifi- cantly benefitting the group’s government adversaries in Kismayo. In fact, the group has

1174 I. LEVY AND A. YUSUF

reportedly cracked down on charcoal, impounding contraband, fining traders, and even punishing its own members if they take part in the trade.81 At the same time, illegal charcoal exports generating tax revenues for al-Shabaab have reportedly persisted through smuggling routes in the Gulf, particularly Iran.82 The ongoing Syrian Civil War has prompted heroin smugglers to divert their business through East Africa. Al-Shabaab has reportedly taken the opportunity to import the drug from the Middle East and resell it to Nigerian, Kenyan, and South Sudanese criminal groups.83 Finally, al-Shabaab has resorted to blockading villages and towns that refuse to pay its taxes, threatening them with starvation.84 Hence, al-Shabaab’s loss of territory has caused it to lose signifi- cant sources of funding, but access to import, ivory, and heroin markets has compen- sated for its losses.

Al-Shabaab’s new sources of funding

Al-Shabaab has increasingly resorted to criminal activity to finance its activities. A dwindling tax base due to loss of territory and an intensifying global effort to crack down on terrorist funding have threatened al-Shabaab’s coffers. Relying on original interviews with Somali government workers, analysts, businesspeople, elders, and former al-Shabaab members, as well as a report by the Hiraal Institute, this section outlines al- Shabaab’s newest sources of funding.85 These include extortion of elders, businesspeo- ple, and farmers outside al-Shabaab territory, illegal importation of cars from the UAE for resale in Somalia, and theft of pastoralists’ livestock.

Extortion of elders and businesspeople outside al-Shabaab territory86

Al-Shabaab has recently begun demanding payments from leaders of Somali clans and businesses based outside of its territory. The expansion of Amniyaat and the creation of an effective auditing system have enabled this practice. The Hiraal Institute reports that Amniyaat has established a presence as far north as Puntland - significantly outside al- Shabaab’s traditional areas of operation. The Finance Office summons clan elders and businesspeople to al-Shabaab territory annually to pay their dues or face Amniyaat enforcement. Al-Shabaab collectors bring money to accountants at checkpoints, who then deliver it to auditors that ensure receipts match collections and return approved collections to accountants. Accountants then carry approved money to banks, from which they retrieve verification slips for auditors. Al-Shabaab assigns an auditor and accountant to each town and gathers information on the targets of its extortion through a network of checkpoints and informants.87 Those who refuse to pay face often severe penalties. The group may increase its demands, kidnap an uncooperative individual, or kill the individual altogether. Amniyaat usually handles these operations.88

Al-Shabaab specifically targets Somali businesspeople for extortion. The group imposes a 2.5-5% tax on the properties of local businesspeople both inside and outside its territory, destroying the businesses of those who refuse to pay. Heads of international businesses face higher rates and often must contribute an automobile to the group.89

The group may occasionally demand lump sum taxes from businesspeople. One Somali businessman says al-Shabaab summoned him from Mogadishu to pay a $30,000 lump

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sum as contribution to the group’s activity. Following his refusal, Amniyaat abducted him to al-Shabaab territory, where Amniyaat members informed him the price had increased to $75,000, since now he had to ransom himself. Once he agreed to pay the amount, Amniyaat warned it would kill him if he refused again.90

Amniyaat extorts funds also from tribal elders. Somali society and identity are strongly tied to tribe/clan.91 Borders between Somali regions often reflect tribal concen- trations and militias operating in Somalia claim allegiance to various clans.92 Tribal eld- ers play central roles as community leaders. Al-Shabaab coopts them to keep order in the areas under its control. It delegates taxation and policing to elders, who have preex- isting authority among local populations. In return, al-Shabaab refrains from punishing cooperative clans, facilitates arbitration of inter-tribal disputes, and provides financial assistance to some clans.93 Some elders residing outside of al-Shabaab territory or in areas formerly under the group’s control have cooperated with it out of desire for finan- cial gain, fear of punishment, and ideological affinity. These elders carry out several kinds of activities for the group, including transfer of funds collected from fellow tribes- men, sharing of intelligence, and recruitment of youth to the group. Elders occasionally must report the names of uncooperative community members, whom al-Shabaab may threaten with extortion, imprisonment, or death.94

Extortion and employment of farmers

Although al-Shabaab has long imposed land taxes and taxes in-kind on Somali farmers supposedly in accordance with sharia, it has only recently begun demanding fixed taxes with little religious justification. In general, the group levies a 2.5% tax on crops and a $50 fixed tax on each hectare of land. It threatens those who do not cooperate with death, killing of family members, and destruction of property.95 One farmer from Middle Shabelle region says, over the past two years, finance and Zakawaat officials started demanding exorbitant payments. For example, al-Shabaab finance officials now levy $1,000 every half-year for ownership of one tractor (even if in disrepair) and $1 for each of a farmer’s lemon trees levied every season.96

This new approach plays a dual purpose of filling al-Shabaab coffers and acquiring new recruits. Al-Shabaab began extorting farmers in south-central Somalia following the introduction of international food assistance programs. One such program, initiated in 2014 by the UN, EU, and Austria, aimed to support Somali agriculture by purchasing 200 metric tons of maize from local farmers for use in food assistance activities.97

While this increased the income of Somali farmers, it seems to have also served as an impetus for al-Shabaab to target farmers for extortion. The organization often summons those unable to pay to become its agents or face punishment.98 These farmers often must perform low-level activities, such as courier runs.

