Merchants of Men: How Jihadists and ISIS turned Kidnapping and Refugee Trafficking into a Multibillion-Dollar Business

Date: 12:30-13:30, 14th September 2017

Location: The Henry Jackson Society, Millbank Tower,

21-24 Millbank, London, SW1P 4QP


Loretta Napoleoni, Author of Merchants of Men
Chairman of the Countering Terrorism Financing Group for the Club de Madrid

Nikita Malik: Alright, thank you very much for joining us today. My name is Nikita, I’m a Senior Research Fellow at the Centre for Countering Radicalisation and Terrorism at the Henry Jackson Society, and I’m delighted today to introduce Loretta Napoleoni, who will be speaking to us today about her book ‘Merchants of Men’, which is available outside at a special price of fifteen pounds. Loretta is an expert on terrorist financing and money laundering and advises several governments and international organisations on counter terrorism. As chairman of the Countering Terrorism Financing Group for the Club de Madid, Loretta brought several heads of states from around the world together to create a new strategy for combatting the financing of terror networks. Her books include Modern Jihad; Terror Inc; Insurgent Iraq; Terror Incorporated; Terror and the Economy; Merchants of Men, and many more. Her books have been translated into eighteen languages, including Chinese and Arabic. Merchants of Men which we’re discussing today examines the link between post nine eleven Western foreign policy and as well as kidnapping and the refugee crisis. Relying on original interviews with former hostages, negotiators, members of crisis units and refugees, the book details how post nine eleven Western foreign policy is responsible for the birth of a new breed of criminal and terrorist engaged in kidnapping of Westerners and trafficking migrants. So I will open now to Loretta who will speak for twenty minutes about her book then I will open the floor to a question and answer session with her and again we are delighted to have you here today.

