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SITE In The News
The Cash Squeeze on Terror Inc.
By Mike McNamee and Lorraine Woellert
Published in: Business Week
March 17, 2003

Key arrests could help choke off al Qaeda financing

Intelligence officials rejoiced over news that al Qaeda operations chief Khalid Sheik Mohammed had been nabbed in Pakistan on Mar. 1 and spirited out of the country by U.S. agents. Suspected of being the key organizer of the September 11 attacks, Mohammed is allegedly one of the biggest fish snared to date in the U.S.-led crackdown on Osama bin Laden's terror network. Almost as encouraging -- though less high-profile -- is the slow but steady progress being made in cracking al Qaeda's fund-raising network.

In the drive to dry up bin Laden's money taps, an operative captured alongside Mohammed may turn out to be equally crucial. Mustafa Ahmed al-Hawsawi, a 34-year-old Saudi, set up the bank accounts used by the September 11 hijackers and received $25,000 in cash that the 19 operatives returned in the days before the attack, FBI Director Robert Mueller told Congress. Al-Hawsawi is "a big cog in the machinery that moves al Qaeda money around the Middle East," says terrorism expert Neil C. Livingstone, chairman of security consultants GlobalOptions Inc. On Mar. 4, U.S. prosecutors unsealed charges against Sheik Mohammed Ali Hasan Al-Moayad, a Yemeni cleric tied to Brooklyn's al Farouq mosque. The FBI alleges his associates regularly solicited funds at al Farouq and that he boasted to an informant of raising $20 million and delivering it personally to bin Laden. Al-Moayad denies the charges. A spokesman for the mosque said it is "just a place of worship."

Coming on the heels of a spate of U.S. and European moves to shut down charitable fronts used to fund terrorism, these skirmishes in the money war are beginning to give harried anti-terror officials a glimmer of hope. "The disruption in [al Qaeda's] funding flow is substantial and real," concludes a senior U.S. official involved in the campaign. But disruption isn't destruction -- and the financial warriors still have a long battle ahead. The wellsprings of terror cash -- donations raised in mosques and by Islamic charities -- have hardly been touched. And the man U.S. intelligence officials suspected of being al Qaeda's financial mastermind, Sheik Said al-Masri, remains at large.

And while the U.S. Treasury has put American banks on high alert to catch dirty money, other governments don't feel the same urgency. Even as they publicly praise the international community for cooperating in the war on terrorist financing, U.S. officials complain privately that foreign government support has been "spotty at best." Part of the problem comes from Washington. Pleas by Treasury Secretary John W. Snow for allies to curb money flows are drowned out by other messages, including the Bush Administration's calls to shore up support for war in Iraq. Indeed, that's why U.S. officials are thought to be going easy now on countries, most notably Saudi Arabia, where terror funders thrive.

So the fund-raising machine that turns legitimate contributions and profits into blood money is still humming. Despite U.S. raids on Islamic charities in Chicago, New York, and elsewhere, terrorist sympathizers "still fund-raise in the U.S.," says Rita Katz, director of the Search for International Terrorist Entities Institute in Washington. Meantime, the destruction of the movement's Afghan training camps -- once bin Laden's most expensive operations -- has freed up resources for terror operations, which tend to be low budget: The September 11 attacks are estimated to have cost between $200,000 and $500,000.

Still, the troops on the financial front lines can claim key victories. The U.S. Treasury has frozen $124 million in suspected terrorist assets worldwide. The Justice Dept. has more than 70 terror-financing probes under way, while Treasury has designated 263 charities, businesses, or individuals as terrorism supporters whose funds are subject to seizure. And U.S. financial institutions face stiff fines under the Patriot Act of 2001: Western Union, whose wire transfers were used by the hijackers, was socked for $8 million on charges it failed to report other large money movements. Western Union neither admitted nor denied guilt.

New probes are leading investigators up the money trail. One key target: Adel Batterjee, a Saudi businessman who founded Chicago-based Benevolence International Foundation, one of the U.S.'s biggest Islamic charities. On Feb. 10, prosecutors struck a deal with Benevolence's executive director, Enaam M. Arnaout, dropping six of seven charges that he aided terrorists. U.S. Attorney Patrick J. Fitzgerald hopes that Arnaout will provide a roadmap of al Qaeda's financial network and help "unmask Batterjee." Benevolence, which has denied the allegations, has not been charged. It is suing the U.S. government over the seizure of its assets, although a federal judge has halted the lawsuit until Arnaout's criminal case is settled.

Such charities play a double game, prosecutors say. Run-of-the-mill donors and U.S. corporations were told of humanitarian missions -- Microsoft, UBS, and Compaq all legally matched employees' gifts to Benevolence. But internal Benevolence documents obtained by investigators show major Muslim donors were aware that much of the group's money went to Islamic fighters in Chechnya and Bosnia -- and al Qaeda. A list of Benevolence's Mideast donors known as the "golden chain" showed Batterjee a close second to bin Laden in receiving funds. The whereabouts of the Saudi, named as an unindicted co-conspirator with Arnaout, are unknown.

Overseas, too, the money war is moving ahead -- if haltingly. Al-Moayad was nabbed in Germany, and even Kuwait, a country with little experience in blocking money laundering, is reporting more financial arrests. But the crackdown largely originates with American investigators. Even in Europe, where already-strong banking rules were tightened after September 11, "a lot of countries don't have the personnel capable of detecting" terror fund transfers, says Roland Jacquard, head of Paris-based International Observatory on Terrorism. In France, "very little money has actually been frozen," Jacquard says.

Despite these difficulties, U.S. officials maintain they're putting a hard squeeze on terrorists' funds. "What matters is the impact we're having on their cash flow, which has slowed," says Treasury General Counsel David D. Aufhauser, who coordinates the U.S. drive against al Qaeda's finances. As evidence, he cites widespread reports that al Qaeda is fleeing the heavily scrutinized Western banking system, switching to couriers who convey cash, gold, diamonds, and other commodities. "That's slower, costlier, and easier to catch," he says.

But critics contend that the Bush Administration's emphasis on arrests and freezes has led officials to neglect more fundamental changes that would starve al Qaeda of funds at the sources. Their main example: Saudi Arabia. U.S. officials have long kept lists of top Saudi businesses and officials who support bin Laden. Last fall, National Security Council staffers threatened to give the Saudis a deadline to block such gifts. But pressure from the Saudis and State Dept. succeeded in blunting that drive. In Saudi Arabia and elsewhere, "the legal and regulatory environment in which terrorists raise and move their money remains unchanged," says Lee S. Wolosky, co-director of a Council on Foreign Relations study of terrorist financing.

The U.S. has powerful weapons it could use to punish financial criminals -- and countries that harbor them. The Patriot Act, for example, gives Treasury the power to cut off any use of the U.S. financial system by a bank, business, or country that doesn't exercise adequate controls over money laundering. So far, Treasury has only exercised that power twice -- against Naru, a tiny Pacific Island financial haven, and Ukraine. Neither case was related to terror funding.

At this point in the struggle against terrorism, potential battlefields are overshadowing bank ledgers. With Iraq consuming Washington's attention, the financial fight inevitably is taking a back seat. But when the bullets stop flying, the U.S. must still maintain a major front against the benefactors of terror to starve al Qaeda of the money it needs for its deadly campaign.

By Mike McNamee and Lorraine Woellert in Washington, with Carol Matlack in Paris, and bureau reports

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