Importation of used automobiles

Since the collapse of the Somali central government in 1991, many Somalis have moved their businesses to the UAE. This has allowed al-Shabaab to establish ties with Somali businesspeople abroad, particularly in Dubai. They in turn facilitate the group’s access

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to the used automobile market. After securing buyers, al-Shabaab orders a number of used automobiles from contacts in the UAE, usually paying $6,000-$8,000 for each car through hawala and mobile money transfer services. It then bribes port officials to allow cars into Somalia and resells them locally for $10,000-$12,000.99

The group imposes import taxes on other importers in the country. It charges a lump sum of $200 for automobile registration and a $30 toll for entering cities with an al-Shabaab presence. The group taxes automobile imports differently depending on the model, though it usually demands a high rate and prefers for companies and individuals to pay it in-kind with cars. This grants the group automobiles virtually free of charge that it may resell or use in its operations.100 Refusal to comply with these taxes can result in harsh penalties. One interviewee says that when a relative entered a city with- out al-Shabaab permission, the group demanded $1,800. The relative refused and the group soon imprisoned him, threatening to hold him until he paid. He was released after finally paying the fine.101

Taxation and theft of pastoral livestock in Somalia

Al-Shabaab taxes and steals pastoral livestock in south-central Somalia to finance its activities. About a quarter of Somalia’s inhabitants are nomadic pastoralists, subsisting on the meat and milk of camels, sheep, cattle, and other pastoral animals.102 Al- Shabaab imposes in-kind taxes according to livestock type. It takes one goat from herds of more than 40 and two from those with more than 100. Further, it takes one goat for every five camels and one camel from herds of more than 50 camels. For every 30 cows, the group takes one. Camels and cattle sell for hundreds of dollars each on the Somali market while goats may fetch up to $60. At the same time, al-Shabaab increas- ingly outright steals the livestock of pastoralists without attempt at justification.103 One pastoralist says the group stole so many of his animals that he had to sell them himself or risk losing his livelihood. He was then forced to use the money to buy a vehicle and become a courier for the group. He finally escaped the organization’s territory, though lives in fear it will attempt to force him back or seek retribution.104 The large presence of pastoralists in Somalia and the fact that al-Shabaab devoted one of its two tax offices to in-kind taxation suggests this is a major funding source for the group.105

Al-Shabaab funding sources and terrorist innovation

This section uses the terrorist innovation framework to discuss the data on al-Shabaab funding sources. Progressing historically, it identifies changes in funding sources to indicate types, drivers, and levels of terrorist innovations.

The ICU phase: 1994-2006

During al-Shabaab’s membership in the ICU, inter-group competition and ideology drove innovation. As part of an organization that received most of its funds from dias- pora community remittances, al-Shabaab had to vie with other factions for recognition. Al-Shabaab strove to show it was doing the most in the ICU’s struggle against

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warlordism, foreign invasion, and a supposedly corrupt, Western-backed government unable to maintain order. Accordingly, it implemented a strategic innovation – targeting of high-level Somali government, Ethiopian, and clan militia targets. This strategy led to the confrontation between the ICU and clan militias that resulted in the former’s con- quest of Mogadishu, setting al-Shabaab to become the ICU’s most powerful successor.106

Therefore, al-Shabaab’s strategy of aggressively, visibly targeting the ICU’s adversaries set it apart from other factions. Ideology features prominently in al-Shabaab’s early innovation in funding sources. Al-

Shabaab frequently employs gangster-esque tactics, such as hits, kidnapings, and thefts, against its adversaries to convey a brutal intolerance to resistance. This comprises an “attachment to weaponry,” or affinity for a certain tactic or weapon due to its symbolic sig- nificance, in this case, the need to appear a strong organization that crushes its enemies.107

At the same time, its jihadist mission facilitated al-Qaeda sponsorship and justified con- flicts with other factions in Somalia. Hence, al-Shabaab’s attachment to gangster-esque tac- tics and its jihadist character drove its adoption of more aggressive strategies, early interactions with al-Qaeda, confrontation with other Somali groups, and conquest of Mogadishu. Al-Shabaab’s use of hawala and courier to transfer funds features in a learning competi-

tion between al-Shabaab and international forces. International efforts to hinder funding of terrorist activities have increased since the September 11, 2001 attacks. The international anti-terrorist funding regimes of the FATF, UN, and United States have developed increas- ingly effective mechanisms to identify individuals and organizations supporting terrorist activities and halt their transfers.108 As this system becomes more effective, terrorist organ- izations like al-Shabaab have had to adjust their funding sources. Developing harder-to- trace hawala networks and resorting to personal courier are two major tactical innovations al-Shabaab has made in response.109 The use of courier is a disruptive innovation since it is simpler and lower-tech than bank or hawala transfers, but its simplicity makes it harder to trace. These new tactics have allowed al-Shabaab to maintain external sources of funding despite international counterterrorism innovation.

Independence and conquest phase: 2006-2011

After the fall of the ICU and al-Shabaab’s conquest of south-central Somalia, pressure from problem solving and opportunity came to drive al-Shabaab innovation. Increasing difficulty in securing external funding forced the group to seek alternative sources. In 2008, the U.S. State Department designated al-Shabaab a “foreign terrorist organ- ization,” blocking any provision of funds and materials suspected of transfer to it.110 In addition, U.S. law enforcement increased efforts to thwart support for al-Shabaab by U.S. nationals. For example, “Operation Rhino” targeted twenty Somali youths in Minneapolis suspected of supporting the group.111 At the same time, al-Shabaab began using two new tactics: terrorist attacks abroad and suicide bombings.112 These exemplify tactical and strategic innovation since these operations, although unpopular with the Somali diaspora, aimed to not only inflict casualties, but also attract support from within the global jihadist movement, most notably al-Qaeda.113 This later helped al-Shabaab gain al-Qaeda sponsorship.

1178 I. LEVY AND A. YUSUF

Similarly, the taxation system largely developed out of the need to solve funding problems. Al-Shabaab originally imposed an interpretation of the Islamic taxation sys- tem, but quickly shifted toward extortive lump sums and ransoms as it began losing ter- ritory. Especially after its loss of major cities and ports since 2011, the group has intensified its involvement in criminal activity under the guise of taxation. For example, the expansion of Amniyaat - an organizational innovation - and subsequent extortion of elders, pastoralists, and businesspeople coincided with al-Shabaab’s setbacks. Indeed, the group discouraged members seeking a purely Islamic tax system. Sheikh Fuad, the first head of the Zakawaat Office, was promptly dismissed after distributing collected taxes to the poor.114 To further compensate for diminished revenues, al-Shabaab levied taxes on markets easily accessible to it, including charcoal, heroin, and sugar smuggling, aid delivery, and imports. Therefore, al-Shabaab’s taxation system developed out of the need to ensure continued acquisition of compromised resources. Al-Shabaab’s profiting from the illicit ivory trade and Eritrean sponsorship reveal

opportunity drove al-Shabaab innovation to an extent. Since 2010, al-Shabaab began facilitating ivory smuggling through its territory and reportedly training some of its members to poach in Kenya.115 This requires a certain level of organizational capital and organizational innovation that would enable participation in the trade, which al- Shabaab proved it could deliver. Still, it could not deploy such capital to seize the opportunity without the easy access to border crossings it obtained through its conquest of south-central Somalia. Similarly, state sponsorship became available to al-Shabaab because Ethiopia had become a common enemy for al-Shabaab and Eritrea, opening the opportunity for sponsorship. Therefore, opportunity seems to have driven the organiza- tion’s involvement in the ivory trade and sponsorship from Eritrea.

