Terrorist Financing and Money Laundering
Wilfried Guth Chair of Constitutional Political Economy and Competition Policy
University of Freiburg
June 8, 2011
Terrorism causes enormous costs to society. Since the 9/11 attacks, the “war on terror” has therefore been an important challenge to all civilized countries. In the present contribution we analyze the root causes and costs of terrorist activity, thereby setting the stage for discussing the need for measures against terrorist financing. We argue that running a terrorist organization requires substantial financial resources which are transferred to the groups through clandestine and often illegal channels. Anti-money laundering policies may appear useful measures to stop transfers to terrorist groups; however, they are not sufficient means to deal with all facets of terrorist financing. Compared to similar activities of organized crime, terrorist financing involves “reverse” money laundering. This is a consequence of some fundamental differences between terrorism and organized crime, which also lead to different implications in terms of choosing appropriate counter-measures.
Number of Pages in PDF File: 26
Keywords: terrorist financing, causes and costs of terrorism, money laundering, organized crime vs. terrorism, anti-terrorist financing policies
JEL Classification: K42, H56, D74working papers series
Date posted: June 8, 2011
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