Following the Money

Understanding how terrorists finance their operations is key to predicting and thwarting attacks.

Three days before he boarded American Airlines Flight 11 at Boston's Logan International Airport on Sept. 11, 2001, Mohamed Atta drove to two grocery stores in Laurel, Md., from which he wired $2,860 and $5,000 to an account in the United Arab Emirates. The conspirator, who would hijack the first of four aircraft on that day's suicide mission, was a stickler for detail. Recently declassified documents captured in Afghanistan after the U.S. invasion in 2001 show that al Qaeda members were under pressure to not waste the organization's money. One document written by Mohammed Atef, a senior leader close to Osama bin Laden, angrily chastises an operative for purchasing an air conditioner: "Furniture used by brothers in al Qaeda is not considered private property . . . I learned that you did not submit the voucher to the accountant."

Marty Ficke, former special agent in charge at the New York field division for Homeland Security's Immigration and Customs Enforcement bureau, says, "My experience is you learn a lot about how an organization works by how they deal with money." Ficke, who ran the El Dorado Task Force, the government's largest multiagency money laundering investigation team, before retiring in January 2007, says the documents show a disciplined organization obsessed with paperwork and the flow of money.

The first executive order President Bush issued following the attacks directed the Treasury Department to designate and freeze the assets of al Qaeda and the Taliban. Since then, tracking terrorist financing has been a central component of the administration's efforts to combat terrorism, involving law enforcement and intelligence agencies, international partners and the private sector.

Critics of this effort, including some in the banking sector who complain privately about the resources required to meet more stringent reporting requirements, question its utility, noting that terrorist organizations spend relatively little to mount their attacks. The Madrid and London transit bombings in 2004 and 2005, respectively, each cost considerably less than $20,000. Even the Sept. 11 attacks, by far the most expensive and consequential in terms of human and economic losses, cost about $500,000, with most of the individual financial trans-actions supporting them falling below the $10,000 threshold that triggers a financial report to Treasury.

Such criticism misses the broader context in which terrorism thrives, says Patrick O'Brien, Treasury's assistant secretary for terrorist financing. He told a group of scholars at The Washington Institute for Near East Policy in February, "These arguments ignore the much larger and sustained expenses required to finance the terrorist life cycle, to include propaganda, radicalization, recruitment and popular support gained through the delivery of welfare and social services, and the development of organized media and political campaigns among vulnerable populations."

"They ignore the training, travel and operational support that terrorists require to be successful. They ignore the costs of security and protecting safe havens from which terrorists can plan and organize their operations. And perhaps most importantly, they ignore the massive devastation that terrorists could inflict if they were to have the financial and logistical means to acquire weapons of mass destruction," O'Brien says.

Al Qaeda, Hezbollah and other terrorist organizations have been especially adept at manipulating broadcast media to promote violence, and they have invested millions of dollars in propaganda operations. The Financial Action Task Force, an international organization that works to combat terrorist financing and money laundering, reported in February: "Although individual terrorist attacks can yield great damage at low financial cost, a significant infrastructure (even if loosely organized) is required to sustain international terrorist networks and promote their goals over time."

The task force cited a number of examples. In one case, an al Qaeda affiliate funded a television station in an unnamed country for about a million pounds per year (about $2 million) to broadcast sympathetic programming into another country. The group gave cash to a number of individuals who then made "donations" to the television station. The station closed after its license was revoked, but it subsequently reopened under a new name in yet another country.

In another case, Al-Manar, a satellite television station owned and operated by Hezbollah in Beirut, Lebanon, broadcast programming throughout Europe, the Middle East and elsewhere, generally inciting violence and terror and openly recruiting suicide bombers and financial donors. After the European Parliament determined the broadcasts violated Article 22 of the Television Without Frontiers Directive (now the Audiovisual Media Services Directive), which prohibits the "incitement to hatred on grounds of race, sex, religion or nationality," the station was banned by a number of satellite pro-viders. The station is still on the air, however, in parts of Europe and the Middle East.

'Money as Oxygen'

Prior to the Sept. 11, 2001, terrorist attacks, bin Laden funded al Qaeda largely through private donations and charities. In some cases the charities were legitimate aid organizations whose proceeds al Qaeda skimmed for its own objectives. Other charities were established expressly to raise funds for the group. Some donors were dupes; others were complicit in the subterfuge.

The National Commission on Terrorist Attacks Upon the United States found no persuasive evidence that al Qaeda relied on the drug trade as a source of revenue, had any substantial involvement with the diamond trade or received sponsorship from a foreign government. Instead, al Qaeda tended to rely on an informal system of money movers and bulk cash couriers. It supported the Taliban in Afghanistan at a cost of about $20 million a year. In exchange, the Taliban provided al Qaeda with a safe haven in which to operate.

