War on financing of terrorism stalls

The Baltimore Sun

WASHINGTON -- The U.S.-led effort to choke off the financing used by al-Qaida and other terrorist groups is foundering because an array of setbacks at home and abroad has undermined the Bush administration's highly touted counterterrorism weapon, according to current and former officials and independent experts.

In some cases, extremist groups have managed to blunt financial anti-terror tools by finding new ways to raise, transfer and spend their money. In other cases, the administration's campaign has stumbled because of legal difficulties and interagency infighting, officials and experts say.

But the most serious problems have come from fractures and mistrust within the increasingly fragile coalition of nations that the United States admits it needs to target financiers of terrorism and to stanch the flow of funding from wealthy donors to extremist causes around the world.

"The international cooperation and focus is dropping, the farther we get from 9/11," said Michael Jacobson, a senior adviser in the Treasury Department's Office of Terrorism and Financial Intelligence until March 2007. "Some countries lack political will. Others just don't have the basic capacity to govern their countries, much less create a viable financial intelligence unit."

The administration's effort to build a global coalition to interrupt extremists' funding has suffered political, legal, cultural and technical setbacks so serious that it is falling apart, said many of the current and former officials and experts.

"Al-Qaida, the Taliban and other terrorist groups continue to have access to the funds they need for active and expanded indoctrination, recruitment, maintenance, armament and operations," said Victor Comras, a former United Nations enforcement official.

Internationally, the urgency of the financial terror war has waned in the years since Sept. 11, 2001. Changing political climates and negative perceptions of the United States have prompted key U.S. allies to reduce their cooperation, current and former officials conceded.

Many countries in the Middle East and elsewhere have resisted U.S. pressure to investigate and publicly identify financiers of terrorism.

Countries such as Saudi Arabia and Pakistan have not taken the necessary steps to crack down on terrorist financing or money flowing across their borders. Other countries, including Afghanistan and some African nations, lack the technological sophistication to provide meaningful cooperation.

At that, the most deadly terrorist attacks since Sept. 11 have cost so little - often less than $10,000 - that they are virtually impossible to detect or stop by following the money trail.

Terrorist networks need larger sums to travel, train their operatives, bribe government officials, evade capture and expand their support bases. Increasingly, however, militant groups are moving funds through means that fly below the radar of U.S.-led enforcement and intelligence-gathering efforts, officials and experts said.

Cash couriers, for instance, use donkeys and camels in places like Pakistan and Afghanistan and private jets in oil-rich Gulf kingdoms to move cash, gold and jewels. They continue to rely on centuries-old informal banking systems known as hawala, which leave virtually no trail.

Overall, it is nearly impossible to distinguish funds meant for potential terrorism from legitimate transactions, said a senior State Department official, who like some of the those interviewed, spoke on condition of anonymity due to prohibitions against commenting on the record or when discussing internal debates.

Current and former U.S. officials acknowledge they are struggling to get at funding streams, especially without much-needed help from allies who are either unwilling or unable to provide assistance.

"It's not as much that we're not properly executing our strategy," said Robert Grenier, a former senior CIA official. "It's that the strategy is of limited utility in countering terrorism financing given the mechanisms that terrorists use."

The campaign targeting terrorism's financiers began 12 days after the Sept. 11, 2001, attacks, when President Bush announced "a major thrust of our war on terrorism ... a strike on the financial foundation of the global terror network."

"We will starve the terrorists of funding, turn them against each other, rout them out of their safe hiding places and bring them to justice," Bush said in a Rose Garden speech, flanked by his secretaries of treasury and state.

Since Sept. 11, the campaign targeting terrorism's financiers stretched across the federal government, encompassing the CIA, FBI, the Justice and Homeland Security departments and others.

At the same time, the administration moved to enlist the cooperation of allies and international organizations such as the United Nations.

Stuart A. Levey, the Treasury official overseeing the finance effort, said in an interview last week that the campaign has deterred would-be financiers and helped uncover the funding sources for terror networks.

The intelligence-gathering efforts have identified al-Qaida networks and exerted serious financial stress on them, Levey said. As a result of Treasury and U.N. efforts, terrorists have been forced out of the international banking system and into more risky ventures that could ultimately trip them up, Levey said.

"I'm generally very pleased with the overall counter-terrorist financing enterprise, especially with the worldwide pressure we have put on al-Qaida," Levey said. "No doubt, there are problems we haven't solved, but we continue to treat them with the urgency they deserve."

As the Treasury undersecretary for terrorism and financial intelligence, Levey is widely credited for enlisting help from many governments and has made 75 foreign trips since 2004 in the effort. But like and other current and former officials at Treasury and elsewhere, Levey acknowledged that significant challenges remain, especially on the international front.

In June, the Defense Department issued its first report on financial counterterrorism, which found many shortcomings first cited by a 2002 independent task force of the Council on Foreign Relations. Both recommended establishment of a special "czar" or agency to coordinate all U.S. agencies and report directly to the White House. Both also called for a U.S.-led international organization dedicated to investigating terrorist financing.

In the absence of such reforms, the U.S. agencies involved remain mired in infighting over who should lead the counterterrorism finance effort.

"There is not a lot of talking," said one recently departed senior Treasury official. "There is a lot of elbowing ... and there isn't any cooperation."

Levey and other agency representatives dispute that characterization. But the Government Accountability Office and other watchdog organizations have reached similar conclusions, regarding both domestic and international issues.

Some experts said that the financial war on terrorism simply can't deliver on what the Bush administration promised.

"It's been way oversold," said Grenier, the former CIA official, who now heads global security consulting for Kroll, a firm that advises the government.

Grenier, who retired in 2006 after 27 years at the CIA, most recently as director of the agency's Counterterrorism Center, said the government has exaggerated the successes of financial enforcement efforts while downplaying obstacles.

Successes and failures in the campaign to disrupt terrorist financing have always been difficult to measure. But in recent years, few terrorist financiers of any significance have been arrested. Al-Qaida's resurgence in the tribal belt of Pakistan, and elsewhere in the world, has been fueled by various methods of financing and moving money.

In the immediate aftermath of Sept. 11, the Treasury Department began freezing the assets of many individuals and entities with suspected links to al-Qaida, the Taliban and affiliates.

In many cases, the United Nations issued its own financial "blocking orders," which require member states to enforce them as part of an attempt to deny terrorists access to the international financial system.

But more recently, U.S. and U.N. designations have slowed to a trickle, records show. Last year, only nine individuals accused of al-Qaida-related activities were designated by Treasury. And some of those designations, like others in recent years, describe acts that occurred as far back as the mid-1990s.

Moreover, even when blocking orders are issued by U.N. officials, giving an international stamp to U.S. efforts, many countries are unable or reluctant to act.

Despite hesitance to criticize a key U.S. ally, many current and former officials said vast donations from Saudi Arabia and other wealthy Gulf donors have continued. Saudi Arabia has promised since 2003 to enact major financial reforms but has yet to implement many of them, several senior U.S. officials said.

The Saudis have yet to establish an accredited financial intelligence unit to detect suspicious transactions or an oversight group to detect donations believed to be flowing to extremist causes worldwide.

Other countries lack even the most basic financial infrastructure needed.

One African government told a visiting delegation of counterterrorism officials that it did not disseminate a U.N. list of blocking orders for hundreds of al-Qaida operatives and entities because it did not have Internet connectivity between its various agencies.

Asked why the government hadn't distributed printed copies of the lengthy U.N. list, an official said his office was allowed only one printer cartridge a month, and didn't want to waste it.

Josh Meyer writes for the Los Angeles Times.

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