Setback and stagnation: 2011-Present

As al-Shabaab again began losing ground, problem solving and organizational capital began driving innovation in funding techniques. Increasingly relegated to rural areas, al-Shabaab kept control over a rapidly shrinking tax base. This posed a grave problem for the organization, whose financial viability had come into jeopardy due to loss of essential revenue from taxation. Foremost among the group’s new funding activities was the deployment of organiza-

tional capital through the dramatic expansion of Amniyaat. Although little is known about the intelligence unit, its membership and expertise seem to have grown over the years, as it is now able to conduct effective operations throughout most of Somalia. Maintaining branches as far south as the Kenyan border and north as Bosaso, experi- enced Amniyaat agents can now extort funds from virtually all of Somalia’s economic centers. This organizational innovation seems to have resulted from a learning process that has taken place inside Amniyaat since its founding. Amniyaat’s increased capability in turn facilitated al-Shabaab’s tactical shift from taxation to outright extortion. Indeed, Amniyaat has proven so formidable that the Somali government’s intelligence agency, the National Intelligence and Security Agency, has employed a significant number of Amniyaat defectors.116

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Inter-group competition seems another element driving changes in al-Shabaab fund- ing activities. The group’s partial reduction of its involvement in the charcoal trade, for example, aimed to reduce the gains of Somali port officials, who were apparently bene- fitting from the trade more than al-Shabaab was.117 In addition, it shows al-Shabaab is not so concerned about its survival as to accept any form of funding regardless of the consequences. On the one hand, this suggests that al-Shabaab, unlike other jihadist organizations, has not undergone a prolonged period of struggling for survival. Existential considerations, then, seem to have been minor in al-Shabaab’s innovations. On the other hand, al-Shabaab’s willingness to reduce certain funding to undermine its adversaries reveals inter-group competition to be an important criterion for whether al- Shabaab decides to invest in innovation. Now, as pro-IS groups establish a foothold in Somalia, al-Shabaab must compete to keep control of its tax base and may well innovate further.118 Hence, al-Shabaab has partially removed itself from charcoal trade activities to undermine the Somali government, but stays involved in sugar, ivory, aid extortion, and drugs since those profiting from these activities do not threaten al-Shabaab and may even cause harm to its adversaries. Opportunity continues to comprise another component of al-Shabaab’s funding

innovation. The organization’s involvement in automobile importation and heroin trade exemplify this trend. These two funding sources became available to al-Shabaab through developments outside its control, i.e. the migration of Somalis to Arab Gulf states and the diverting of heroin smuggling routes through East Africa. With capacity to import materials, al-Shabaab was able to exploit the used automobile trade to its benefit. As heroin smuggling routes began traversing areas near al-Shabaab’s areas of operations, the group acquired the ability to profit from importing the drug and reselling it to criminal groups. Indeed, external factors independent from al-Shabaab’s actions allowed it the opportunity to profit from the used automobile and heroin trades. Perhaps the most significant feature of al-Shabaab’s current innovations is the

absence of ideology as a driving factor. Many of the organization’s funding activities today have little basis in sharia or jihadist ideology.119 For example, the heroin trade is not only antithetical to Islamic beliefs, but also necessitates contact with non-Muslims and Muslims the organization considers to be heretics. This applies just as well to the group’s involvement in other illicit trades. Its increasingly extortive tactics likewise indi- cate a distancing of its “taxation” system from its supposedly Islamic foundations. This turn from a system based on sharia toward one amalgamated from a number of crim- inal activities indicates a strategic innovation derived from al-Shabaab’s aforementioned attachment to maintaining a formidable image. The organization has arguably deter- mined efficient funding as a more important objective than the maintenance of a jihad- ist character. Within this context, al-Shabaab’s attachment to weaponry, i.e. activities that perpetuate its signature gangster-esque ethos, has become central where it previ- ously existed as coequal with or lesser than a jihadist ethos.120 Besides precipitating intra-group conflict or a cooling of relations with al-Qaeda, this change enables predic- tion that al-Shabaab will continue pursuing criminal activities over jihadist goals, at least in the short-term. Should this trend continue in the long-term, it may relegate the group’s jihadist character irrelevant and change the group’s character to criminal rather than jihadist terrorist.

1180 I. LEVY AND A. YUSUF

Discussion

This section examines the data as it relates to the theory and hypotheses. Overall, reach has proven a strong determinant of terrorist innovation in funding in the al-Shabaab case. The territoriality hypothesis has strong empirical support. Both 2006 and 2008 - the years al-Shabaab first conquered and reconquered territory, respectively - saw major changes in al-Shabaab’s funding sources. 2006-2008 saw its forging of an alliance with al-Qaeda, involvement in the illicit charcoal trade, and sponsorship from Eritrea. At the same time, its diaspora funding decreased. Around 2008, the organization became involved in aid extortion, ivory, sugar, and allegedly piracy, and built its taxation sys- tem. Likewise, its loss of territory in 2011-2012 marked a shift toward criminal activities and the reduction of charcoal revenues. Territoriality may serve as an indicator for involvement in other types of funding activities, most notably illicit trades. Organizational innovation appeared a solid determinant of the extent to which a group may extort a population under its control. In the case of al-Shabaab, the establishment of the tax offices and expansion of Amniyaat outside al-Shabaab’s territory exemplified this trend. Organizations committed to different types of ideologies and objectives may refrain from extortive and criminal activities. Thus, territoriality can serve as an indica- tor for a wide array of funding innovations, but other organizational features, like ideol- ogy, may modify its impact. The access hypothesis also has strong support. In its early development, al-Shabaab

