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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," IZA Discussion Papers 4347, Institute for the Study of Labor (IZA).
  2. Friedrich Schneider, 2004. "Shadow Economies around the World: What do we really know?," IAW Discussion Papers, Institut für Angewandte Wirtschaftsforschung (IAW) 16, Institut für Angewandte Wirtschaftsforschung (IAW).
  3. Loayza, Norman, 2004. "Comment on: "The open society assesses its enemies: shocks, disasters and terrorist attacks"," Journal of Monetary Economics, Elsevier, Elsevier, vol. 51(5), pages 1071-1075, July.
  4. Alan B. Krueger & Jitka Maleckova, 2003. "Education, Poverty and Terrorism: Is There a Causal Connection?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 17(4), pages 119-144, Fall.
  5. Konstantinos Drakos, 2009. "Cross-Country Stock Market Reactions to Major Terror Events: The Role of Risk Perception," Economics of Security Working Paper Series, DIW Berlin, German Institute for Economic Research 16, DIW Berlin, German Institute for Economic Research.
  6. Pierre-Emmanuel Ly, 2007. "The charitable activities of terrorist organizations," Public Choice, Springer, Springer, vol. 131(1), pages 177-195, April.
  7. Friedrich Schneider & Ursula Windischbauer, 2010. "Money Laundering: Some Facts," Economics of Security Working Paper Series, DIW Berlin, German Institute for Economic Research 25, DIW Berlin, German Institute for Economic Research.
  8. 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.
  9. Bruno S. Frey & Simon Luechinger & Alois Stutzer, 2004. "Calculating Tragedy: Assessing the Costs of Terrorism," CREMA Working Paper Series, Center for Research in Economics, Management and the Arts (CREMA) 2004-23, Center for Research in Economics, Management and the Arts (CREMA).
  10. Konstantinos Drakos, 2009. "The Determinants of Terrorist Shocks' Cross-Market Transmission," Economics of Security Working Paper Series, DIW Berlin, German Institute for Economic Research 17, DIW Berlin, German Institute for Economic Research.
  11. Caruso, Raul & Locatelli, Andrea, 2007. "Deadly Contests An economic note on al Qaeda’s reward system," MPRA Paper 5448, University Library of Munich, Germany.
  12. 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, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics 2009-009, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  13. Alberto Abadie, 2006. "Poverty, Political Freedom, and the Roots of Terrorism," American Economic Review, American Economic Association, American Economic Association, vol. 96(2), pages 50-56, May.
  14. Elöd Takáts, 2007. "A Theory of "Crying Wolf"," IMF Working Papers, International Monetary Fund 07/81, International Monetary Fund.
  15. Walker John & Unger Brigitte, 2009. "Measuring Global Money Laundering: "The Walker Gravity Model"," Review of Law & Economics, De Gruyter, De Gruyter, vol. 5(2), pages 821-853, December.
  16. William Shughart, 2006. "An analytical history of terrorism, 1945–2000," Public Choice, Springer, Springer, vol. 128(1), pages 7-39, July.
  17. Peter Kurrild-Klitgaard & Mogens Justesen & Robert Klemmensen, 2006. "The political economy of freedom, democracy and transnational terrorism," Public Choice, Springer, Springer, vol. 128(1), pages 289-315, July.
  18. Llussá, Fernanda & Tavares, José, 2007. "Economics and Terrorism: What We Know, What We Should Know and the Data We Need," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6509, C.E.P.R. Discussion Papers.
  19. Jeffrey R. Brown & J. David Cummins & Christopher M. Lewis & Ran Wei, 2004. "An Empirical Analysis of the Economic Impact of Federal Terrorism Reinsurance," NBER Working Papers 10388, National Bureau of Economic Research, Inc.
  20. Khusrav Gaibulloev & Todd Sandler, 2008. "Growth Consequences of Terrorism in Western Europe," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 61(3), pages 411-424, 08.
  21. Abadie, Alberto & Gardeazabal, Javier, 2008. "Terrorism and the world economy," European Economic Review, Elsevier, Elsevier, vol. 52(1), pages 1-27, January.
  22. Zdanowicz John S., 2009. "Trade-Based Money Laundering and Terrorist Financing," Review of Law & Economics, De Gruyter, De Gruyter, vol. 5(2), pages 855-878, December.
  23. 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, Elsevier, vol. 27(S1), pages S37-S49.
  24. Tavares, Jose, 2004. "The open society assesses its enemies: shocks, disasters and terrorist attacks," Journal of Monetary Economics, Elsevier, Elsevier, vol. 51(5), pages 1039-1070, July.
  25. 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), Centre for the Study of African Economies (CSAE), vol. 15(2), pages 245-336, December.
  26. Drakos, Konstantinos & Kutan, Ali M., 2001. "Regional effects of terrorism on tourism: Evidence from three Mediterranean countries," ZEI Working Papers, ZEI - Center for European Integration Studies, University of Bonn B 26-2001, ZEI - Center for European Integration Studies, University of Bonn.
  27. Kaul, Inge & Conceicao, Pedro & Le Goulven, Katell & Mendoza, Ronald U. (ed.), 2003. "Providing Global Public Goods: Managing Globalization," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195157413, October.
  28. 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, De Gruyter, vol. 5(2), pages 879-902, December.
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Citations

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Cited by:
  1. Stefan Haigner & Friedrich Schneider & Florian Wakolbinger, 2012. "The Financial Flows of Terrorism and Transnational Crime," EUSECON Policy Briefing, DIW Berlin, German Institute for Economic Research 17, DIW Berlin, German Institute for Economic Research.
  2. repec:diw:diwdiw:diwepb17 is not listed on IDEAS
  3. Stefan Haigner & Friedrich Schneider & Florian Wakolbinger, 2012. "Combating Money Laundering and the Financing of Terrorism: A Survey," Economics of Security Working Paper Series, DIW Berlin, German Institute for Economic Research 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, DIW Berlin, German Institute for Economic Research 58, DIW Berlin, German Institute for Economic Research.

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