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Terrorism financing banking laundering { September 24 2001 } Original Source Link: (May no longer be active)
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Funding Evil
How Terrorism Is Financed and How to Stop It
Excerpted from Funding Evil: How Terrorism Is Financed and How to Stop It by Dr. Rachel Ehrenfeld. Reprinted with permission. All rights reserved. Available wherever books are sold.
"We will direct every resource at our command to win the war against terrorists: every means of diplomacy, every tool of intelligence, every instrument of law enforcement, every financial influence. We will starve the terrorists of funding, turn them against each other, rout them out of their safe hiding places, and bring them to justice."
President George W. Bush
September 24, 2001
Chapter One: How Did We Get Here?
There are experts who claim that terrorism does not require large amounts of money; when you "kill one, [you] frighten ten thousand," as the old Chinese proverb suggests. Individual terrorist acts do not in fact cost much the attack on the World Trade Center is estimated to have cost only $500,000.(1)
But today's global terrorism requires money for much more than individual attacks. An expanding terror network must have enough funds to support:
Recruitment
Training camps and bases
Housing and food
Equipment, explosives, and conventional and unconventional weapons
Forged identity and travel documents
Intelligence gathering
Communications among organizational components
Bribery
Day-to-day maintenance expenses of members awaiting commands to launch operations(2)
Terrorism also requires money for television, radio, print media, videos, and paid demonstrations to advance incitement against the targeted "enemy." Funding is needed to maintain the families of terrorists who are deployed as "sleepers" who live undercover and do not support their dependents as well as to compensate families of terrorists who are killed. The total cost of maintaining the global Islamist terror network is estimated to be in the billions of dollars.
To sustain these operations, sophisticated, multifaceted worldwide funding networks have been set in place over the past two decades. Funding sources for terrorism are:
Governments such as Saudi Arabia and Iran
Charitable organizations such as the Muslim World League (MWL) and the International Islamic Relief Organization (IIRO)
Legitimate businesses operating as fronts
The exploitation of financial markets, especially the unregulated commodity markets
International trade, which converts cash into precious commodities such as diamonds and gold
Funding also comes from criminal activities such as:
Extortion
Smuggling
Kidnapping
Prostitution rings and trafficking in people
Credit card fraud, identity theft, and counterfeiting.
Pirating of videos, compact discs, tapes, and software
Unacknowledged is a major source of funding that comes from trade in illegal drugs such as heroin, hashish, cocaine, and methamphetamines.(3) "Terrorism Financing," a report published by the United Nations Security Council in January 2003, notes that "Saudi charities raise an estimated $4 billion in revenues and send abroad up to 20%."(4) The report identified Saudi charities and individuals as the major sponsors of al-Qaeda, but ignored al-Qaeda's revenues from criminal activities, and said nothing about the huge profits obtained by al-Qaeda from the illegal drug trade.(5)
Narco-Terrorism
"Terrorism and drugs go together like rats and the bubonic plague," said Attorney General John Ashcroft. "They thrive in the same conditions, support each other, and feed off each other."(6) Twelve of the thirty-six groups on the U.S. Department of State's Foreign Terrorist Organizations List have been identified as being involved in drug trafficking.(7) In October 2002 a Colombian courier for the Revolutionary Armed Forces of Columbia (FARC), which is funded mostly by drug trafficking, was arrested in the U.S. for having attempted to transport 182,000 euros into the country; the money was confiscated. In another case, U.S. law enforcement derailed an al-Qaeda plot to exchange "9,000 assault weapons, such as AK-47 rifles, submachine guns and sniper rifles; 300 pistols; rocket-propelled grenade launchers; 300,000 grenades; shoulder-fired anti-aircraft missiles and 60 million rounds of ammunition," for $25 million dollars in cash and cocaine.(8) Attorney General Ashcroft said that the "toxic combination of drugs and terrorism," threatens U.S. national security.(9)
The nexus of terrorist groups and international criminal organizations is complex, linking money, geography, politics, arms, and tactics to create a mutually beneficial relationship. This nexus yields hundreds of billions of dollars in revenues worldwide for 1992 alone, close to U.S.$1 trillion.(10) A decade later, with the exponential growth in drug consumption, U.S. experts estimate the profits to be as high as U.S.$2 trillion.(11) "It's so important for Americans to know that the traffic in drugs finances the work of terror, sustaining terrorists," said President George W. Bush. "Terrorists use drug profits to fund their cells to commit acts of murder."(12)
Not only are there no other commodities on the market today with as high and fast a return, but the drug trade is also a triple-pronged weapon that helps terrorists to:
Finance their activities
Undermine targeted countries politically and economically, and create crises in public health
Recruit new members by citing drug use as an example of
Western social degeneracy and arguing that such corrupt societies must be destroyed
Origins
Today there are sixty-nine major terrorist organizations in the world, according to the U.S. Department of State's Patterns of Global Terrorism 2002. Of these, thirty-six are designated as Foreign Terrorist Organizations and, of those, thirty-one are Islamist. (The Provisional Irish Republican Army [PIRA] is the only other terrorist group on the list that has a religious component.) How and why did terror traditionally directed within the terrorists' own borders and at their own rulers become the international plague it is today?
To understand terrorism in its larger historical, cultural, and economic context, it might be helpful to look eastward. A large gap lies between the political and economic cultures of the West and the Islamic countries of the East in which corruption plays an important structural role.
