The men who carried out the July 7, 2005 attacks on London's mass transit system are believed to have had a budget of $2,000. They raised the money in cash, completely off the radar of governments, which have pursued terrorist financial networks since 9/11. The case highlights the difficulties in disrupting terrorist financing (CSMonitor). As this CFR Background Q&A explains, governments need to adapt their approach if they are to have any hope of cutting off terrorists' money supply.
The Congressional Research Service (CRS) outlines U.S. efforts to combat terrorist financing, which are largely in keeping with the recommendations of the intergovernmental Financial Action Task Force that have come to be viewed as a standard. The Economist reports that these efforts are both costly and ineffective. A 2004 CFR Task Force Report suggests improving understanding of the threat of radical Islam and strengthening current multilateral initiatives are just two steps that could help produce better results.
Some of the difficulties in stemming terrorist financing are due to the fact that terrorist groups have adapted their operations (openDemocracy) to better slip through the net cast by the world's governments. Terrorists increasingly rely on the illicit economy (Foreign Policy), smuggling drugs or selling counterfeit merchandise to fund their sinister activities. Such ill-gotten funds are easily laundered and deposited into terrorists' coffers (BBC).
The 9/11 Commission Report estimates that prior to the attacks on New York and Washington, al-Qaeda had an annual operating budget of $30 million dollars, most of which came from donations. Saudi Arabia was home to some of the biggest donors, but as a CRS report indicates, Riyadh has taken several important steps toward cutting off this flow of funds.
Elsewhere, Muslim charities have been scrutinized for sending money into volatile regions. The Red Crescent Society of the United Arab Emirates has been criticized for providing financial assistance to the families of Palestinian "martyrs" (IHT). Some agencies complain they are being persecuted for the crime of being Muslim charities (WashPost).
So what is to be done? A Government Accountability Office report calls for better leadership to coordinate interagency efforts, as well as means to assess the effectiveness of measures already in place. Enforcing existing measures would also help: A UN Security Council resolution, created a standing committee four years ago that monitors the UN's 191 members with mandated measures to crack down on terrorist financing, but compliance has been mixed.