was dependent on foreign contributions that it received through diaspora remittances, hawala, or courier. This required access to hawala networks and individuals who had the know-how to smuggle funds across borders. This need persisted after the group’s reduced reliance on diaspora funds through its al-Qaeda sponsorship. Territoriality seems to interact with access since control over south-central Somalia gave al-Shabaab access to trade routes and export markets that allowed it to extract revenues from illicit trades. Opportunity appeared to link innovation and access; the group opened new funding sources as it discovered and conquered new markets. For example, al-Shabaab’s conflict with Ethiopia incidentally implied it shared a common enemy with Eritrea. This provided the opportunity to gain access to Eritrean sponsorship. The diversion of the heroin trade through East Africa provided al-Shabaab with access to the illegal drug market and the opportunity to extract revenues from drug smuggling, but only as long as the Middle East remained too risky for drug smugglers to traverse. The public support hypothesis is supported. Al-Shabaab’s early reliance on diaspora

remittances and the favor of other jihadist groups necessitated support from an external audience. Somali expatriates and jihadist activists had to willingly send money toward al-Shabaab activities. Territoriality interacts with public support as the focus of public support turned toward an internal audience with al-Shabaab’s conquests. Often kept in check through terrorization, the population under the organization’s control also sup- ported it willingly when citizens perceived the Somali government as corrupt and inef- fective and al-Shabaab as a viable alternative. Adequate recruitment necessitates a certain degree of public support to bolster activities, particularly those of Amniyaat. The network ties hypothesis enjoys strong support. Contact with liaisons from crim-

inal or jihadist groups or representatives of states can provide insight into al-Shabaab’s sponsorship (both state and non-state) and involvement in illicit markets. Circles of

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close ties between friends and family can paint a picture of al-Shabaab’s receipt of exter- nal remittances. How the organization networks itself most likely determines the rela- tionship between funding and the roles of different members, notably collectors, accountants, and auditors. Network ties can also shed light on more elusive funding sources, such as al-Shabaab’s importation of automobiles from the UAE and Kenya. These sources emanate from outside the organization’s territory and seem to require more connection to people involved in the market than physical access to the mar- ket itself. The reach theory enables prediction of al-Shabaab’s future funding activities.

Territoriality and increasing access to population centers through the expansion of Amniyaat suggest al-Shabaab will accordingly expand its extortive measures, “taxing” an increasing number of items, activities, and entities. Should al-Shabaab gain territory, it will increase revenue from taxation. Should it lose territory, the group will invest more in Amniyaat activities and seek to expand its network ties and access to markets. Given its steady involvement in illicit dealings in the Arabian Peninsula, the group will most likely seek more revenues from the region in the future, through al-Qaeda sponsorship, ties to businesspeople, or import/export dealings. As its public support increases, al- Shabaab will gain more revenue from extorting people outside its territory while decreases will make involvement in illicit trades and criminal activities more likely to rise and hinder the group’s ability to collect taxes. A prolonged increase in illicit trades and criminal activities will lead to erosion of the group’s jihadist character, difficulties with its relationship with al-Qaeda and other jihadist groups, and ultimately its trans- formation into a criminal gang rather than a terrorist organization. One can expect to see al-Shabaab investing more in organizational innovation in its expansion of Amniyaat while it will exhibit strategic innovation as it increasingly resembles a crim- inal rather than terrorist organization.

Conclusion

This paper investigates al-Shabaab’s sources of funding to formulate a theory of terrorist funding innovation. This study finds reach, a terrorist organization’s capacity to operate in various fields, proves a strong explanation of terrorist funding sources. This study produces four derivative explanations of terrorist funding: territoriality, public support, access to different markets, and network ties. Using a framework on terrorist funding and terrorist innovation, this paper examines the case of al-Shabaab against these varia- bles. It finds that as al-Shabaab’s reach has varied, so too has its funding sources. Indeed, it developed more and stronger funding sources as it expanded its territory, enjoyed higher public support, gained access to markets like the charcoal and heroin trades, and established ties with individuals and organizations that made available spon- sorship and resources it could not previously acquire. Opportunity indicated al- Shabaab’s augmentation of funding sources. Inter-group competition marked both the group’s reduction and adoption of funding sources. The group’s current conflict with IS-inspired groups will likely lead to further changes in funding. Decreased reach, such as when al-Shabaab began losing territory, seems to have correlated with weakening of existing funding sources and the group’s search for new funding sources stemming

1182 I. LEVY AND A. YUSUF

from the need for problem-solving. In its accumulation of funding sources, al-Shabaab has demonstrated increasing disregard for its supposedly foundational jihadist ideology, favoring instead its attachment to a gangster-esque image. This development may influ- ence al-Shabaab’s competition with IS, which may offer a more ideologically committed alternative to al-Shabaab. In sum, reach allows for more precise analysis of and offers a predictive framework for terrorist funding sources. Reach can serve as a powerful tool for experts and policymakers. Understanding not

only how terrorist organizations fund themselves, but also what causes them to seek differ- ent funding sources helps develop more sophisticated responses to terrorist funding. International efforts to stop cross-border money transfers may close one source of fund- ing, but lead to development of internal or less traceable ones. Depriving groups of terri- tory may shrink their tax bases, but will not stop them from engaging in criminal activities or developing capacity to carry on taxation from outside these bases. At the same time, forcing terrorist groups to adopt funding sources antithetical to their ideologies, such as the heroin trade in al-Shabaab’s case, may weaken their ideological appeal and public sup- port. While this may have contributed to al-Shabaab’s ideological deterioration, it also could have paved the way for more ideological organizations, like IS, to take its place. Overall, this suggests that international regimes to stop undesirable cross-border transac- tions, military efforts to deprive groups of their territory, and mechanisms to counter criminal activities must coordinate to effectively undermine terrorist funding. Adaptable organizations like al-Shabaab will continue to find ways to sustain themselves even as counter-terrorism forces deny them access to various funding sources. Instead of proceed- ing in this learning competition incrementally and reactively, international counter-terror- ism forces should adopt a proactive approach of coordinating anti-funding efforts to anticipate organizations’ adoptions of different finding sources.

Notes

1. This paper follows Hoffman’s definition of terrorism as “the deliberate creation and exploitation of fear through violence or the threat of violence in the pursuit of political change.” Al-Shabaab uses terrorism with the stated political aim of turning Somalia into an Islamic state. Bruce Hoffman, Inside Terrorism (New York: Columbia University Press, 2017), 44.

2. Counter Extremism Project, “Al-Shabab,” https://www.counterextremism.com/threat/al- shabab#violent_history (accessed November 24, 2018).

