FPI Bulletin: Saudi Arabia and Terror Financing

February 25, 2016

By FPI Associate Analyst Danielle Ellison

This month, Saudi Arabia launched massive military exercises that underscore its recent offer to send ground forces to fight against ISIS as part of a U.S.-led coalition. While Riyadh and Washington share the objective of destroying ISIS, our counterterrorism priorities are not always aligned. Therefore, Riyadh’s recent moves justify a re-examination of whether and when the Saudis can serve as reliable partners in combating violent Islamic extremism. Despite allegations that the monarchy has directly supported violent extremists such as al-Qaeda, there is no public evidence supporting this charge. However, Saudi Arabia’s mixed record on combating terrorist financing over the past 15 years reveals that Riyadh is more concerned with its domestic security and regional feuds than it is focused on combating global terrorism.

U.S.-Saudi Mistrust After 9/11

After it was revealed that 15 of the 19 hijackers on September 11, 2001 were Saudis, the Saudi government and royal family were the targets of multiple lawsuits by employers and families of the victims. Prominent U.S. lawmakers also indicated concerns about Saudi Arabia. Senator Mitch McConnell (R-KY) observed that the United States “in some ways, have had a good relationship with [the Saudis] over the years, and in other ways, it appears as if they’re funding our enemies.” Amid legislative proposals to compel Saudi cooperation, Senator Chuck Schumer (D-NY) criticized Riyadh for a “well-documented history of suborning terrorist financing and ignoring the evidence when it comes to investigating terrorist attacks on Americans.” A December 2002 report by the House and Senate intelligence committees investigated these issues, but 28 still-classified pages related to Saudi Arabia resulted in controversy over whether Washington protected Saudi government figures.

Despite such controversy, the 9/11 Commission Report “found no evidence that the Saudi government as an institution or senior Saudi officials individually funded [al Qaeda].” However, the Commission also noted that “Saudi Arabia has been a problematic ally in combating Islamic extremism. At the level of high policy, Saudi Arabia’s leaders cooperated with American initiatives aimed at the Taliban or Pakistan before 9/11. At the same time, Saudi Arabia’s society was a place where al Qaeda raised money directly from individuals and through charities.” The Report states that although it did not find evidence to incriminate Riyadh, “This conclusion does not exclude the likelihood that charities with significant Saudi government sponsorship diverted funds to al Qaeda.”

Before the 9/11 attacks, the Saudi royal family had long shied away from cracking down on private donors and foundations linked to terrorist financing, primarily to avoid confrontation with the powerful ultra-conservative clerics in the kingdom and their followers. After 9/11, Riyadh remained reluctant to help the U.S. Treasury Department dismantle international terror funding networks with links to donors and foundations in Saudi Arabia.

Saudi Arabia Steps Up After New Terror Threats in the Kingdom

Saudi Arabia’s complacency was rocked in 2003-2006 after a series of significant attacks within the kingdom claimed dozens of lives and demonstrated to Saudi citizens and rulers that al Qaeda posed a direct threat to Saudi Arabia’s stability. This development propelled Riyadh to dramatically strengthen its policies and enforcement to stop terrorist financing stemming from within the kingdom. Testifying before the Senate in 2005, U.S. Treasury Deputy Assistant Secretary Daniel L. Glaser stated, “Today, Saudi Arabia is actively countering the threat of terrorism. This is a key success, unfortunately catalyzed by the May 2003 terrorist attacks in Riyadh, which alerted the kingdom that terrorism was not only a theoretical global problem, but very much a local one.”

With aggressive arrests and widespread crackdowns on financing and operating of terrorist cells, as well as efforts to better train police and monitor mosques as part of a wide-ranging counterterrorism program, the Saudi government subdued the internal threat from al Qaeda. Riyadh also began to cooperate with efforts by the U.S Treasury Department to sanction charitable foundations that were financing al Qaeda and the Taliban. The Saudi government also instituted new financial restrictions on charities, such as limits on cash transactions, foreign transactions, and multiple accounts.

