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Terrorists' money trail probe relies on familiar tactics

By Manuel Perez-Rivas
CNN Washington Bureau

WASHINGTON (CNN) -- In their search for sources of money used to fund terrorist groups, federal officials are using some of the same skills and knowledge they have employed for years to rein in drug dealers, smugglers, tax evaders and other lawbreakers.

Officials say the new Operation Green Quest -- a multi-agency effort led by the Customs Service -- will probe such areas as counterfeiting, credit card fraud, fraudulent import and export schemes, drug trafficking, cash smuggling and other activities that could be used by al Qaeda and other terrorist groups for financing their operations.

Investigators will use undercover operations, electronic surveillance, intelligence data and other resources to uncover underground financial systems, illicit charities and corrupt institutions that may be raising money for terrorists here at home and abroad.

Customs Commissioner Robert Bonner, who stepped into the post shortly after the September 11 terrorist attacks, has said the agency -- most commonly known for its border enforcement presence at airports and other entry points into the United States -- will have a major role to play in the new battle against terrorists.

"U.S. Customs criminal investigators are well-trained in all types of financial crimes. We target not only the individuals involved in money laundering -- those who finance the criminal activity -- but also the networks they use to carry out their criminal activities," Bonner said Wednesday in a speech before a meeting of international financial intelligence groups in Washington.

"Now, we are turning this expertise full-force on terrorist organizations and their financial backers and supporters, and against those who help move money for terrorists," said Bonner, a former federal judge and head of the Drug Enforcement Administration.

Last week, Deputy Treasury Secretary Kenneth Dam put it this way: "We are going to use the same kind of talent and expertise to go after Osama bin Laden and his finances that brought down Al Capone."

A reliance on illicit activity

Financial Action Task Force has issued a report on money laundering and international terrorist funding. Andrew Clark of PWC gives CNN his view of the report.

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Though bin Laden's wealth has been estimated as high as $300 million, U.S. officials believe al Qaeda is involved in numerous other moneymaking activities. According to the State Department, it maintains moneymaking front organizations, solicits donations from like-minded supporters, and illicitly siphons funds from donations to Muslim charitable organizations.

Other suspected terrorist groups are also believed to profit from illicit activity, both in the United States and abroad.

One example was the arrest in July in North Carolina of 18 people believed by federal authorities to be part of a North Carolina cigarette-smuggling ring raising money for Hezbollah, a militant Islamic organization based in Lebanon that is considered a terrorist group by the United States.

Investigators are also looking at "trade-based" money laundering, in which goods are imported or exported at inflated prices, as a way of getting large sums of money across borders under the guise of commerce.

The honey trade

One such possible scheme being scrutinized involves the trade in honey. Earlier this month, the Treasury Department listed honey stores in Yemen as possible fronts for bin Laden's al Qaeda network. In addition, two men were arrested last week at Kennedy Airport in New York for smuggling more than $140,000 in cash hidden in boxes containing honey that were on flights destined for Yemen.

A recent analysis of U.S. government trade data by two Florida International University professors found a series of sharp price discrepancies in some shipments of U.S. honey to several countries in the Middle East, including Yemen. Though the "abnormal pricing" does not necessarily indicate money laundering, said John Zdanowicz, one of the professors, the information could provide leads for further investigation.

Zdanowicz, the director of the university's Center for Banking and Financial Institutions, who has been analyzing trade data for a decade, said the practice of using commerce as a way of hiding international transfers of funds is the oldest form of money laundering. And it is on the rise, he said, as open trade expands and governments enact tougher money laundering rules for banks and other financial systems.

"The numbers have been getting bigger every year," he said, adding that the trend highlights the need for investigators to broaden their scope. "You can't leave any one door open," he said.

Though some of Customs' biggest successes have come in uncovering money being laundered through the banking systems, Bonner said this week that the agency also has expertise in identifying trade-based money laundering schemes.

He mentioned the "Black Market Peso Exchange," in which special money brokers working on behalf of the drug cartels exchanged dollars in the United States for pesos abroad.

"Other traffickers master complicated forms of trade fraud. They overvalue or undervalue merchandise. They use double invoicing. They fabricate shipments," Bonner said.

A broad-based strategy

Indeed, officials hope a broad-based strategy targeting a multitude of possible illicit money-raising activities will dry up funding streams for al Qaeda and other terrorist groups.

Operation Green Quest, which seeks to augment other existing antiterrorism efforts, will be headquartered in Washington. In addition to Customs, other participating agencies include the IRS and the Secret Service. The FBI and Justice Department prosecutors also will be included.

In effect, Green Quest will serve as the operational and investigative arm for existing entities already involved in tracking terrorist assets -- such as the Office of Foreign Assets Control, the Financial Crimes Enforcement Network and the new Foreign Terrorist Asset Tracking center.

The Operation also will have field offices outside of Washington. The first one will be based in New York, and be a part of an existing financial investigations unit known as the El Dorado Task Force, which scored a series of successes against drug-related money laundering.

Since its inception in 1992, the 200-person El Dorado Task Force -- which is led by Customs and IRS agents -- has resulted in the arrests of 1,500 people and the seizure of $425 million in criminal proceeds, officials said.

The operation will seek to identify and seize current terrorist-related funds as well as target possible future funding sources. Treasury officials concede it will not be an easy task.

Unconventional methods hide tracks

Bonner: "We need information to act on."  

At a recent speech before business leaders in Washington, Deputy Secretary Dam noted that bin Laden and al Qaeda have taken pains in recent years "to transfer and hide their finances in a way that avoids detection by even the most discerning authorities."

"Suitcases full of cash, informal 'hawala' transfers and even everyday money orders have become regular methods for sending terrorist money abroad. Front companies are also used to transfer funds. These illegal and unconventional methods complicate our tracking efforts," he said.

Hawala -- a largely paperless financial system that relies on money lenders active both in the Middle East, as well as in the U.S. -- will be one of the areas given greater scrutiny by federal investigators.

In addition, hawala dealers will be required to register with the Treasury Department by December 31, 2001 as part of new regulations issued in 1999 that created a new category of non-bank financial institutions called "money services businesses."

Dam said significant progress already has been made against al Qaeda. He noted efforts underway to block terrorist assets in the U.S. and abroad.

He also said the recent passage of money laundering regulations and antiterrorism legislation, and its provisions allowing greater sharing of information between law enforcement and intelligence agencies, will further boost investigators' arsenal for blocking terrorist finances.

Good intelligence, however, will be key in thwarting terrorist financing schemes. And streamlining and coordinating the flow of financial intelligence will be a top priority for the multi-agency operation. It's a point Bonner stressed in his speech to the Egmont Group of Financial Intelligence Units, which includes dozens of agencies from across the world among its members.

"The bottom line is that our global war on terrorism mandates that we tear down the intelligence-sharing walls that may have previously existed between law enforcement agencies themselves and the public and private sector," he said. "We need information to act on, and we need it by any and all means."


• U.S. Customs Service
• Federal Bureau of Investigation
• Internal Revenue Service

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