Terrorism money is still flowing

Times Staff Writer

The U.S.-led effort to choke off financing for Al Qaeda and other terrorist groups is foundering because setbacks at home and abroad have undermined the Bush administration’s highly touted counter-terrorism weapon, according to current and former officials and independent experts.

In some cases, extremist groups have blunted financial anti-terrorism tools by finding new ways to raise, transfer and spend their money. In other cases, the administration has stumbled over legal difficulties and interagency fighting, officials and experts say.

But the most serious problems are fractures and mistrust within the coalition of nations that the United States admits it needs to target financiers of terrorism and to stanch the flow of funding from wealthy donors to extremist causes.


“The international cooperation and focus is dropping, the farther we get from 9/11,” said Michael Jacobson, who was a senior advisor in the Treasury Department’s Office of Terrorism and Financial Intelligence until March 2007. “Some countries lack political will. Others just don’t have the basic capacity to govern their countries, much less create a viable financial intelligence unit.”

Many current and former officials and experts say that because of political, legal, cultural and technical problems, the administration-led coalition is deteriorating.

“Al Qaeda, the Taliban and other terrorist groups continue to have access to the funds they need for active and expanded indoctrination, recruitment, maintenance, armament and operations,” said Victor D. Comras, a former United Nations terrorism finance official.

Internationally, the sense of urgency over terrorism financing has waned since the 2001 attacks. As political climates have changed and negative perceptions of the United States have risen, key allies are cooperating less, current and former officials say.

In the Middle East and elsewhere, many countries have resisted U.S. pressure to investigate and identify financiers.

Saudi Arabia, Pakistan and other key nations have not taken the necessary steps to crack down on terrorist financing or suspect money flowing across their borders. Other countries, including Afghanistan and some African nations, lack the financial infrastructure to cooperate meaningfully.


Also, the most deadly terrorist attacks since Sept. 11, 2001, have cost so little -- often less than $10,000 -- that they are virtually impossible to detect by following a money trail.

Terrorist networks need larger sums to travel, train operatives, bribe government officials, evade capture and expand support bases. Increasingly, however, they are moving funds below the radar of U.S.-led enforcement and intelligence-gathering efforts, officials and experts said.

Cash couriers use donkeys and camels in places like Pakistan and Afghanistan, for instance, and private jets are used in oil-rich Persian Gulf kingdoms to move cash, gold and jewels. The networks continue to rely on a centuries-old informal banking system known as hawala, which leaves virtually no trail.

Overall, it is nearly impossible to distinguish funds meant for potential terrorism from legitimate transactions, said a senior State Department official, who, like some of the those interviewed, spoke on condition of anonymity because of prohibitions against commenting on the record on counter-terrorism.

Current and former U.S. officials acknowledge they are struggling, especially because much-needed allies are unwilling or unable to assist.

“It’s not as much that we’re not properly executing our strategy,” said Robert Grenier, a former senior CIA official. “It’s that the strategy is of limited utility in countering terrorism financing given the mechanisms that terrorists use.”



The effort begins

Thirteen days after the attacks on New York and the Pentagon, President Bush announced “a major thrust of our war on terrorism . . . a strike on the financial foundation of the global terror network.”

“We will starve the terrorists of funding, turn them against each other, rout them out of their safe hiding places and bring them to justice,” Bush said in a Rose Garden speech, flanked by his secretaries of Treasury and State.

Over the next six years, that effort stretched across the federal government, including the CIA, the FBI and the Justice and Homeland Security departments.

The administration also enlisted allies and international organizations such as the United Nations.

In the first years, scores of alleged terrorists and their financiers were identified, and their banks and associates were targeted by officials worldwide. The intelligence-gathering helped catch several important Al Qaeda figures, including Hambali, Southeast Asia chieftain.

Stuart Levey, the Treasury undersecretary for terrorism and financial intelligence, said in an interview last week that the campaign had deterred would-be financiers and helped uncover terrorism funding sources.


The intelligence-gathering has exerted serious financial stress on Al Qaeda networks, Levey said. As a result of Treasury and U.N. efforts, terrorists have been forced out of the international banking system and into riskier ventures that could ultimately trip them up, Levey said.