"Force and favors, as determined among individuals through corruption, are the fundamentals of Arab and inter-Arab politics," writes David Pryce-Jones. "Corruption among Arabs is nothing more nor less than a daily functioning among every one of the power challenge dialectic, and it is registering individual advances and retreats everywhere and at all times. Corruption plays a role approximating competition in a democracy. At the top of the social scale, corruption represents the power of the strong over the weak."(13)
Islamist rulers like the mullahs in Iran do not afford a high priority to improving their peoples' standard of living or human rights. In Afghanistan, when the Islamist Taliban seized power, we witnessed the spread of violence, the marginalization of women, and the persecution of all but like-minded Islamist fundamentalists. In other Arab countries where democracy has not taken root yet, such as Iraq and Libya, making use of violence must often seem the only way to try to effect change.(14)
Violence is central to the history and culture of the Islamist branch of Islam. A core tenet of the Islamist interpretation of Islam is that "the world is divided into two houses: the House of Islam (Dar al-Islam), in which Muslim governments rule and Muslim law prevails, and the House of War (Dar al-Harab), the rest of the world . . . ruled by infidels."(15) One reaches the House of Islam only through the House of War that is, by the sword. According to the terrorism adviser of former Israeli premier Yitzhak Rabin, "Terrorism stems from cultural violence rooted in a perversely callous attitude toward human life and general disregard for the worth of individual rights."(16)
To paraphrase Carl von Clausewitz, terrorism for Islamists is the extension of both war and diplomacy by other means.(17) Not surprisingly, many Islamist rιgimes, as well as Arab dictatorships like Iran and Syria, use terrorism as a political weapon to achieve their goals and exert their influence externally. Saddam Hussein ruled Iraq with terror. He murdered and intimidated the Iraqi population, and funneled at least $9 million to finance homicide bombers in attacks against Israel, and to reward their families.(18) Documents found during Operation Iraqi Freedom revealed that Saddam not only funded terrorism, but also bought international political influence and public opinion, bribing foreign politicians and journalists alike.(19)
Dictators do not necessarily aspire to a literate, self-sustaining, and politically empowered citizenry. Instead, they concentrate on staying in power, using real or imagined external threats to rally the populace behind their rιgimes, viewing arms procurement as essential to maintaining their power base. Without democratic and economic development, the climate is not conducive to either progress or innovation. As the former Soviet dissident Natan Sharansky has said: "In a democracy, the leader has to be concerned about the wellbeing of his people. For him, war is always the last resort, because people want to avoid war at all costs. A dictator, however, does not depend on his people; the people depend on him. His primary goal, and greatest headache, is how to keep the people under control. To do so, he always needs an enemy, against whom he can constantly mobilize his people. The enemy can be an external one, an internal one, or if the dictator, like Stalin, is particularly adept, both external and internal concurrently."(20)
International Terror
Before September 11, terrorist groups most often attacked relatively small, select targets political figures, airlines, multinational corporations using conventional weapons of low lethality to achieve clearly defined goals that advanced their ideological or political objectives. Even though today's terrorists still target political leaders (e.g., three failed attempts in 1995 to assassinate Egypt's President Hosni Mubarak, and the IRA's attempts to blow up Ten Downing Street in the early nineties), they appear to prefer mass attacks on random civilians with the explicit intent of inflicting as much damage, high lethality, and international visibility as possible.
The new policy of targeting civilians was first presented publicly by Osama bin Laden in his February 1998 fatwa (religious edict). He said that any Muslim striving for God's rewards should "kill the Americans and plunder their money, wherever and whenever they find it."(21) This view was reiterated in an article written by Abu Aiman al-Hilali, a senior member of al-Qaeda:
The citizens of the democratic western countries take full part in the decisions taken by their governments. The residents of those countries are not classified as "civilians" as they were classified during previous wars in history. In light of their influence on the decisions taken by their governments, they do not comply with the definition of "elderly, women and children" (who are immune from being targeted in terror attacks). . . . The western citizens who object to the actions of their governments are but a minority and lack substantial influence. They can not be separated from the entire population during an attack [by al- Qaeda].(22)
The Globalization of Terrorism
Most modern international terrorist organizations were trained, sponsored, and supported by the Soviet Union and its surrogates to help expand Marxism and Leninism.23 To them, Communist domination meant the absence of national boundaries and the presence of a globalized Communist world order. According to the Soviet Military Encyclopedia, their objective was to conduct unconventional warfare to subvert and destabilize the targeted nations. The Soviets trained the PLO and various nationalists groups in guerrilla and terror techniques, and then used those groups to expand Soviet influence.
The Soviet Bloc continued to train PLO terrorists in countries as diverse as Cuba, Vietnam, South Africa, Bulgaria, and Hungary, until the Soviet Union's demise in 1991. All terrorists who were schooled by the Soviets or their allies received Marxist/Leninist indoctrination as part of their training.(24) Such indoctrination was also part of the training provided by the PLO in Lebanon, with the assistance of the Eastern Bloc, to terrorists from all over the world. In addition to training Middle Eastern terrorists, these camps also trained recruits from many different parts of the world, including Holland, Turkey, Japan, and Ireland. Instructors working for the PLO included East Germans, Hungarians, Bulgarians, and Russians. Eastern Bloc countries supplied material support like weapons and tanks.(25) The PLO oversaw these camps until it was expelled from Lebanon in 1982. Since then, Hizballah in Lebanon, supported by Iran and Syria, has taken over the training of terrorists.
The Soviets specifically linked drugs and terrorism as part of their strategy. The Soviet Military Encyclopedia, in its 1979 edition, provides a list of measures to be used in peacetime to promote Soviet foreign policy objectives. These measures include the use of "poisons and narcotics" as weapons against the West.(26) Involvement in illicit drug trafficking grew among terrorist organizations like the Revolutionary Armed Forces of Colombia (FARC),(27) the PLO in the Middle East, the Liberation Tigers of Tamil Eelam (LTTE) in Sri Lanka, and the Provisional Irish Republican Army (PIRA) in Ireland. This growing involvement in the illicit drug trade reinforced the alliance and intensified cooperation between nationalistic terrorist groups and criminal organizations.
