Staff Report to the Commission

National Commission on Terrorist Attacks

Upon the United States

Monograph on Terrorist Financing

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Staff Report to the Commission

John Roth

Douglas Greenburg

Serena Wille

 

Preface

The Commission staff organized its work around specialized studies, or monographs,

prepared by each of the teams. We used some of the evolving draft material for these

studies in preparing the seventeen staff statements delivered in conjunction with the

Commission’s 2004 public hearings. We used more of this material in preparing draft

sections of the Commission’s final report. Some of the specialized staff work, while not

appropriate for inclusion in the report, nonetheless offered substantial information or

analysis that was not well represented in the Commission’s report. In a few cases this

supplemental work could be prepared to a publishable standard, either in an unclassified

or classified form, before the Commission expired.

This study is on terrorist financing. It was prepared principally by John Roth, Douglas

Greenburg, and Serena Wille, with editing assistance from Alice Falk. As in all staff

studies, they often relied on work done by their colleagues.

This is a study by Commission staff. While the Commissioners have been briefed on the

work and have had the opportunity to review earlier drafts of some of this work, they

have not approved this text and it does not necessarily reflect their views.

Philip Zelikow

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Table of Contents

INTRODUCTION AND EXECUTIVE SUMMARY................................................................................ 2

AL QAEDA’S MEANS AND METHODS TO RAISE, MOVE, AND USE MONEY.......................... 17

GOVERNMENT EFFORTS BEFORE AND AFTER THE SEPTEMBER 11 ATTACKS................ 30

COMBATING TERRORIST FINANCING IN THE UNITED STATES: THE ROLE OF

FINANCIAL INSTITUTIONS.................................................................................................................. 52

AL-BARAKAAT CASE STUDY .............................................................................................................. 67

THE ILLINOIS CHARITIES CASE STUDY......................................................................................... 87

AL HARAMAIN CASE STUDY............................................................................................................. 114

APPENDIX A: THE FINANCING OF THE 9/11 PLOT..................................................................... 131

APPENDIX B: SECURITIES TRADING.............................................................................................. 145

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Chapter 1

Introduction and Executive Summary

Introduction

After the September 11 attacks, the highest-level U.S. government officials publicly

declared that the fight against al Qaeda financing was as critical as the fight against al

Qaeda itself. It has been presented as one of the keys to success in the fight against

terrorism: if we choke off the terrorists’  money, we limit their ability to conduct mass

casualty attacks. In reality, completely choking off the money to al Qaeda and affiliated

terrorist groups has been essentially impossible. At the same time, tracking al Qaeda

financing has proven a very effective way to locate terrorist operatives and supporters

and to disrupt terrorist plots.

As a result, the U.S. terrorist financing strategy has changed from the early post-9/11

days. Choking off the money remains the most visible aspect of our approach, but it is not

our only, or even most important, goal. Ultimately, making it harder for terrorists to get

money is a necessary, but not sufficient, component of our overall strategy. Following the money to identify terrorist operatives and sympathizers provides a particularly powerful tool in the fight against terrorist groups. Use of this tool almost always remains invisible to the general public, but it is a critical part of the overall campaign against al Qaeda. Moreover, the U.S. government recognizes—appropriately, in the Commission staff’s view—that terrorist-financing measures are simply one of many tools in the fight against al Qaeda.

 

This monograph, together with the relevant parts of the Commission’s final report,

reflects the staff’s investigation into al Qaeda financing and the U.S. government’s efforts to combat it. This monograph represents the collective efforts of a number of members of the staff. John Roth, Douglas Greenburg and Serena Wille did the bulk of the work reflected in this report. Thanks also go to Dianna Campagna, Marquittia Coleman,Melissa Coffey and the entire administrative staff for their excellent support. We were fortunate in being able to build upon a great deal of excellent work already done by the U.S. intelligence and law enforcement communities.

The starting point for our inquiry is 1998, when al Qaeda emerged as a primary global

threat to U.S. interests. Although we address earlier periods as necessary, we have not

attempted to tell the history of al Qaeda financing from its inception. We have sought to

understand how al Qaeda raised, moved, and stored money before and after the

September 11 attacks, and how the U.S. government confronted the problem of al Qaeda financing before and after 9/11. We have had significant access to highly classified raw and finished intelligence from the intelligence community, have reviewed law enforcement, State Department, and Treasury Department files, and have interviewed at Terrorist Financing Staff Monograph

 

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length government officials, from street-level agents to cabinet secretaries, as well as

non-government experts, representatives from the financial services industry, and

representatives of individuals and entities directly affected by U.S. government action to

combat al Qaeda financing.

