Libya Financing Terrorists Via Private U.S. Accounts : Laundering Operation Uncovered

Funds from Libyans’ private bank accounts in the United States, which were not affected by President Reagan’s order freezing the North African nation’s official bank deposits here, are being used to pay for international terrorist activities, according to a top-secret U.S. intelligence report.

Reagan Administration officials with access to the document said today that an apparent “laundering” operation was discovered more than a week ago--before the freeze was imposed--but that government officials have not moved to cut off the flow.

“There are accounts on which terrorists are drawing in the United States. It’s unbelievable,” one senior Administration official said, speaking on the condition that he not be identified.

As portrayed by another official, the money is deposited in U.S. banks and then withdrawn for eventual payment through various channels to terrorists overseas.

Information on Networks

However, the senior official said disclosure of details about the accounts, the flow of money or those with access to the funds could hamper government efforts to monitor use of the money--a process that could possibly provide information about overseas terrorist networks.

One Administration official placed the value of the accounts at “millions and millions” of dollars.

An investigative source said the material, classified top-secret, was discussed at an interagency meeting of intelligence experts earlier this week. It was also circulated in the government’s National Intelligence Digest.

The Treasury Department, which holds primary responsibility for monitoring currency transfers, is leading the investigation, the sources said. It is understood that the agency is looking at the accounts and transactions under the federal requirement that all transfers of $10,000 and above be reported to the Treasury in a currency transaction report.

‘No Comment’

Treasury spokesman Kim Hoggard said Treasury Secretary James A. Baker III had decided that “there will be no comment from this department on that subject.” But one Treasury official, speaking on the condition of anonymity, said that, in a public relations sense, “it wouldn’t hurt us” to make public the information about the accounts.

Reagan’s order, issued Wednesday, froze access to Libyan government accounts held in U.S. banks as the Administration stepped up its efforts to isolate the regime of Moammar Kadafi in retaliation for the Dec. 27 terrorist attacks by radical Palestinians at the Rome and Vienna airports. Nineteen people, including five Americans and four terrorists, died in the attacks.

The order was issued after the Libyan government transferred about $100 million from an American bank to a foreign bank earlier Wednesday, raising officials’ fears that more would be quickly withdrawn.