- The Washington Times - Tuesday, July 30, 2002

The U.S. government is facing a terrorist adversary that has a range of options for seamlessly moving its primary instrument of terror: money. From the murky and medieval to the cyber-modern, networks for sending currency have gone global, and U.S. law enforcement has largely been stumped.

On Thursday, when the Treasury Department released its annual money-laundering strategy report, which included a 13-page section on terrorist financing, it became conspicuously clear how far investigators still have to go. These pages have essentially repackaged information that had already been made public.

The report said the United States has identified 210 terrorist-related entities, and America and its allies have frozen more than $112 million in terrorist-related assets. At least 160 countries have frozen funds and more than 500 accounts have been blocked. It is unclear, though, how much those actions have actually damaged international terrorist organizations' financial networks.

The actions of the September 11 hijackers exposed some of the shortfalls in America's approaches to tracking terrorists' financial transactions. Leading up to September 11, these terrorists used three known methods for moving money: commercial U.S. banks, money transmitters and, apparently, a centuries-old network for transferring money, prevalent in South Asia and the Middle East, known as hawalla. Hawalla functions with money rarely crossing a border, as agents receive and pay out transfer orders from around the world, and settle up differences later.

Clearly, the hijackers knew the ins and outs of U.S. banks' reporting requirements, and moved at least $325,000 into about 35 U.S. bank accounts without ever causing the banks to file suspicious-activity reports with the government. The terrorists used fake Social Security numbers to open accounts.

In response to the activities of the hijackers, the U.S. Patriot Act has required banks to verify the identification of their clients. But the Treasury Department has yet to issue a suspicious-activity form for conventional money transmitters like Western Union, as mandated by Congress more than two years agoeven though hijackers moved money through these outfits.

Even more importantly, though, federal regulators need to improve their coordination for sharing information, said Charles Intriago, publisher of moneylaundering.com and formerly a federal prosecutor. Treasury's financial crimes unit apparently has yet to craft some kind of memorandum of understanding for coordinating with the FBI, he said, adding that the Bureau lacks an effective network for dealing with the financial aspect of crime.

Washington will need to better coordinate efforts to disrupt terrorist financing in conjunction with other nations and to independently evaluate allies' success. When asked what the administration is doing to prevent hawalla networks from being used for terrorist purposes, Customs Service Commissioner Robert Bonner pointed to efforts to work with the Paris-based Financial Action Task Force on Money Laundering, known as FATF. But the FATF largely depends on other nations evaluating their own performances. The U.S. still needs to come up with a way to undertake the diplomatically painful task of measuring allies' progress.

Huge challenges lie ahead for Washington in dismantling terror's financial building blocks. "I think they are starting from point zero on this stuff," said Patrick Jost, an expert for Complinet.com and formerly with the Treasury's financial crimes unit. Ultimately, it is up to U.S. law-enforcement agencies to devise more successful strategies in order to learn about the shadowy world of terror financing.


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