Risk and Reward: How Shadow Economies Impact the Financial Practices of Militant Organizations

ABSTRACT

Violent non-state actors often maintain diverse economic portfolios to fund their operations and endure. While some tactics yield limited funds, such as opportunistic robberies or kidnappings, other activities such as smuggling and drug trafficking can produce consistently high returns, but require complex planning, coordination and execution. This study delves into the nexus between the economic environments in which militant groups operate and their funding tactics. We hypothesize that the magnitude of a state’s informal economy plays a significant role in shaping the fundraising choices of militant organizations. Specifically, groups operating within states with expansive shadow economies are likely to lean towards intricate, high-yield fundraising tactics over unpredictable, hit-or-miss methods. States with sprawling informal sectors often grapple with governance deficiencies, that provide fertile ground for collaborations between militant factions and criminal syndicates and enable them to pursue lucrative funding opportunities that demand connections and logistical infrastructure. We use the case study of FARC to illustrate our argument, and test our arguments quantitatively using group-level data on the funding activities of militant organizations around the world between 1998–2012.

KEYWORDS:

• Terrorism
• terrorist financing
• political violence
• militants
• drug trafficking
• shadow economies

Disclosure statement

No potential conflict of interest was reported by the author(s).

Supplementary material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/09546553.2024.2381211

Notes

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Additional information

Notes on contributors

Amira Jadoon

Amira Jadoon is an assistant professor at Clemson University, specializing in U.S. security and counterterrorism strategies, political violence and terrorism, and the strategic dissemination of propaganda by non-state actors. Jadoon worked at the U.S. Military Academy at West Point, New York between 2017-2022, and is currently a non-resident fellow at the Stimson Center and an associate editor of the European Journal of International Security. She is the author of over 23 peer-reviewed articles and book chapters, and author of the book, The Islamic State in Afghanistan and Pakistan (Lynne Rienner, 2023).

Daniel Milton

Daniel Milton is Director of Research at the Combating Terrorism Center at the United States Military Academy, West Point, New York and a Professor in the Department of Social Sciences.