Loretta Napoleoni: Thank you. Well thank you for being here. I’m an expert in financing of terrorism, I’ve been working on this field since the mid nineteen nighties. I must confess that when I started this research I had no idea that I would stumble into a new form of terrorist financing. I also did not expect this form of terrorist financing directly related to our response to nine eleven. So I would like to take you back the eleventh of September two thousand and one. The first response from the United States if you remember was the Patriot Act. The Patriot Act is well known in the world as a sort of legislation which greatly limits the liberties of US citizens; but what really interests us is the financial connection of the Patriot Act. Which is, very much an anti-money laundering legislation. So almost overnight US banks and US registered foreign banks were prevented from doing any business with offshore facilities. But also the US monetary authority had the right to monitor any dollar transaction taking place anywhere in the world. So you can imagine the Patriot Act was a bureaucratic nightmare for the international banking system. But, even more important, it became a real nightmare for the Columbian cartel. So until the international Patriot Act the Columbian cartel had used the United States as a main transshipment point of cocaine coming to Europe. They also used the dollar in the US as the main hub to money launder the profits of this business, so all of this started with the PA this was not going to be possible anymore. So the cartel was literally in a panic, and the Italian organised crime, the ‘inaudible’ actually came to the rescue. They thought this is a great opportunity for us we can ‘inaudible’ we can sell the cocaine un Europe and money launder all the profits using the euro, the newly introduced European currency. There was an idea to replace the dollar, because there is no similar legislation to the euro, because the euro is ‘inaudible’ in a continent is this continent is not politically homogenous so you cannot have a central bank of Europe, the European Central Bank, checking the euro transaction taking place in Spain, that would be impossible. So the euro is at an advantage, the ‘inaudible’ also suggested an alternative route to reach Europe, they suggested well take the cocaine to Venezuela then on small planes fly the cocaine to west Africa, and then from west Africa we’ll take it through the Sahara either by plane or by smuggling network which was in place at that time, and this is exactly what they did, they chose their the cartel chose Burkina Faso as the most important transshipment in west Africa because Burkina Faso has infrastructure that was ideal so it was an ex colony of Portugal it had many small landing strips scattered throughout the county it was a destabilised country of course as most of west Africa the collapse of the soviet union, it had large warehouses facilities because in the old days this is a country that had a very profitable fishing industry which of course had been completely destroyed by the overfishing taking place in west Africa so the warehouses were empty so literally the cartel moved in in 2002 and brought the country. So you know they brought the ‘inaudible’ country by buying the politian’s who wanted elected so this is the beginning of the story that interests us because when they got there they had to carry the cocaine all the way to Italy and they discovered this network of smugglers and these smugglers were partly criminals but were partly mujahedeen who had fought in the anti-Soviet jihad in the nineteen eighties and had come home to mostly Algeria and then it had been pushed to the south of the country in this Sahara by military coup which took place in the early nineties, they stayed there for a decade by smuggling whatever they could mostly cigarettes, so the cartel thought fantastic we are going to use this network which they did and this was a blessing for this criminal jihadists because all of a sudden they had enough cash in their pockets and this was good from the point of view of recruitment it is easier to recruit young people you can pay them also the process of destabiliation accelerated of the arrival of the cartel so the potential supply of new recruits was even higher. In two thousand and three one of this group decided to branch into another business, they could ok so we are working for the cartel but we get the scraps of the cocaine business because we are only carrying the cocaine, why don’t we find a business where we can make much more money and that business was kidnapping. So they kidnapped in two thousand and three they kidnapped thirty-two Europeans, they negotiated successfully with the European parliaments and got six million dollars. That was a lot of money at that time for an organisation like that who had their headquarters in Mali, they had their camps ‘inaudible’ in Mali. With this money this organisation, al-Qaeda in the Islamic Maghreb, is nothing to do with bin-Laden, nothing to do with al-Qaeda central, and has nothing to do with their sponsor, this is diverse organisation, a jihadist organisation which was born out of self-funded strategies, so the kidnapping was instrumental, even more important to a certain extent was the participation in the cocaine because that gave them the possibility to start this new model. From that moment onwards, al-Qaeda in Islamic Maghreb concentrated on kidnapping, and initially they did very well, because people wouldn’t go on holiday in Timbuktu, or going Mauritania, so if look on the map of the Sahel they were ‘inaudible’ they knew the area very well but more Important they actually had an ability to negotiate and this is key because you can’t kidnap a foreigner if you don’t know how to deal with the governments of the families and the companies in negotiation then these hostages were worth nothing so we’re seeing a degree of complexity in this organisation which we haven’t seen in other organisations what is interesting is that all of this was happening from two thousand and two and two thousand and eight and two thousand and nine and we knew very little. So European government paid ransom and kept it quiet because they did not want to publicise how dangerous this area was becoming, they also kept quiet about the cocaine trade. So people kept going in holiday or going there as aid workers or journalists without knowing the actual danger. Now although al-Qaeda centre had nothing to do with this, they did welcome this new model, because they of course thought this was a new form of terrorist financing that they had not consider, so while we were introducing more and more legislation, to block the international move of funds, similar to ‘inaudible’ our governments were delivering cash, millions in cash, to organisations like al-Qaeda in Islamic Maghreb. So this is idea, this idea was replicated everywhere, the Taliban start to do same thing, south east Asia, ‘inaudible’ of the model I think is most interesting is the example of the pirates, because of course the al-Qaeda in Islamic Maghreb model of kidnapping had to be applied to the various ‘inaudible’ different places where it was assimilated so each group did some changes, alterations in order to adapt it perfectly to their own needs. A good example is the pirates, in Somalia, who you all know is a failed state, a country that could not sustain itself, support itself so piracy really became a sort of resource a certain point a peak of Somali crisis we saw the ransom payment being the second largest revenue for the population after the remittances of the diaspora, so we’re talking about an important source of the economy, they kept people alive so that also explains why the pirates were so popular in Somalia they never perceived as a crime, on the contrary the local population looked at it as a sought of blessing, but you understand in order to hijack a cargo and then kidnap the crew you require a