“I’m generally very pleased with the overall counter-terrorist financing enterprise, especially with the worldwide pressure we have put on Al Qaeda,” he said. “No doubt, there are problems we haven’t solved, but we continue to treat them with the urgency they deserve.”

Levey, who has made 75 foreign trips since 2004, is widely credited for enlisting help from many governments. But like other current and former officials at Treasury and elsewhere, Levey acknowledged that significant challenges remain, especially on the international front.

A January report by the Paris-based Financial Action Task Force said that the international effort has had only limited success in detecting terrorism financing activities. The United States and other participating countries must reexamine how terrorists raise and move money and devise techniques to combat them, said the task force, an international body that sets standards for fighting money-laundering and terrorist financing.

Last June, the Defense Department issued its first report on financial counter-terrorism, and found many shortcomings first cited by a 2002 independent task force of the Council on Foreign Relations. Both recommended establishment of a czar or agency to coordinate all U.S. agencies and report directly to the White House. Both also called for a U.S.-led international organization dedicated to investigating terrorist financing.

“To be successful, the U.S. must address the problem . . . under the guidance and leadership of one overarching organization,” said the report by the Pentagon’s School of Advanced Military Studies at Ft. Leavenworth, Kan.


In the absence of such reforms, many say, the U.S. agencies involved remain mired in infighting over who should lead the effort. “There is not a lot of talking,” said one recently departed senior Treasury official. “There is a lot of elbowing . . . and there isn’t any cooperation.”

Levey and other agency representatives dispute that characterization. But the Government Accountability Office and other watchdog organizations have reached similar conclusions, regarding domestic and international issues.


Bush’s vow ‘oversold’

Some experts said that the financial war on terrorism simply can’t deliver on what the Bush administration promised.

“It’s been way oversold,” said Grenier, who heads global security consulting for Kroll, a company that advises governments.

Grenier, who retired from the CIA in 2006 after 27 years, most recently as director of the agency’s Counterterrorism Center, said the government had exaggerated the successes of financial enforcement while downplaying obstacles: “There’s been a lot of work done on it, a lot of focus. But as a method for identifying and capturing terrorists, it has not been significant.”

The results of the campaign are difficult to quantify.

But in recent years, few terrorist financiers of significance have been arrested.

Al Qaeda’s resurgence in the tribal belt of Pakistan and elsewhere in the world has been fueled by various methods of financing and moving money.


Immediately after Sept. 11, the Treasury Department began freezing the assets of many individuals and entities with suspected links to Al Qaeda, the Taliban and affiliates, barring them from doing business in the United States.

In many cases, the United Nations issued its own financial blocking orders, which require member states to enforce them in an attempt to deny terrorists access to the international financial system.

But in recent years, U.S. and U.N. designations have slowed to a trickle, records show. Last year, only nine individuals accused of Al Qaeda-related activities were designated by Treasury. And some of those designations describe older acts that occurred as far back as the mid-1990s, mostly by low-level operatives.

Moreover, even when blocking orders are issued by U.N. officials, giving an international stamp to U.S. efforts, many countries are unable or reluctant to act.

Despite hesitance to criticize a key U.S. ally, many current and former officials said that vast contributions from Saudi Arabia and other wealthy gulf donors have continued.

Saudi Arabia has promised since 2003 to enact major financial reforms, but has yet to implement many of them, several senior U.S. officials said. The Saudis have not established an accredited financial intelligence unit to detect suspicious transactions or an oversight group to prevent donations to extremist causes, current and former officials said.


Other countries lack even the most basic financial infrastructure to participate.

One African government official told a visiting counter- terrorism delegation that his nation had not disseminated U.N.-mandated blocking orders for hundreds of suspected Al Qaeda operatives and entities because its various agencies lacked Internet connectivity. Asked why the government hadn’t distributed printed copies, he said his office was allowed only one printer cartridge a month and didn’t want to waste it.

“When you hear problems like that, you almost want to give up,” said one former U.S. counter-terrorism official.

“We’re spending billions of dollars, and a toner cartridge can affect whether a whole country implements the list.”