Crackdown on Terror Funding Is Questioned

The U.S. government’s much-touted financial war on terrorism has been hamstrung by bitter turf battles among federal agencies, questionable evidence against targeted Middle Eastern groups and a lack of cooperation by foreign allies, senior government officials said.

In recent months, President Bush and his top Cabinet members have hailed the U.S. government’s effort to “shut down the money pipeline” as an increasingly important, and successful, component of the broad counter-terrorism strategy in the United States and abroad.

But privately some administration officials are voicing growing concern that the strategy isn’t working as advertised.

“You read the papers and it seems like everything is going great,” said one senior law enforcement official. “But this is no way to run an investigation. And the worst part is that this is the biggest case in existence. And so much is at stake.”

Debate over the problems has occurred at the highest levels, according to interviews with more than a dozen law enforcement, intelligence and counter-terrorism officials familiar with the financial crackdown. Among the concerns:

* Infighting between the Justice and Treasury departments has spawned two parallel and often conflicting bureaucracies pursuing financial investigations of suspected terrorists, sending confusing signals to law enforcement and intelligence agencies here and abroad over who is in charge.

Privately, some Treasury and Justice officials blame each other for refusing to work together, withholding information and lacking the required financial training, even as both concede that the current system squanders precious resources, money, time and investigative leads.

* At least some of the financial crackdowns on groups with suspected terrorist ties, resulting in the freezing of tens of millions of dollars in assets, were launched prematurely or based on insufficient evidence.

The asset seizures have triggered lawsuits from targeted groups, as well as a backlash from Muslims who say they are being unfairly branded as terrorists. Some prosecutors now say they are concerned about whether the seizure cases will hold up in court.

* The United States is receiving far less cooperation than it needs from many allied nations, which have pledged to help choke off the terrorist money supply but lack the political will, technical know-how and legal framework to make that happen.

As a result, the financial crackdown risks being little more than a symbolic effort because only a tiny fraction of the money believed to be supporting terrorist activity resides within U.S. financial institutions.

* Key financial provisions of last year’s Patriot Act, which granted authorities broader powers to track suspected terrorist money, are too unwieldy and unrealistic.

The law subjects an array of businesses--from currency transfer and exchange firms to pawnbrokers and even car dealerships--to new auditing and reporting requirements to help authorities detect potential terrorist activity. The legislation gives an April 24 deadline for the new regulations, but many businesses say they have no system for taking on their expanded role as money cops, and authorities complain that they will be overloaded with information.

Leaders of the financial war on terrorism acknowledge the investigations’ shortcomings, but they point to success in some areas.

The campaign has been instrumental, for instance, in determining who was behind the Sept. 11 attacks and in establishing connections among the 19 hijackers and other co-conspirators around the world. It also has provided a clearer picture of how Osama bin Laden’s Al Qaeda network and other terrorist organizations operate, officials said, adding that the financial component of the war on terrorism ultimately could prove to be instrumental in U.S. efforts to avert another attack.

“Naturally, there are a few growing pains, but I don’t detect a systemic problem here,” Deputy Treasury Secretary Kenneth Dam said Friday. “No doubt there will be glitches here and there, but that doesn’t detract from the point that it’s just an incredible joint effort, and it’s made a major impact on Al Qaeda and their ability to finance themselves.”

Last week, FBI Director Robert Mueller said the crackdown has damaged the ability of Bin Laden and other suspected terrorists to keep their operations going.

Dam, Mueller and other high-ranking leaders say they base those assessments on classified information, intelligence and other indicators that, as Al Qaeda’s funding dries up, its cells are withering on the vine.

So far, authorities have frozen more than $100 million in alleged terrorist money, about $70 million of it overseas. Several major charities have been targeted for allegedly helping terrorist organizations, as have currency transfer businesses that are popular means of routing money from the United States to Africa and the Middle East.

But others involved in the investigation say they couldn’t name any cases in which criminal charges have been brought in the United States directly related to the post-Sept. 11 funding of terrorism.

