Staff Report to the Commission

Emergency Economic Powers Act (IEEPA) against U.S. persons (individuals or entities)

suspected of supporting foreign terrorist organizations. It may well be effective, and

perhaps necessary, to disrupt fund-raising operations through an administrative blocking

order when no other good options exist. The use of IEEPA authorities against domestic

organizations run by U.S. citizens, however, raises significant civil liberty concerns

because it allows the government to shut down an organization on the basis of classified

evidence, subject only to a deferential after-the-fact judicial review. The provision of the

IEEPA that allows the blocking of assets “during the pendency of an investigation” also

raises particular concern in that it can shut down a U.S. entity indefinitely without the

more fully developed administrative record necessary for a permanent IEEPA

designation.

The NSC’s interagency Policy Coordinating Committee (PCC) on terrorist financing has

been generally successful in its efforts to marshal government resources to address

terrorist-financing issues in the immediate aftermath of the attacks, although its success

likely resulted more from the personalities of its members than from its structure. As the

government’s response to the problem has evolved over time, the NSC is better situated

than an agency or a stand-alone “czar” to take the lead in forming an interagency

strategic and operational response to terrorist financing.

The attacks galvanized the international community to set up a near-universal system of

laws, tied to United Nations Security Council Resolution 1373, to freeze the assets of

terrorists and their supporters. The United States pursued an ambitious course of highly

visible asset freezes of terrorists, terrorist supporters, and terrorist-related entities. The

State Department embarked on a course of intense diplomatic pressure to ensure that the

asset freezes were truly international. Multilateral institutions, such as the Financial

Action Task Force, began to develop international antiterrorist finance standards for

financial institutions.

Saudi Arabia is a key part of our international efforts to fight terrorist financing. The

intelligence community identified it as the primary source of money for al Qaeda both

before and after the September 11 attacks. Fund-raisers and facilitators throughout Saudi

Arabia and the Gulf raised money for al Qaeda from witting and unwitting donors and

divert funds from Islamic charities and mosques. The Commission staff found no

evidence that the Saudi government as an institution or as individual senior officials

knowingly support or supported al Qaeda; however, a lack of awareness of the problem

and a failure to conduct oversight over institutions created an environment in which such

activity has flourished.

From the 9/11 attacks through spring 2003, most U.S. officials viewed Saudi cooperation

on terrorist financing as ambivalent and selective. U.S. efforts to overcome Saudi

recalcitrance suffered from our failure to develop a strategy to counter Saudi terrorist

financing, present our requests through a single high-level interlocutor, and obtain and

Terrorist Financing Staff Monograph

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release to the Saudis actionable intelligence. By spring 2003 the U.S. government had

corrected these deficiencies. Not just a more effective U.S. message but more especially

al Qaeda operations within the Kingdom in May and November 2003 focused the Saudi

government’s attention on its terrorist-financing problem, and dramatically improved

cooperation with the United States. The Saudi government needs to continue to

strengthen its capabilities to stem the flow of money from Saudi sources to al Qaeda. A

critical part of the U.S. strategy to combat terrorist financing must be to monitor,

encourage, and nurture Saudi cooperation while simultaneously recognizing that terrorist

financing is only one of a number of crucial issues that the U.S. and Saudi governments

must address together. Managing this nuanced and complicated relationship will play a

critical part in determining the success of U.S. counterterrorism policy for the foreseeable

future.

The domestic financial community and some international financial institutions have

generally provided law enforcement and intelligence agencies with extraordinary

cooperation, particularly in providing information to support quickly developing

investigations, such as the search for terrorist suspects at times of emergency. Much of

this cooperation, such as providing expedited returns on subpoenas related to terrorism, is

voluntary and based on personal relationships. It remains to be seen whether such

cooperation will continue as the memory of 9/11 fades. Efforts within the financial

industry to create financial profiles of terrorist cells and terrorist fund-raisers have proved

unsuccessful, and the ability of financial institutions to detect terrorist financing remains

limited.

Since the September 11 attacks and the defeat of the Taliban, al Qaeda’s budget has

decreased significantly. Although the trend line is clear, the U.S government still has not

determined with any precision how much al Qaeda raises or from whom, or how it spends

its money. It appears that the al Qaeda attacks within Saudi Arabia in May and November

of 2003 have reduced—some say drastically—al Qaeda’s ability to raise funds from

Saudi sources, because of both an increase in Saudi enforcement and a more negative

perception of al Qaeda by potential donors in the Gulf. However, as al Qaeda’s cash flow

has decreased, so too have its expenses, generally owing to the defeat of the Taliban and

the dispersal of al Qaeda. Despite our efforts, it appears that al Qaeda can still find money

to fund terrorist operations. Al Qaeda now relies on the physical movement of money and

other informal methods of value transfer, which can pose significant challenges for those

attempting to detect and disrupt money flows.

