Privatising ransom payments will reduce returns to terrorism

Italian aid worker Vanessa Marzullo freed after being kidnapped in Syria in 2014. EPA/Giampaolo Magni

The US government is currently reviewing its policy on allowing families to pay ransoms to terrorists. This comes in the aftermath of the Islamic State executions of US, Japanese and UK hostages while other nations’ citizens walked free – albeit for multi-million dollar ransoms. Did the US deny its citizens the basic human right to life?

It is a fundamental role of governments to protect their citizens. The question is how best to do this in the case of citizens kidnapped abroad for ransom. Fundamentally, paying ransoms perpetuates the kidnap-for-ransom business model. And the proceeds from the crime may be invested in further criminal activity – or into insurgency and terrorism. For this reason, most official stance of most governments is to not negotiate with terrorists. The deterrent effect of such a “no negotiation” stance should not be overestimated, however: employers have a duty of care to their employees and families do not abandon their loved ones. This quickly translates into media pressure for governments to intervene.

It is an open secret that some governments pay ransoms to free their nationals. An article in the New York Times in July 2014, titled “Paying Ransoms, Europe Bankrolls Qaeda Terror”, provides details of how al-Qaeda obtained at least US$125m in ransoms from countries such as France, Italy, Spain, Germany, Switzerland and Austria from 2008-2013.

High ransoms are also reported to have been paid for Italian and French IS hostages. Where governments get involved, it’s not just about money: prisoner releases and limited charges or lenient sentences for captured accomplices are frequently reported in the context of government-negotiated ransoms – and some kidnappers actively seek publicity. Ransom inflation in either or all of these dimensions encourages further market entry. A policy of governments paying ransoms is therefore problematic.

Why are governments so bad at negotiating ransoms? Firstly, it is difficult for them to argue that they cannot afford a multi-million dollar ransom and that other concessions, for example prisoner releases, are categorically off the table. Secondly, they are often under pressure by the media to resolve a situation quickly. Thirdly, many rescue actions result in the death of hostages (and occasionally the security forces sent to liberate them) and are therefore rarely an attractive outside option. This decidedly shifts bargaining power towards the hostage takers.

Walking ATMs

Might the government be able to achieve better outcomes by delegating the negotiation to the private sector? There is already a private-sector mechanism for resolving criminal kidnap for ransom (KfR) cases. People who live, travel and work in complex and hostile territories have the option of buying KfR insurance or have it bought on their behalf. However, KfR insurance is very discreet: employers are not allowed to discuss KfR insurance with their employees and ransom cover is limited. This avoids turning staff into “walking ATMs” and, in the case of a kidnap, there is a convenient degree of ambiguity about who is negotiating and what resources are available for ransoming.

KfR insurance provides parties interested in freeing victims with immediate access to highly experienced hostage negotiators, who are experts at exploiting this ambiguity. Professional crisis response consultants advise on the negotiation and manage family expectations. Because a ransom is offered, hostage takers treat their victims as assets and the vast majority of KfR victims are released unharmed. Victim stakeholders are reassured by this and take more time to barter down the hostage-takers. Kidnappers are often under pressure to conclude: few criminal organisations can hold hostages indefinitely – either local security forces or rival gangs are bound to come knocking on doors eventually.

Edouard Elias was one of four French journalists released last year. The French government denied paying a ransom. EPA/Etienne Laurent

The commercial resolution process, if played by the book (consultants can only advise), means ransoms usually settle at a small fraction of the cost of government ransoms. Few families can raise hundreds of thousands of dollars, never mind millions. Disruptive bargaining strategies are a clear signal that opportunistic criminals will not do well in this market: high ransoms require long detention periods. This discourages market entry.

Families may ransom

It can therefore be argued that leaving hostage negotiations to the private sector serves the public interest better than a “hands-on” approach by governments. The deliberations of the US government should be seen in this context. Allowing families to bargain with terrorists gets the government out of the media spotlight and devolves bargaining to a stakeholder with demonstrably limited resources. A “families may ransom” policy stance would probably not be entirely new: US kidnap victims have returned from captivity in the past and nobody has been prosecuted. It is simply a matter of clarifying current practice – and removing (well-resourced) employers as well as the government explicitly from the ransom negotiations.

Although in principle we all agree that not paying ransoms and ending the KfR business would be the first best solution, in practice everyone will want to ransom a kidnapped loved one. One could therefore summarise the public interest as “paying as little as possible for the safe return of hostages”. If this is the goal of government policy, officially delegating ransoming to the private sector may indeed be the best solution.