And some said Al Qaeda’s operations are too shrouded in secrecy to gauge the effectiveness of the crackdown, particularly since terrorists frequently use gold, diamonds and other noncurrency transactions to fund their activities.

“I would have no idea [how successful the effort has been], and I have no idea how they would know,” one senior law enforcement official said of those who claim Al Qaeda has been financially crippled. Like many others involved in the money-tracking effort, the official declined to be identified by name or even by agency, citing political sensitivities and interagency conflicts.

Agencies Can’t Get Together

That official and others said the financial counter-terrorism effort has been faltering on operational and policy levels. Many fear that the problems will only get worse unless something is done to streamline--and de-politicize--the entire initiative.

A bewildering array of law enforcement squads is involved in the financial investigations, not to mention committees set up to oversee them, including a high-level panel so secretive that no one will even disclose its name.

The FBI set up its money-tracking Financial Review Group within days of the attacks and invited other agencies, including Treasury, the CIA and the National Security Council, to join.

Within weeks, however, the Treasury Department created Green Quest, headed by Customs Commissioner Robert C. Bonner, a former U.S. attorney in Los Angeles. It said the multi-agency panel would lead the effort to track terrorist financing.

Bonner and Treasury officials say they were following Bush’s Sept. 23 executive order that sought to freeze the U.S.-based assets of individuals and organizations involved with terrorism.

Justice officials counter that the Treasury Department has interpreted its role too broadly and that the FBI, which is part of the Justice Department, is supposed to be leading the global effort to staunch the flow of terrorist funds. The Treasury and Justice departments have opened hundreds of financial investigations independent of each other.

Things have degenerated to the point where the two FBI positions on the customs panel are vacant, and the two customs agents in the FBI unit left and never came back, according to people close to the investigations.

Treasury’s Dam and other top officials said the interagency conflicts are minimal and simply the natural outgrowth of forcing two massive law enforcement and intelligence-gathering bureaucracies to work together and share sensitive and often classified information.

But others remain concerned.

“I just find it absurd, especially in light of what we’re going through, that the agencies can’t put this petty [conflict] behind them,” said one law enforcement official.

At a Feb. 12 congressional hearing, Rep. Doug Bereuter (R-Neb.) questioned the “behind-the-scenes tug of war” between Treasury and Justice.

“I am concerned that if parallel financial intelligence databases are set up, the U.S. government will both spend money unnecessarily and decrease investigative and enforcement efficiency,” Bereuter said.

FBI officials have confidentially proposed merging the two panels, but the Treasury Department has consistently rejected that idea, sources said. Treasury Undersecretary for Enforcement Jimmy Gurule says the groups perform important but separate functions. He says the Treasury Department is responsible for the broader financial investigation into terrorism, while the FBI pursues the Sept. 11 investigation and other law enforcement actions.

FBI Request to View Records Is Denied

The two camps are often working at cross-purposes. A few weeks ago, the Treasury Department denied FBI requests to look at financial records that the department seized from a New Jersey charity with suspected terrorist ties. FBI agents had to go to the charity itself to seek permission to see the records.

Matthew Piers, an attorney for the Benevolence International Foundation USA, agreed to the request because, he said, the charity has nothing to hide. Piers said the episode struck him as bizarre and symptomatic of what he described as the flimsy case the Treasury Department has brought against the charity in freezing $800,000 in assets and crippling the organization’s relief efforts in Asia and Europe.

He called the Treasury Department’s methods draconian and noted that no criminal charges have been filed against the charity or its employees.

The Treasury Department alleges that Benevolence’s chief executive has ties to radical Islamic fundamentalists.

“They’re wrong,” Piers said. “It’s just plain and simple a case of mistaken identity.”

If authorities think the executive has suspected terrorist ties, Piers asked, “why have they not even questioned him? Why haven’t they picked him up?”