Understanding the difficulties in disrupting terrorist financing, both in the United States

and abroad, requires understanding the difference between seeing “links” to terrorists and

proving the funding of terrorists. In many cases, we can plainly see that certain

nongovernmental organizations (NGOs) or individuals who raise money for Islamic

causes espouse an extremist ideology and are “linked”  to terrorists through common

acquaintances, group affiliations, historic relationships, phone communications, or other

such contacts. Although sufficient to whet the appetite for action, these suspicious links

do not demonstrate that the NGO or individual actually funds terrorists and thus provide

frail support for disruptive action, either in the United States or abroad. In assessing both

National Commission on Terrorist Attacks Upon the United States

10

the domestic efforts of the U.S. government and the overseas efforts of other nations, we

must keep in mind this fundamental and inherently frustrating challenge of combating

terrorist financing.

Case studies and common themes

The Commission staff examined three significant terrorist-financing investigations in

existence prior to September 11 in order to (a) understand U.S. efforts to stem al Qaedarelated

terrorist financing before the September 11 attacks, (b) trace the evolution of U.S.

policy and operations since the attacks, and (c) illustrate the problems and opportunities

in the area of terrorist financing. These case studies—a Somalia-based worldwide moneyremitting

organization with alleged ties to al Qaeda; two Illinois charities that allegedly

raised money for al Qaeda; and an international Saudi-based private charity, with ties to

the Saudi government, accused of being a conduit of terrorist money—have given the

staff insights into the larger problems and recommendations.

Al-Barakaat: The informal movement of money and its implication for

counterterrorist financing

Al-Barakaat (literally, “the blessing”), a money-remitting system centered in Somalia

with outlets worldwide, took shape after the collapse of the government and the banking

system in Somalia. The intelligence community developed information that Usama Bin

Ladin had contributed money to al-Barakaat to start operations, that it was closely

associated with or controlled by the terrorist group Al-Itihaad Al-Islamiya (AIAI), and

that some of al-Barakaat’s proceeds went to fund AIAI, which in turn gave a portion to

Usama Bin Ladin.

In the United States the FBI developed an intelligence case on the al-Barakaat network in

early 1999, and had opened a criminal case by 2000. Shortly after 9/11 al-Barakaat’s

assets were frozen and its books and records were seized in raids around the world,

including in the United States. Subsequent investigation by the FBI, including financial

analysis of the books and records of al-Barakaat provided in unprecedented cooperation

by the UAE, failed to establish the allegations of a link between al-Barakaat and AIAI or

Bin Ladin. No criminal case was made against al-Barakaat in the United States for these

activities. Although OFAC claims that it met the evidentiary standard for designations,

the majority of assets frozen in the United States under executive order (and some assets

frozen by other countries under UN resolution) were unfrozen and the money returned

after the U.S.-based al-Barakaat money remitters filed a lawsuit challenging the action.

The Illinois Charities: Domestic charities used to fund al Qaeda?

Two Illinois-based charities, the Global Relief Foundation, Inc. (GRF), and the

Benevolence International Foundation (BIF), have been publicly accused of providing

financial support to al Qaeda and international terrorism. GRF, a nonprofit organization

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with operations in 25 countries, ostensibly devoted to providing humanitarian aid to the

needy, raised millions of dollars in the United States in support of its mission. U.S.

investigators long believed that GRF devoted a significant percentage of the funds it

raised to support Islamic extremist causes and jihadists with substantial links to

international terrorist groups, including al Qaeda, and the FBI had a very active

investigation under way by the time of 9/11. BIF, a nonprofit organization with offices in

at least 10 countries, raised millions of dollars in the United States, much of which it

distributed throughout the world for purposes of humanitarian aid. As in the case of GRF,

the U.S. government believed BIF had substantial connections to terrorist groups,

including al Qaeda, and was sending a sizable percentage of its funds to support the

international jihadist movement. BIF was also the subject of an active investigation

before 9/11.

After 9/11 OFAC froze both charities’ assets, effectively putting them out of business.

The FBI opened a criminal investigation of both charities, ultimately resulting in the

conviction of the leader of BIF for non-terrorism-related charges. The Immigration and

Naturalization Service detained and ultimately deported a major GRF fund-raiser. No

criminal charges have been filed against GRF or its personnel.

