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Friday, 19 October, 2001, 06:46 GMT 07:46 UK
Freezing terror funds: A tricky business
El Shifa pharmaceutical plant in Sudan
Evidence linking El Shifa to Bin Laden proved false
By BBC News Online's Stefan Armbruster

The US is not just using military weapons in its "war on terrorism", but also financial ones by freezing bank accounts of alleged terrorists and threatening to impose fines for "trading with the enemy".

OFAC Powers
OFAC has the authority to impose corporate and personal fines up to $1m, prison sentences of 12 years, civil penalties of up to $250,000 as well as forfeiture of funds and property involved in a violation.
But the US Treasury agency enforcing President George W Bush's orders to block the assets of Afghanistan's Taleban rulers, Osama bin Laden and his al-Qaeda has itself a less than transparent record.

The Office of Foreign Asset Control (Ofac) claims on its website it has in recent years "imposed fines of millions of dollars in civil penalties involving payments and exports".

Hundreds of companies have been affected, many inadvertently, and have little legal recourse.

But unlike other financial regulators, such as the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC), the little-known Ofac never reveals who is fined or why.

"We wouldn't post that publicly," a US Treasury spokeswoman told BBC News Online

"I don't know if it is for privacy reasons but if the party reveals they have been fined, that's fine."

She suggested filing a freedom of information suit to gain the information.

Ofac has powers to freeze funds of individuals, organisations and countries implicated in terrorism or drug trafficking, and fining individuals and organisations trading with them, including US tourists.

But the US Treasury estimates that between one third and half of all Ofac violations occur at banks.

Key case

One individual who objected to his funds being frozen was Saudi businessman Salah Idris.

Al-Shifa Honey Press for Industry and Commerce in Sanaa, Yemen
Did the US mistake the Al Shifa honey press for the El Shifa factory?

His El Shifa pharmaceutical factory in Sudan was destroyed by 13 US cruise missiles in 1998 for, it was alleged, making chemical weapons for Osama Bin Laden.

Even though Mr Idris did not appear on any Ofac list, about $24m held in Bank of America accounts in the UK and Jersey was frozen and only released 18 months later when he sued the US Treasury.

By releasing the money, the US government effectively cleared Mr Idris of the terrorism charges.

But officials maintained they only did so maintain the integrity of intelligence sources.

The US Treasury spokeswoman could not explain how Mr Idris could have had his assets frozen by Ofac without appearing on their list.

Mr Idris, who has not been added to the list since, has not been offered an apology or compensation, and is suing the US government for $50m.

An unrelated company, the Al-Shifa Honey Press for Industry and Commerce in Yemen, has now been listed by the US government as one of the organizations suspected of links with terrorism with Osama bin Laden.

Presidential order

President Bush on 24 September issued his executive order to US institutions to block the funds of 27 individuals and organisations, and urged overseas banks to follow suit.

Last Friday, the assets of a further 39 alleged terrorists and their supporters were frozen around the world under a UN resolution which was described by Treasury Secretary Paul O'Neill as "the next step in this financial war".

A list of people affected, which Mr O'Neill says it will "continue to grow", is available on the Ofac website .

Little appeal

As Mr Idris demonstrated, it is possible to appeal by threatening to take the US Treasury to court.

But many US businesses inadvertently caught up in presidential decisions to freeze accounts have not been successful in appealing.

Messina logo
Messina has spent 10 years trying to recover its money

Messina, a small Texas-based oilfield services company, once exported drilling fluids, cement additives and exploration products to Iraq with the US government's blessing.

A deal with Iraq had just been completed, for which Messina was given the international standard letter of credit as payment, just before the invasion of Kuwait.

But once the US froze $1.2bn in Iraqi bank accounts, Messina was left holding a $500,000 credit note which it could not cash.

"We presented the letters of credit to Midland and Barclays, Iraq's advising banks in the UK, but they couldn't pay because the funds of Iraq's bank accounts in New York had been frozen," said Mario Messina who heads the company.

The company has spent more than 10 years trying to get its money.

"We claimed against Ofac but got nowhere," Mr Messina said.

"Finally in 1996, through the Freedom of Information Act, we found there were more than 400 companies out of pocket, including big ones like American Airlines and Halliburton.

"The US government is shooting US exporters in the foot and just says 'too bad'."

Tracking down how terrorist organisations fund their operations suddenly took on new importance after 11 September 2001


See also:

12 Oct 01 | Americas
01 Oct 01 | UK
12 Oct 01 | Business
04 Oct 01 | Europe
14 Oct 01 | Middle East
05 May 99 | Africa
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