3. Ibid. 4. Bill Roggio and Caleb Weiss. “US Special Forces Commando Killed in Shabaab Ambush.”

https://www.longwarjournal.org/archives/2018/06/us-special-forces-soldier-killed-in-shabaab- ambush.php (accessed November 24, 2018).

5. Al-Shabaab’s alleged connection to piracy is complex. UN and Somali officials report links between pirate gangs and al-Shabaab operatives. Militants have demanded a cut of up to 20% of pirate ransoms, though officials do not believe pirates become themselves members of al-Shabaab. A Reuters investigation found that al-Shabaab maintains a “marine office” that exacts payments of up to hundreds of thousands of dollars from pirates. Richard Lough, “Piracy Ransom Cash Ends up with Somali Militants,” https://www.reuters.com/article/ somalia-piracy/piracy-ransom-cash-ends-up-with-somali-militants-idUSLDE7650U320110706 (accessed May 12, 2019); Jonathan Saul and Camila Reed, “Shabaab-Somali Pirate Links Growing: UN Adviser,” https://af.reuters.com/article/topNews/idAFJOE79J0G620111020?sp=

STUDIES IN CONFLICT & TERRORISM 1183

true (accessed May 12, 2019); Valter Vilkko, “Al-Shabaab: From External Support to Internal Extraction,” (Minor Field Study, Department of Peace and Conflict Research, 2011), http:// www.uu.se/digitalAssets/57/a_57537-f_MFS_paper_Vilkko.pdf; Khaled Wassef, “Al Qaeda Urges Somalis To Attack Ships,” https://web.archive.org/web/20110212105724/http://www. cbsnews.com/8301-503543_162-4949488-503543.html (accessed May 12, 2019).

6. Zachary Abuza, “Funding Terrorism in Southeast Asia: The Financial Network of Al Qaeda and Jemaah Islamiya,” Contemporary Southeast Asia 25, no. 2 (2003): 172-173; Igor Dobayev and Andrey Dobayev, “Financing of Terrorist Networks in North Caucasus,” Social Sciences 48, no. 3 (2017): 116; Financial Action Task Force, “Terrorist Financing,” http://www.fatf-gafi.org/media/fatf/documents/reports/FATF%20Terrorist%20Financing% 20Typologies%20Report.pdf (accessed December 9, 2018).

7. Dobayev and Dobayev, “Financing of Terrorist Networks in North Caucasus,” 112; Herbert V. Morais, “Fighting International Crime and Its Financing: The Importance of Following a Coherent Global Strategy Based on the Rule of Law,” Villanova Law Review 50, no. 3 (2005): 619.

8. Abuza, “Funding Terrorism in Southeast Asia: The Financial Network of Al Qaeda and Jemaah Islamiya,” 173-180; Kathryn L. Gardner, “Fighting Terrorism the FATF Way,” Global Governance 13, no. 3 (2007): 342; Jimmy Gurul�e, “The Demise of the U.N. Economic Sanctions Regime to Deprive Terrorists of Funding,” Case Western Reserve Journal of International Law 41, no. 19 (2009): 39-40; U.S. Department of State, “Anti- Money Laundering/Counter Terrorist Financing,” https://www.state.gov/j/inl/c/crime/ c44634.htm (accessed June 26, 2018).

9. Financial Action Task Force, “Emerging Terrorist Financing Risks,” http://www.fatf-gafi.org/ media/fatf/documents/reports/Emerging-Terrorist-Financing-Risks.pdf (accessed December 9, 2018).

10. Georgina Bensted, “Hi Terrorist Financing and the Internet: Dot Com Danger,” Information & Communications Technology Law 21, no. 3 (2012): 238-247.

11. Mark Maremont and Christopher S. Stewart, “FBI Says ISIS Used eBay to Send Terror Cash to U.S.,” https://www.wsj.com/articles/fbi-says-isis-used-ebay-to-send-terror-cash-to- u-s-1502410868 (accessed June 28, 2018).

12. Matteo Vaccani, “Alternative Remittance Systems and Terrorism Financing: Issues in Risk Management” (Working Paper no. 180, World Bank, Washington, DC, 2010), http:// siteresources.worldbank.org/FINANCIALSECTOR/Resources/Alternative_Remittance_Syste ms.pdf.

13. Abuza, “Funding Terrorism in Southeast Asia: The Financial Network of Al Qaeda and Jemaah Islamiya,” 183-185; Shima Keene, “Hawala and Related Informal Value Transfer Systems – An Assessment in the Context of Organized Crime and Terrorist Finance: Is There Cause for Concern?” Security Journal 20, no. 3 (2007): 185-196; Robert Looney, “Hawala: The Terrorist’s Informal Financial Mechanism,” Middle East Policy 10, no. 1 (2003): https://www.mepc.org/ journal/hawala-terrorists-informal-financial-mechanism; Mohammed El Qorchi, Samuel Munzele Maimbo, and John F. Wilson, “Informal Funds Transfer Systems: An Analysis of the Informal Hawala System” (Occasional Paper 222, International Monetary Fund, Washington, DC, 2003), http://www.imf.org/en/Publications/Occasional-Papers/Issues/2016/12/30/ Informal-Funds-Transfer-Systems-An-Analysis-of-the-Informal-Hawala-System-16535.

14. Victor Odundo Owour, “Mobile Money Transfers have Taken off in Somalia, but it’s a Risky Business,” https://www.pri.org/stories/2018-10-17/mobile-money-transfers-have-taken-somalia- its-risky-business (accessed November 24, 2018).

15. United Nations Counter-Terrorism Implementation Task Force, “About the Task Force,” https://www.un.org/counterterrorism/ctitf/en (accessed June 26, 2018).

16. Financial Action Task Force, “What We Do,” http://www.fatf-gafi.org/about/whatwedo/#d. en.3146 (accessed June 26, 2018).

17. Sascha-Dominik Bachmann, “Bankrupting Terrorism: The Role of US Anti-terrorism Litigation in the Prevention of Terrorism and Other Hybrid Threats: A Legal Assessment and Outlook,” Liverpool Law Review 33, no. 2 (2012): 92-94.

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18. Michael Levi, “Combating the Financing of Terrorism: A History and Assessment of the Control of ‘Threat Finance,’” British Journal of Criminology 50, no. 4 (2010): 653-661.