In fact, terror groups that were trained by the Soviets and their surrogates all seem to have adopted this strategy. For example, Antonio Farach, a Nicaraguan diplomat and former member of the Sandinista rιgime, explained how the Sandinistas trafficked in drugs: "In the first place, drugs did not remain in Nicaragua; the drugs were destined for the United States. Our youth would not be harmed, but rather the youth of our enemies. Therefore, the drugs were used as a political weapon against the U.S. The drug trafficking [provided] a very good economic benefit, which we needed for our revolution. We wanted to provide food for our people with the suffering and death of the youth of the U.S."(28)
The PLO turned to international drug trafficking and criminal organizations as it began to globalize in the late sixties. Documents discovered in Lebanon in 1982, following the expulsion of the group, expose in minute detail how the PLO committed itself even in its earliest days "to alliances on the international scene" and "to bring about international measures, and especially UN resolutions . . . which will tighten the isolation of the Zionist and the American enemy."(29)
Ideological Transformation
Once the Soviet Union imploded and Islamist fundamentalism exploded, Communism was often replaced by the belief in radical versions of Islam, but the arena for terrorist operations remained the same the international stage. Muhammad replaced Marx and Lenin, and radical Islam replaced the Socialist nationalist doctrines of the Arab revolutionaries. The collapse of the Soviet Union served as the catalyst for an alliance between radical Sunni and Shiite movements that helped to revive Islamist fundamentalism. Their new religious ideology offered divine guidance: suffering and frustration in this world were explained as trials on the road to martyrdom and paradise. The more the believer suffered and sacrificed, the richer would be his eternal reward. Improvement in technology and communications and the increasingly heightened vitriol in Islamist rhetoric only helped to make today's radical Islamist terrorists even more dangerous than their nationalist predecessors.
After his successful Islamic revolution in Iran, the Ayatollah Khomeini began calling for the unification of Muslims throughout the world, and for exporting his Muslim Revolution to wherever Muslims live so that Muslim domination could be achieved. "We are at war against Infidels," the Ayatollah told a large group of Pakistani military officers on a pilgrimage to Qom in January 1980. "Take this message with you . . . I ask all Muslims [emphasis added] . . . to join the Holy War. There are many enemies to be killed or destroyed. Jihad must triumph." He stressed that the "Iranian Experiment" should be followed, and that the realization of the true Islamic State should be carried out forcibly and without compromise.(30)
These plans for Islamic unification were accelerated by the Gulf War. The war helped the leaders of Islamist groups throughout the globe to enforce their vision that Jihad, holy war, is the only formula for protecting Islam from extinction by the West led by the U.S. This opinion was and is repeatedly voiced by every Islamist leader. "Bush and Thatcher have revived in the Muslims the spirit of Jihad and martyrdom," wrote the Palestinian leader of the Islamic Jihad, Sheikh As'ad Bayyud al-Tamimi, on the eve of the Gulf War. He promised that all Muslims "will fight a comprehensive war and ruthlessly transfer the battle to the heart of America and Europe. . . . Islamic Jihad has the forces to carry out strikes in Europe and America."(31)
Westerners might have considered statements like this to be pure rhetoric designed solely for domestic consumption, and might have dismissed them. But, to judge by events, the leaders of the international Islamist movement meant what they said.
The Legacy of Narco-Terrorism
Some Islamist terrorist organizations had early exposure to the Soviet drug-trafficking doctrine, and most depend upon revenues from illegal drugs, especially Afghan heroin sales, as their major source of funding. In 2001, Afghanistan produced 80 percent of the heroin sold in Europe, according to the U.S. Drug Enforcement Administration (DEA),(32) and more than 70 percent of the heroin that was sold worldwide. (Surprisingly, the report makes no mention of the fact that al- Qaeda benefited from the revenues generated by this trade.)
Moreover, despite the war in Afghanistan in 2001, and despite the presence of the International Security Assistance Force (ISAF), opium production for the year 2002 is estimated to have been between thirty-five hundred and four thousand tons (33) up 10 percent from the year 2000. That quantity of opium, when refined, would yield 350 to 400 tons of heroin amounting to an estimated profit, for 2002, of U.S.$6 billion.
From Afghanistan, heroin is moved to expanding international consumer markets through various routes: (34)
To Europe through Pakistan and Turkey or the Balkans
To the United States through Pakistan via the port of Karachi
To Moscow through Pakistan, Central Asia, and Chechnya
To Europe through the Central Asian Republics to Moscow and from there by air to Iraq
(35)
Another route to Europe passes through Pakistan and from there to the Gulf States, Saudi Arabia, Egypt, and Lebanon.(36) All the countries through which the heroin is transferred are also affected by the growing number of people who are exposed and become addicted, and by growing criminal activity.
Terrorist groups that most benefit from the trade in heroin, cocaine, methamphetamines, and hashish include al-Qaeda, Hizballah, the Irish Republican Army (IRA), and the Revolutionary Armed Forces of Columbia (FARC).(37) For the year 2000, for example, revenues generated from illegal drugs for the FARC alone have been determined by U.S. experts to be at least $7 to $8 billion.(38)
From Drugs to Dollars
In January 2002, as part of the U.S. Drug Enforcement Administration's "Operation Mountain Express," members of a Hizballah drug ring were captured by U.S. and Canadian law enforcement. This action resulted in the arrests of three hundred people who had been selling methamphetamines in Detroit, Cleveland, Chicago, Phoenix, Los Angeles, San Francisco, and other cities in California. The DEA also seized $16 million in U.S. currency; 8 real estate properties; 160 cars; 181 pounds of methamphetamines; 30 tons of pseudoephedrine, and 9 methamphetamine laboratories.
According to the DEA, a significant portion of the drug sales revenues had been sent to the Middle East to support Hizballah, HAMAS, and al-Qaeda terror operations. Some of the money had simply been carried to the Middle East in cash. The rest of the money had been laundered and then transferred to the Middle East.(39)
Money laundering has been defined as follows: The Money Laundering Control Act of 1986 makes it a crime for someone, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, to conduct or attempt to conduct such a financial transaction which in fact involved the proceeds of a specified unlawful activity with the intent to:
promote the carrying on of specified unlawful activity; conceal or disguise the nature, location, source, ownership or control of the proceeds of the specified unlawful activity; or avoid a transaction report requirement under state or federal law. (40)
The former managing director of the International Monetary Fund (IMF) Michel Camdessus has estimated that the global volume of laundered money in 1999 amounted to between 2 and 5 percent of the world's gross domestic product or approximately $1.8 trillion dollars. (This estimate, however, did not take into account the huge volume of money laundered through the businesses and charities of terrorist organizations; these funds were not yet considered suspect.) Most money laundering operations are conducted through unregulated financial centers known as Offshore Financial Centers (OFCs).
