Chapter 17

Money-Laundering Activities of the PKK

Ozcan Ozkan

Introduction

Money laundering has long been used by organized criminal groups and terrorist
organizations, whose financial benefits have remarkably increased as a result of
engaging in lucrative businesses such as drugs, arms, and humans trafficking to con-
ceal the origin of their illicit funds. While money laundering may be traced back to the
emergence of money itself, money laundering for terrorist purposes is not an old
phenomenon. It has emerged by the rapid process of globalization, globalized nature
of the terror threat, and increasing need for the legal instruments for financial activities
both domestically and globally. A great deal of globalization process has taken place
only after the second half of the twentieth century thanks to developments in technol-
ogy and communication. Terrorist organizations and organized criminal groups alike
have also gone global as a result of the rapid globalization for the last decades. Now,
criminal groups and terrorist organizations can more easily use diverse countries for
recruiting, collecting funds, organizing, propagating, and taking shelter. One of the
main concerns of these organizations is to finance their activities. Although they can
find little difficulty in getting money and funds for their operations, they have more
difficulty in using the money for their acts since state-level, regional, and global
instruments for countering the financing of terrorism have enhanced considerably as a
result of tough measures set forth in multilateral agreements among states and
international institutions. These measures have promptly necessitated terrorist organi-
zations to use money-laundering techniques for their financing.
The fact that the financial markets have also been globalized has created new
opportunities for both legitimate businesses and illegal organizations. Like

O. Ozkan, Ph.D. (*)

Turkish National Police, Ankara, Turkey
e-mail: ozcanozkan2003@yahoo.com

© Springer International Publishing Switzerland 2016 315

A.R. Dawoody (ed.), Eradicating Terrorism from the Middle East,
Public Administration, Governance and Globalization 17,
DOI 10.1007/978-3-319-31018-3_17
316 O. Ozkan

everybody else, organized crime and terrorist groups, too, who wish to do business
globally, have the opportunity to use open financial systems for rapid mobility of
funds. Criminals thus take advantage of this mobility in order to launder the pro-
ceeds of their illegal acts and conceal their illegal wealth.
There are numerous terrorist organizations that use sophisticated methods to
move their illicit funds through financial systems both at home and across the globe.
The Kurdistan Workers’ Party (Kurdish: Partiya Karkerên Kurdistanê, PKK), an
ethno-nationalist terrorist organization rooted in Turkey but operating in various
countries including Turkey’s neighbors such as Iran, Syria, and Iraq, as well as in
Europe has benefited from similar kinds of terrorism-financing activities for a long
time. To finance its activities, it has engaged in terrorist-financing methods and
laundered its illicitly gained funds by cash couriers or front companies through
which it collects money under the name of donation or aid particularly in Europe,
where its financial infrastructure heavily relies upon.
The PKK has long been known to have engaged in various methods to find fund-
ing for its activities. While the main concern is not money itself for the group, finan-
cial activities have forced the PKK to find ways to maintain relationship with drug
and weapons dealers as well as human traffickers from whom it takes commission
charges. The financing activities of the PKK particularly in Europe make it necessary
for the group to deal with financial management including setting up front organiza-
tions for money laundering. Using various kinds of NGOs and media organizations
has allowed the PKK to engage in money-laundering activities. However, since the
organization prefers not to use open financial institutions to move the funds, and its
illegal money usually comes in the form of cash, it is becoming harder for law
enforcement agencies to track money-laundering activities of the group.

Money Laundering and Terrorism Financing

The term money laundering may be traced back to the 1920s when mafia groups in
the United States showed an active interest in acquiring launderettes to launder the
money derived from criminal activities and inject it into the legal instruments.
According to a report of the World Bank and IMF on Combating Money Laundering
and the Financing of Terrorism, money laundering is the process by which proceeds
from a criminal activity are disguised to conceal their illicit origins. In the same
report, the financing of terrorism is defined as the financial support of terrorism or
of those who plan, encourage, or take part in terrorist acts (Schott, 2006).
Money laundering is used for financing the activities of a criminal organization
in a way that the organization can conceal the origin of the money in order to be
immune from law enforcement control. Money laundering has also been used by
terrorist organizations for a long time for financing their activities. In this regard,
financing of terrorism and money laundering are interrelated. Both have similar
objectives and characteristics as well as some differences. While money laundering
includes laundering illicit funds in legal channels in order to conceal the origins of
17 Money-Laundering Activities of the PKK 317

the funds, terrorist financing includes both legally and illegally acquired funds for
the support of terrorism. In short, while terrorism financing is aimed at providing
funds to final destination, money-laundering deals with legitimization.
Profits made by organized crime and terrorist organizations need to be laundered
to be used in the future. While terrorist organizations engage in money laundering
for terrorism financing, for most of them money is not the primary goal since money
is only used as a means leading to their ends. However, for law enforcement units,
tracking money is of great importance. One of the axioms of many analysts in the
security agencies is “follow the money” meaning criminals, and their networks can
be more easily traced, uncovered, and disrupted. On the other hand, once the meth-
ods of terrorism financing are identified and traced by law enforcement agencies, it
is more likely for terrorist organizations to go into bankruptcy and degenerate,
which will consequently bring an end to most of their activities.