 

This monograph does not attempt a comprehensive survey of all known data on al Qaeda financing and every government action to combat it. Rather, we have sought to

understand the issues that make a difference, what the 9/11 disaster should have taught us about these issues, and the extent to which the current U.S. strategy reflects these lessons. What we have found is instructive in the larger analysis of what the U.S. government can do to detect, investigate, deter, and disrupt al Qaeda and affiliated terrorist groups bent on mass casualty attacks against the United States.1

 

Executive Summary

September 11 financing

The September 11 hijackers used U.S. and foreign financial institutions to hold, move,

and retrieve their money. The hijackers deposited money into U.S. accounts, primarily by wire transfers and deposits of cash or travelers checks brought from overseas.

Additionally, several of them kept funds in foreign accounts, which they accessed in the

United States through ATM and credit card transactions. The hijackers received funds

from facilitators in Germany and the United Arab Emirates or directly from Khalid

Sheikh Mohamed (KSM) as they transited Pakistan before coming to the United States.

The plot cost al Qaeda somewhere in the range of $400,000–500,000, of which

approximately $300,000 passed through the hijackers’  bank accounts in the United

States. The hijackers returned approximately $26,000 to a facilitator in the UAE in the

days prior to the attack. While in the United States, the hijackers spent money primarily

for flight training, travel, and living expenses (such as housing, food, cars, and auto

insurance). Extensive investigation has revealed no substantial source of domestic

financial support.

Neither the hijackers nor their financial facilitators were experts in the use of the

international financial system. They created a paper trail linking them to each other and

their facilitators. Still, they were easily adept enough to blend into the vast international

financial system without doing anything to reveal themselves as criminals, let alone

terrorists bent on mass murder. The money-laundering controls in place at the time were largely focused on drug trafficking and large-scale financial fraud and could not have detected the hijackers’ transactions. The controls were never intended to, and could not, detect or disrupt the routine transactions in which the hijackers engaged.

1 Our investigation has focused on al Qaeda financing and the country’s response to it. Although much of

our analysis may apply to the financing of other terrorist groups, we have made no systematic effort to

investigate any of those groups, and we recognize that the financing of other terrorist groups may present

the government with problems or opportunities not existing in the context of al Qaeda.

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There is no evidence that any person with advance knowledge of the impending terrorist

attacks used that information to profit by trading securities. Although there has been

consistent speculation that massive al Qaeda–related “insider trading” preceded the

attacks, exhaustive investigation by federal law enforcement and the securities industry

has determined that unusual spikes in the trading of certain securities were based on

factors unrelated to terrorism.

One of the pillars of al Qaeda: Fund-raising

Al Qaeda and Usama Bin Ladin obtained money from a variety of sources. Contrary to

common belief, Bin Ladin did not have access to any significant amounts of personal

wealth (particularly after his move from Sudan to Afghanistan) and did not personally

fund al Qaeda, either through an inheritance or businesses he was said to have owned in

Sudan. Rather, al Qaeda was funded, to the tune of approximately $30 million per year,

by diversions of money from Islamic charities and the use of well-placed financial

facilitators who gathered money from both witting and unwitting donors, primarily in the

Gulf region. No persuasive evidence exists that al Qaeda relied on the drug trade as an

important source of revenue, had any substantial involvement with conflict diamonds, or

was financially sponsored by any foreign government. The United States is not, and has

not been, a substantial source of al Qaeda funding, although some funds raised in the

United States may have made their way to al Qaeda and its affiliated groups.

After Bin Ladin relocated to Afghanistan in 1996, al Qaeda made less use of formal

banking channels to transfer money, preferring instead to use an informal system of

money movers or bulk cash couriers. Supporters and other operatives did use banks,

particularly in the Gulf region, to move money on behalf of al Qaeda. Prior to 9/11 the

largest single al Qaeda expense was support for the Taliban, estimated at about $20

million per year. Bin Ladin also used money to train operatives in camps in Afghanistan,

create terrorist networks and alliances, and support the jihadists and their families.

Finally, a relatively small amount of money was used to finance operations, including the

approximately $400,000–500,000 spent on the September 11 attacks themselves.