A 1999 International Monetary Fund report estimated annual global offshore assets at roughly $4.8 trillion.41 These tax havens do not require either the owners of the accounts or the beneficiaries of the transactions to disclose their identities; nor do they require reports on any transactions. The OFCs have no uniform guidelines to identify suspicious transactions, no effective means of monitoring crossborder currency movements, and no requirements for maintaining financial records.(42)
OFCs include shell banks and shell companies fictitious corporations that are created to conceal the identities of their owners, whose names never appear on the registration papers. Only the names of the local representatives or the "nominees"(43) are listed. The company's activities are couched in obscure and vague terms that satisfy lenient and permissive local requirements. Once money is safely deposited in such a "corporate" account, it can easily be transferred. Another way to launder money is simply to convert cash into money orders. Since the proceeds of drug sales are usually in cash, members of U.S. terrorist cells can take the cash to banks and post offices to purchase money orders in sums smaller than $10,000. (Transactions in excess of $10,000 are reported to the government.)
Members of terrorist cells then send the money orders overseas "to support their families," as countless immigrants in the U.S. do with legitimate money.
Money also can be laundered through systems similar to the Black Market Peso Exchange (BMPE) used by the Colombian drug cartels. According to the U.S. government's 2002 National Money Laundering Strategy: "Typically, narcotics dealers sell Colombian drugs in the U.S. and receive U.S. dollars. The narcotics traffickers thereafter sell the U.S. currency to a Colombian black market peso broker's agent in the U.S. [at a discounted rate]." The Colombian BMPE then deposits the agreed-upon equivalent sum in pesos into the drug dealer's bank account in Colombia. U.S. dollars deposited in the Colombian peso broker's account in the U.S. are then sold to Colombian businessmen, who use the dollars to import products from the U.S. into Colombia. The drug trafficker has succeeded in converting drug dollars into pesos without transferring the money abroad, and has also avoided U.S. reporting requirements.(44)
Terrorists and other criminals often call upon members of legitimate professions such as accountants and lawyers to help move and hide their money. "Money laundering is now an extremely lucrative criminal enterprise in its own right," stated the U.S. Senate Committee on Government Affairs:
The Treasury's investigations have uncovered members of an emerging criminal class professional money launders that aid and abet other criminals through financial activities. . . . They are accountants, attorneys, money brokers, and members of other legitimate professions. They need not become involved with the underlying criminal activity except to conceal and transfer the proceeds that result from it. They are drawn to their illicit activity for the same reason that drug trafficking attracts new criminals to replace those who are convicted and imprisoned greed. Money laundering, for them, is an easy route to almost limitless wealth.(45)
The "Super Hawala"
Terrorists also clandestinely transfer money through the hawala, an informal exchange in which payments are delivered without money actually being moved. Say you wish to transfer $20,000 to your friend in Karachi. Since you conduct business both here and in Karachi, someone gives you $20,000 here, and you arrange with your business contact in Karachi to give $20,000 or its equivalent to your friend. Money never leaves the U.S., yet the funds are delivered. The process is totally untraceable.
There are even official hawaladars who conduct a hawala transaction for a fee of 1 percent. The advantages of transferring money through the hawala, according to the U.S. government's 2002 National Money Laundering Strategy, are the low overhead, the integration with existing business activities, and the ability to avoid taxation and foreign exchange regulations. A hawala transaction is often completed more rapidly than international wire transfers that involve corresponding banks. For customers in the U.S. who do not have a social security number or adequate identification, opening a bank account can be problematic. But the hawaladar requires only the customer's cash and some link for trust, usually one based on a cultural or ethnic relationship. The Money Laundering Strategy continues: "The anonymity and lack of paper trail also hide the remittance from the scrutiny of tax authorities. Lastly, some areas of the world are poorly served by traditional financial institutions, while the hawaladar may offer a viable alternative."(46) For terrorists, there could hardly be a system that is faster or more discreet.
Technology has enabled an even greater "super hawala" system to arise one devoid of the ethnic or personal components that infuse traditional hawala transactions. Although the Bank Secrecy Act requires financial institutions to file reports and record transactions, improvements in technology permit "peer to peer" transactions to take place even without financial institutions. As the Money Laundering Strategy states, "Internet money transfers and new payment technologies such as 'e-cash,' electronic purses, and smart-cards based electronic payment systems, make it more difficult for law enforcement to trace money laundering activity, and easier for money launderers to use, move, and store their funds. These faceless transactions and the greater anonymity they may afford pose new challenges to law enforcement that must be addressed."(47)
Attempts to Stop Money Laundering
How well does the U.S. government stop terrorist money? Not very. To trace money or commodities that fund terrorism, the government tends to rely on sophisticated technologies such as special computer programs to detect suspicious transactions. However, since money is often provided to terrorists through legitimate businesses and institutions such as non-governmental organizations or even international aid organizations,(48) and through various charities, no amount of technology can detect where each dollar goes. Money is interchangeable; when there is a mix of legitimate and illegitimate funds how can anyone identify which dollar bill came from where?
On October 26, 2001, when it had become apparent that the laws in place before September 11 were not sufficient to stop the flow of money to criminals and terrorists, and on the premise that without money terrorists would not be able to operate, the U.S. Congress enacted the USA PATRIOT Act.(49) The new act better enabled the U.S. government to identify suspicious transactions, to trace money, and to stop the laundering of money. As part of this effort, the U.S. Treasury Department also established Operation Green Quest (OGQ) a "multi-agency terrorist financing task force" that focuses on the coordination among all U.S. law enforcement agencies in "identifying, disrupting, and dismantling the financial infrastructures and sources of terrorist funding."(50)
Additionally, in July 2002, the U.S. government put into place its National Money Laundering Strategy (NMLS) to "deny terrorist groups access to the international financial system, to impair the ability of terrorists to raise funds, and to expose, isolate, and incapacitate the financial networks of terrorists."(51) Also, the United Nations Security Council adopted Resolutions 1373 and 1390, requiring member nations to join the U.S. in its effort to disrupt terrorist fi- nancing. And U.S. Government Executive Order 13244 was set in place to "block property and prohibit transactions with persons who commit, threaten to commit, or support terrorism."