Offenses and Methods of Money Laundering

The major aim of money laundering is to inject the dirty money into the legal econ-
omy. While there are different kinds of methods of terrorist financing and money
laundering, there are four general kinds of offenses related to money laundering set
forth by the United Nations Convention against Transnational Organized Crime (the
Palermo Convention), which contains a broad range of provisions to fight interna-
tional organized crime:
1. Conversion or transfer of proceeds of crime: In this method, criminals try to
convert financial assets from one type to another. For instance, illegally acquired
cash money is used to purchase real estate, to sell criminally derived real estate,
or to buy precious metals.
2. Concealment or disguise of proceeds of crime: This offense takes place where
criminals intentionally conceal or disguise the proceeds of crime. This includes
intentional deception of law enforcement units.
3. Acquisition, possession, or use of proceeds: In this section, in addition to those
who provide illegal proceeds, recipients who acquire, possess, or use property
have also responsibility.
4. Participation in, association with or conspiracy to commit, attempts to commit and
aiding, abetting, facilitating, and counseling. (United Nations/Commonwealth
Secretariat/International Monetary Fund, 2009).
As to the offenses related to money laundering and terrorism financing, the
Financial Action Task Force (FATF) designated categories of offenses as such:
• Joining an organized criminal group and racketeering;
• Terrorism and terrorist financing;
• Humans trafficking and migrant smuggling;
• Sexual exploitation, including sexual exploitation of children;
318 O. Ozkan

• Illicit drugs trafficking and trafficking in psychotropic substances;

• Illegal arms trafficking;
• Illicit trafficking in stolen and other goods;
• Corruption including bribery;
• Fraud;
• Counterfeiting currency;
• Counterfeiting and piracy of products;
• Environmental crime;
• Murder, grievous bodily injury;
• Kidnapping, hostage-taking;
• Robbery, theft;
• Smuggling;
• Extortion;
• Forgery;
• Piracy; and
• Insider trading and market manipulation.
For above offenses, the FATF recommendations require financial institutions and
nonfinancial businesses and professions such as casinos (which also includes inter-
net casinos), real estate agents, dealers in precious metals, dealers in precious
stones, lawyers, notaries, other independent legal professionals, accountants, and
trust and company service providers to apply national measures to combat money
laundering and terrorist financing, and in particular, in detecting and reporting sus-
picious transactions (FATF 40 Recommendations, 2003).
As to the process, money is laundered in three essential stages. Placement is the
first stage in which illicit funds are separated from their illegal source and injected
into the financial system. It also includes carrying of proceeds of crime, such as
cash, across borders. Layering is the second stage where laundering the funds usually
involves creating multiple layers of transactions that further separate the funds from
their illegal source in order to make it more difficult to trace these funds to the ille-
gal source. The last stage, integration, includes injecting the illegal funds into the
legitimate economy so that criminals can use the funds without raising suspicion
that might trigger investigation and prosecution (World Bank & IMF, 2009).

The PKK and Money Laundering

The PKK was founded in 1978 by Abdullah Ocalan who was caught in 1999 and is
now serving his life sentence in Turkey. Turkey has been suffering from the PKK
terrorism since 1979 when the terrorist organization first started its violent campaign
in Turkey by an attempt to kill a member of the Turkish Parliament in his house. To
date, it is responsible for nearly 40,000 Turkish citizens’ deaths. One of the reasons
why the PKK has remained capable of operating, recruiting, and carrying out terror-
ist attacks not just inside the country but also in Europe and elsewhere can be
17 Money-Laundering Activities of the PKK 319

