Al Qaeda Shifts Assets to Gold U.S. Agency Turf Battles Hamper Hunt for Untraceable Commodities
By Karen DeYoung and Douglas Farah Washington Post Staff Writers Tuesday, June 18, 2002; Page A01
The U.S.-led effort to track money belonging to terrorist groups has been hobbled by bureaucratic infighting and a growing understanding by investigators that most of al Qaeda's money is not in banks but in untraceable commodities, including gold and diamonds, according to U.S. and international officials.
The transfer of al Qaeda's assets, the scale of which is only now becoming clear, has left much of the organization's financial network untouched by the Bush administration's campaign to freeze terrorist funds around the globe.
At the same time, the efforts to shut down terrorist financing, one of the key components of President Bush's counterterrorism strategy, have been hindered by interagency turf battles in the U.S. government, sources in various agencies said.
The disputes mirror those that have plagued intelligence-sharing efforts between the CIA and the FBI. Coupled with the elusive nature of al Qaeda's financing, they reveal the formidable challenges confronting the financial leg of the war on terrorism nine months after Bush launched it amid great fanfare.
"If we were trying to build a new police force in another country, we would have to tell them, 'Look at us and don't do what we do,' " a senior U.S. official said. "We compartmentalize, we don't share intelligence among agencies, no one seems to have the authority to make that cooperation happen. We are very much a Third World country in how we are doing this."
According to dozens of investigators and financial sources interviewed in Asia, Africa and the United States, al Qaeda operatives long before Sept. 11 began shifting money out of bank accounts that could be traced and into untraceable gold and precious stones such as diamonds, tanzanite and sapphires. But the move went largely unrecognized.
"It was a paradigm shift in the financial organization that we missed," said one European financial investigator. "Everyone was trying to find bank accounts in Geneva when al Qaeda was greatly reducing their exposure in the formal financial sector. Now we are finding tentacles into all kinds of precious stones and metals."
Such commodities are small and easy to store and transport, and they hold their value over time. They can also be released in small amounts on the market without arousing attention. Monitoring the shift of millions of dollars into precious stones was made even more difficult because the U.S. government has still not developed a central database on what is known about al Qaeda's financial network.
The government's effort is marred by other problems as well. Senior officials from the Treasury and Justice departments and their component agencies, along with the CIA and the Pentagon, began weekly interagency meetings within days after Sept. 11. But due in part to rivalries between the departments, those at the working level often have had little time for each other.
Some of the worst conflicts have been between Treasury and Justice. Asset-tracking task forces within the Customs Service at Treasury and the FBI's financial review group inside Justice have nearly identical investigative missions. But they have been so resistant to cooperation that, until recently, they did not fill designated chairs at each other's tables.
Though not disputing that there have been problems with coordination and information sharing, a number of officials throughout the government argue that the situation has greatly improved since Sept. 11. They note that the Foreign Terrorist Asset Tracking Center, established under Treasury's auspices in late September, was moved in April to CIA headquarters in Langley to improve coordination. Overall, officials say, competing, often conflicting, investigations are no longer among their biggest problems.
"It's not so much a lack of cooperation, [although] I'm not saying there isn't, but the incidents I'm aware of are more of the character of, 'Whose investigation is this?' or, 'Gee, I wanted to do that and now you're doing it,' " Deputy Treasury Secretary Kenneth W. Dam said in an interview. "I don't know of anything systemically wrong. . . . I wouldn't argue that it's working like clockwork, but everybody's participating in it."
Dam, who heads a high-level National Security Council strategy group that sets policy for the financial campaign, said the biggest problem is a lack of information. "No agency knows as much as it would like to know," he said.
The biggest unknown is what happened to the hundreds of millions of dollars the Bush administration initially suggested was in the coffers of al Qaeda and organizations allied to it.
"These terrorists are intelligent, adaptable people, and they realize that putting money in bank accounts, particularly in the United States or Western Europe, is not a very good way to make sure it's available when you want it," Dam said.
Ordered by Bush in late September to "starve the terrorists of funding," the Treasury-led financial war was marked by well-publicized early success. The government mobilized vast domestic resources, and executive orders and legislation speedily approved by Congress gave the government new arrest and seizure powers. The administration enlisted international organizations, from the United Nations, the European Union and NATO to more obscure economic bodies such as the 29-nation Financial Action Task Force on Money Laundering. The initial goal was to block bank accounts linked to individuals and organizations on a U.S. list that began with 27 names and has grown to 210. By February, more than $100 million in alleged terrorist money was frozen in financial institutions in the United States and abroad.
