Homeland Security Advisor Loretta Napoleoni Gives Lecture
Loretta Napoleoni, advisor to the Department of Homeland Security on matters of terrorism financing and the author of numerous articles and books, notably Terrorism Inc. (2003) and Insurgent Iraq (2005), spoke at Hamilton College on November 7. Napoleoni's talk, titled "Who is financing global terror networks?," focused on the economics of terrorism.
Napoleoni analyzes terrorism from an economic rather than a political perspective. "There is an international economic system…to fund terror," said Napoleoni. There are three stages of terror funding, she explained. The first is state-sponsored terrorism, in which a superpower uses a mix of legal and illegal activities to pursue its interests. Napoleoni cited the Cold War as an example of the state-sponsored of terror. This system changed radically in the late 1970s, when terrorist organizations were able to separate the superpowers and set up their own systems. This led to the second stage of terror funding, the creation of state shells. A state shell occurs when a terrorist organization moves into a state and takes it over with violence, destroys the social and economic infrastructure and takes it over with its own. The final stage occurred in the 1990s, and that is the globalization of terror—global terror networks.
At this point, according to Napoleoni, all three stages have merged to create a system of terror that has a $1.5 trillion economy. One-third of this money is generated by legitimate businesses and also includes charitable donations. Usually, people do not know where their money is going.
Since the 1960s, said Napoleoni, an increased amount of United States dollars actually leaves the U.S. and never comes back. Because the dollar was the main currency used, a lot of this U.S. money eventually funded terror.
After September 11, the United States instituted two acts to try to control money from reaching terror networks. The first is the International Patriot Act, in which the United States blocked entry of dirty money by preventing banks from doing business with off-shore banks. This, said Napoleoni, did not stop terrorist financing or money laundering because the Euro replaced the dollar as the main currency used. "[The Patriot Act] reduced the flow of dirty money into the U.S. by increasing the flow into Europe," said Napoleoni. Since November 2001, there has been a progressive outflow of money from the dollar into the Euro.
The second policy instituted by the U.S. after September 11 was the International Terror List. The goal of this list was to track legitimate businesses that fund terror organizations. The assets of any company suspected of funding terror were frozen. However, because many countries refused to participate, there is no consolidated terror list. "Today, the terror list is very much a photocopy of the U.S. terror list," said Napoleoni. People managing money involved in terror are able to escape controls by exploiting the lack of communication between countries.
"What I have done is to analyze the failure of the financial war of terror," Napoleoni explained. "The results show the first step is to carry on the fight within a democratic framework; we can not put people on a terror list on suspicion, we need proof. We need a global policy—blocking one entry [of money for terror organizations] means nothing." Napoleoni's other recommendations include the investigation of not only where the money comes from, but where it is going. Terrorist organizations operate on the distribution of money, so the movement of money should be investigated. Finally, she recommended that an international organization focusing on the communication between countries be created.
"I think that it is possible to say economics can give us another tool to fight terrorism," said Napoleoni in closing, "Without money, there is no terrorism…it is a tool that will save many lives."
-- by Laura Trubiano '07