19. Chris Dishman, “The Leaderless Nexus: When Crime and Terror Converge,” Studies in Conflict and Terrorism 28, no. 3 (2004): 246-247.

20. Tom Keatinge, “The Role of Finance in Defeating Al-Shabaab” (Whitehall Report 2-14, Royal United Services Institute, London, 2014), https://rusi.org/sites/default/files/201412_ whr_2-14_keatinge_web_0.pdf.

21. Yvonne M. Dutton and Jon Bellish, “Refusing to Negotiate: Analyzing the Legality and Practicality of a Piracy Ransom Ban,” Cornell International Law Journal 47 (March 2014): 305-307.

22. Martin and Solomon, “Islamic State: Understanding the Nature of the Beast and its Funding,” 35; Jacob Townsend and Hayder Mili, “Human Smuggling and Trafficking: An International Terrorist Security Risk?” Combating Terrorism Center Sentinel 1, no. 6 (2008): 1-3.

23. Financial Action Task Force, “Terrorist Financing”; Yvonne M. Dutton, “Funding Terrorism: The Problem of Ransom Payments,” San Diego Law Review 53 (April, 2016): 340-345.

24. Matthew Levitt, “Terrorist Financing and the Islamic State” (Congressional Testimony, Washington Institute for Near East Policy, Washington, DC, November 13, 2014), http:// www.washingtoninstitute.org/policy-analysis/view/terrorist-financing-and-the-islamic-state; Michaela Martin and Hussein Solomon, “Islamic State: Understanding the Nature of the Beast and its Funding,” Contemporary Review of the Middle East 4, no. 1 (2017): 35.

25. Financial Action Task Force, “Terrorist Financing.” 26. Irina Ionescu, “Financing Terrorism: From Offshore Companies to the Charity Paradox,”

SEA - Practical Application of Science 3, no. 2 (2015): 94. 27. Dale Coker, “Smoking may not only be Hazardous to your Health, but also to World

Political Stability: The European Union’s Fight against Cigarette Smuggling Rings that Benefit Terrorism,” European Journal of Crime, Criminal Law and Criminal Justice 11, no. 4 (2003): 350.

28. Mark Basile, “Going to the Source: Why Al Qaeda’s Financial Network Is Likely to Withstand the Current War on Terrorist Financing,” Studies in Conflict & Terrorism 27, no. 3 (2004): 172.

29. Jonathan M. Winer, “Fighting Terrorist Finance,” Survival 44, no. 3 (2002): 90. 30. Vilkko, “Al-Shabaab: From External Support to Internal Extraction.” 31. Valpy FitzGerald, “Global Financial Information, Compliance Incentives and Terrorist

Funding,” European Journal of Political Economy 20, no. 2 (2004): 391. 32. Charles Lister, “Cutting of ISIS’ Cash Flow” (Markaz, Brookings Institute, Washington,

DC, 2014), https://www.brookings.edu/blog/markaz/2014/10/24/cutting-off-isis-cash-flow/. 33. Martin and Solomon, “Islamic State: Understanding the Nature of the Beast and its

Funding,” 37-38. 34. Keatinge, “The Role of Finance in Defeating Al-Shabaab;” United Nations Security

Council, “Report of the Monitoring Group on Somalia and Eritrea Pursuant to Security Council Resolution 1916 (2010),” https://www.un.org/ga/search/view_doc.asp?symbol=S/ 2011/433 (accessed May 17, 2019).

35. Eitan Azani and Nadine Liv, “Jihadists’ Use of Virtual Currency” (ICT Cyber Desk, International Institute for Counter-Terrorism, Herzliya, 2018), https://www.ict.org.il/ images/Jihadists%20Use%20of%20Virtual%20Currency.pdf.

36. Loretta Napoleoni, Greg Palast, and George Magnus, Terror Incorporated: Tracing the Dollars Behind the Terror Networks (New York: Seven Stories Press, 2003).

37. U.S. Department of State, “Anti-Money Laundering/Counter Terrorist Financing,” https:// www.state.gov/j/inl/c/crime/c44634.htm?utm_campaign=e4&utm_medium=social&utm_ source=FRblog&utm_content=blockchainanswerspart3 (accessed June 28, 2018).

38. Peter R. Neumann, “Don’t Follow the Money: The Problem with the War on Terrorist Financing,” Foreign Affairs, July/August 2017, https://www.foreignaffairs.com/articles/2017- 06-13/dont-follow-money (accessed June 28, 2018).

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39. Dobayev and Dobayev, “Financing of Terrorist Networks in North Caucasus,” 114-115. 40. Michael Freeman, “Sources of Terrorist Funding: Theory and Typology,” in Financing

Terrorism: Case Studies, ed. Michael Freeman (London: Routledge, 2012), 9-22. 41. This section is based on lectures of and personal interactions with Dr. Gil-Ad Ariely.

Gil-Ad Ariely, “Terrorism and Counter-Terrorism Innovation,” (course, Interdisciplinary Center Herzliya, Herzliya, Israel, 2018).

42. Joseph A. Schumpeter, The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle (New Brunswick: Transaction Publishers, 1934), 65-66.

43. Adam Dolnik, Understanding Terrorist Innovation: Technology, Tactics, and Global Trends (London: Routledge, 2007), 6.

44. Ibid, 156-158. 45. Martha Crenshaw, “Innovation: Decision Points in the Trajectory of Terrorism,” in

Terrorist Innovations in Weapons of Mass Effect: Preconditions, Causes, and Predictive Indicators, eds. Maria J. Rasmussen and Mohammed M. Hafez (Monterey: Naval Postgraduate School, 2010), 36, 39.

46. Ibid, 36, 40. 47. Assaf Moghadam, “How Al Qaeda Innovates,” Security Studies, 22, no. 3 (2013): 469. 48. Ibid, 472. 49. Clayton M. Christensen, The Innovator’s Dilemma: The Revolutionary Book that will

Change the Way you do Business (New York: HarperBusiness, 2000), xviii. 50. Canada Broadcasting Corporation Radio, “‘Disruptive Innovation’ Theory Often

Misunderstood, Says Creator Clayton Christensen,” https://www.cbc.ca/radio/thecurrent/ the-current-for-november-8-2016-1.3840044/disruptive-innovation-theory-often- misunderstood-says-creator-clayton-christensen-1.3840127 (accessed June 29, 2018).