The cases of BIF and GRF illustrate the U.S. government’s approach to terrorist fundraising

in the United States before 9/11 and how that approach dramatically changed after

the terrorist attacks: the government moved from a strategy of investigating and

monitoring terrorist financing to actively disrupting suspect entities through criminal

prosecution and the use of its IEEPA powers to block their assets in the United States.

Although effective in shutting down its targets, this aggressive approach raises potential

civil liberties concerns, as the charities’  supporters insist that they were unfairly targeted,

denied due process, and closed without any evidence they actually funded al Qaeda or

any terrorist groups.4 The BIF and GRF investigations highlight fundamental issues that

span all aspects of the government efforts to combat al Qaeda financing: the difference

between seeing links to terrorists and proving funding of terrorists, and the problem of

defining the threshold of information necessary to take disruptive action.

Al Haramain: International charities and Saudi Arabia

Al Haramain Islamic Foundation is a Saudi Arabia–based Islamic foundation. It is a

quasi-private, charitable, and educational organization dedicated to propagating a very

conservative form of Islam throughout the world. At its peak, al Haramain had a presence

in at least 50 countries with estimates of its total annual expenditures ranging from $30 to

$80 million. The government of Saudi Arabia has provided financial support to al

4 Legal actions taken by the aggrieved parties have been largely unsuccessful either because, as in the case

of al-Barakaat, the government unfroze assets, or because of the highly deferential standard of review

afforded to the President in the exercise of his Commander in Chief powers under IEEPA. The issue is not

whether the government had the power to conduct the actions that it did. Rather, the issue is whether,

based on the nature and quality of the evidence involved, and the threat of likely harm, the government

appropriately exercised those powers against U.S. persons.

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Haramain in the past, although that has perhaps decreased in recent years. At least two

Saudi government officials have supervisory roles (nominal or otherwise) over al

Haramain.

Since at least 1996 the U.S. intelligence community has developed information that

various al Haramain branches supported jihadists and terrorists, including al Qaeda. Since

9/11 high-level U.S. officials have considered their options regarding al Haramain. As of

January 2003 the U.S. government was concerned that personnel in 20 of al Haramain’s

offices, including personnel within Saudi Arabia, were aiding and abetting al Qaeda and

its affiliated terrorist groups.

In March 2002 the U.S. and Saudi governments froze the assets of the Somali and

Bosnian offices of al Haramain and, simultaneously, submitted these names to the United

Nations for international listing as terrorist supporters. The United States has raised al

Haramain’s involvement in terrorist financing with the Saudi government repeatedly, in

different forms and through different channels, since 1998, but most effectively since

2003. The Saudi government has made some moves to rein in the charity since May

2003, including replacing the executive director of al Haramain, announcing the

shutdown of all overseas branches of al Haramain, and changing its relevant laws and

regulations. Some of these actions proved to be ineffective and, as a result, the U.S. and

Saudi governments froze the assets of four additional branch offices of al Haramain in

January 2004 and five additional branch offices in June 2004. The U.S. government took

additional action against the U.S. entities in February 2004 and against the former

executive director in June 2004. It remains to be seen whether the Saudis have the

political will to develop the necessary capabilities to stem the flow of funds to al Qaeda

and its related groups and to sustain these efforts over the long haul.

We completed our investigation of al Haramain in early June 2004. Subsequently, the

Saudi government announced that it would dissolve the al Haramain Islamic Foundation

and that a new Saudi charity commission would “take over all aspects of private overseas

aid operations and assume responsibility for the distribution of private charitable

donations from Saudi Arabia.” We have not assessed the state-of-play or impact of these

actions. They are moving targets and it is difficult to come to any final conclusions about

the status of al Haramain. Regardless, we believe the discussion in this chapter tells an

important story about U.S.-Saudi cooperation on terrorist financing in the post 9/11

period from which important lessons can be drawn.

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Findings

The funding of the hijackers

* The 9/11 plot cost al Qaeda approximately $400,000–500,000, of which

approximately $300,000 was deposited into U.S. bank accounts of the 19

hijackers. Al Qaeda funded the hijackers in the United States by three primary and

unexceptional means: (1) wire transfers from overseas to the United States, (2) the

physical transport of cash or traveler’s checks into the United States, and (3) the

accessing of funds held in foreign financial institutions by debit or credit cards.

Once here, all of the hijackers used the U.S. banking system to store their funds

and facilitate their transactions.