In March 2003, to better coordinate the government's efforts to stop the flow of money to terrorists at home and abroad, the U.S. Department of Treasury established a new "Executive Office for Terrorist Financing and Financial Crimes (EOTF/FC)."(52)
Nevertheless, although 166 countries had blocking orders in force, by April 2003 only $124 million in assets had been frozen $88 million overseas and $36 million in the U.S.53 According to frustrated U.S. intelligence sources, despite cooperation agreements, some European countries unfroze or released some of the assets on the grounds that the U.S. did not provide the requisite information to warrant the seizure. Moreover, a U.S. request to freeze Hizballah's assets was refused outright by Syria and Lebanon, who claimed that Hizballah is "a resistance group and not a terrorist organization."(54)
Anti-money-laundering laws, like any other laws, are effective only when they are implemented. Unfortunately, there seems to be little political will to apply and enforce existing laws often because of stated "other political priorities" that come between the laws and their implementation.
Technological surveillance of financial transactions has yielded some positive results. However, most information received by U.S. intelligence about funds belonging to terrorist organizations has come from human sources, and not from the super-sophisticated electronic surveillance technology upon which U.S. intelligence is so reliant. A better way to intercept the money before it reaches terrorists would be to better identify the people who deposit it.
Legitimate Fronts
In addition to illegal businesses such as drug trafficking and money laundering, terrorist groups have established legitimate businesses that serve as covers for their illegal activities, provide employment to their members, generate additional income, and serve as ideal vehicles to launder money.
Money made through drug trafficking might be invested in farmland in South America, prime real estate in London, or hedge funds in the U.S. Perfect laundering vehicles are cash-and-carry businesses such as pizzerias and car washes how can an investigator prove that any part of the profits was not generated by the legitimate business? Since the money is either laundered before it is invested or made legitimate afterward, its presence in legal enterprises makes it difficult to trace.
Moreover, the ability to integrate illegal funds into legitimate businesses helps provide those businesses with unlimited sources of money. This not only weakens the ability of law-abiding businesses to compete, but also severely undermines the economies in which they operate.
A recent example of a legitimate business that allegedly serves as a front for terrorist activities is Ptech, a computer software company in Quincy, Massachusetts. Ptech, which is privately held, uses artificial intelligence to provide organizations with a blueprint of their operations and tools to analyze their data.(55) Ptech was raided by U.S. federal agents on December 6, 2002. Apparently a secret owner of the company was Yassin al-Qadi, a Saudi millionaire. After September 11, al-Qadi was listed on the United States Treasury Department's Specially Designated Global Terrorist Entity List for allegedly funneling millions of dollars to al-Qaeda through the Muwafaq Foundation, a Saudi charity that he headed. Among the company's clients were the FBI, the FAA, the U.S. Air Force, the U.S. Naval Air Systems Command, the Department of Energy, and NATO. Federal agents involved in the case anonymously voiced their concern not only that Ptech was suspected of being a front for al-Qaeda, but that it was also using the software it had supplied to these agencies to access the government's data. Moreover, if the allegations against Ptech prove true, there is room for concern about Ptech's involvement in designing the Rocky Flats nuclear plant near Denver for the Department of Energy.(56)
Osama bin Laden's own legitimate fronts were first established in Sudan in 1983. (57) His investments included: peanut and sunflower farms; a bakery; a furniture company; International al-Ikhlar Company, which produced honey and sweets; Bank of Zoological Resource, a cattle-breeding operation; and the Laden International import/export company. (In 1996 bin Laden was expelled from Sudan under extreme pressure from the U.S. and Saudi Arabia, and the Sudanese president Omar al-Bashir announced that his businesses were liquidated, but as late as 2001 his holdings in Sudan were estimated at about $30 million.)(58) Other al-Qaeda investments included an ostrich farm and shrimp boats in Kenya, agricultural holdings in Tajikistan, (59) and, according to U.S. and European intelligence sources, between fifteen and fifty cargo freighters around the world. (60)
Based on a U.N. report, the war on terrorism seems to have had little effect thus far on Osama bin Laden's fortune. "A large portfolio of ostensibly legitimate businesses," the Washington Post reported, "continue to be maintained and managed on behalf of Osama bin Laden and al Qaeda by a number of as yet unidentified intermediaries and associates across North Africa, the Middle East, Europe and Asia [and the United States]."(61)
Osama bin Laden's legitimate fronts make it easier for him to achieve his stated goal to destroy the U.S. economy. As he said in a video released after the September 11 attacks, "It is very important to concentrate on striking the American economy with every possible means. Hit hard the American economy at its heart and its core."(62) The September 11 attacks were estimated by the end of 2002 to have cost the U.S. economy at least $135 billion.(63)
Where the Money Is... and How It Got There
If you want to move money in larger quantities, you need a bank. The bigger the bank, the easier it is to avoid scrutiny, especially when you regularly use the bank to conduct business transactions.
For instance, Osama bin Laden's financial officer in Sudan until 1996, Mustafa Ahmed al-Hisawi (AKA Sheikh Saeed), held an account at the Dubai Islamic Bank. In the months prior to the September 11 attacks, al-Hisawi deposited $148,895 into bank accounts in Dubai that were held by two of the September 11 hijackers. These accounts were in the Dubai Islamic Bank, as well as in Hong Kong Shanghai Bank (HSBC Holdings) and Citibank. The money was then wire-transferred to the hijackers' accounts in Sun- Trust Bank in Florida. This transaction was executed in violation of the Bank Secrecy Act (BSA) and the Suspicious Activity Report (SAR) requirements designed to prevent money laundering.
