ARGUMENT TERTERRORIT FINANCING & DRUG CARTELSLessons From the Ledger
The United States and Canada recently began designating drug cartels and other transnational criminal organizations as terrorist groups, in part to use counterterrorism tools against these organizations. Jessica Davis writes that some “counterterrorist financing tools might yield some results against cartels. But here, the lessons of decades of counterterrorist financing will need to be applied for maximum disruptive effect.”
The United States has recently designated eight drug trafficking organizations/cartels as terrorist entities. Canada, at the behest of the United States, has followed suit and designated seven. Other countries have, or are likely to, follow suit.
Jessica Davis writes in Lawfare that These designations (or listings in Canada) have generated significant debate about whether these criminal entities meet the legal definition of terrorist groups and what utility these designations or listings will have.
“Some analyses have suggested that counterterrorist financing (CTF) tools can now be applied against these groups. However, in practice, these designations change little in terms of how financial intelligence and anti-money laundering/counterterrorist financing activities are applied against these criminal non-state actors. Prior to the designations, it was already illegal to launder funds for the cartels and many of their activities were heavily surveilled by banks and law enforcement.”
She notes that other counterterrorist financing tools, however, might yield some results against cartels. “But here, the lessons of decades of counterterrorist financing will need to be applied for maximum disruptive effect. CTF tools will need to be used in combination to create a multifront attack and coordinated among states affected by cartel operations. In addition, second-order effects—including how cartels will adapt and the potential disruption to financial systems—will need to be considered, even as both the supply and demand of drug trafficking and the unintended consequences of these designations are addressed.”
She adds:
[T]he most important lesson from more than 20 years of CTF initiatives is that disrupting the financial network of terrorist actors is a necessary but insufficient condition for success. Kinetic strikes, counter-radicalization, and even arrests and prosecutions of attackers and plotters are insufficient on their own, just as only targeting terrorist finances yields limited results. Targeting terrorist finances is critical in obtaining long-term results against terrorist groups. In fact, one of the only terrorist groups to have been successfully defeated in recent history (the Liberation Tigers of Tamil Eelam) was defeated through a concerted combination of kinetic (counterinsurgency) and counterterrorist financing approaches, specifically sanctioning and network disruption. This is a critical lesson for countering the cartels: Without targeting their finances, long-term results are unlikely to be achieved against these profit-motivated organizations.
Applying terrorism laws to the cartel problem is not without other unintended consequences. For instance, states that have designated or listed cartels as terrorist entities might be tempted to charge low-level drug users, or people loosely associated with cartels, with material support or facilitation charges. This approach would be counterproductive, as it would significantly increase the cost to states of prosecuting and incarcerating these offenders without addressing the supply and demand problem, and it would have little meaningful effect on the market forces that shape cartel finance.
Ultimately, the history of counterterrorist financing demonstrates that disrupting illicit networks requires comprehensive action, global and regional cooperation, and a nuanced understanding of both supply and demand. These same principles must guide efforts to dismantle the financial lifelines of drug cartels while also targeting other aspects of these organizations, such as leadership, territorial control, and popular support. However, these organizations are more financially sophisticated and adaptive than terrorist groups; therefore, even with expanded tools, disrupting them will be a multiyear and global challenge. While terrorist groups employ minimal financial tradecraft to hide the source, destination, and use of funds, cartels employ sophisticated money laundering schemes to make their money seem legitimate. They employ professional money launderers, who, in turn, use real estate transactions, casinos, and trade-based money laundering schemes, among other techniques, to obscure the funds generated by their criminal activities. They also use incentives (money) and violence and the threat of violence to coerce individuals in useful positions (including bankers, lawyers, accountants, and other professional service providers) to help them stay ahead of law enforcement. As states begin to use CTF tools against cartel financial networks, they should also expect the cartels to adapt and evolve with both violence and innovative money laundering techniques in response.
