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Tuesday, 3 September, 2002, 06:03 GMT 07:03 UK
US terror fund drive stalls
Dubai gold market
Hawala brokers are common in Dubai's gold markets

Disagreements between US agencies are hampering the fight against terrorist finance, BBC News Online has learned.

Traditional rivalries have not been overcome between the FBI, the CIA, Customs, and the Treasury, despite the creation of two new joint agencies to lead the terror fund fight.

We came from a standing start... There was no roadmap, no gameplan

Rob Nichols
US Treasury
And the drive to close down the sources of terrorist finance has slowed sharply, with many fewer suspect charities or bank accounts being shut down than in the months immediately after 11 September.

For the past year the US government has been leading an international initiative to close down the pipelines through which acts of terror are funded.

But according to a leaked draft report from a UN monitoring group - due to be released on 5 September - the efforts so far have been woefully inadequate.

"Standing start"

More than $112m (72m) in suspect bank accounts has been frozen, 160 countries have participated in the intelligence effort, and the list of people and organisations on United Nations-sanctioned blacklists now runs to more than 30 pages of closely-spaced text, listing aliases, dates of birth and last known locations.

A handful of controversial charities have been shut down - a contentious move in some cases. Somalia's al-Barakaat, a traditional and informal system of global money transfer, has been virtually destroyed.

For officials at the US Treasury, to which most of the agencies conducting the hunt for terrorist finance report, front-page headlines saying the attack against terror funds had stalled was hardly what they wanted to see less than a fortnight before the first anniversary of 11 September.

The UN report's conclusions were clear: the fight against terror finance was failing, al-Qaeda has as much money as it needs and can move it wherever it wants, while international co-operation is faltering.

Rob Nichols, Deputy Assistant Secretary at the US Treasury, is not surprised by the intense interest the news attracted around the world.

But, he told BBC News Online, the UN has got the wrong end of the stick.

No-one, he says, is pretending that they have "spiked the football" - the celebratory slamming of an American football into the ground once the points have been scored.

"We came from a standing start," he says. "There was no roadmap, no gameplan."

And if the report is simply trying to suggest that there's a long road ahead, then he is not going to disagree.

Under the radar

For a start, before 11 September 2001 tracking terrorist funding was not a huge priority.

"When we found someone plotting some terrorist act, we'd arrest him and then, only on a secondary level, we'd look through his finances to see where that leads," Mr Nichols said.

"After 11 September we flipped that, did a complete about face."

Concealed within a large box of Ritz crackers, two boxes of baby wipes and a box of Quaker Oats was approximately $659,000

Arrest warrant for a man caught smuggling cash through New York's JFK Airport
The more esoteric tools used by some groups to channel money where they needed it, including informal money transfer systems and the alleged use of Islamic charities as cover, "would not have been things that jumped to the forefront of people's minds pre-11 September", he admits.

Follow the money!

It is worth noting that investigators working on money laundering - of the criminal rather than terrorist kind - have always focused on the money trail.

"Follow the money" is a mantra in that business, and both serving and former members of US agencies including the FBI and the Internal Revenue Service - whose responsibilities include charity oversight - have confirmed that their expertise was never truly exploited in counter-terrorism.

As for informal money transfer systems, often dubbed hawala after a Hindi word for "trust", Afghan drug runners have used them for years - as narcotics investigators are well aware.

And if the Afghan drugs trade knew about it, it seems obvious - in retrospect - that al-Qaeda did too.

Not only that, but the traditional rivalry between counter-terrorist agencies was often, although not always, a sticking point.

Legal structures got in the way too - a point addressed in the USA Patriot Act of October 2001, which laid down a string of strict new rules for financial institutions and for the federal government itself.

The information held by the myriad different agencies, Mr Nichols says, was "stovepiped"- unavailable to other agencies.

Everyone had a different piece of the puzzle, so two inter-agency teams - Operation Green Quest, led by US Customs and consisting of law enforcement agents, and the Foreign Terrorist Asset Tracking Centre for financial intelligence - were formed to try to bring things together.

Cutting the cash flow

Twelve months on, though, Mr Nichols insists that solid progress is being made whatever the UN report might say - which, he points out, is still only a leaked unofficial draft.

For a start, the UN only looked at the blocking orders, reckoning that because 90% came before the end of 2001 the process had run into the sand.

"That's simply backwards," Mr Nichols says. "We welcome the time when there are less blockings and freezings because it indicates that our other fronts are being successful."

And it's the other fronts which are key: Cutting the pipelines through which money flows, making those moving money for "heinous ends" do so through channels which are easier to track than a simple electronic money transfer.

"If we can drive terrorists out of recorded banking systems... we can force them into using bulk cash transfers - literally taking trunkfuls of cash around the globe.

Dogs can smell money

That, incidentally, is not as easy as it sounds.

Marcy Forman, the US Customs agent in charge of Operation Green Quest, told BBC News Online that sniffer dogs can actually smell the ink in dollar bills these days.

Not that it always takes sniffer dogs. One man, Ms Forman said, was arrested at a simple customs check at New York's John F Kennedy Airport.

Mogadishu, capital of Somalia
Mogadishu: No banks, and informal money transfer systems are being shut down
In his luggage, as the arrest warrant puts it, "investigators found concealed within a large box of Ritz crackers, two boxes of baby wipes and a box of Quaker Oats, approximately $659,000 in US currency."

Other alternatives becoming popular involve the transfer of gems and gold - a trade in highly portable items which is traditionally secretive in any case.

Expatriates suffer

And increasingly the off-the-books channels are now being watched too.

Often it's a case of a few insiders pushing money out through the back door.

In the case of one charity, al-Hamarain, which was closed in collaboration with Saudi Arabia, "we found that the main branches had no idea what some of their satellites were up to".

It is unfortunate that the crackdown is causing some collateral damage.

Informal money transfer systems are hugely useful to immigrants and expatriates in getting money home to parts of the world without modern electronic banking. Mr Nichols acknowledges that their closure is causing much grief.

Regrettable, he agrees, but necessary.

"It may require folks to find alternatives, but we simply cannot allow a pipeline to al-Qaeda to exist," he says.

Rush to support US crackdown

In the meantime, following a well-attended conference in Bahrain earlier this year, international efforts are under way to come up with ways of regulating hawala and charities to cut down on the risk of back-channel operations.

And it's further international cooperation that will keep the across-the-board push working.

"In the first days after 11 September our phone was ringing off the hook with offers of assistance," Mr Nichols says.

According to the Treasury, that hasn't slackened - despite the much-publicised arguments between the US and most of the rest of the world over Iraq, the environment, the International Criminal Court and other issues.

Mr Nichols points to the increasing trend for countries other than the US to issue their own terror money blacklists, either alone or with US support.

Italy, for one, issued a joint notification with the US less than a week ago, with 25 people and organisations to add to the global asset freeze.

"Ensuring the international co-operation remains strong is perhaps the most important thing we have to do," Mr Nichols says.

The UN report due out on 5 September seems likely to contradict that statement, claiming that European countries in particular face legal problems in blocking assets as requested.

The secrecy inherent in financial intelligence work certainly makes judging these conflicting claims a difficult task.

But over the coming months cases will begin to come to court.

The evidence presented there will demonstrate whether Rob Nichols' optimism is justified.


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