In 1999, the U.S. government had identified the Dubai Islamic Bank as having laundered money for bin Laden. (64) Even so, it was only after September 11 that SunTrust reported one of the suspicious transactions to the U.S. Treasury's Financial Crimes Enforcement Network. (65) Further, on September 25, 2001, Luxembourg's commission for supervising financial institutions cited the Dubai Islamic Bank as having links with Osama bin Laden and terrorism.(66) Despite all this, as of December 3, 2002, the Dubai Islamic Bank was still absent from the U.S. Specially Designated Nationals and Blocked Persons list.(67)
In another example, in 2002 the Israel Defense Forces discovered Palestinian documents in Ramallah indicating that the Ammanbased Arab Bank had been a primary recipient of funds from Saudi Arabia, Syria, and Iran to be awarded to families of Palestinian homicide bombers. (68) The documents also revealed that Saudi charitable organizations had been transferring money through Arab Bank branches in the West Bank to organizations linked to HAMAS, also to be given to families of homicide bombers. (69) The Arab Bank was also used by Iran to funnel money to Fatah's al-Aqsa Martyrs Brigades for weapons, bomb-making materials, and other expenses, such as preparations for an attack that killed six Israelis. (70) In addition, the Arab Bank was identified by the Spanish authorities as having transferred money from the al-Qaeda cell in Spain to members involved in the September 11 attacks, and as having wired money to al-Qaeda members in Yemen and Pakistan. (71)
Yet another bank, the Saudi-owned al-Taqwa Bank, was identified by the Swiss authorities in 1995 as having links to terrorist organizations but the Swiss authorities kept that information to themselves. Subsequently, in 1996, Italian intelligence also linked the al-Taqwa bank to terrorist groups: the Egyptian Jama'at al-Islamiyya, the Algerian Armed Islamic Group (GIA), and several Palestinian terror organizations. (72) Nevertheless, when in 1997 the FBI learned of the bank's activities, (73) the al-Taqwa Bank was allowed to continue its operations. It was only in November 2001 that the U.S. Treasury Department froze the assets of sixty-two individuals and organizations associated with al-Taqwa or the Saudi charity al-Barakaat on the grounds that these institutions provided fundraising, financial services, communications, weapons procurement, and shipping services for al-Qaeda. (74)
In The Spirit of Charity
In the year 2000 alone, Americans donated $133 billion dollars to humanitarian charities. (75) How much of it ultimately ended up funding the attacks on the World Trade Center and the Pentagon?
Charity is required of Muslims through a system called Zakat an Islamic tithe specifying that at least 2.5 percent of one's income should be donated every year. Many charities, however, appear to have been diverting funds to terrorist groups for terror activities including paying for homicide bombers, buying and manufacturing weapons, and funding training camps. (76)
Terrorist groups such as the PLO, al-Qaeda, HAMAS, and Hizballah have also established their own international networks of charities. In countries where governments do not provide adequate infrastructure or social services not only in Muslim nations, but in countries worldwide terror organizations such as the FARC in Colombia, HAMAS in the Palestinian territories, and al-Qaeda in Pakistan take advantage of this void to supply those services to people who would otherwise have no access to them. In return, the people offer their allegiance not to the government, but to the terrorists. (77) Unfortunately, alongside genuinely worthy causes such as building hospitals and supplying food, the groups pursue illicit activities such as purchasing weapons, establishing training camps, and paying families of homicide bombers. Their dual role possibly serves to legitimize and glorify terrorist activities.(78)
In Africa, for example, not only do hospitals supported by terrorist organizations serve the needy population (thus enhancing their image in the eyes of the locals), but they also provide an apparently legitimate way to obtain visas that make it easier for terrorists to in- filtrate other countries.
Direct contributions from wealthy individuals also fund Islamist terrorists. It only takes a few such individuals to put into motion a great number of terror activities. (79) A disproportionately large number of these funders are from Saudi Arabia members of the royal family and individuals close to the Saudi government. The former chairman of the National Commercial Bank (NCB) in Saudi Arabia, Sheikh Khalid bin Mahfouz, for example, deposited tens of millions of dollars in London and New York directly into terrorist accounts the accounts of the same terrorists who were implicated in the 1998 bombings of the U.S. embassies in Kenya and Tanzania, in which 224 people were killed, including twelve Americans, and more than four thousand were injured.(80)
State Sponsorship
It was only after September 11 that the U.S. authorities made a serious effort to follow the money trail. Only then did the U.S. government openly acknowledge that Muslim charities legitimate and illegitimate were being used to collect money explicitly for a variety of illegal purposes,81 and that hawalas were transferring millions to al-Qaeda and its affiliates. A vast illegal trade in commodities, such as gold and diamonds, was developing to hide terrorists' funds and launder their money. The spread of illegal arms and weapons of mass destruction internationally was persisting unchecked, and worldwide networks were producing illegal drugs and trafficking in them to fund terrorism. What the authorities did not acknowledge, however, was the extent to which Saudi Arabia, Iran, (82) Iraq, (83) Pakistan, (84) Syria, (85) and Sudan (86) were sponsoring the most virulent terror networks, such as al-Qaeda, Hizballah, and HAMAS. (87)
Before September 11, terrorism experts had considered the implosion of the Soviet Union to be the end of state-sponsored terrorism. These experts had turned their attention instead to transnational criminal organizations and had somehow managed to miss the growing cooperation between them and terror groups. They had also managed to overlook countries that were increasing their sponsorship of the fast-growing Islamist terror network.
Significant support to terrorist rιgimes such as Iraq and North Korea has been provided by international aid organizations, which sometimes deliberately do not control the use of their humanitarian aid. Such was the case with the "oil-for-food program" run by the UN in Iraq starting in 1991; in addition to at least $36 billion skimmed by Saddam Hussein, (88) billions of dollars more flowed into the coffers of governments, companies, and politicians in Russia, Egypt, France, Germany, (89) Jordan, China, the United Arab Emirates, and the United Kingdom. (90) For example, British Labour member of Parliament George Galloway established a charitable organization, the Mariam Appeal, allegedly "to save the life of Mariam Hamza . . . and to demand the lifting of the sanctions on Iraq which, we believed, were causing widespread suffering to the civilian population of Iraq." (91) However, according to a letter sent by the chief of Iraq's intelligence services to Saddam Hussein, Galloway planned to arrange visits of British delegations to Iraq and "to start broadcasting programs for the benefit of Iraq and to locate Iraq On Line for the benefit of Iraq on the internet and mobilise British personalities to support the Iraqi position." (92) For his efforts Galloway was apparently given at least $10 million, which was paid to his company "in co-operation with Mr. Galloway's wife, Dr. Amina Abu Zaid." (93) Once translated, the volumes of documents found in Iraq will no doubt reveal many more details about politicians, companies, and governments that aided Saddam Hussein's terror rιgime.
Saudi Arabia
State sponsorship continues to be one of the major forces sustaining Islamist terror organizations. The former head of the Saudi intelligence services, Prince Turki al-Faisal, for example, gave Osama bin Laden $200 million in 1998 to move to Afghanistan. (94) The money was intended to keep Osama bin Laden away from Saudi Arabia and to prevent him from overthrowing the Saudi royal family.
According to a report submitted to the president of the UN Security Council in December 2002, "One must question the real ability and willingness of the [Saudi] Kingdom to exercise any control over the use of religious money in and outside the country." (95) In the year 2000 alone, Saudi citizens' contributions to various Islamist groups amounted to $500 million. (96) Most of the money went to cover expenses such as salaries, pensions, and "terrorcare" services that included hospitals and schools especially ulemas (religious teachers) and madrasas. (97) As Secretary of Defense Donald Rumsfeld pointed out: "There's a lot of money going into these so-called madrasas and they aren't training people in mathematics or languages or sciences or whatever, humanities they're training people to kill. They're training people to go out and kill innocent men, women and children. And we need to see that those schools are closed down, and we need to see that those schools provided [are] teaching the right things, so that people can live a constructive life in this world." (98) In Wahabi schools in the U.S., students are taught that "it is better to shun and even to dislike Christians, Jews and Shiite Muslims." Moreover, hurting and stealing from non-Muslims is permissible. (99)
Despite U.S. requests that the Saudi government take action to stop funding terrorist organizations and madrasas that breed hate, the Saudis have "in fact only taken 'baby steps'" in that direction. (100) Saudi Arabia continues its efforts to enlist the Muslim population worldwide to the radical Wahabist way of life. (101) "The angry form of Islamism and Wahhabism in Saudi Arabia today is the soil in which anti-Western and anti-American terrorism grows," stated former CIA director R. James Woolsey. (102) Wahabism is the Saudi branch of Islam, established by Sheikh Muhammad bin Abd al-Wahab (1703/4-91). At its core is al-Wahab's decree that, in addition to the known Five Pillars of Islam, there is a sixth, hidden pillar: fighting the Jihad to spread Islam and to defeat its enemies.
According to scholar Daniel Pipes, "Wahhabism is the extremist vision of Islam that predominates in Saudi Arabia." (103) It is this version of Islam that has "pervaded the Saudi education system with its heavy doses of mandatory religious instruction" and that has "seeped outside the classroom through mosque sermons, television shows and the Internet, coming to dominate the public discussions on religion." (104)
The Saudi government English weekly Ain-al-Yaqeen bragged that the royal family and the Saudi Kingdom have spent billions of dollars "to spread Islam to every corner of the earth."(105) According to Ain-al- Yaqeen, the Islamic Center in Brussels, Belgium, received a total of more than $5 million; the Islamic Center in Geneva, Switzerland, receives annual support of close to $7 million; and the biggest Islamic Center in Europe, which the Saudis built in Madrid, Spain, received close to $8 million in total. (106) The Saudi Kingdom's efforts, under the leadership of King Fahd bin Abd al-Aziz, "has been astronomical, amounting to many billions of Saudi Riyals . . . [resulting in] 210 Islamic centers . . . more than 1,500 mosques and 202 colleges . . . and 2,000 schools for educating Muslim children in non-Islamic countries in Europe, North and South America, Australia and Asia." (107)
The Islamic Society of North America (ISNA) is the front organization through which the Saudis promote Wahabism in the U.S. In 2000, ISNA, through the North American Islamic Trust, funded 27 percent of the estimated 1,209 mosques in the United States, according to a report by the Council on American-Islamic Relations (CAIR). (108) Every fifth mosque has a full-time school and three quarters have a weekend school. According to this report, some thirty thousand adults and eighty thousand children attended a mosque's weekend school in the year 2000. (109)
From 1973 to the end of 2002, the Saudi Kingdom's spending to promote Wahabism worldwide (lately particularly in the West and especially in the U.S.) was estimated by Reza F. Safa, the author of Inside Islam, at $87 billion. (110) A major motive behind the Saudi royal family's funding of the proselytization and expansion of Wahabism throughout the world seems to be an attempt to hold onto its throne. (111) Ironically, it was also probably more the Saudi Royals' attempt to increase their influence than a desire to support democratic systems that led them to be among the major contributors to the first democratic elections held in the Muslim former Soviet republics, and the major sponsors of the Islamic political party, the Justice and Development Party (AKP), that won Turkey's October 2002 general election. (112)
In November 2002, Newsweek broke the story that Princess Haifa al-Faisal, the daughter of the late King Faisal and the wife of the Saudi ambassador to the U.S., had contributed tens of thousands of dollars to two of the World Trade Center homicide bombers. She claimed that she was deceived and that the funds were transmitted to the hijackers without her knowledge. The U.S. government tried to suppress the story for over a year, until on November 23, 2002, it was reported in Newsweek by Michael Isikoff and Evan Thomas. (113) In the meantime, the FBI investigation into this payment exposed another payment of $400,000, made by the Saudi embassy in the late 1990s to a Saudi-based charity, the International Islamic Relief Organization (IIRO), whose offices in Virginia were raided and shut down in March 2002. The IIRO was implicated in funding the 1993 World Trade Center bombing, as well as the 1998 bombing of the U.S. embassies in Kenya and Tanzania.
Even after the al-Qaeda attack in Riyadh in May 2003 that killed at least thirty-four people, including eight Americans, (114) the U.S. government does not seem eager to name Saudi Arabia as a state that sponsors terrorism, or to prosecute Saudi businessmen and organizations that fund terror. (115) The government is currently negotiating with the Saudis about whether or not to block the lawsuit brought by the families of the September 11 attacks "on the grounds that it could impair American foreign relations." (116)
Other States
Iran not only carried out Jihad against those within its borders who did not adhere to the Ayatollah Khomeini's version of fundamentalism; (117) it also expanded the Jihad internationally by funding likeminded organizations such as Hizballah. Iran opened training camps for terrorists and provided them with funds for terrorist attacks. Radical states such as Libya, Syria, Sudan, Pakistan, and Afghanistan soon followed the Iranian example, opening training camps and funding terror organizations with or without the cover of religion. (118)
In contrast to Iran, Iraq, a secular state, initially fought for the uni- fication of the Arab world through the message of Pan-Arabism a secular movement that attempted to unite all Arab nations. It was only shortly before the outbreak of the Gulf War that Saddam Hussein added Jihad to Pan-Arabism in an apparent effort to gain more support in the Muslim world.
From its inception in 1964 until September 2000, Yasser Arafat's Palestine Liberation Organization (PLO) had historically been a nationalist movement. Arafat only embraced Jihad when he launched the September 2000 attack on Israel, apparently to distract the Palestinian population from their growing fury and daily frustration over the vast corruption and human rights abuses committed by his rιgime. Although Arafat claimed that the September 2000 attack on Israel was a popular uprising, the chief of the Palestinian Security Forces' political indoctrination department, Mazen Izz al-Din, said on Palestinian National Television on May 28, 2000, that the uprising was in fact anything but.
"We have to be truthful and honest and spell it out," Mazen said. "One day history will expose the fact that the whole intifada and its instructions came from Brother Commander Yasser Arafat." The Palestinian Authority's communications minister, Imad Faluji, at a PLO rally in the Ein Hilwe refugee camp in South Lebanon on March 9, 2001, stated that Arafat and the Palestinian Authority had planned the current uprising during July 2000 a full three months before the attacks on Israel began. (119)
Igniting another war enabled Arafat to redefine the economic decline in the territories as "sacrifices" necessary to mobilize the Palestinians against the "Zionist enemy." Instead of fulfilling his promises to better the welfare of the Palestinian people through the creation of a viable, prosperous state, Arafat created terror both at home and abroad. "There are two kinds of Arab leaders," noted an Arafat aide, "those who have all power concentrated in their hands. And those who are dead." (120) Apparently initiating the war had helped Arafat to stay in power by deflecting attention from his refusal to accept a peace proposal that had been proffered by former U.S. president Bill Clinton and former Israeli prime minister Ehud Barak.
Sudan was added to the State Department's list of countries sponsoring terrorism in 1993, and had its assets frozen by the U.S. government for not complying with UN Security Council resolutions requiring them to end all support to terrorism. Despite these actions, Sudan continues to be a safe haven for terrorists, including members of al-Qaeda, Hizballah, Jama'at al-Islamiyya, Egyptian Islamic Jihad, Palestinian Islamic Jihad, and HAMAS. (121)
Statesmen argue the difference between "moderate" and "radical" Islamic states, but this distinction is often no more than a whitewash on the part of the West, in order not to inconvenience Western foreign policy including the policies of the U.S. "Moderate" states like Algeria, Yemen, and even Egypt are known to aid terrorism abroad. They traffic in arms, abuse human rights, and promote incitement in the media against Jews, the U.S., and the West all while understandably attempting to stem terrorism at home.
Oppression + Corruption = Terrorism
The precursors of state sponsorship for terror organizations are corruption, domestic terrorism, and the absence of democracy. Although there are claims that poverty pushes people into the arms of terrorists, the September 11 hijackers all belonged to the middle and upper middle classes. As President George W. Bush said: "Poverty does not make poor people into terrorists and murderers. Yet poverty, weak institutions and corruption can make weak states vulnerable to terrorist networks and drug cartels within their borders." (122)
The West has long been guilty of supporting the most repressive Third World rιgimes despite evidence of their corruption and often abysmal human rights records. Of the 169 countries on the World Bank's list of recipients of development loans, 135 are afflicted with various degrees of systemic corruption. The disbursement of close to $400 billion in loans to these countries between June 1946 and June 2002 (123) has done little to diminish this corruption. If anything, the money has only served to strengthen the corrupt systems.
Much of the money given to Third World countries seldom reaches its intended recipients; instead it often finds its way into secret offshore bank accounts. Former Zairian president Mobuto Sese Seko, for example, who advised Zairian civil servants, "If you want to steal, steal a little in a nice way," (124) looted the national treasury of $4 to $10 billion and fled to the French Riviera, leaving his nation bereft only $4 million in Swiss bank accounts was frozen. In another example, Pakistani prime minister Benazir Bhutto's husband was sent to prison for abusing his status to increase the family wealth through government contracts no money was recovered. Similarly, Philippine president Ferdinand Marcos and his wife Imelda made off with $5 billion from the Philippine people only $2 billion was recovered. Former Indonesian President Suharto, along with his cronies and his family, in more than thirty-two years in office helped himself to $80 billion. No money was recovered, and the three Indonesian governments that succeeded him never tried seriously to retrieve it. (125)
To curtail the growing industry of terrorism it is mandatory to combat corruption and lawlessness, even though fighting them requires the cooperation of the very entities that most benefit from them.
What Is To Be Done?
The U.S. faces a monumental challenge in its efforts to stop international corruption, international money laundering, and international terrorism. To make matters worse, despite the existence of the USA PATRIOT Act, and despite international conventions, few countries seem to be willing to cooperate fully with the U.S. Even those that do cooperate do so mainly because of their own security concerns. They often claim that the U.S. is not providing sufficient evidence to require action, or that cooperation might conflict with their own laws, especially their bank secrecy laws, and might discourage people from depositing money in their banks, thus hurting their economies.
Presenting the National Security Strategy of the United States of America in September 2002, President George W. Bush said: "The United States will continue to work with our allies to disrupt the financing of terrorism. We will identify and block the sources of funding for terrorism, freeze the assets of terrorists and those that support them, deny terrorists access to the international financial system, protect legitimate charities from being abused by terrorists, and prevent the movement of terrorists' assets through alternative financial networks."
The war on terrorism needs to be waged on all possible fronts; liberating Afghanistan and Iraq were necessary first steps. However, the most urgent task is to stop terrorist funding especially that which is derived from the drug trade. The funding of this evil is enormous in scope, broad in diversity, ingenious in method, and aggressive in approach. Funding Evil draws a roadmap illustrating how terrorist organizations especially Islamist terror organizations are funded. To identify the patterns of terrorist funding, the book exposes the primary groups and some of the individuals that give and receive money on their behalf. The book sheds light on how these activities have gone undetected for decades while terrorists have recruited thousands to their ranks and millions to their cause amassing fortunes in the process.
Funding Evil shows how terrorism works, and ways to defeat it. In order to end its threat, we must cut off its funds.
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