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The (Hidden) Financial Flows of Terrorist and Transnational Crime Organizations: A Literature Review and Some Preliminary Empirical Results

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Author Info

  • Friedrich Schneider
  • Raul Caruso

Abstract

The financial means of international terror and transnational organized crime organizations are analyzed. First, some short remarks about the organization of international terror organizations are made. Second and in a much more detailed way a literature review is provided about the financing of terrorist and transnational organized crime organizations, their sources and the various methods they use. Third, an attempt is made to estimate the financial means of terror organizations with the help of a latent estimation approach (MIMIC procedure). The figures show that Al Qaeda and other terror organizations have sufficient financial means. Fourth, some remarks are made about the negative effects of terror on the economy in highly developed countries and some strategies are presented to combat (the financing) of terrorism.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.386645.de/diw_econsec0052.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Economics of Security Working Paper Series with number 52.

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Length: 34 p.
Date of creation: 2011
Date of revision:
Handle: RePEc:diw:diweos:diweos52

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Keywords: Financial flows of terrorist organizations; financial flows of transnational organized crime; Hawala banking; money laundering; transnational organized crime; terrorist organizations; kinds of terrorist financing;

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References

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  1. Gould, Eric D. & Stecklov, Guy, 2009. "Terror and the costs of crime," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1175-1188, December.
  2. Andreas Freytag & Jens J. Krüger & Daniel Meierrieks & Friedrich Schneider, 2009. "The Origins of Terrorism - Cross-Country Estimates on Socio-Economic Determinants of Terrorism," Jena Economic Research Papers 2009-009, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  3. Schneider, Friedrich, 2005. "Shadow economies around the world: what do we really know?," European Journal of Political Economy, Elsevier, vol. 21(3), pages 598-642, September.
  4. Khusrav Gaibulloev & Todd Sandler, 2008. "Growth Consequences of Terrorism in Western Europe," Kyklos, Wiley Blackwell, vol. 61(3), pages 411-424, 08.
  5. Alberto Abadie, 2004. "Poverty, Political Freedom, and the Roots of Terrorism," NBER Working Papers 10859, National Bureau of Economic Research, Inc.
  6. Bruno S. Frey & Simon Luechinger & Alois Stutzer, 2004. "Calculating Tragedy: Assessing the Costs of Terrorism," CREMA Working Paper Series 2004-23, Center for Research in Economics, Management and the Arts (CREMA).
  7. Kaul, Inge & Conceicao, Pedro & Le Goulven, Katell & Mendoza, Ronald U. (ed.), 2003. "Providing Global Public Goods: Managing Globalization," OUP Catalogue, Oxford University Press, number 9780195157413.
  8. Raul Caruso & Andrea Locatelli., 2008. "Deadly contests: An economic note on al Qaeda's reward system," Economics of Peace and Security Journal, Economists for Peace and Security (UK), vol. 3(2), pages 62-67, July.
  9. Pierre-Emmanuel Ly, 2007. "The charitable activities of terrorist organizations," Public Choice, Springer, vol. 131(1), pages 177-195, April.
  10. Abadie, Alberto & Gardeazabal, Javier, 2008. "Terrorism and the world economy," European Economic Review, Elsevier, vol. 52(1), pages 1-27, January.
  11. Tavares, Jose, 2004. "The open society assesses its enemies: shocks, disasters and terrorist attacks," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 1039-1070, July.
  12. Alan B. Krueger & Jitka Maleckova, 2003. "Education, Poverty and Terrorism: Is There a Causal Connection?," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 119-144, Fall.
  13. William Shughart, 2006. "An analytical history of terrorism, 1945–2000," Public Choice, Springer, vol. 128(1), pages 7-39, July.
  14. Friedrich Schneider & Ursula Windischbauer, 2010. "Money Laundering: Some Facts," Economics of Security Working Paper Series 25, DIW Berlin, German Institute for Economic Research.
  15. Brown, Jeffrey R. & Cummins, J. David & Lewis, Christopher M. & Wei, Ran, 2004. "An empirical analysis of the economic impact of federal terrorism reinsurance," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 861-898, July.
  16. John Page & Sonia Plaza, 2006. "Migration Remittances and Development: A Review of Global Evidence," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 15(2), pages 245-336, December.
  17. Konstantinos Drakos, 2009. "Cross-Country Stock Market Reactions to Major Terror Events: The Role of Risk Perception," Economics of Security Working Paper Series 16, DIW Berlin, German Institute for Economic Research.
  18. Caruso, Raul & Schneider, Friedrich, 2011. "The socio-economic determinants of terrorism and political violence in Western Europe (1994–2007)," European Journal of Political Economy, Elsevier, vol. 27(S1), pages S37-S49.
  19. Konstantinos Drakos, 2009. "The Determinants of Terrorist Shocks' Cross-Market Transmission," Economics of Security Working Paper Series 17, DIW Berlin, German Institute for Economic Research.
  20. Elöd Takáts, 2007. "A Theory of "Crying Wolf"," IMF Working Papers 07/81, International Monetary Fund.
  21. Llussá, Fernanda & Tavares, José, 2007. "Economics and Terrorism: What We Know, What We Should Know and the Data We Need," CEPR Discussion Papers 6509, C.E.P.R. Discussion Papers.
  22. Caruso, Raul & Schneider, Friedrich, 2009. "Al Qaeda and Jihadist Terrorism in the Light of Contest Theory, Empirical Evidence for the period 2004-2008," MPRA Paper 15856, University Library of Munich, Germany.
  23. Peter Kurrild-Klitgaard & Mogens Justesen & Robert Klemmensen, 2006. "The political economy of freedom, democracy and transnational terrorism," Public Choice, Springer, vol. 128(1), pages 289-315, July.
  24. Zdanowicz John S., 2009. "Trade-Based Money Laundering and Terrorist Financing," Review of Law & Economics, De Gruyter, vol. 5(2), pages 855-878, December.
  25. Walker John & Unger Brigitte, 2009. "Measuring Global Money Laundering: "The Walker Gravity Model"," Review of Law & Economics, De Gruyter, vol. 5(2), pages 821-853, December.
  26. Bagella Michele & Busato Francesco & Argentiero Amedeo, 2009. "Money Laundering in a Microfounded Dynamic Model: Simulations for the U.S. and the EU-15 Economies," Review of Law & Economics, De Gruyter, vol. 5(2), pages 879-902, December.
  27. Drakos, Konstantinos & Kutan, Ali M., 2001. "Regional effects of terrorism on tourism: Evidence from three Mediterranean countries," ZEI Working Papers B 26-2001, ZEI - Center for European Integration Studies, University of Bonn.
  28. Loayza, Norman, 2004. "Comment on: "The open society assesses its enemies: shocks, disasters and terrorist attacks"," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 1071-1075, July.
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Citations

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Cited by:
  1. repec:diw:diwdiw:diwepb17 is not listed on IDEAS
  2. Stefan Haigner & Friedrich Schneider & Florian Wakolbinger, 2012. "The Financial Flows of Terrorism and Transnational Crime," EUSECON Policy Briefing 17, DIW Berlin, German Institute for Economic Research.
  3. Stefan Haigner & Friedrich Schneider & Florian Wakolbinger, 2012. "Combating Money Laundering and the Financing of Terrorism: A Survey," Economics of Security Working Paper Series 65, DIW Berlin, German Institute for Economic Research.
  4. Michael Brzoska & Raphael Bossong & Eric van Um, 2011. "Security Economics in the European Context: Implications of the EUSECON Project," Economics of Security Working Paper Series 58, DIW Berlin, German Institute for Economic Research.

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