Money Launderers Find New Ways to Fund Terror

Dogged by investigators tracking the funds raised for terrorists, money launderers constantly find new ways to give them the slip. German police suspect that one trick may be as simple as buying some fine cars.

Police at Germany’s Frankfurt airport were suspicious when a Saudi and three Pakistanis stepped up to the immigration counter last year with a letter of invitation from a local luxury auto dealer. The travelers, including a Muslim cleric in his 70s, didn’t look like high-end car merchants. Border officers searched their luggage.

They found fund-raising letters from Islamic schools and cultural groups in Pakistan, Saudi Arabia and Europe, according to a confidential Pakistani Interior Ministry report on the incident recently leaked to the media.

German federal police think that the groups are linked to militant Islamists and are using donations to buy luxury cars that are exported through Hamburg’s port for sale in Saudi Arabia. Millions of dollars laundered this way each year are then channeled to militants in Pakistan, Afghanistan and the Middle East, according to the report.

German security officials informed Pakistani Ambassador Asif Ezdi of their investigation, according to the report, and sought his government’s help with this warning: “In our assessment, money collected here [in Germany] is used to buy cars, export them to Saudi Arabia and resell them. Income earned in this way is then transferred to Islamic organizations and Al Qaeda elements in Pakistan.”

Despite their suspicions, German police have found no evidence of a crime in the Frankfurt case, and no charges were filed against the four men. Like investigators around the world, the Germans are having trouble sorting out good money from bad in their effort to dry up suspected terrorist finances.

So far in the war against terrorism, Washington has designated 243 individuals and entities in several countries as terrorist financiers, and, with its allies, has blocked more than $133 million in funds, according to Jimmy Gurule, the U.S. Treasury Department’s undersecretary for enforcement.

It is complex work, and “these schemes to move money globally are very, very difficult to uncover,” he said. “The money trail can be very difficult to follow.

“And, of course, these terrorist financiers are looking for new ways all the time to raise money and to move money,” Gurule added. “And as we continue to put pressure on one aspect of their means to move money, such as the banking sector, then of course they’re likely to move away from that mechanism for moving money and look to less formal mechanisms.”

If German police are right, tougher controls have not stopped Islamists from raising and moving large amounts of cash from Islamic charities in Saudi Arabia and Western Europe to radical religious schools and terrorist training camps in Pakistan, Afghanistan and Lebanon.

Germany’s equivalent of the FBI, the Bundeskriminalamt, has traced car exports to the four men questioned in Frankfurt. Investigators suspect that they make up one of 12 money-laundering rings believed to be operating in Germany’s 16 states to support militant training camps in Pakistan and Afghanistan, as well as Hezbollah bases in Lebanon and the Palestinian group Hamas. Yet authorities seem powerless to stop such activity.

German police refuse to discuss details of the case. But a Pakistani diplomat said he had spoken with German authorities and confirmed that no one was arrested after the Frankfurt incident. “When we checked, we were told that those persons have done nothing illegal,” said the diplomat, who spoke on the condition he not be identified.

Job Tilman, spokesman for the Frankfurt prosecutor’s office, confirmed that police are probing the money-laundering allegations in “an ongoing investigation against unspecified persons for membership in a criminal organization.”

In 1989, the Group of 7 industrialized nations created the Financial Action Task Force to develop strategies against money laundering, but the task force’s 31 member countries -- including the U.S. -- only began to focus on terrorist financing after the Sept. 11 attacks.

The billions of dollars that organized gangs and drug traffickers launder each year come from traditional criminal enterprises, which often give investigators an obvious crime to look for. But terrorist groups increasingly rely on charitable donations and other legitimate methods of raising and moving money that make a crime more difficult to detect, said Patrick Moulette, the task force’s executive secretary.

New Techniques

“It is certain that the money launderers are very good and that they have a great imagination to invent new techniques all the time,” Moulette said from Paris.

Last month in Rome, the task force brought 170 police, customs officers and other government officials from several continents to swap stories on money-laundering techniques and discuss ways to deal with them.

In 2001, when the task force studied for the first time how terrorists launder money, experts reported numerous dodges that were frighteningly simple. One unidentified group moved about $7 million by purchasing money orders worth $500 to $1,000 each, done so blatantly that the serial numbers ran in sequence. Another operation used three grocery stores as a front to move large amounts of cash.

For the first time, the task force concentrated on charities and an informal international money-trading network known as hawala, which moves hundreds of millions of dollars across borders each year without formal bookkeeping -- and beyond the prying eyes of government regulators.