But since that low-hanging fruit was harvested -- virtually all of it from a few countries among the 161 the administration says are cooperating with the effort -- pickings have been slim. Over the past four months, barely $10 million has been added to the total, while far more than that has been returned to its owners for lack of evidence of terrorist links. Countries such as Saudi Arabia and Sweden have complained that the United States has been arrogant in expecting them to freeze accounts while sharing little or no evidence to justify the request.
At the same time, Dam and others acknowledged that there has been less than full cooperation from some parts of the world. "Frankly, there's been a little falling off in the alacrity with which some countries" have adhered to the list, particularly in Southeast Asia, Dam said in a speech last month.
Although all 189 U.N. member nations were obligated to submit reports last winter detailing their compliance with a September Security Council resolution on terrorist assets, only 43 have done so. The majority of the 43, including countries such as Indonesia and Syria, believed by the administration to be centers of terrorist finance, have said they found no money to freeze.
A number of countries lack the technological resources to search bank accounts or the legal framework to seize money that has not been tied to a crime. Eager to help install new computer systems or write the necessary laws, Treasury has dispatched dozens of "jump teams," consisting of technicians, legal experts and senior officials, to countries since October. Senior officials, including Treasury Secretary Paul H. O'Neill and Dam, have made hundreds of calls and visits to their counterparts around the world to push the campaign.
The administration maintains that its push to publicly name terrorists and grab their money has had some utility. "Al Qaeda is feeling a financial squeeze," U.S. Customs Commissioner Robert C. Bonner said. "It is far riskier to be a terrorist fundraiser or contributor than before September 11."
Officials also say the asset-freezing campaign has largely served its purposes of promoting international cooperation -- through both threats and pats on the back -- and helping other countries to develop new banking laws and improve intelligence. "The financial front of the war on terrorism," Dam announced in a speech to the Council on Foreign Relations early this month, "has entered a new phase." Its focus, he said, will be on "means of financing terrorism outside of the mainstream financial system."
Many financial investigators are sharply revising estimates of the personal fortune of al Qaeda leader Osama bin Laden, who used a great deal of his own money to start the organization.
Bonner and other senior U.S. officials said they believe bin Laden's inheritance from his wealthy Saudi family was far less than the $300 million that was commonly reported. Some officials said the amount was likely closer to $30 million, and that most of it was spent forming al Qaeda in the late 1980s and early 1990s in Africa and in Afghanistan.
U.S. officials believe al Qaeda derives much of its current funding from two sources: what Dam called "informal methods of moving their money," through Islamic charities and private remittance systems called hawalas, and storing money in "commodities like gold or diamonds, converting the commodities to cash only as needed."
Going after the charities "is an important and sensitive issue," Dam acknowledged in a reflection of criticism from a number of Islamic countries. The administration recognizes that "hawala dealers provide an important service" in low-cost money transfers to Muslim populations, particularly in parts of Africa with no access to formal financial services, he said. "We do not think that banning hawalas altogether is the answer."
One source who has dealt with Taliban and al Qaeda financial matters said that bin Laden's chief financial officers began a serious shift in assets from banks to commodities after the United States froze $254 million in Taliban money in 1998 following the attacks on two U.S. embassies in East Africa by al Qaeda operatives.
A recent U.N. report on al Qaeda and Taliban money movements found that, as a result of global efforts to crack down on terrorist funds, al Qaeda "may be diversifying financial aspects of its logistical support by converting parts of its assets into gold, diamonds and other precious stones."
The shift to commodities underscores how little was understood about how al Qaeda's finances operated, or how much money the network had at its disposal.
Financial investigators and intelligence sources acknowledge that even after months of intense, global investigations, they have no clear idea of how much money al Qaeda needs to operate each year or how much money it is able to access.
"The number we use is $100 million a year for al Qaeda's operations and support of the Taliban in Afghanistan and groups in Chechnya and Bosnia, but that really is a number pulled out of the air," said one U.S. law enforcement official. "We just don't really know."