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Last Updated: Wednesday, 20 July 2005, 20:52 GMT 21:52 UK
Warning signs for the funding of terror
By Jeremy Scott-Joynt
BBC News business reporter

A youth centre in Leeds being searched by police
The search goes on for forensic evidence to map the bombers' network

Investigating the money trail of attacks such as the London bombings or 9/11 can be a frustratingly nebulous business.

Investigators are not under the illusion that financial support for such attacks comes in neat packages, or from pre-determined directions.

The small amounts of money involved, and the rapid learning curve of those behind the assaults, mean that off-the-shelf templates for spotting suspicious patterns simply do not exist.

But experts and investigators do, however, have firm ideas about where to start.

CHARITIES

The misuse of charities - both international and domestic - has been on the security radar ever since 9/11.

Some charities in Saudi Arabia have long been accused of funding extremism and even directly underwriting attacks. The Saudis now say they are controlling donations sent overseas and collections in mosques, but not everyone is convinced.

We know that to a significant extent, cells in Europe have tended over the past three years to become self-financing
Michael Chandler

"We've never really dealt with the problem of how much money comes out of Saudi charities," says Michael Chandler, till recently responsible for tracking terrorist finance for the United Nations.

And domestically there are concerns too - as evidenced by the fact that a Leeds charity is under the spotlight in the London bombings investigation.

The Terrorist Finance Team at the National Criminal Intelligence Service (NCIS) has for more than a year been trying to map the risks in the UK that charities may be abused - whether unwittingly, through penetration or redirection of money sent overseas, or with the knowledge of their staff.

Similarly, the Charity Commission has a five-person team appointed last year, which is responsible for trying to harden up its regulation so as to avoid misuse.

And Islamic charities are keen to make sure that they themselves can ensure the integrity of their operations - not least to prevent their donors from being discouraged or unfairly suspected.

Britain's biggest Islamic charity, Islamic Relief, is working to design more transparent systems to track funding both for itself and its peers, and is looking for United Nations' and government support for the project.

RICH BACKERS

With bitter irony, many investigators refer to the "philanthropist problem": the existence of well-off individuals who act either as anonymous donors or - occasionally - as active participants in supporting attacks.

Diamonds
The US has denied that the gem trade is being abused

In some cases, money can be donated directly to a central organisation or network, to be distributed to members of cells to pay for living expenses, training, travel or equipment.

The more recent alternative, experts say, is for donors to fund one or two individuals, giving them prepaid credit cards loaded up with money.

Such cards are easily available from a number of offshore and other jurisdictions, and leave little paper trails connecting the recipient either with the donor - or with the network which introduced them in the first place.

CRIMINALITY

"We know that to a significant extent, cells in Europe have tended over the past three years to become self-financing," Mr Chandler says.

He points to the 2004 Madrid bombing, where the attackers used credit card fraud and marijuana smuggling to fund their activities. A recent case in Germany involved insurance fraud.

One of the London bombers, Mohammad Sadique Khan, is believed to have been involved in low-level credit card fraud.

And Northern Ireland has a long history of paramilitaries funding their activities through crimes ranging from cross-border smuggling of tobacco or fuel, to robberies such as the Northern Bank raid in December 2004 - which the police say netted the IRA almost 30m.

THE BANKING SYSTEM

Over the past four years, investigators say, one key change in tactics has been to avoid as far as possible the global financial system.

Transactions leave too much of a paper trail, the theory goes. After all, most of the 9/11 money entered the US via wire transfers into US banks from institutions in the United Arab Emirates and Germany.

But at some point money has to hit the banking system - although it may do so through proxies. There may be multiple accounts opened simultaneously.

There may be payments to companies whose products can be used to make bombs, or to army surplus stores.

A mosque
Islamic organisations are building their own defences against abuse

And for local-born attackers, there may be important clues in their bank accounts, which existing anti-fraud systems might pick up.

Do transactions suddenly change in nature or number? Are accounts closed or emptied - a possible sign that an attack is imminent? Is there, in other words, a significant change in long-established patterns of banking behaviour?

CASH AND HIGH-VALUE ITEMS

The risks of mainstream banking mean cash is once again king. Investigators are on the lookout for large amounts of cash crossing borders.

But cash is bulky, and there are far better ways of transporting value from one country to another.

For years, non-governmental agencies such as Global Witness have argued that people linked to al-Qaeda were using gems and gold to move money around.

US authorities dismissed the idea out of hand. Then earlier this year the Financial Crimes Enforcement Network (FinCEN), the US's national financial intelligence unit, tacitly acknowledged the risk, by demanding that gem dealers start reporting suspicious transactions.

But experts fear the jewellery world is still wide open to abuse. Despite systems for marking and tracing diamonds like the Kimberly Process for diamonds, gems from conflict zones such as the Democratic Republic of Congo and Sierra Leone are easy to smuggle and easy to sell.

HAWALA

Mainstream banking is not the only way to move money across borders electronically. Informal money transfer systems flourish across the world, with brokers relying on personal trust and long-held relationships to collect cash in one country and distribute it in another, with no money ever crossing a border.

The two ends of the transaction will periodically tally up their incomings and outgoings, and settle up the difference.

Systems such as this - known by many names, but most frequently referred to by the South Asian term "hawala" - are in themselves innocuous and of long standing. They are cheap, reliable, quick and thus very popular with diaspora communities desperate to send much-needed money home.

But they are also unregulated, leave no paper trail to speak of and - many investigators believe - are therefore ripe for abuse.

SUSPICIOUS ACTIVITY REPORTS (SARs)

In theory, SARs can be the backbone of any large-scale financial investigation, terrorist or otherwise.

ATM
ATM use can help map a network

In the UK, every financial institution, lawyer, accountant, casino, and any business engaged in high-value transactions from jewels to property is obliged to file an SAR for any transaction which - in any way - "smells funny".

The penalty for not doing so could be a jail sentence.

The reality, however, is a stack of mostly paper reports - more than 200,000 this year, in all likelihood - which threaten to overwhelm NCIS, whose job it is to receive them and then distil and disseminate from them useful intelligence.

Businesses say the administrative burden is too heavy, and that the law forces them into "defensive filing" rather than using discretion.

But law enforcement agencies say SARs can be vital - although they acknowledge that the weight of paper can get unmanageable.

This is the third feature in a series of three on the money trail which could lead to the London bombers' supporters.


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