German federal police are looking at Islamic charities and hawala middlemen in their investigation into money-laundering rings.

In the Pakistani Interior Ministry report on the Frankfurt incident, the three Pakistanis are identified as Mohammed Younas, Mohammed Abdullah and Mohammed Ismail. The Saudi is identified only as Mohammed Z. All had arrived from the Saudi city of Jidda, where they received visas from the German Consulate using an invitation letter from Jericho Automobil, a small Frankfurt dealership selling Mercedes-Benzes and BMWs.

Ismail, who is in his 70s and was born under British rule in what is now India, was carrying two briefcases, according to the report. In one, police found documents bearing the letterhead of several Islamic groups.

Two are in Germany: the Islamic Cultural Assn. in Heidelberg and the Islamic Welfare Organization in Bochum. Two others are in the Netherlands: the Ayasofia Mosque Mili Goerues in Amsterdam and the Islamic Cultural and Information Center, Abu-Bakar Mosque, in Nijmegen. Another document was written on the letterhead of the International Islamic Welfare Organization of Saudi Arabia.

Government officials interviewed in Germany and Pakistan provided no evidence that any of the groups have broken any laws.

Introduction Letters

Ismail, who told police that he lives in Karachi, had a letter of introduction in his second briefcase. It said he was the official representative of the Madrasa Jamia Arabia Nazirul Islam in Karachi and was authorized to collect money on the religious school’s behalf.

Ismail’s fund-raising letter was certified by “Pakistani authorities,” according to the Interior Ministry report, which identifies neither the officials who gave their approval nor the agencies involved.

Officials from the religious and government bodies that regulate Pakistan’s madrasas, or Islamic schools, said in interviews that they have no record of the Karachi school where, other documents cited in the Pakistani report indicated, Ismail claims to be a senior cleric.

“German authorities believe that Ismail was collecting money from Islamic organizations in west Europe and taking it out,” the Pakistani government report said, adding: “The letter of recommendation carried by him said not only that he was authorized to collect donations, but also that among 250 pupils at the school there were also some who were prepared to lay down their lives for the holy war against USA/Christians.”

According to the report, Ezdi, the ambassador, informed the Pakistani Foreign Ministry of the German investigation and asked his superiors “to look into the matter and pass on the relevant facts to him as he has to inform the German authorities.”

But the matter ended there, according to an Interior Ministry source, who spoke on the condition of anonymity.

“We never received any instructions from the Foreign Office to investigate the case,” the source said.

Jericho Automobil, the Frankfurt car dealership where the men said they wanted to do business, has about 30 Mercedes-Benzes and BMWs, most of them used, for sale in the shadow of the steel and glass towers that line the financial district.

The manager, Aziz Dasan, is a German citizen of Palestinian descent. He emigrated with his family 20 years ago after fleeing his homeland to Jordan during the 1967 Middle East War. German police have not accused Dasan of any crime, and he said they have not interviewed him.

Displayed proudly behind his desk are pictures of three daughters, each receiving a kiss on the hand from Palestinian Authority President Yasser Arafat during an official visit to Germany. “Chancellor [Gerhard] Schroeder was there too,” Dasan said, adding: “I would be glad if I had ever met Arafat, but I didn’t.”

Visits to Car Dealership

Dasan said he vaguely remembers two or three of the men named in the German inquiry paying a visit to his dealership before November 2001. They didn’t buy anything and were interested in the used cars because they said new models were too expensive, Dasan said.

They asked him to fax an invitation letter so that they could return to Germany and do business with him then, Dasan added. He said that’s a common request because 70% of his sales are for export to the Middle East, mainly to Kuwait and Jordan.

Dasan estimated that he used to fax four or five invitation letters a year to German visa offices abroad on behalf of potential buyers. He said he stopped after his dealership’s name appeared in a police report on the Frankfurt airport encounter that was leaked to a local newspaper.

The Saudi and Pakistanis returned to Dasan’s dealership in November 2001, he said, apparently after they were questioned by border police. They didn’t buy any cars then either, he added.

Publicity surrounding the incident has been bad for business, Dasan said. Next year, he’ll have to find a smaller store to rent because two businesses that sublease from him are pulling out.

“They are afraid that something will happen to their shops,” he said. “There are a lot of crazy people out there.”

*

Special correspondents Mubashir Zaidi in Karachi and Dirk Laab in Frankfurt contributed to this report.