51. Tai Ming Cheung, Thomas G. Mahnken, and Andrew L. Ross, “Frameworks for Analyzing Chinese Defense and Military Innovation” (Policy Brief No. 27, Institute on Global Conflict and Cooperation, San Diego, 2011), https://escholarship.org/uc/item/5cr8j76s.

52. Brian A. Jackson et al, “Aptitude for Destruction Volume 1: Organizational Learning in Terrorist Groups and Its Implications for Combating Terrorism” (MG-331-NIJ, RAND, 2005), https://www.rand.org/pubs/monographs/MG331.html.

53. Brian A. Jackson et al, “Aptitude for Destruction Volume 2: Case Studies of Organizational Learning in Five Terrorist Organizations” (MG-332-NIJ, RAND Corporation, 2005), https://www.rand.org/pubs/monographs/MG332.html.

54. David H. Petraeus and James F. Amos, Counterinsurgency (Washington D.C.: Headquarters, Department of the Army, 2006), ix.

55. Gil Ariely and Tomer Bitzer, “The Sinai Terror Threat - A Misleading ’Fata-Morgana’ of Tranquil Desert” (Commentaries, International Institute for Counter-Terrorism, Herzliya, 2007).

56. Gary King, Robert O. Keohane, and Sidney Verba, Designing Social Inquiry: Scientific Inference in Qualitative Research (Princeton: Princeton University Press, 1994).

57. Amina Wako, “Shabaab Abductors Demand Sh150m Ransom for Kidnapped Cuban Doctors,” https://www.nation.co.ke/news/Cuban-doctors-abductors-demand-Sh150m-ransom/1056-5117 474-d3jplf/ (accessed May 17, 2019). Al-Shabaab recently kidnapped two Cuban doctors in Kenya and demanded a $1.5 million ransom for their release. Kenya was employing these doctors, implying the demand was directed at the Kenyan government. In April, Nairobi declared it will not pay ransom to Al-Shabaab. This may indicate a new al-Shabaab strategy of demanding large ransoms from governments. Since it is unclear whether this will become a trend, the authors have not analyzed it in the paper.

58. Cedric Barnes and Harun Hassan, “The Rise and Fall of Mogadishu’s Islamic Courts,” Journal of Eastern African Studies 1, no. 2 (2007): 152-154.

59. Christopher Anzalone, “The Rise and Decline of al-Shabab in Somalia,” Turkish Review 4, no. 4 (2014): 388-392.

60. Vilkko, “Al-Shabaab: From External Support to Internal Extraction.”

1186 I. LEVY AND A. YUSUF

61. Ibid. 62. Keatinge, “The Role of Finance in Defeating Al-Shabaab.” 63. Ibid; Hiraal Institute, “The AS Finance System,” (Yool, Hiraal Institute, Mogadishu, 2018),

https://hiraalinstitute.org/wp-content/uploads/2018/07/AS-Finance-System.pdf. 64. Hiraal Institute, “The AS Finance System.” 65. Ibid. The general rate is one out of every 25 camels and one out of every 40 goats.

Zakawaat officials issue receipts to pastoralists, who must present it to officials yearly or be double-taxed.

66. Ibid. 67. Action on Armed Violence, “Sources of Funding (Including Self-Funding) for the Major

Groupings that Perpetrate IED Incidents - al Shabaab,” https://aoav.org.uk/2017/sources- funding-including-self-funding-major-groupings-perpetrate-ied-incidents-al-shabaab/ (accessed August 10, 2018).

68. United Nations Security Council, “Report of the Monitoring Group on Somalia and Eritrea Pursuant to Security Council Resolution 2182 (2014): Somalia,” https://www.undocs.org/S/ 2015/801 (accessed May 17, 2019).

69. Tom Keatinge, “The Role of Finance in Defeating Al-Shabaab.” 70. Vilkko, “Al-Shabaab: From External Support to Internal Extraction.” 71. William Maclean, “Qaeda’s Somali Allies Take Fight onto World Stage,” https://www.reuters.

com/article/uk-uganda-explosions-shabaab-foreign/analysis-signs-point-to-somali-war-blowba ck-idUKTRE66B2EC20100712 (accessed August 10, 2018).

72. Anzalone, “The Rise and Decline of al-Shabab in Somalia,” 390-391. 73. Keatinge, “The Role of Finance in Defeating Al-Shabaab.” 74. The Somali Transitional Government has accused Iran, Saudi Arabia, Syria, Qatar, and

Yemen of also providing financial support to al-Shabaab, though there is little information available on possible links. These countries deny having connections to al-Shabaab. Action on Armed Violence, “Sources of Funding (Including Self-Funding) for the Major Groupings that Perpetrate IED Incidents - al Shabaab”; Geoffrey Kambere, “Financing al- Shabaab: The Vital Port of Kismayo,” https://globalecco.org/financing-al-shabaab-the-vital- port-of-kismayo#6 (accessed May 13, 2019); Vilkko, “Al-Shabaab: From External Support to Internal Extraction.”

75. Ursula Daxecker and Brandon C. Prins, “Financing Rebellion: Using Piracy to Explain and Predict Conflict Intensity in Africa and Southeast Asia,” Journal of Peace Research 54, no. 2 (2017): 219; Keatinge, “The Role of Finance in Defeating Al-Shabaab.”

76. David Lerman, “African Terrorist Groups Starting to Cooperate, U.S. Says,” https://web. archive.org/web/20141111084441/http://www.businessweek.com/news/2012-06-25/african- terrorist-groups-starting-to-cooperate-u-dot-s-dot-says (accessed May 13, 2019).

77. Benjamin Acosta and Steven J. Childs, “Illuminating the Global Suicide-Attack Network,” Studies in Conflict & Terrorism 36, no. 1 (2013): 61-62.

78. BBC Staff, “Who Are Somalia’s Al-Shabab?” https://www.bbc.com/news/world-africa- 15336689 (accessed August 12, 2018).

79. Keatinge, “The Role of Finance in Defeating Al-Shabaab.” 80. Andrea Crosta and Kimberly Sutherland, “The White Gold of Jihad: Al-Shabaab and the

Illegal Ivory Trade,” (Report, Elephant Action League, Los Angeles, 2016), https:// elephantleague.org/wp-content/uploads/2016/02/Report-Ivory-al-Shabaab-Oct2016.pdf.