* The hijackers and their financial facilitators used the anonymity provided by the

vast international and domestic financial system to move and store their money

through a series of unremarkable transactions. The existing mechanisms to

prevent abuse of the financial system did not fail. They were never designed to

detect or disrupt transactions of the type that financed 9/11.

* Virtually all of the plot funding was provided by al Qaeda. There is no evidence

that any person in the United States, or any foreign government, provided any

substantial funding to the hijackers.

* Exhaustive investigation by U.S. government agencies and the securities industry

has revealed no evidence that any person with advance knowledge of the 9/11

attacks profited from them through securities transactions.

Raising and moving money for al Qaeda

* Contrary to public opinion, 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 owned in Sudan. Rather, al Qaeda relied on diversions from

Islamic charities and on well-placed financial facilitators who gathered money

from both witting and unwitting donors, primarily in the Gulf region.

* The nature and extent of al Qaeda fund-raising and money movement make

intelligence collection exceedingly difficult, and gaps appear to remain in the

intelligence community’s understanding of the issue. Because of the complexity

and variety of ways to collect and move small amounts of money in a vast

worldwide financial system, gathering intelligence on al Qaeda financial flows

will remain a hard target for the foreseeable future.

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Intelligence gathering on al Qaeda

* Within the United States, although FBI street agents had gathered significant

intelligence on specific suspected fund-raisers before 9/11, the FBI did not

systematically gather and analyze the information its agents developed. The FBI

as an organization failed to understand the nature and extent of the problem or to

develop a coherent strategy for confronting it. As a result the FBI could not fulfill

its role to provide intelligence on domestic terrorist financing to government

policymakers and did not contribute to national policy coordination.

* Outside the United States, the U.S. intelligence community before 9/11 devoted

relatively few resources to collecting financial intelligence on al Qaeda. This

limited effort resulted in an incomplete understanding of al Qaeda’s methods to

raise, move, and store money, and thus hampered the effectiveness of the overall

counterterrorism strategy.

* Since 9/11 the intelligence community (including the FBI) has created significant

specialized entities, led by committed and experienced individuals and supported

by the leadership of their agencies, focused on both limiting the funds available to

al Qaeda and using financial information as a powerful investigative tool. The

FBI and CIA meet regularly to exchange information, and they have crossdetailed

their agents into positions of responsibility.

Economic disruption of al Qaeda

* Before 9/11 the limited U.S. and UN efforts to freeze assets of and block

transactions with Bin Ladin were generally ineffective.

* Before 9/11 the Department of Justice had little success developing criminal cases

against suspected terrorist fund-raisers, despite a 1996 law that dramatically

expanded its power to do so. Because of the “wall”  between criminal and

intelligence matters, both real and perceived, the prosecutors lacked access to the

considerable information about terrorist fund-raising in the United States

maintained in the FBI’s intelligence files.

* The United States engaged in a highly visible series of freezes of suspected

terrorist assets after 9/11. Although few funds have been frozen since the first few

months after 9/11, asset freezes are useful diplomatic tools in engaging other

countries in the war on terror and have symbolic and deterrence value. The use of

administrative freeze orders against U.S. citizens and their organizations may, at

times, be necessary but raises substantial civil liberties issues.

* Since 9/11 the FBI has recognized that its investigations of terrorist fund-raising

within the United States must have an endgame: to stop the funding or otherwise

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disrupt the terrorist supporters. The Department of Justice has created a unit to

coordinate an aggressive national effort to prosecute terrorist financing and now

regularly receives information from the FBI about terrorist fund-raising in the

United States, which it lacked before 9/11. Still, prosecuting most terroristfinancing

cases remains very challenging.

* The financial provisions enacted after September 11, particularly those contained

in the USA PATRIOT Act and subsequent regulations, have succeeded in

addressing obvious vulnerabilities in our financial system. Vigilant enforcement is

crucial in ensuring that the U.S. financial system is not a vehicle for the funding

of terrorists.

* Financial institutions have the information and expertise to detect money

laundering, but they lack the information and expertise to detect terrorist

financing. As a result, banks and other financial institutions play their most

important role by obtaining accurate information about their customers that can be

provided to government authorities seeking to find a known suspect in an

emergency or investigating terrorist fund-raisers.

* Although the government can often show that certain fund-raising groups or

individuals are “linked” to terrorist groups (through common acquaintances,

group affiliations, historic relationships, phone communications, or other such

contacts), it is far more difficult to show that a suspected NGO or individual

actually funds terrorist groups. In assessing both the domestic efforts of the U.S.

government and the overseas efforts of other nations, we must keep in mind this

fundamental and inherently frustrating challenge of combating terrorist financing.