attributed to the organization’s capacity to survive economically by terrorism-

financing tools and control a huge amount of money, circulating especially in nar-
cotic and other areas. In addition, money-laundering activities of the PKK have also
been an important component of its operations inside and outside the country.
The terrorist organization PKK has long been known to engage in terrorism-
financing methods such as commission charges from all kinds of smuggling, extor-
tion, and taxing. The drug dealing is considered as one of the biggest sources of the
PKK (Lilley, 2006). Although the PKK is believed to control 80 % of the drug mar-
ket in Europe, the organization usually deny any participation in the drug market
(Laciner, 2008). This could be explained by two reasons. First, if the PKK is seen as
a drug dealer it may lose its support in Europe. Second, if it engages in drug dealing
this may lead its members to use drug, thus degenerating the relations within the
organization. Therefore, except for taking commission charges from drugs and
weapons dealers, the PKK claims not to deal with the narcotic production and dis-
tribution. Nevertheless, the PKK’s engagement in all levels of narcotic trafficking
was accepted by the international community including the US government. Given
its significant involvement in international drug trafficking and money laundering,
the PKK was recognized by the US Drug Enforcement Agency (DEA) as well
established in the production and distribution of a variety of opiate products and to
be deeply involved in money laundering. The United States also designated the
PKK as a narcotic kingpin in 2008.
In addition to drug dealing, the PKK’s finance comes from many traditional and
untraditional terrorism-financing methods. Among them there is the so-called revo-
lutionary tax provided by Kurdish businessmen in Turkey and Europe. The PKK also
engages in protection rackets targeting Kurdish owned businesses across Europe,
where it collects millions of dollars annually from Kurdish businesses and individu-
als in Europe. In addition, the Kurdish Diaspora voluntarily provides funds to the
organization through cultural associations and information centers such as Europe-
based the Kurdish Employers Association, the Kurdish Islamic Movement, and the
Kurdish Red Crescent, which also deals with money transfers through subsidiary
foundations in Switzerland, Britain, Sweden, Belgium, Denmark, and Cyprus.
The accounts of former PKK members interviewed also revealed that the organi-
zation’s funding comes from various sources including:
• Kidnapping,
• Commission charges from drug dealers,
• Charges in what they call the “organization’s customs” from smugglers of weap-
ons, fuel oil, cigarette, food, cattle, etc.,
• Forcefully taken revolutionary tax and donation from ordinary citizens, artists,
and businessmen of Kurdish origin,
• Benefits of media outlets,
• Donation to charities and NGOs,
• Funds collected in social and entertainment activities,
• Direct funds from some states (state-sponsored terrorism financing), and
• Direct provision of weapons, trainings, bombs, and ammunition from various
countries (Marcus, 2007).
320 O. Ozkan

Given the above-mentioned financial activities of the group, one can argue that
the PKK has gone beyond a mere ideologically based terrorist organization since
the PKK who claimed to defend the Kurdish rights in the region has walked away
from a traditional politically motivated organization to a more complex and profit/
interest-based and economically driven criminal network. This inevitably leads the
organization to engage in money-laundering activities. While the PKK commits
offences of money laundering, it doesn’t launder illicit funds in financial intermedi-
aries as other organized crime groups do. Rather, the group prefers using cash couri-
ers consisting of its armed units who carry the funds from different sources to the
finance center of the organization in northern Iraq. Money involved in the PKK
activities usually comes in the form of cash, which makes it harder for law enforce-
ment agencies to follow the money. In addition, for the PKK, money is not consid-
ered as an end, but as a means to continue the fight and trade for supplies.
Like many other transnational terrorist organizations, the PKK has benefited
from dealing with organized crime groups that engage in lucrative businesses such
as illegal trafficking of drugs, humans, and weapons as well as money-laundering
activities mainly in Europe. For instance, two PKK members were arrested in
France in July 2006 for money laundering aimed at financing terrorism. At the end
of 2005, three members of the PKK were arrested in Belgium and another one in
Germany suspected of financing the PKK. In Belgium, the authorities seized receipt
booklets indicating that the arrested suspects were collecting tax from their fellow
countrymen.
The most prominent evidence that the PKK engaged in money laundering came
out of the Sputnik operations in 1996 and in 2002. In the first Sputnik operation
conducted simultaneously by the British Scotland Yard and the Belgian Police in
London and Brussels, as well as in Germany and Luxembourg, it was revealed that
the PKK was laundering the illicit financial gains from its drugs and weapons smug-
gling via the MED-TV Broadcasting Company, a media outlet and a screen corpora-
tion founded by a British citizen of Kurdish origin in 1995 and acting for the
PKK. In that operation, the police were able to link an amount of $11 million seized
from an account belonging to MED-TV to drugs, weapons, and human trafficking
activities of the terrorist organization. The Belgian Police discovered that the PKK
conducted its money-laundering activities through 15 different companies (Roth &
Sever, 2007).
The case of MED-TV is very crucial to understand the money-laundering activities
of the PKK in that it served both for the media propaganda for the group and as a legal
company to launder the dirty money of the organization. When the members of the PKK
had difficulty to launder their illicitly obtained money, they decided to open an account
by the name of “Kurdish Association” in England and “Sweden Postal” in Sweden for
sending money to the MED-TV under the disguise of donations and consolidations.
The second Sputnik operation conducted by the Belgian and the French police in
2002 revealed that a Paris-based company linked to the PKK involved in
money-laundering activities. The PKK operatives detained in this operation con-
fessed that money had been transferred to the PKK under the auspices of a company
called the Kurdish Foundation Trust, which was located in the British controlled
Jersey Islands, known as an offshore haven for international money laundering.
17 Money-Laundering Activities of the PKK 321

