Few people noticed Saudi Arabia’s three-day conference in September on disrupting terrorism financing. For a team at the U.S. Treasury Department, though, it was a long-sought victory in the fight against al-Qaeda.
While drone attacks and covert operations such as the raid that killed Osama bin Laden get headlines, terrorism relies just as much on cash as on car bombs. With that in mind, a cadre of intelligence analysts at the Treasury wage a quiet war to choke off terrorists’ money supplies.
“The financial dimension is critical,” said Daveed Gartenstein-Ross, a terrorism researcher at the Foundation for Defense of Democracies in Washington, in a telephone interview.
The Saudi session brought together regional officials involved in countering money laundering and terrorism. Conducted with the help of officials from the Treasury and other U.S. agencies, the conference provided training in financial investigative techniques.
Like the Saudi meeting, many of the efforts to obstruct terrorist financing draw little public notice, particularly because it is difficult to show that they may have helped prevent attacks. Still, less money has been flowing from wealthy Persian Gulf sympathizers to the terrorist group’s remaining leaders in Pakistan since the Saudis got serious about terrorism financing in recent years, said a senior U.S. intelligence official, who spoke on the condition of anonymity because intelligence issues are classified.
Al-Qaeda’s depleted core in Pakistan has been forced to economize, said a second U.S. intelligence official, who also spoke on the condition of anonymity for the same reasons. The anti-financing efforts have forced terrorist groups to reduce spending on training, recruiting and payments to terrorists’ surviving family members, he said. The U.S. has detected many more complaints from al-Qaeda members about money shortages, he said.
By 2009 and 2010, “we were able to say that al-Qaeda was in its weakest financial condition since 2001,” said David Cohen, the Treasury’s undersecretary for terrorism and financial intelligence.
To be sure, the effort to stem the financial flows is just part of a broader struggle. And access to money isn’t always important because terror plots can cost as little as a few thousand dollars to initiate, as demonstrated by a parcel-bomb plot in October 2010, which involved printer-toner cartridges packed with explosives in an failed attempt to bring down a Yemen-to-Chicago cargo flight.
The May 1 raid by U.S. Navy SEALs on bin Laden’s compound in Abbottabad, Pakistan, highlighted two prongs of the U.S. fight against terrorists: military force and financial intelligence. The action yielded financial records and other intelligence, Cohen said.
“If I were a donor to al-Qaeda, I’d be worried about the fact that there were a lot of documents that were picked up in Abbottabad,” he said in an interview.
Cohen, 48, who oversees the Treasury’s Office of Terrorism and Financial Intelligence, is the point man in the battle to prevent terrorist groups from raising, laundering, moving, spending or investing money. The office has evolved since its 2004 creation to become a crucial element of U.S. anti-terrorism efforts.
Since September, Cohen’s office has imposed sanctions or taken related punitive measures against Iran and Syria, two states designated by the U.S. as supporters of international terrorism, as well as against members of al-Qaeda and affiliates.
‘Gum Up the Works’
The office, known as TFI, seeks to “gum up the works” of terror groups and “isolate bad actors from the international financial system,” Cohen said.
The Treasury is the only finance or economy ministry that conducts its own intelligence analysis, he said. Its analysts, working with intelligence officials from the CIA, the National Security Agency, the State and Defense Departments and other agencies, are fighting a running battle, one in which Saudi Arabia’s changed attitude toward fighting terror financing is important.
The Saudis were half-hearted partners in the aftermath of the 9/11 attacks on New York and Washington, said the first U.S. intelligence official, who said they weren’t convinced that Saudi Arabia was an important source of al-Qaeda’s funds. That attitude changed after Saudi Arabia was the target of a bombing in 2003 that killed 35 people.
As the Saudis began to crack down on terrorism at home, they paid more attention to Islamic terror groups’ funding channels, the official said. In 2010, the highest religious authority in Saudi Arabia issued a fatwa, an Islamic order with the force of law, against financing terrorism. Last May, the kingdom for the first time publicly tried detainees suspected of raising funds for terrorists.
Those actions were “the product of many factors, and a lot of work on the issue over the course of several years,” said Stuart Levey, 48, Cohen’s predecessor and the first head of the Treasury’s terrorism office. “Countries ultimately do things because they think it’s in their own interest to do them.”
Kuwait and Qatar have been slower to cooperate. Both remain “permissive environments for extremist fundraising” and Kuwait is the only country in the Gulf region not to have criminalized terrorist financing, Cohen said at a conference in Washington to mark the 10th anniversary of the Sept. 11 attacks.
In addition, terrorists have turned to cheap, informal money-transfer methods that can be hard to penetrate -- such as couriers and Hawala networks, which provide informal channels for moving funds -- as the U.S. and its allies have become better at intercepting international phone calls, e-mails, and electronic fund transfers.