81. Hiraal Institute, “The AS Finance System.” 82. Michelle Nicols, “Iran is New Transit Point for Somali Charcoal in Illicit Trade Taxed by

Militants: U.N. Report,” https://www.reuters.com/article/us-somalia-sanctions-un/iran-is-new- transit-point-for-somali-charcoal-in-illicit-trade-taxed-by-militants-u-n-report-idUSKCN1MJ1 58 (accessed May 13, 2019).

83. Action on Armed Violence, “Sources of Funding (Including Self-Funding) for the Major Groupings that Perpetrate IED Incidents - al Shabaab;” United Nations Security Council, “Report of the Monitoring Group on Somalia and Eritrea Pursuant to Security Council Resolution 2182 (2014): Somalia,”

STUDIES IN CONFLICT & TERRORISM 1187

84. Action on Armed Violence, “Sources of Funding (Including Self-Funding) for the Major Groupings that Perpetrate IED Incidents - al Shabaab.”

85. Hiraal Institute, “The AS Finance System.” 86. Several of our sources cited al-Shabaab’s extortion of Somali religious leaders as well, but

there are few details about this source of income. 87. Hiraal Institute, “The AS Finance System.” 88. Interview with a Mogadishu-based businessman, June 2018. 89. Interview with Mogadishu-based businessman, August 2018. 90. Ibid. 91. This paper uses the terms “tribe” and “clan” interchangeably. 92. Ken Menkhaus, “State Collapse in Somalia: Second Thoughts,” Review of African Political

Economy 30, no. 97 (2003): 408. 93. Interview with Lower Shabelle-based tribal elder, August, 2018. 94. Interview with Somali tribal elder, August 2018. 95. Interview with Middle Shabelle-based farmer, July 2018. 96. Ibid. 97. World Food Programme, European Union, Food and Agriculture Organization of the

United Nations, and Government of Austria, “New Initiative Enables Somali Farmers to Produce Food Assistance,” http://eeas.europa.eu/archives/delegations/somalia/documents/ press_corner/20140306_1.pdf (accessed August 17, 2018).

98. Interview with Middle Shabelle-based farmer, July 2018. 99. Interview with a Mogadishu-based political analyst, June 2018. 100. Ibid. 101. Interview with Somali relative of an extortion victim, August 2018. 102. United Nations Population Fund, “Population Estimation Survey 2014 for the 18 Pre-War

Regions of Somalia,” https://somalia.unfpa.org/sites/default/files/pub-pdf/Population- Estimation-Survey-of-Somalia-PESS-2013-2014.pdf (accessed August 20, 2018).

103. Interview with pastoralist from south-central Somalia, August 2018. 104. Interview with pastoralist from south-central Somalia, July 2018. 105. VOA Staff, “Hiraan: Shabaab iyo Xoola Dhaqato oo Dagaallamay,” https://www.voasomali.

com/a/4301516.html (accessed November 18, 2018). Various pastoralist tribes have formed organized militias to oppose al-Shabaab. One group of pastoralists has pooled its forces to oppose al-Shabaab near Mahas, a district in the Hiran region. Dozens of pastoralists and al-Shabaab members have died in the ensuing fighting.

106. Barnes and Hassan, “The Rise and Fall of Mogadishu’s Islamic Courts,” 154. 107. Dolnik, Understanding Terrorist Innovation: Technology, Tactics, and Global Trends, 156-158. 108. Thomas J. Biersteker, Sue E. Eckert, and Peter Romaniuk, “International Initiatives to

Combat the Financing of Terrorism,” in Countering the Financing of Terrorism, eds. Thomas J. Biersteker and Sue E. Eckert (London: Routledge, 2008), 232-241, 253-254; Interview with Somali political analyst, June 2018.

109. Keatinge, “The Role of Finance in Defeating Al-Shabaab.” 110. U.S. Department of State, “Designation of al-Shabaab,” https://www.state.gov/j/ct/rls/other/

des/143205.htm (accessed August 13, 2018). 111. Keatinge, “The Role of Finance in Defeating Al-Shabaab.” 112. BBC Staff, “Bombs Kill Somalia Peacekeepers,” http://news.bbc.co.uk/2/hi/africa/7904613.

stm (accessed August 13, 2018). 113. There is an ongoing scholarly debate on the causes of suicide bombing. See, Benjamin T.

Acosta, “The Suicide Bomber as Sunni-Shi’i Hybrid,” Middle East Quarterly 17, no. 3 (2010): 13-20; Acosta and Childs, “Illuminating the Global Suicide-Attack Network,” 49-76; Anat Berko and Edna Erez, “”Ordinary People” and “Death Work”: Palestinian Suicide Bombers as Victimizers and Victims,” Violence and Victims 20, no. 6 (2006): 603-623; Mia M. Bloom, “Palestinian Suicide Bombing: Public Support, Market Share, and Outbidding,” Political Science Quarterly 119, no. 1 (2004): 61-88.

114. Hiraal Institute, “The AS Finance System.”

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115. Crosta and Sutherland, “The White Gold of Jihad: Al-Shabaab and the Illegal Ivory Trade.”

116. Interview with a Somali government official, June 2018. 117. Hiraal Institute, “The AS Finance System.” 118. Harun Maruf, “In Somalia, Businesses Face ‘Taxation’ by Militants,” https://www.voanews.

com/a/in-somalia-businesses-face-taxation-by-militants/4684759.html (accessed December 14, 2018).

119. For a detailed discussion on the relationship between ideology and the shift from terrorism to criminality, see Audrey Kurth Cronin, How Terrorism Ends: Understanding the Decline and Demise of Terrorist Campaigns (Princeton: Princeton University Press, 2009), 146-166.

120. Interview with a Mogadishu-based Somali businessman, August 2018.

Acknowledgements

We thank Benjamin Acosta for his support, Gil-Ad Ariely for inspiring a large part of our work, Chaim B. Weizmann for preparing us for this work, Bruce Hoffman and Siobhan Steel for assist- ing us in the publication process, an anonymous reviewer for their valuable feedback, and our interviewees without whom this project would not be possible.

Disclosure statement

No conflicts of interest arise from the application of this research.

Funding

The authors received no funding for this project.

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