U.S. government efforts before the September 11 attacks

Terrorist financing was not a priority for either domestic or foreign intelligence

collection. As a result, intelligence reporting on the issue was episodic, insufficient, and

often inaccurate. Although the National Security Council considered terrorist financing

important in its campaign to disrupt al Qaeda, other agencies failed to participate to the

NSC’s satisfaction, and there was little interagency strategic planning or coordination.

Without an effective interagency mechanism, responsibility for the problem was

dispersed among a myriad of agencies, each working independently.

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The FBI gathered intelligence on a significant number of organizations in the United

States suspected of raising funds for al Qaeda or other terrorist groups. Highly motivated

street agents in specific FBI field offices overcame setbacks, bureaucratic inefficiencies,

and what they believed to be a dysfunctional Foreign Intelligence Surveillance Act

(FISA) system2 to gain a basic understanding of some of the largest and most problematic

terrorist-financing conspiracies since identified. The FBI did not develop an endgame,

however. The agents continued to gather intelligence with little hope that they would be

able to make a criminal case or otherwise disrupt the operations. The FBI could not turn

these investigations into criminal cases because of insufficient international cooperation,

a perceived inability to mingle criminal and intelligence investigations due to the “wall”

between intelligence and law enforcement matters, sensitivities to overt investigations of

Islamic charities and organizations, and the sheer difficulty of prosecuting most terroristfinancing

cases. As a result, the FBI rarely sought to involve criminal prosecutors in its

terrorist-financing investigations. Nonetheless, FBI street agents had gathered significant

intelligence on specific groups.

On a national level the FBI did not systematically gather and analyze the information its

agents developed. It lacked a headquarters unit focusing on terrorist financing, and its

overworked counterterrorism personnel lacked time and resources to focus specifically on

financing. The FBI as an organization therefore failed to understand the nature and extent

of the jihadist3 fund-raising problem within the United States or to develop a coherent

strategy for confronting the problem. The FBI did not, nor could it, fulfill its role to

provide intelligence on domestic terrorist financing to government policymakers and did

not contribute to national policy coordination. For its part, the Criminal Division of the

Department of Justice had no national program for prosecuting terrorist-financing cases,

despite a 1996 statute that gave it much broader legal powers for doing so. The

Department of Justice could not develop an effective program for prosecuting these cases

because its prosecutors had no systematic way to learn what evidence of prosecutable

crimes could be found in the FBI’s intelligence files, to which they did not have access.

The U.S. intelligence community largely failed to comprehend al Qaeda’s methods of

raising, moving, and storing money, because it devoted relatively few resources to

collecting the strategic financial intelligence that policymakers were requesting or that

would have informed the larger counterterrorism strategy. Al Qaeda financing was in

many respects a hard target for intelligence gathering. But the CIA also arrived belatedly

2 This monograph is a survey and analysis of the government’s efforts with regard to terrorist financing

both before and after 9/11. This necessarily touches on many different aspects of the government’s

counterterrorism efforts, including the FISA review process and barrier between law enforcement and

intelligence information. We did not attempt, however, to conduct an exhaustive review of those issues.

Rather, we refer the reader to the 9/11 Commission Report, pp.78-80.

3 We use the term jihadist to include militant Islamist groups other than the Palestinian terrorist groups,

such as Hamas and Palestinian Islamic Jihad, and Lebanese Hizbollah. The other jihadist groups who have

raised money in the United States appear to loosely share a common ideology, and many of them have been

linked directly or indirectly to al Qaeda. These groups raise funds in the United States to support Islamist

militants around the world; some of these funds may make their way to al Qaeda or affiliated groups. The

Palestinian groups and Hizbollah, which have raised large amounts of money domestically, present

different issues that are beyond the scope of our investigation.

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at an understanding of some basic operational facts that were readily available—such as

the knowledge that al Qaeda relied on fund-raising, not Bin Ladin’s personal fortune. The

CIA’s inability to grasp the true source of Bin Ladin’s funds and the methods behind

their movement hampered the U.S. government’s ability to integrate potential covert

action or overt economic disruption into the counterterrorism effort. The lack of specific

intelligence about al Qaeda financing frustrated policymakers, and the intelligence

deficiencies persisted through 9/11.

Other areas within the U.S. government evinced similar problems. The then-obscure

Office of Foreign Assets Control (OFAC), the Treasury organization charged by law with

searching out, designating, and freezing Bin Ladin assets, lacked comprehensive access

to actionable intelligence and was beset by the indifference of higher-level Treasury

policymakers. Even if those barriers had been removed, the primary Bin Ladin financial

flows at the time, from the Gulf to Afghanistan, likely were beyond OFAC’s legal

powers, which apply only domestically.