After Sept. 11, there was tremendous international support to stop the flow of money to terrorists. "The idea was to choke off [support]," says Celina Realuyo, then a private banker at Goldman Sachs. "Think of money as oxygen." Treasury's designation of individuals and financial institutions known or believed to have provided financial support to terrorism was a serious deterrent, she says.

For Realuyo, a former Foreign Service officer born and raised in Manhattan, the Sept. 11 attacks had personal resonance. "My brother was in World Trade Center Tower 8. I was on the trading floor at Goldman Sachs in London," she says. The London traders watched in horror when television monitors showed the second hijacked plane crashing into the second World Trade Center tower. A squawk box piped in audio from the New York offices, creating an indelible memory for those who were there: "We could hear the traders trapped in the top of the towers. They couldn't turn [the squawk box] off. It turned off when the towers collapsed," she says.

When a former colleague at the State Department called Realuyo and asked her to return to government to direct State's counterterrorism finance programs, she says, "It was almost like a call to duty." As one of her co-workers at Goldman Sachs, a Navy Reserve SEAL, deployed to Afghanistan to battle al Qaeda, Realuyo enlisted in the financial war against terrorism.

"This was something I could contribute, knowing how international finance markets work and how you move money," she says. A previous Foreign Service assignment in Panama in the 1990s had taught her a lot about money laundering and illicit finance as well. Almost immediately Treasury and State, working with international counterparts, instituted a host of actions aimed at tightening the global banking system. "It was known at the time that terrorists and transnational criminals were using and abusing banking systems around the world to move money, store money and transfer it from point to point," says Realuyo, who now teaches at the National Defense University in Washington.

Banks spend enormous resources to validate clients and their transactions, and that's generated backlash from the private sector, she says. "You have to remind people that this has had broader positive effects," she says. "It's much harder for drug traffickers, organized criminals or corrupt government officials to move money as well. At some point this money has to touch the traditional banking system, unless you have a straight cash setup." But as the formal banking system has evolved to avoid exploitation, terrorist groups and their tactics have as well.

Al Qaeda is less of an organization now and more of a movement, Realuyo says. "Because of the fact that we've publicly advertised how many strides we've made in terms of clamping down on the traditional banking system, terror groups are finding other ways to move money. It's a huge challenge." Terrorists are relying more on cash couriers to smuggle money, both dollars and euros. That's particularly true with funds moving into Iraq now, she says. Illicit and subverted charities continue to be a problem as well, because it's ex-tremely difficult to prove that donors knowingly are supporting terrorism. Stuart Levey, undersecretary of Treasury for terrorism and financial intelligence, in April told the Senate Finance Committee that prepaid debit cards, called stored value cards by financial institutions, present a potentially serious vulnerability to money laundering. "It's a way the bad guys can move value without having to move cash or otherwise get access to the banking system," he said.

Perhaps most challenging for regulators and law enforcement is the use of what are called alternative remittance systems. These are trust-based financial networks, often operated by families for generations, who can quickly move funds around the globe. While formal remitters such as Western Union rely on wire transfers and charge a percentage of the funds transferred, these informal networks charge much smaller fees and operate more quickly. Hawala systems, as they are known in the Middle East, are commonly used by immigrants, especially those sending money to family in remote regions far from banks. In the United States, hawalas typically are operated as a side business by small business owners who run cash-intensive enterprises, such as convenience stores.

The way the hawala system works is an individual in one country initiates a transaction by giving the amount of money to be transmitted to a local hawaladar. The hawaladar gives the individual an authentication code, which that person gives to the individual who is to receive the money in another country. The hawaladar then contacts a hawaladar in the receiving country and instructs him to deliver the amount of money to the receiving individual, who must first present the authentication code. The hawaladars settle the debt between them through a reverse hawala, through the import of goods, or the transfer of funds or goods through a third party in another country- whatever is most convenient for the merchants. Unless a credit card or bank transfer is used, such transactions are less likely to leave any record. The hawala system has operated in one form or another for centuries. Until Sept. 11, few understood how it was used by the immigrant community in the United States. To be clear, the majority of transactions through hawalas are believed to be legitimate-the problem is so little is known about them. The Treasury Department now requires these informal remittance systems to be registered, but regulators have no clear idea of how compliant operators are, law enforcement officials say.

