Terrorist Financing in 2021

It is sadly ironic that in the year marking the 20th anniversary of the 9/11 terrorist attacks, a riot occurred at the U.S. Capitol on January 6. It was a gut punch. It was upsetting. It was surreal and a reminder that terrorism remains the most significant threat to U.S. national security. It is also a reminder that the seeds of terrorism are no longer exported from far-flung lands but are often planted and nurtured in the U.S.

Those two seminal moments in history are reflective of the transformation in the terrorist threat environment over the last 20 years. This threat remains real and constant. As with 9/11, there were intelligence shortcomings, or a sense of government complacency, and a breakdown in information sharing concerning the threat of the moment prior to the breach of the Capitol.

The acts of terrorism perpetrated on 9/11 were organizationally driven by al-Qaeda (al-Qaida), a foreign terrorist organization (FTO). Participants in the attack were members of al-Qaeda who were directed and funded by al-Qaeda’s command-and-control structure. It took two years to plan and execute the 9/11 attacks. This was clearly an act of international terrorism.

The Capitol insurrection was driven by individuals; some were loosely affiliated, while others were complete strangers. There were thousands of demonstrators originating near the White House protesting the outcome of the 2020 presidential election. At some point, these protesters marched toward the Capitol and joined protesters that were already there. Hundreds of individuals have been arrested and indicted. Hundreds more remain under investigation. What has emerged are allegations that a core group of individuals affiliated with right-wing extremist movements and groups conspired to cause violence by inciting the protestors and using this as a cover for their illegal activities. Perhaps equally notable was the way in which other protesters, either by themselves or collectively, got caught up in the escalation from activism to extremism to extreme violence and terrorism. However, unlike the 9/11 attacks, there was no command-and-control structure or centralized funding outside of the core group.

Evolution of Threat Landscape

Whether motivated by international or domestic extremist ideology, the threat of terrorism is not a U.S. problem, it is a global problem. For the better part of 20 years, the primary terrorist threat for many countries was posed by FTOs. Over the last three years, the primary threat has shifted from FTOs to lone actors or small cells aligned with either international Islamist or domestic violent extremist ideologies. Individuals who are inspired by FTOs (such as al-Qaeda and the Islamic State [IS]) are referred to as homegrown violent extremists (HVEs). Dealing with HVEs is more straight forward both logistically and legally. Because they are aligned with designated FTOs, the U.S. can invoke federal counterterrorism statutes and authorities. The San Bernardino shooting on December 2, 2015, is an example of the HVE threat. Syed Rizwan Farook and his wife Tashfeen Malik killed 14 of Farook’s co-workers at a training and Christmas party event. During the attack, Malik pledged his allegiance to IS.

Individuals who commit violent criminal acts in furtherance of ideological goals stemming from domestic influences are referred to as domestic violent extremists (DVEs). The top threat from DVEs stems from those identified as racially or ethnically motivated violent extremists (RMVEs). DVEs will be affiliated with movements and groups within movements from both right and left-wing ideologies. The main right-wing threat comes from the white supremacist movement. The Boogaloo Bois are a right-wing militia movement desirous of instigating a civil race war. By contrast, Antifa is a left-wing anti-fascist political protest movement that has used violence in furtherance of its political goals. There are a variety of loosely organized and fragmented groups, as well as individuals, associated with these and other movements. For example, the Oath Keepers are a right-wing anti-government militia group, while the Proud Boys are right-wing white supremacists. Identifying DVE affiliations is more challenging than HVEs for two primary reasons:(1) the loose affiliation of these groups and lack of command and control makes membership difficult to determine and (2) unlike HVEs and FTOs, U.S. law is much more limited in its ability to designate and criminalize these groups due to constitutional freedom of speech concerns and a lack of statutory authority.

The evolution of the threat environment to HVEs and DVEs has been greatly facilitated by transnational communication through the internet and social media platforms. Many individuals, especially those who are disenfranchised, are extremely susceptible to online radicalization. IS and al-Qaeda have been masterful at inspiring and alluring vulnerable individuals to become HVEs. One of the most compelling problems in recent years has been the internationalization of domestic terrorism, wherein likeminded DVEs easily communicate regardless of where they are located. The right-wing white supremacist extremist movement in particular has evolved as a global problem, and it is especially active in Europe.

In 2019, the threat of internationalization of domestic terrorism emanated from lone actors, who found likeminded DVEs driven by right-wing racial and religious hate on the internet. There were a series of large scale or highly visible attacks inspired by likeminded DVEs based on each other’s manifestos. The starting point for this phenomenon was an attack at a youth leadership meeting in Oslo, Norway in 2011. The attacker’s manifesto inspired the Christchurch attack on two mosques in March 2019. The Christchurch DVE simplified the manifesto from the Oslo attack. This manifesto became the bible for copycat attacks later in 2019 at a synagogue in Poway, California; a Walmart in El Paso, Texas; and a synagogue in Halle, Germany.

In 2020, COVID-19 and George Floyd protests presented an opportunity for DVE violence. This caused the DVE lone actor threat to evolve into threats coming from left and right-wing movements, groups and/or lone actors identifying with those movements. Although left-wing violent extremists were notably active at demonstrations in Portland and Seattle, right-wing violent extremists represented a greater threat. This was exemplified by two striking cases. In May 2020, using the Black Lives Matter protest in Oakland, California, Boogalo Bois adherent Steven Carrillo killed a federal security guard and subsequently a deputy sheriff. More broadly, Carrillo communicated with other Boogaloo Bois followers locally and around the U.S., promoting violence at demonstrations to provoke a civil war. From June to October 2020, the Wolverine Watchmen, a militia group linked to the Boogaloo Bois, plotted to kidnap Michigan Governor Gretchen Whitmer. Fortunately, the DVE conspirators were arrested before executing their nefarious plan. Importantly, although radicalization may be recognized as an HVE phenomenon, the clear path from Oslo to Poway shows that radicalization is just as dangerous, and prevalent, with DVEs.

Financial Transformation

The change in the threat environment from organizations to individuals or groups of individuals and cells means that there is a corresponding change in terrorist financing. The landscape has shifted from hierarchically organized groups with a command-and-control structure to groups of individuals or individuals devoid of a command-and-control structure. Basically, this is a shift from a centralized threat to one that is decentralized and one that has shifted from being group funded. This shift requires significant capital to a self-funding model, which requires much less money.

Organizations need significant funds to sustain their operations. Funding sources will vary depending on where the organizations are located, their infrastructure and how they can exploit an opportunity. Individuals, groups of individuals and cells require more minimal funding. HVEs and DVEs will most likely be self-funded. Money sources will come from salaries, family, government entitlement, loans, crowd funding and criminal activities. Funding will tend to be localized and not involve cross-border transactions. Attacks by HVEs and DVEs tend to be cheaper, less sophisticated and smaller scale.

Addressing the trend toward self-radicalized lone actors and self-financed individuals or small cells from a financial perspective should involve becoming situationally aware of the individual radicalization process. This is a four-step process. As individuals radicalize, they will probably undergo six levels of lifestyle or personality changes that influence their spending habits or customer profile. By integrating those six levels of change with the four steps to radicalization, warning signs or red flags could be identified.

Four Steps to Terrorist Radicalization

In general, terrorist radicalization is a four-step process. Regardless of ideology, the path to radicalization and ultimately violent radicalization is similar. Depending on the individual and circumstances, the pace of escalation will be different. It starts with getting the person to sympathize and become interested in a cause. The next step is to become an activist and engage in the cause. The third step has two phases. The first is to become an extremist. The second is to evolve into nonviolent extremism. The first three steps―sympathizer, activist and nonviolent extremist―are within lawful bounds. However, as extremism gains passion and evolves, it escalates to violence. Legal boundaries become blurred and are easily crossed. The fourth step is from violent extremism to terrorism.

HVEs are more likely to progress to extremism, violent extremism and terrorism quickly. Once they become inspired and pledge allegiance to a designated FTO, they begin providing material support to terrorism. As HVEs and DVEs interact with like-minded individuals, they will steadily escalate from sympathizer to activist to extremist to terrorist. With respect to the San Bernardino shooting, Farook and Malik escalated their radicalization over several years through internet communications. In the Carrillo case, he was introduced to the Boogaloo Bois after he joined the Air Force in 2009. In 2012, Carrillo progressed from sympathizer to activist. He escalated to extremist in 2018 following his wife’s suicide. By 2020, Carrillo’s extremism became violent and worsened to terrorism when he killed a federal security guard on May 29, 2020.

How the Radicalization Process Transforms to Personal Traits and Warning Signs

The six levels of personality or trait changes are mindset; pattern of life changes; capability development; concealment activity; operational planning as well as preparation; and personal preparation. The first step to radicalization, sympathizing, starts with the mindset and considering the ideology. There could be payments related to extremist political activity or donations to a cause. These payments are perfectly legal. As people move from sympathizer to activist, stage two, they begin to descend into radicalization. There are more flirtations with lifestyle changes and more financial commitments. However, there is still time to pull back from the descent. Part of activism is capacity development. The activist purchases weapons, gear, literature and other inflammatory propaganda. As people devolve to the third step of radicalization, extremism, they engage in the concealment of activities. The extremist realizes that law enforcement may be looking at them or their financial activity. This is where they may start shifting to cryptocurrency or being more guarded about their purchasing activity. As they further descend into more violent extremism, they put their fantasy into action. They plan, surveil and select targets, travel and conduct other transactions that show them moving into action. At this stage, they transcend into terrorism, step four, finalize their personal preparations, settle their business and move into action.


The changing threat environment from organizations to individuals or groups of individuals and cells results in the transformation of funding requirements to support terrorism. The money flow has shifted from organizational funding derived from diverse sources and more significant amounts to self-funded individuals or small groups from localized sources. Countering the terrorist threat requires being situationally aware of the change in extremist operations and their corresponding financial requirements and funding flows. This requires understanding the four steps to terrorist radicalization: sympathizer to activist to extremist to terrorist. From a financial perspective, overlaying six levels of personal traits that could influence spending patterns could help to identify warning signs of transacting with HVEs and DVEs. Radicalization starts with sympathizing, which begins with the mindset. Moving to becoming an activist involves pattern of life changes and capacity development. Escalating to extremism involves the concealment of an activity and then operational planning and preparation. Crossing over to terrorism starts with personal preparation. Placing these warning signs in context and reporting suspicious activity could disrupt a plan between preparation and execution.

Dennis M. Lormel, CAMS, internationally recognized CTF expert, president & CEO, DML Associates LLC, VA, USA, dlormel@dmlassocllc.com

Fredrick Reynolds, chief compliance officer, Brex, freynolds@brex.com

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