large investment this not like snatching a tourist trekking in Mauritania so the pirates required an initial capital investment which they got from the diaspora so they reached out to the diaspora they got capital investment and with this capital investment they actually did the hijacking then during the negotiation they kept the hostages alive and also the crews alive through borrowing with the local populations they would keep a ship in port and keep in port until negotiation finished and everting they needed, food, phone the sim card for the phone everything would be brought through borrowing following a very strict interest rate structure. This is really interesting because this is exactly what happened with the concept of leverage you want to do something you cannot afford it you go and borrow and this is the leverage the interest rates so once the ransom was paid, then the payment worked according to another very well defined structure so the investors would get between sixty and seventy percent of the ransom then the pirates would repay the debt that they occurred with the local population what was left over was divvied between the pirates so that was the structure. Now in both cases, the case of the al-Qaeda in Islamic Maghreb aim and the case of the pirates these kind of business model was not business model that would last forever because of course people stop going on holiday in Mali journalists stop going to report on Sahel and cargos started to travel in conveys with armed guards so this was business short term business extremely profitable but short term so in the case of al-Qaeda in Islamic Maghreb by two thousand and nine it became clear that business of kidnapping would not continue to grow on the contrary it was shrinking so they looked around and thought what can we do which can maximize the kind of infrastructure that we have built and to keep funding ourselves and of course the migrants offered the best possible opportunity so the ‘inaudible’ of west Africa had produced a massive migration so millions of people were on the move and all of these people wanted to cross the Sahel in order to reach Europe so al-Qaeda in Islamic Maghreb had the perfect infrastructure they had the perfect relationship with the Libyan regime but also they were kidnappers so they knew how to handle people and the real very profitable business started. Now this is a business a long term business which carries on today, we do have the jihadist criminal organisation which of course today ‘inaudible’ these people are not interested in the jihad at all, this ‘inaudible’ interested in making money so is a form of crime which is extremely profitable. The same thing happened in Somali, the destabiliation in east Africa started to result in massive migration of people who wanted to cross the Arabic peninsular and work in the rich countries of the Gulf; Saudi Arabia, Kuwait, Qatar so the pirates become smugglers of people using the same infrastructure they used for hijacking kidnapping cargos and crews and so then we come to the latest development which is the one I think we find most interesting, this is what happening in Syria. In two thousand and eleven the Syrian war in Syria starts kidnapping becomes the most important source of funding for anybody who is involved in this conflict we are talking the Assad regime also the so called rebels. The Assad regime focus on rich Syrians snatched by the police of the army put in regime prisons and the family asked to pay ransom between ten and fifteen thousand dollars. Of course soon after these people freed these people left the country, so very quickly the Syrian upper middle class left and emigrated. The insurgency was focused more on kidnapping foreigners, when we’re talking about insurgency I do not only talk about the jihadists I basically talk about everybody. If you are in a situation as Syria was and you have no source of revenues and you do not want to depend on the sponsor and this is the other important element, there was plenty of sponsor there is still sponsorship comes with strings attached so if you want to be independent of a sponsor the foreigner becomes really a source of revenue. So what we see in Syria is the formation of groups specialising in kidnapping and the group it pretends to be driver, fixer for journalists predominantly or even members of the insurgency and as soon as they convinced the journalists to cross into Syria with their protection they would be kidnapped immediately. These groups did not have the infrastructure or the ability to negotiate the ransom so what we seen in Libya is secondary market. So hostages get sold to the two largest organisations which has infrastructure and ability to maximise their value which is of course al-Nursa and Islamic State. Now the Islamic State in the case of the Islamic State we see a far development even more accepting the hostages are not only for financing options to maximise their ransom, some of the hostages are brought as an investment because these hostages will be worth more dead than alive and this is where we see really the most upsetting development of the kidnapping industry. Again we see in Syria ‘inaudible’ before in the Sahel and Somalia ‘inaudible’ nobody goes into Syria anymore because the beheadings taking place and everybody release how dangerous it is but two thousand and fourteen is the beginning of the mass exodus. So two thousand fourteen two thousand fifteen two thousand sixteen we see people everybody trying to leave form this region and some people also come from central Asia east Africa go to Syria because they think it’s easier to cross into Turkey from this county so these groups specialising in kidnapping become smugglers which territory do they cross, of course they do not cross territory controlled by Assad, or by west side of Syria, they cross the Caliphate. They pay one tax when they get to the border. So in the summer of two thousand and fifteen when we are in the peak of the exodus from Syria Islamic State were netting around half a million dollars per day from this business, crossing into people were crossing into Turkey, so you had to pay a tax per migrant but then ‘inaudible’ that migrant would cross back in bringing the products needed in caliphate so they would pay a lot of tax so this is what has happened today we still face this kind of reality, not so structured as I told you. We have Libya for example, we have Bangladesh, we have Afghanistan I mean we still have people on the move from everywhere and we still have groups which initially are jihadist groups, chose this business to fund their so called political battle, but in reality this group eventually degenerates into criminal groups and that’s it so.

Nikita Malik: Thank you so much Loretta, that was incredibly insightful I’m sure everyone agrees, there are many questions, so now I’ll open up the floor to questions, if you can kindly please introduce yourself, your name and your organisation, before asking the question and may I please request that you ask questions and that there is a question at the end. So anyone would anyone like to start? Yes, please.

Question 1: Mike Start, no organisation or affiliation. I didn’t quite understand why they were more valuable dead than alive; could you clarify that please.

Loretta Napoleoni: The more dead than alive because in the case of the Americans for example they were beheaded. The beheading was very important propaganda tool for the Islamic State in order to terrorise the Westerner. Even more interesting is the case of the Japanese, the Japanese two Japanese they were negotiating for the release then all of a sudden they were negotiating for money then all of a sudden the Prime Minister of Japan went to Cairo and gave a speech to pledge two hundred million to help this situation now Japan has article nine of its constitution which prevents it from being involved.

[Recording ends]


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