"If you had asked anybody at Task Force El Dorado about hawalas before Sept. 11, a couple of people might have heard of them," says Ficke. "They're very difficult to infiltrate. But I can tell you this: Hawalas will continue to operate long after you and I have left this world."

Crime and Terror

Michael J. Garcia, former assistant secretary of Homeland Security for Immigration and Customs Enforcement and now the U.S. attorney for the Southern District of New York, unsealed an indictment in May that should give pause to anyone worried about the global reach of terrorist organizations. The 20-page statement of charges against Viktor Bout of the former Soviet Union, a former Russian army officer turned international arms dealer, reads more like the outline for a thriller than a legal document. Bout, who goes by at least seven aliases, agreed last winter to sell surface-to-air missiles, armor-piercing rocket-launchers, assault rifles, millions of rounds of ammunition, land mines, plastic explosives, night-vision equipment, armed aircraft and unmanned aerial vehicles, along with spare parts and training, to the Fuerzas Armadas Revolucionarias de Colombia, more commonly known as the FARC. For more than four decades, the FARC has been working to overthrow the democratic government of Colombia. Formally designated a terrorist organization by the United States and the European Union, the group has waged a campaign of terror against Colombian citizens marked by hundreds of bombings, massacres and kidnappings, all while building the largest cocaine supply operation in the world along with a well-organized militia of about 15,000 troops.

None of this mattered to Bout, who allegedly spent much of the 1990s using his Liberian-based weapons brokerage to arm most sides of conflicts in sub-Saharan Africa, as well as the war in Afghanistan (where he supplied both the Taliban and the Northern Alliance). At a meeting in Bangkok on March 6 with his FARC liaisons, who turned out to be confidential sources for the Drug Enforcement Administration, Bout said he understood the weapons were to be used against American officials combating the FARC's drug trade. According to the indictment, he said the organization's fight against the United States was also his fight.

Bout was arrested by Thai authorities later that day, based on conspiracy charges filed by Garcia in New York, and he remained in custody in Thailand at press time. Russia reportedly is trying to prevent his extradition to the United States to face what are four separate terrorism offenses: conspiracy to kill U.S. nationals; conspiracy to kill U.S. officers or employees; conspiracy to acquire and use an anti-aircraft missile; and conspiracy to provide material support or resources to a designated foreign terrorist organization.

Douglas Farah, an expert on terrorist financing and author of Blood From Stones: The Secret Financial Network of Terror (Broadway Books, 2004), says the Bout case is indicative of "a growing nexus of contacts and collaboration between terrorist networks and transnational criminal organizations around the world."

Farah, who was West Africa bureau chief for The Washington Post in 2000, has written and lectured extensively about the pipelines terrorists and criminal syndicates use to funnel money and goods around the world in a kind of shadow economy. "Recent documented cases stretch from the diamond trade in West Africa involving Hezbollah and al Qaeda to criminal groups in the tri- border area [between Argentina, Brazil and Paraguay] in Latin America to the groups that grow and refine poppy in Afghanistan under the guidance of the Taliban, to the protection of coca crops and cocaine trafficking activities on the FARC in Colombia," he wrote in a January paper for the Nine Eleven/Finding Answers Foundation, where he is a senior investigator.

Earlier this year, senior officials from nine federal law enforcement agencies met to work out the details of a new strategy to combat international organized crime. The group, created during the Nixon administration and known as the Organized Crime Council, hadn't met for 15 years. Most Americans think of organized crime as La Cosa Nostra, a part of America's past, said Attorney General Michael Mukasey at an April forum sponsored by the Center for Strategic and International Studies, where he announced the strategy. The council was re-established because organized crime has taken on a new and more dangerous posture, he said.

"International organized crime poses a greater challenge to law enforcement than did the traditional Mafia in many respects," Mukasey said. "The degree of sophistication is also markedly different, markedly higher. Some of the most significant international organized criminals are also infiltrating our own strategic industries and those of our allies, are providing logistical support to terrorist organizations and foreign intelligence agencies, and are capable of creating havoc in our economic infrastructure."

The problem demands a coordinated response from agencies across government. "It involves our law enforcement and non-law enforcement colleagues at the Departments of Homeland Security, State, Treasury, Labor and the U.S. Postal Service, as well as the intelligence community," Mukasey said. But developing workable relationships between those charged with gathering intelligence and those with enforcing laws and regulations will not be easy. "That's a very tough balance," says Ficke. "You're watching money going through various accounts knowing it's going to be used to support some event. Every day you're watching it you're learning something about how they operate. At the same time, you're under enormous pressure to make sure that event they're planning never happens."

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec