which terrorist financial networks distribute funds while operating through a variety
of covert channels. We are told that “al-Qaeda is notably and deliberately
decentralized, compartmentalized, flexible, and diverse in its methods and
targets...Al-Qaeda’s financial network is characterized by layers and redundancies. It
raises money from a variety of sources and moves money in a variety of manners."
Reports from the multinational Financial Action Task Force on Money Laundering,
the Asia/Pacific Group on Money Laundering,
narrative.
From this perspective, it is hard to imagine why a group would underfund
operational elements. As an alternative to the traditional approach, suppose that the
members of a terrorist support network, middlemen, were not uniformly driven by
mission accomplishment, but that some proportion were driven by monetary rewards.
Because the network is covert, information asymmetries abound, exacerbating the
principal agent dilemmas found in any hierarchical organization, and thus creating
numerous opportunities for middlemen to appropriate funds or resources for personal
use. Under this scenario, a greedy middleman might only pass on as much money to
rough sketch, which our model formalizes, can explain underfunding in hierarchical
terrorist groups.
A game-theoretic approach is particularly attractive for dealing with this type of
puzzle because it places the strategic and organizational dilemmas faced by terrorist
groups into the starkest possible contrast (Victoroff 2005). Developing formal models
of terrorism can also help explain otherwise puzzling patterns. The best example of
such work is Bueno de Mesquita (2005b) which reconciles the seemingly
contradictory findings that while terrorist operatives are neither poor nor lacking in
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Convention