The Sources of Terrorist Financing: Theory and Typology

Terrorism costs money. Although the costs of specific operations may be relatively inexpensive, terrorist organizations require much larger budgets in order to function. But how do terrorist groups acquire funding? What explains the variation in the particular sources used by different groups? This article develops a theory of terrorist financing that identifies criteria by which we can evaluate the different sources of terrorist funding, particularly in terms of their advantages and disadvantages to the terrorist group. These criteria are then applied across a typology of four primary types of terrorist financing: state sponsorship, illegal activity, legal activity, and popular support.