Effort to Cut Off Terrorist Money Shows Progress

Four months into the United States’ financial war on terrorism, federal authorities have helped freeze $80 million in terrorist money worldwide, arrested at least 11 people, secured three indictments and seized more than $12.5 million, officials said Tuesday.

Their efforts have also resulted in more than 200 ongoing criminal investigations into groups and individuals suspected of financing terrorist activities since the Sept. 11 attacks on the World Trade Center and the Pentagon. Some of those probes focus on Al Qaeda, Osama bin Laden’s terrorist network, while others target apparently unrelated terrorist organizations operating in the United States and abroad.

Of the $80 million, about $34 million has been frozen in the United States and the remaining $46 million has been frozen by allies overseas.

Authorities said it was hard to quantify how much of an effect they have had on the terrorists’ financial lifelines. But they said there are indications that Al Qaeda is suffering greatly as a result of the crackdown.

“We have intelligence information that Al Qaeda is starving for money and feeling the squeeze,” said Deputy Assistant Treasury Secretary Rob Nichols. “And while that is encouraging, we don’t know if the $80 million is 90% of the money that’s out there or 10%. We are in a race where the finish line is uncertain.”

That status report on the multi-agency effort to staunch the flow of terrorist financing was provided at a lengthy Senate hearing by top officials of the U.S. Treasury and Justice departments and in interviews.

Investigators have analyzed about 61,000 transactions involving more than 90 foreign banks, and the vast amount of information culled in the last four months has been very valuable in understanding how the Sept. 11 operation worked, said Michael Chertoff, a top Justice Department official.

“Through financial information, we have established how the hijackers received their money, how and where they were trained to fly, where they lived and, perhaps most significantly, the names and whereabouts of persons with whom they worked and came into conflict,” he said.

Broadest Financial Probe in U.S. History

The officials testified that federal agents are cooperating with authorities in dozens of nations to freeze the assets of people and organizations accused of terrorism, and to choke off the financial pipeline that terrorist networks use to pay for weapons, explosives, plane tickets and the day-to-day sustenance of shadowy operatives.

“The work of these financial experts is just starting, but they have already opened well over 200 terrorist financing investigations and are following new leads on a daily basis,” Deputy Treasury Secretary Kenneth W. Dam said at a hearing before the Senate Banking Committee.

Dam and other officials told the Senate panel that much of the burgeoning crackdown cannot be discussed in public because it involves the secret tracking of terrorists’ financial assets and other classified means of intelligence gathering. Treasury officials are working closely with the FBI, the CIA, the departments of Justice, State and Defense, and other government agencies in what Dam called the most extensive financial investigation in U.S. history.

“We remain focused on finishing off Al Qaeda,” Dam said. “We are targeting not only Al Qaeda operatives but their financial intermediaries and others that support them. Increasingly, we are also focusing on other terrorist groups of global reach.”

But, Dam added, “although we have made much progress, we still have much work to do.”

Dam and Chertoff told the Senate panel that they need significantly more law enforcement tools and personnel to continue the financial assault on terrorism and to plug holes created by the passage of the Patriot Act, the sweeping anti-terrorism legislation created in the wake of the skyjackings.

Members of the committee said they too had concerns about how terrorists may be abusing banking loopholes to finance their global jihad, or holy war.

Chertoff, assistant attorney general for the Justice Department’s criminal division, told the Senate panel that the Patriot Act granted law enforcement officials an array of powerful new tools to block the money flowing to terrorists. But he called on Congress to plug a loophole that makes it illegal to conceal large amounts of criminally “tainted” cash funneled across international borders but not within U.S. borders.

Chertoff said Congress needs to ban the concealed transport of more than $10,000 in cash within the United States as well, if it can be shown that the offender knew the money was linked to criminal activities.

The Bush administration proposed such a measure during last fall’s debate on the Patriot Act. But it was thrown out of the final version because some lawmakers felt its wording was “too Draconian” in assuming that anyone carrying so much cash must be tied to crime, according to a Democratic Senate aide who asked not to be identified.

If that concern can be addressed in this latest version, the measure may well pass, the aide said.

Details of Inquiry Being Kept Classified

In addition, Chertoff said, with evidence mounting that terrorist groups have used informal money-changers known as “hawalas” to finance their attacks, “we need to change the way we think about money laundering.”

Dam and Chertoff said investigators are continuing to probe the financial underpinnings of the Sept. 11 attacks, but they were unwilling to answer publicly some of the key questions surrounding the funding of the operation.

These questions include just how much money was made available to the hijackers in the United States--estimates have varied widely from several hundred thousand dollars to more than $1 million--and whether Bin Laden and Al Qaeda leaders were able to manipulate stock transactions to profit from the Sept. 11 attacks.

Chertoff said bank accounts “used by, or related to, the Sept. 11 terrorists” have been seized by federal authorities in New Jersey and New York. And federal authorities have made arrests, executed warrants and frozen funds in Massachusetts, Virginia, Ohio, Georgia, Minnesota, New Jersey, Florida, Washington state and elsewhere against financial outfits and charities with suspected terrorist ties, he said.

“These actions demonstrate that our fight against terrorist financing is a broad-based effort extending well beyond the Al Qaeda network,” Chertoff said.

One expanded tool that authorities are employing is the sharing of tax information with foreign nations. Dam told lawmakers that the United States has recently signed several such information-sharing agreements in the Cayman Islands--renowned as a haven for offshore accounts--and he said “there are more in the pipeline.”

But Sen. Paul S. Sarbanes (D-Md.), chairman of the hearing, said he was concerned that some nations were being given a grace period of several years to execute the agreements. “A lot of mischief can happen during that period of time,” he said.

Sen. Jack Reed (D-R.I.) suggested that law enforcement officials must also do more to get U.S. financial institutions to report suspicious activity and root out possible money laundering.

“I would suspect our strongest leverage is on American financial institutions,” he said. “And one of their responsibilities is to know their customers much better.”

Dam hailed foreign governments for cooperating in the crackdown on terrorist assets, saying they have blocked more than $46 million of the overall $80 million in assets frozen. He did not provide details of which accounts were blocked or who has been arrested and indicted.

The White House also disclosed Tuesday that Dam will travel this weekend to India and Pakistan to discuss the financial war on terrorism, economic issues and Indo-Pakistan tensions.