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Following the Money: Tracking Down Al Qaeda's Fund Raisers in Europe By Mark Chediak
A look at the challenges facing European and American officials as they struggle to crack down on terrorist financing.

Within two weeks of the 9/11 attacks, President Bush, in an executive order, linked a company owned by German national Mamoun Darkazanli to Al Qaeda. Based on those suspicions, the Syrian-born businessman's assets were frozen and he was placed under surveillance by German authorities. However, the Germans said they did not have sufficient evidence to charge him with a crime.

All of that changed in 2004 when a Spanish judge indicted Darkazanli in September for aiding Al Qaeda in Spain, the United Kingdom and Germany. Within a month, under new rules issued by the European Union, German authorities arrested Darkazanli and began the process of extraditing him to Spain to stand trial. Darkazanli has repeatedly denied the allegations and is fighting his extradition in the German courts.

The case of Mamoun Darkazanli highlights many of the challenges now facing European and American officials as they struggle to coordinate their efforts to crack down on terrorism financing. Nations in the European Union still do not have uniform laws and regulations for detecting money laundering and other terrorism-financing schemes.

"The only way forward is to produce a global approach [to terrorism financing], where all countries agree to follow the same legislation," says Loretta Napoleoni, a terrorism financing expert and author of Terror Inc. Napoleoni says the need for coordination is especially critical in Europe, where active fundraising in mosques and less stringent banking laws have helped make the continent the center of terrorism financing in the West.

+ How Terrorism Is Funded

Financing a single terrorist strike does not necessarily take a large sum of money. At the high end, according to The 9/11 Commission Report, the 9/11 planners spent an estimated $400,000 to $500,000 to carry out their attack. The United Nations estimates the March 11, 2004 bombings in Madrid cost only $10,000.

However, a terrorist organization such as Al Qaeda needs to spend a significant amount of cash to sustain its operations. The CIA estimates that it cost Al Qaeda an estimated $30 million a year to finance itself before 9/11.

"Maintaining a terrorist cell can be very expensive," agrees Jeff Breinholt, deputy chief of the Department of Justice counterterrorism section, who oversees the agency's nationwide terrorist financing criminal enforcement program. The primary cost, he says, lies in the preparation and training before an attack.

Al Qaeda is believed to fund itself largely through donations to Islamic charities and organizations, many of which are based in Europe. Money to be used for terrorist operations is transferred and sheltered using a variety of methods including money laundering, front or shell companies, offshore banking and an informal Middle Eastern cash exchange and banking system known as hawala, say investigators in the U.S. and Europe.

"Money now moves in cash," says Napoleoni. "It is moved by couriers or shipments and that is the most difficult aspect of funding because you can't track it."

Investigators contend that Mamoun Darkazanli's import-export business served as a front for Al Qaeda. Steven Emerson, author and founder of The Investigative Project, a Middle East terrorism research group in Washington, D.C. testified before the U.S. House Committee on Financial Services in 2002 that "Darkazanli offers a strategic paradigm for the manner in which a small, legitimate business with convenient European locations and inconspicuous business transactions can be misused to launder money, purchase technical equipment, and facilitate the establishment -- both in Europe and elsewhere -- of business 'front' groups for Al Qaeda."

U.S. and German investigators allege Darkazanli opened joint bank accounts with suspected Al Qaeda members and supported their operations. According to the Chicago Tribune, between 1994 and 1998, at least $600,000 moved into Darkazanli's accounts from a range of sources, some with known ties to terrorist groups.

Darkazanli is suspected of helping Wadih El Hage, bin Laden's former personal assistant, purchase a ship in 1994, which bin Laden himself is thought to have owned, according to news and U.S. intelligence reports.

In March 1995, Darkazanli co-signed the opening of a Deutsche Bank account for Mamdouh Mahmud Salim, identified by the CIA as chief of bin Laden's computer operations and weapons procurement, according to news reports. Salim is currently facing charges in the U.S. for the 1988 bombings of U.S. embassies in Africa.

Darkazanli told several news outlets that he was unaware of Salim's association with Osama bin Laden.

Investigators say bank records show that Darkazanli also had business dealings with an Albanian-based rental-car operation that is part of a Saudi Arabia-based company with suspected ties to Al Qaeda.

Bank records, according to news reports, also indicate that Darkazanli transferred money to the head of the Global Relief Foundation in Europe, which is suspected by the U.S. Treasury Department of providing support to Al Qaeda.

+ Legislation and Enforcement

In many ways, Darkazanli's case illustrates the difficulties faced in the fight against terrorism financing. Individuals funding terror operations often use legitimate and normal financial channels to carry out their plans. Their goal, of course, is always to avoid suspicion and detection. A financial link is not always enough for authorities to prosecute.