A number of significant legislative and regulatory initiatives designed to close

vulnerabilities in the U.S. financial system failed to gain traction. Some of these, such as

a move to control foreign banks with accounts in the United States, died as a result of

banking industry pressure. Others, such as a move to regulate money remitters, were

mired in bureaucratic inertia and a general antiregulatory environment.

The U.S. government had recognized the value of enlisting the international community

in efforts to stop the flow of money to al Qaeda entities. U.S. diplomatic efforts had

succeeded in persuading the United Nations to sanction Bin Ladin economically, but such

sanctions were largely ineffective. Saudi Arabia and the UAE, necessary partners in any

realistic effort to stem the financing of terror, were ambivalent and selectively

cooperative in assisting the United States. The U.S. government approached the Saudis

on some narrow issues, such as locating Bin Ladin’s supposed personal wealth and

gaining access to a senior al Qaeda financial figure in Saudi custody, with mixed results.

The Saudis generally resisted cooperating more broadly against al Qaeda financing,

although the U.S. government did not make this issue a priority in its bilateral relations

with the Saudis or provide the Saudis with actionable intelligence about al Qaeda fundraising

in the Kingdom. Other issues, such as Iraq, the Middle East peace process,

economic arrangements, the oil supply, and cutting off Saudi support for the Taliban,

took primacy on the U.S.-Saudi agenda.

The net result of the government’s efforts, according to CIA analysis at the time, was that

al Qaeda’s cash flow on the eve of the September 11 attacks was steady and secure.

Where are we now?

It is common to say the world has changed since September 11, 2001, and this conclusion

is particularly apt in describing U.S. counterterrorist efforts regarding financing. The U.S.

government focused, for the first time, on terrorist financing and devoted considerable

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energy and resources to the problem. As a result the United States now has a far better

understanding of the methods by which terrorists raise, move, and use money and has

employed this knowledge to our advantage.

With an understanding of the nature of the threat and with a new sense of urgency, the

intelligence community (including the FBI) created new entities to focus on, and bring

expertise to, the area of terrorist fund-raising and the clandestine movement of money.

These entities are led by experienced and committed individuals, who use financial

information to understand terrorist networks, search them out and disrupt their

operations, and who integrate terrorist-financing issues into the larger counterterrorism

efforts at their respective agencies. Equally important, many of the obstacles hampering

investigations have been stripped away. The current intelligence community approach

appropriately focuses on using financial information, in close coordination with other

types of intelligence, to identify and track terrorist groups rather than to starve them of

funding.

The CIA has devoted considerable resources to the investigation of al Qaeda financing,

and the effort is led by individuals with extensive expertise in the clandestine movement

of money. The CIA appears to be developing an institutional and long-term expertise in

this area, and other intelligence agencies have made similar improvements. Still, al Qaeda

financing remains a hard target for intelligence gathering. Understanding al Qaeda’s

money and providing actionable intelligence present ongoing challenges because of the

speed, diversity, and complexity of the means and methods for raising and moving

money; the commingling of terrorist money with legitimate funds; the many layers and

transfers between donors and the ultimate recipients of the money; the existence of

unwitting participants (including donors who give to generalized jihadist struggles rather

than specifically to al Qaeda); and the U.S. government’s reliance on foreign government

reporting for intelligence.

Since the attacks, the FBI has improved its dissemination of intelligence to policymakers,

usually in the form of briefings, regular meetings, and status reports. The creation of a

unit focusing on terrorist financing has provided a vehicle through which the FBI can

effectively participate in interagency terrorist-financing efforts and ensures that these

issues receive focused attention rather than being a footnote to the FBI’s overall

counterterrorism program. Still, the FBI needs to improve the gathering and analyzing of

the information developed in its investigations. The FBI’s well-documented efforts to

create an analytical career track and enhance its analytical capabilities are sorely needed

in this area.

Bringing jihadist fund-raising prosecutions remains difficult in many cases. The inability

to get records from other countries, the complexity of directly linking cash flows to

terrorist operations or groups, and the difficulty of showing what domestic persons knew

about illicit foreign acts or actors all combine to thwart investigations and prosecutions.

Still, criminal prosecutors now have regular access to information on relevant

investigations, and the Department of Justice has created a unit to coordinate an

aggressive national effort to prosecute terrorist financing.

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In light of the difficulties in prosecuting some terrorist fund-raising cases, the

government has used administrative blocking and freezing orders under the International