Today, Saudi Arabia likely sees the battle against al Qaeda within the kingdom to be past its violent peak, but not yet over, argues The Washington Institute for Near East Policy’s Lori Plotkin Boghardt. Since 2008, a special Saudi terrorism court has prosecuted thousands of suspects charged with playing a role in the al Qaeda attacks of 2003-2006. In January 2016, the Saudis executed 43 men charged with supporting al Qaeda plots from a decade ago. (Regrettably, the court has also tried Saudi human rights activists, including female drivers, whose activities the kingdom has defined as terrorism.) The individual most responsible for the kingdom’s aggressive approach to terrorism in recent years is the recently anointed crown prince, Muhammad bin Nayef, who built his reputation by leading the kingdom’s campaign against al Qaeda and surviving a 2009 attack on his person. The efforts of the crown prince and others demonstrate a new seriousness of purpose, although loopholes remain as Saudi Arabia turns its attention to the threat posed by the Islamic State (also known as ISIS, ISIL, or Daesh).

Funding Loopholes Remain

Saudi Arabia’s position on ISIS parallels the kingdom’s hostility towards al Qaeda. ISIS leader Abu Bakr- al-Baghdadi has branded Saudi royalty as apostates. His calls for attacks on the kingdom have resulted in a wave of suicide bombings and other attacks. In 2014, the Saudis designated the Islamic State as a terrorist organization, which rendered any financial support illegal. Saudi Arabia has also arrested ISIS cells in the kingdom. Nonetheless, Saudi citizens who support the Islamic State and other extremists in Syria are finding ways to provide those groups with funding.

”There is no credible evidence that the Saudi government is financially supporting ISIS,” writes Lori Plotkin Boghardt, since “Riyadh views [ISIS] as a terrorist organization that poses a direct threat to the kingdom’s security.” Yet she notes, “Riyadh could do much more to limit private funding,” especially via other Gulf States that offer more permissive financial networks.

Senior U.S. officials have publically stated their concerns about terror-financing contributions routed through third parties. Former Secretary of State Hillary Clinton, in a 2012 speech about combating ISIS, said, “the Saudis, the Qataris, and others need to stop their citizens from directly funding extremist organizations, as well as the schools and mosques around the world that have set too many young people on a path to radicalization.” Speaking in March 2014, Treasury Under-Secretary David Cohen revealed, “A number of fundraisers operating in more permissive jurisdictions – particularly in Kuwait and Qatar – are soliciting donations to fund extremist insurgents, not to meet legitimate humanitarian needs.” He explains, “Fundraisers aggressively solicit donations online from supporters in other countries, notably Saudi Arabia, which have banned unauthorized fundraising campaigns for Syria.”  The recipients of these funds include al Qaeda’s Syrian affiliate, Jabhat al-Nusra, as well as ISIS, Cohen said.

David Weinberg of the Foundation for Defense of Democracies laments that “Saudi authorities have also declined to take punitive measures against local preachers … [who] advised donors to circumvent local restrictions by sending their donations to accounts in Qatar and Kuwait.” Social media and crowd funding technologies have particularly made it easier for smaller donations to circumvent Riyadh’s policing of the formal financial sector. Cash transfers across state borders also easily escape detection. Boghardt concludes that “a combination of politics, logistics, and limited capabilities have impeded more effective Saudi efforts to counter terrorism financing.”

Incentivizing Saudi Cooperation

U.S. Secretary of State John Kerry admitted in January 2015, “We all know that massive private funding goes to the extremist groups,” and governments must step up their programs to stop this. But it may be difficult to compel Saudi Arabia to more comprehensively combat the outflow of money to extremists abroad, since this goes beyond Saudi Arabia’s own concerns of domestic stability, which have been its key incentive to combat terrorism over the past decade. Moreover, many Saudis view Sunni extremists abroad as a bulwark against the influence of the kingdom’s rival, Iran. So as long as Saudi Arabia senses that the United States is seeking rapprochement with Tehran, it may resist pressure to more aggressively assist with Washington’s global counterterrorism efforts. While maintaining pressure on Riyadh to fight terrorist financing, the United States can also work to reassure Saudi Arabia that we will not ignore Iran’s regional aggression. Steps for doing so would include firm responses to such Iranian provocations as ballistic missile launches, as well as renewing Washington’s faltering commitment to the ouster of Bashar al-Assad, Tehran’s most important client in the region.

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