Officials say tracking down and identifying suspected terrorists based on their financial transactions remains a daunting task. William Langford, associate director of the regulatory policy and programs division for the Financial Crimes and Enforcement Network (FinCEN) at the U.S. Treasury Department, says monitoring terrorism financing is "probably one of the most perplexing problems" faced by his agency. He says terrorists typically don't use or transfer the amounts of cash that would trigger a money laundering or other financial crime alert.

According to the Treasury Department, since 9/11, countries around the world have frozen $147 million in assets linked to groups including Al Qaeda, the Taliban, Hamas and Hezbollah. Assistant Treasury Secretary Juan Zarate said in a January 2005 statement that U.N. sanctions against those linked to Osama bin Laden have helped cut off funding to the terror network. But Zarate noted that room for improvement remains.

Charles Intriago, a former federal prosecutor and publisher of Money Laundering Alert in Miami agrees that improvement is necessary. He says authorities have only seized or frozen a limited amount of terrorist assets since 9/11. "I still don't think they're getting the right intelligence on where that stuff is," he says. And even if they do, he adds, "the enforcement of laws is an even bigger issue than the problem of identifying terrorist financiers."

Criminalizing the act of funding terrorists and their organizations is the key to stemming the flow of money, says Vincent Schmoll, principal administrator at the Financial Task Force on Money Laundering (FATF), a Paris-based international organization.

"Many of our countries," Schmoll says, "use the same mechanisms as those used against money laundering. That works if the terrorist money is derived from criminal sources. However, in many cases, terrorists use money from legitimate activities."

Schmoll adds that all countries, including those in Europe, need to follow uniform laws that outlaw the monetary support of terrorists. To that end, the FATF has issued a set of recommendations designed to "detect, prevent and suppress" terrorism financing. They call for the close monitoring of non-profit organizations, wire transfers and cross-border cash movements, and mandate that financial institutions report funds suspected of being linked to terrorists -- all with the highest level of international cooperation.

Yet Schmoll recognizes that his organization can't force a sovereign country to adopt these measures. He says his organization is in the process of evaluating which countries are not complying with FATF recommendations.

Terrorism financing expert Napoleoni says that European countries have more work to do if they want to live up to standards like those proposed by the FATF and other regulatory bodies. Napoleoni says there are still countries in Europe (such as Luxembourg) that have bank secrecy laws that prevent full financial disclosure, and money flows freely into the EU from offshore banks with ties to terrorists, she says. "In Europe it's business as usual," she says.

For its part, since 9/11 the European Union has been updating and reviewing its plan to address terrorism financing within its member states. The EU plan calls for cooperation with FATF recommendations, greater coordination in law enforcement efforts between governments and private financial institutions, transparency of non-profits and charities, and closer regulation of individuals carrying cash in and out of the EU.

Some observers say that even with these new EU measures, terrorists will still have access to funds unless governments and banks step up their monitoring and enforcement efforts. Stopping suspected financiers like Darkazanli is not as easy as imposing a slew of new mandates.

"You can have all the laws in the world," says David Marchant, a journalist and publisher of OffshoreAlert, a money laundering newsletter, "but if at the end of the day if they are not enforced properly or by competent people or financial institutions don't care, then these laws don't matter."

Europol, the European law enforcement agency, says enforcing anti-terrorism financing laws is one of its top priorities. "Within the limits of the Europol Convention and established co-operation agreements, Europol is co-operating in all fields in the fight of international organized crime including terrorism with various partners," said a Europol spokesman in a statement.

International officials, while admitting there is room to improve, say they are gaining ground on the financiers of terror. "We're not producing spectacular results," says Javier Ruperez, executive director for the Counter-Terrorism Committee of the United Nations, "but we're producing good and positive results."

But for Europe to drain the cash and resources available to terrorists on its soil, full international cooperation is necessary, says Napoleoni.

"The world of finance is global," she says. "One country can't fight this alone."

The ultimate objective, say officials on both sides of the Atlantic, is not to stop terrorist financing. Early efforts to freeze terrorist funds have proven to be largely ineffective, according to The 9/11 Commission Report. "Trying to starve the terrorist of money," said the commission, "is like trying to catch one kind of fish by draining the ocean."

Instead, the Commission recommended that information about terrorist financing be used to identify and find terrorists and disrupt their activities.

"In the game of prevention," says Breinholt of the Department of Justice, "it is not enough to expect law enforcement will uncover the bomber before he detonates the bomb. The goal of pursuing terrorism financing as a crime is to widen the universe of possible criminal defendants so that we can prosecute before the terrorist act occurs."

 

Mark Chediak is a student at the Graduate School of Journalism at the University of California, Berkeley. His articles have appeared in San Francisco magazine, Red Herring magazine, Frontline, The South Florida Sun-Sentinel and The San Francisco Business Times.

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posted jan. 25, 2005

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