Choking off financing is a critical part of the battle against international terrorism. It is as important as disrupting and degrading terrorist operations and capabilities. But it is not an easy undertaking as Pakistan is finding out in its existential struggle against domestic terrorism. A huge challenge is the massive inflow of funds to sectarian groups and radical religious schools from external sources, mostly ‘brotherly’ countries. Terrorist violence in Pakistan is partly bankrolled by rich, conservative donors from the Middle East whose governments do little to stop them. In this context, a secret December 2009 paper signed by then US Secretary of State Hilary Clinton identified Saudi Arabia as the world’s largest source of funds for Islamist militant groups such as the Taliban and Lashkar-e-Tayyaba (LeT). According to Clinton, “Donors in Saudi Arabia constitute the most significant source of funding to Sunni terrorist groups worldwide but the Saudi government is reluctant to stem the flow of money.” Three other Arab countries were listed as sources of militant money: Qatar, Kuwait and the UAE. Traditionally, terrorist groups have favoured multiple revenue streams. These groups rely on covert fundraising and illegal activities, like drug trafficking, kidnapping, smuggling or counterfeiting to generate revenue that is difficult to track through the financial system. The problem is particularly acute in Saudi Arabia where militants soliciting funds slip into the country disguised as holy pilgrims, set up front companies to launder funds and receive money from government-sanctioned charities. Fundraising campaigns often conflate jihadist fighting and humanitarian aid. For example, funds collected in the name of orphans and refugees find their way to Sunni jihadists waging war against the Shia and infidels. In this way, funds earmarked for war and aid become indistinguishable. Thus, an important priority in the fight against terrorism is to devise an effective way to tackle the problem of religious charities. Law enforcement efforts are further confounded by the fact that devastating attacks can be accomplished at relatively low cost. Even a small donation can go far: though the 9/11 attacks are believed to have cost as much as half a million dollars, most terrorist operations have had much more modest budgets. The UN estimates that the 2002 bombing of a Bali nightclub cost about $ 50,000. By comparison, the 2004 Madrid train bombing is believed to have cost between $ 10,000 and $ 15,000. The 2005 attacks on London’s mass transit system apparently cost about $ 2,000. The LeT operates on a budget of just $ 5.25 million a year, according to US estimates. In certain countries, the terrorists’ financial engine is chugging at full force right under the nose of law enforcement. Despite the freezing of substantial terrorist assets in bank accounts worldwide, experts say terrorist groups have become increasingly adept at eluding detection through use of cash, sophisticated laundering operations or legitimate front companies. Monetary practices, such as donating to charities and informal money transfer centres (hawala), have compounded the difficulty in tracking down terrorist financial links. Terrorists have also begun to rely more on cash, leaving less of a paper trail. The use of middlemen to smuggle cash, in addition to employing decades’ old smuggler routes, makes terrorist financing especially hard to track. The effort to cut terrorists off from their finances has a long way to go. A couple of factors frustrate attempts to dam these rivers of cash. First, the relatively open banking systems of some Gulf States do not automatically raise red flags when money is siphoned to religious causes. Second, these states are loath to limit the activities of highly influential donors due to the political fallout such intervention may cause. Cracking down on some influential financiers is politically complicated for these countries’ leaderships. Third, there is also a large inflow of donations from individuals and expatriates to religious institutions, part of which is believed to be diverted to militant and sectarian networks. The Pakistani authorities have decided to make it obligatory for religious schools (madrassas) to get their accounts audited and reveal their sources of funding. It is certainly a step in the right direction but some tough measures need to be put in place against those who defy their legal obligations. That will certainly be a major test for the federal and provincial governments. What has to change is the funding quagmire that extends to Pakistan itself. In the past, western governments had detailed sharp criticism of the government’s ambivalence towards funding of militant groups that enjoy covert military support. So, in the end, this is a matter of will. Governments cannot parade on the international scene their desire to assist in taking on the global threat from extremism but then condone, in their own backyard, those providing the means to carry through that deadly intent. Pressure needs to come not just from states primarily under the threat of terrorism but from all those nations committed to providing a stable and secure world in which trade can flourish, poverty can be reduced and freedom from fear can be secured. The writer can be reached at shgcci@gmail.com