Another international police operation led by Belgian authorities and assisted by

the Italian and French police was conducted against the PKK’s operatives and com-
panies in major cities in Belgium on March 4, 2010. The operation resulted in arrest-
ing many high profile PKK members including two of its leading figures, Remzi
Kartal and Zubeyir Aydar who since October 2009 have been on a US list of drug
traffickers suspected of using smuggling proceeds to fund the PKK (Houlton, 2010). The
operation was based on the allegation directed against Roj TV—a successor to
MEDYA TV which is also a successor to MED TV that was banned after the above-
mentioned Sputnik operations—and chief operatives of the PKK in Europe regarding
its involvement in the financial fraud and tax evasion as well as distributing PKK
propaganda, educating PKK members, recruiting members for the PKK, human
trafficking, counterfeiting, and racketeering. The operation in which 300 Belgian
police officers as well as tax inspectors from the finance ministry participated was
launched in coordination with Turkish intelligence, which provided Belgian authori-
ties with information and evidence on the links between the PKK and its European
operatives.
The PKK has often laundered illegal money under the name of donation or aid via
the so-called business, cultural, children, and women associations in London,
Frankfurt, Paris, Brussels, and other European cities in order to be spent for its televi-
sion channels, weapons, explosives, militia training, etc. One of these organizations
that provide money to the PKK in Europe is International Kurdish Businessmen and
Employers Union (known as KARSAZ). The PKK acquired its arms and ammunition
from the funds provided by KARSAZ which operates in Germany. The member com-
panies of KARSAZ played an active role in laundering PKK’s drug money to be sent
to mainly the PKK camps in northern Iraq for purchasing weapons and ammunition.
The cross-border transportation of currency known as cash couriers has been
often used by the PKK for laundering money. The money collected from donations
and businessmen in Turkey and Europe is brought to the financial unit of the orga-
nization’s military wing, People’s Defense Force known in Kurdish as Hêzên
Parastina Gel (HPG), in northern Iraq and Iran by the reliable cash couriers. On the
other hand, using the banking system is rare in the case of the PKK. However,
hawala system or other money transfer methods such as Western Union were used
to transfer money from Europe to its supporters in different countries such as
Armenia and Syria to finance the daily needs of the members.

Conclusion

It is no doubt that the PKK, just like many terrorist organizations, engaged in terror-
ism-financing methods. And it is evident that as a fundraiser not just in Turkey but
also in Europe, the PKK and the PKK-affiliated entities have needed to launder the
illicit money through legal channels if possible (as seen in the case of media and
front companies), and illegal channels if not possible such as using cash couriers.
322 O. Ozkan

Beyond being a terrorist organization, the PKK has also acted like a mafia by
dealing with organized crimes–mainly the drug market—and money laundering.
The fact that the PKK has walked away from a traditional politically/ideologically
motivated organization to a more complex and profit/interest-based and pragmati-
cally/economically driven criminal network has made it difficult for the govern-
ments to dissolve the group by traditional counter-terrorism methods since the
current members and would-be members consider the PKK as a profitable organiza-
tion that they can get respect and power by controlling this huge array of financial
activities. Therefore, the policy makers should pay much more attention to the eco-
nomic development of the region as an incentive for the group’s members to lay
down arms and end the violent campaign in the region.
In this regard, the PKK, both as a regional and a global threat, not only harms the
regional stability in the Middle East but also endangers the Western and interna-
tional security by taking advantage of democracy and liberal economy. Therefore, it
becomes very important to cut resources of the PKK by tracing illegal money trans-
acted under the name of donations, aids, and fundraising, and by freezing the finan-
cial assets of its members while taking appropriate law enforcement measures in all
countries they are operating. Given that the Achilles heel of any criminal organiza-
tion is its financial survival, cutting lucrative businesses of the PKK will lead to
degeneration and finally dissolution of the terrorist organization.

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