Following the Terrorists' Money

Bin Laden relies on accounts too small to track

During Friday sermons in mosques in Saudi Arabia, the imams--preachers--often ask the congregation to donate money for a good Islamic cause. Why not help the Chechens, most of whom are Muslims, fight against Russia, the imams cajole. The faithful hand over their riyals on their way out, and the money is whisked away.

Many of those funds actually reach legitimate causes. But the Saudi government is now stepping up efforts to monitor such giving. That's because knowledgeable banking and intelligence sources say that in recent years a sizable chunk of the collections has been diverted to Islamic extremist groups, including those linked to Saudi-born fundamentalist Osama bin Laden. Wealthy Saudi and Persian Gulf businessmen are another source of financing for bin Laden's Al Qaeda network. Many prosperous families in the region have at least one or two members with a strong fundamentalist streak, intelligence sources say. Besides, Muslims are encouraged to donate 2.5% of their annual increase in wealth to charity.

Pass-the-hat donations, wire transfers from businessmen--this is the stuff of Osama bin Laden's financial operation. Profits from Afghanistan's opium trade may also figure, say diplomats. The terrifying ability of bin Laden to strike where he wants would seem to imply the existence of some vast, sophisticated money machine behind him. Instead, the Saudi militant and his followers use simple, direct techniques that often rely on cash and bank accounts too small to monitor easily. "It is very difficult to see into the household finances of the Middle East," says a well-placed European diplomat. Extremists "get money from drugs, collections, nongovernment organizations. [And] important people afraid of being attacked pay protection money. You can't pin it down to names and addresses."

That's why it will be hard to shut down the terrorists' money pipeline. Of course, the U.S. Treasury Dept. and the FBI will now try their hardest to map out bin Laden's funding. "Following the money trail will assist immensely in this investigation," says Jimmy Gurule, Treasury Under Secretary for Enforcement. On Sept. 14, the Bush Administration created a new Foreign Terrorist Asset Tracking Center to coordinate efforts by financial and intelligence agencies in the fight to interdict terrorists' cash flow. The Treasury Dept. has launched a review of all bank reports on suspicious account activity, as well as cash transactions of $10,000 or more. Banks worldwide are scurrying to investigate whether the suspected hijackers had accounts with them or engaged in suspicious purchases with their credit cards.

UNDETECTED. For regulators tracking bin Laden's funding, the task is hugely complex. For starters, the money originates from abroad. Take those wealthy merchants, construction magnates, or bankers who donate directly to the Islamic militant groups. Security specialists believe they wire funds to bank accounts in places like London, Hong Kong, or Dubai that are held by Islamic charities, businesses, or individuals who front for the militant Islamic groups. In 1999, U.S. intelligence agents reported that Dubai Islamic Bank in the United Arab Emirates was a conduit for bin Laden funds. The bank declined to comment. On Sept. 19, Barclays Bank froze a suspicious account, although the bank says the account was long inactive. Thousands of such accounts could exist.

Another reason terrorist funds are hard to follow is that the wire transfers are believed to be small in size. Analysts figure bin Laden's terrorist cells receive sums in chunks of less than $10,000 to avoid detection by banks and regulators in the U.S. It's easy for a gulf merchant with an offshore bank account to carry out such a transaction. And Saudi Arabia permits unlimited cross-border wire transfers. While transfers are reported to the government, monitoring is mainly for national statistical purposes, not for policing. Some $18 billion leaves the country this way each year: Terrorist funds are a small portion and could slip out undetected.

When the cash is brought into the U.S., it finances a low-budget operation. Preparations for the World Trade Center and Pentagon attacks involved supporting operatives in the U.S., flight training, and buying air tickets for the hijackers. Yoram Schweitzer, an analyst at the International Policy Institute for Counter-Terrorism in Herzliya, Israel, estimates the cost ran into the hundreds of thousands of dollars--not millions. "When you closely analyze their activities, we're not talking about a great deal of money," he says. At the recent trial of bin Laden followers accused of the 1998 bombing of the U.S. embassies in Kenya and Tanzania, a former bin Laden operative said he was paid only $500 per month.

All of this seems surprising since the 44-year-old bin Laden has a reputation for being a wealthy man himself. The Saudi native is one of 52 sons of the late Mohammed bin Laden, who was once Saudi Arabia's most prominent contractor and was closely linked to the Saudi royal family. After Mohammed died in 1966, Osama inherited a fortune estimated at $200 million. But he's now estranged from both his family and his country, and Saudi sources say he has dissipated much of his wealth. Saudi authorities froze many of his assets in 1991 after he broke with the royal family for bringing U.S. troops into Saudi Arabia to fight Iraq. Bin Laden himself may have used his funds to invest in Sudan and secure its help as a base of operations. Bin Laden's interests there are said to have included a construction business, a tannery, and an agricultural products export business. Saudi sources say those investments have been money losers.

HAMSTRUNG. If bin Laden's personal wealth is running out, can U.S. and other authorities stop the flow of money to terrorist groups? The U.S. needs to push for more effective monitoring, especially in the Persian Gulf region. But cracking down is easier said than done. While Saudi Arabia may seem like a tightly controlled society, its Hanbali system of Islamic jurisprudence puts great emphasis on the sanctity of private property. "What you do with your money is utterly up to you," says Michael Field, London-based author of several books on business in the gulf. "People can walk around with very large sums of cash in bags." Thus, when the French internal security service confronted the Saudis with evidence that the Islamic Salvation Front (FIS), a hard-line Algerian group, was funded from the gulf, the Saudi government said there was little it could do.

It would take unprecedented cooperation from governments and banking centers globally to close down bin Laden's funding completely. Without that effort, his cut-rate terrorist groups can still afford their dirty deeds.

By Stanley Reed in London, with John Rossant in Paris, Mike McNamee in Washington, and Heather Timmons in New York

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