Treasury officials refuse to discuss the case or details about any of the orders blocking the assets of more than 190 individuals, charities and businesses. The orders are often based on evidence that Treasury officials say is classified and not available to the accused.

On Friday, a federal judge in Chicago supported the use of such evidence when he allowed government attorneys to present their case against another charity, Global Relief Foundation, without its lawyers present. The hearing was part of Global Relief’s lawsuit to recover about $1 million in frozen assets.

Dam and Treasury General Counsel David Aufhauser said they are satisfied that there is ample evidence underlying all of the Treasury Department’s searches and its orders freezing assets. Aufhauser also said all of the orders were issued after thorough investigations and consultation with the Justice Department.

But others within the administration dispute that. Sources who asked not to be identified said the Justice Department has expressed concerns to senior Treasury officials about the strength of the asset-freezing cases, as well as the lack of coordination.

Some officials fear that any evidentiary weakness will become an embarrassment when organizations whose assets are frozen bring cases in court here and overseas--and the Justice Department has to defend the government’s position.

“There are going to be huge problems,” one law enforcement official said. In many of the cases, “I don’t think there’s a lot there. . . . It’s pretty thin.”

An official at a separate agency said that, although there may be legitimate reasons to target many of these groups, he believes the Treasury Department’s rush to take action last fall may have been “politically driven” and premature. “They were running and gunning,” the official said.

Treasury officials disputed the charge. “The last thing we want to engage in is political theater,” Aufhauser said.

In fact, the Treasury Department has had complaints of its own: Officials say the FBI repeatedly hampered cooperation. For example, when it requested intelligence information from the FBI last fall to prepare orders for freezing assets, some of those requests were never acted on, officials said. Only when higher-ups intervened did the Treasury Department get the requested information.

A Parade of Official Visits to U.S. Allies

Several senior law enforcement officials complained that the tug of war extends overseas as well.

As evidence that U.S. allies are getting mixed messages about the U.S. operation, they cited the separate trips to Europe and Asia by Atty. Gen. John Ashcroft, FBI Director Mueller, Treasury Secretary Paul H. O’Neill and other top-level officials to talk up the financial war on terrorism.

The Treasury and Justice departments also have been quietly sending employees overseas to press U.S. allies into doing more to help in the financial crackdown. Those include legal experts who are trying to help the countries establish the legal frameworks needed to follow through on any seizures. And technical consultants are working with those governments and private banks to set up the appropriate computer systems, officials said.

Other nations “are asking for additional proof” of wrongdoing by suspected terrorists, charities and other businesses before acting, Aufhauser said.

One of those countries is Switzerland. On a recent trip to Washington, Switzerland’s attorney general, Valentin Roschacher, complained that U.S. officials told him to freeze the assets of several suspected terrorist organizations but then said they couldn’t hand over the underlying evidence because it is classified.

U.S. officials also said some of their allies, including some suspected of having a major terrorist presence, such as Saudi Arabia, Pakistan and the United Arab Emirates, are dragging their feet for fear of a backlash from their Muslim populations.

Amid all the logistical problems, an even more troubling question has begun to emerge: How much good can tracking terrorist money really do?

Everyone agrees that financial investigations are critically important in uncovering, and even thwarting, terrorist activity. Credit card, phone and travel records and other forms of payment can be used to identify those involved in a conspiracy, to establish links between them and other co-conspirators and to gather evidence.

But much of the current focus appears to be on examining the entire universe of financial transactions for signs of terrorist activity, which many investigators liken to searching for a needle in a haystack the size of Nebraska.

Authorities note that the 19 hijackers were able to carry out the Sept. 11 attacks on a budget of about $500,000, without any of their financial transactions triggering red flags.

“This was the Super Bowl of terrorist acts, and even in retrospect, knowing what we do now, we would never have caught that,” one law enforcement official said.

Oliver “Buck” Revell, a former top FBI official and counter-terrorism expert, was equally skeptical that monitoring the flow of money will prevent another terrorist attack: “I think you need to do it, but it’s not going to stop them.”