ABSTRACT
This chapter addresses why terrorists need money and how much money they actually need. It presents a theory of terrorist financing that identifies six key criteria by which we can evaluate the advantages and disadvantages of different sources of financing. These criteria are: quantity, legitimacy, security, reliability, control, and simplicity. The chapter offers a typology of terrorist financing sources that identifies four broad sources: state sponsorship, illegal activities, legal activities, and popular support. It also addresses the counter terrorism financing implications of understanding the rationale behind different sources of financing. From the perspective of a terrorist organization, state sponsorship is advantageous because of the quantity of funds it can provide and the simplicity by which the terrorists can get them. Many terrorist groups rely on the support of a sympathetic population or constituency as a source of funding. Charitable donations comprise a large portion of the revenue for many Islamic groups in particular.