“Illicit actors are now savvy to the fact that the formal financial system is quite well-monitored, so they look for other ways, and it’s hard to keep up with that,” Levey said in an interview. “It’s a bit of a cat-and-mouse game.”
As the number of al-Qaeda’s financiers has diminished and money transfers have become more difficult, the group’s affiliates in sub-Saharan Africa, Yemen and Iraq have been forced to become self-sufficient, said the second intelligence official, and there’s less profit-sharing going on among them and the core group in Pakistan.
In sub-Saharan Africa, al-Qaeda in the Islamic Maghreb now relies heavily on ransom from kidnappings. Al-Qaeda in the Arabian Peninsula, based in Yemen, supports itself by extorting money in neighborhoods where it’s taken control, the official said. Somalia’s al-Shabaab controls a third of the country’s ports, in addition to making money from piracy and local rackets, he said.
‘Missionary from Hell’
“What concerns me the most, particularly among al-Qaeda affiliates, is resorting to crime to raise funds, and in particular kidnapping for ransom,” said Daniel Glaser, the Treasury’s assistant secretary for terrorist financing.
If a man is known by the company he keeps, Glaser is known informally at Treasury as the department’s “chief thug” for his zealous approach to talks with North Korean, Iranian and Syrian officials. He prefers “missionary from hell,” a nickname that South Korean media gave him in 2009 during talks on Iran and North Korea.
Glaser, 43, has been with the office since its inception, and he recalls when it had a half-dozen people, compared with 42 today.
“It wasn’t even clear who we reported to,” Glaser said. “We were basically given a year to prove that the office should exist at all.”
The office had its watershed moment in 2005, when it targeted a little-known company in Macau called Banco Delta Asia SARL. The bank was a front company for the North Korean regime, bolstering Pyongyang’s finances by laundering money and passing counterfeit U.S. currency, Glaser said. The U.S. designated it a primary money-laundering concern, and Macau, the former Portuguese colony, froze about $25 million in funds tied to North Korea.
Glaser and Levey traveled to countries including Vietnam and Mongolia to explain the situation.
“We never said, ‘Don’t do business with North Korea,’” Glaser said. “We said, ‘If you want to do legal business with North Korea, go ahead and do it. And by the way, the line between licit and illicit business with North Korea is so thin as to be nearly invisible.’”
By early 2006, North Korea was “almost entirely cut off from the international financial system,” he said.
Glaser spent a decade leading the U.S. delegation to the Financial Action Task Force, an inter-governmental group that pushes nations to fight terrorism and money laundering. The task force, which Cohen calls an “unsung development” in the anti-terror fight, has grown from 16 members in 1991 to about three dozen today, including a half-dozen Persian Gulf states, Russia and Mexico.
While U.S. financial sanctions, which are now imposed by TFI, have a mixed record, U.S. officials say the measures directed at al-Qaeda and Libya have been more successful than those aimed at dousing the nuclear ambitions of North Korea and Iran. Cohen said financial sanctions contributed to the demise of Libya’s Muammar Qaddafi regime, which was ousted after months of fighting by rebels who were backed by a NATO air campaign.
“It was part of the overall pressure,” he said.
The TFI office also targets some of terrorism’s allies, including money launderers, drug kingpins and people or countries involved in the proliferation of weapons of mass destruction.
“Enforcement coupled with enhanced regulation has strengthened the ability of financial institutions themselves to be the first line of defense against illicit activity,” said Amit Sharma, former senior adviser in the TFI office who is now chief of staff at Mitsubishi UFJ Financial Group Inc.’s U.S. investment banking unit.
“These efforts continue to make it harder for terrorists and other illicit actors to financially support their efforts, but they remain innovative and exploit holes where they exist in the financial system,” he said in an e-mail.
Internet fundraising remains a “huge issue” even with progress, said Matthew Levitt, a former senior Treasury Department terrorism and financial intelligence official. Online casinos and other Web-based tools can be exploited to evade international policing efforts, said Levitt, now director of the Stein Program on Counterterrorism and Intelligence at the Washington Institute for Near East Policy.
So far, though, there’s little evidence that terrorists are using the Internet to raise, launder or move money, said the second U.S. intelligence official.
Attacking financing is just one aspect of actions necessary to thwart terrorists, said Paul Pillar, a longtime senior intelligence official who now teaches at Georgetown University in Washington.
Yemen-based al-Qaeda in the Arabian Peninsula said it spent only $4,200 for the failed parcel bomb-plot in October 2010. The bomb was found during a cargo check during a stopover in London after authorities were tipped off by Saudi intelligence.
“Most terrorist operations that are big enough to get our attention are pretty cheap,” Pillar said. “And most terrorist organizations don’t need extensive infrastructures.”