Staff Report to the Commission

Interagency cooperation and coordination

* Terrorist financing is, and must continue to be, closely integrated with the broader

counterterrorism effort. Terrorist-financing measures both rely on and feed the

broader effort. Terrorist financing is neither intrinsically different from nor more

complex than other counterterrorism issues. The NSC (as opposed to an agency or

a terrorist-financing “czar”) is well situated to lead the operational and strategic

integration of terrorist financing with counterterrorism generally. The

government should resist the temptation to create a terrorist-financing czar or

specialized, stand-alone entities focused on terrorist financing, and should support

the current NSC-led interagency Policy Coordinating Committee.

Diplomatic efforts and Saudi Arabia

* Before the September 11 attacks, the Saudi government resisted cooperating with

the United States on the al Qaeda financing problem, although the U.S.

government did not make this issue a priority or provide the Saudis with

actionable intelligence about al Qaeda fund-raising in the Kingdom.

National Commission on Terrorist Attacks Upon the United States

16

* Notwithstanding a slow start, since the al Qaeda bombings in Saudi Arabia in

May and November of 2003 and the delivery of a more consistent and pointed

U.S. message, it appears that the Saudis have accepted that terrorist financing is a

serious issue and are making progress in addressing it. It remains to be seen

whether they will (and are able to) do enough, and whether the U.S. government

will push them hard enough, to substantially eliminate al Qaeda financing by

Saudi citizens and institutions. The highest levels of the U.S. government must

continue to send an unequivocal message to Saudi Arabia that the Saudis must do

everything within their power to substantially eliminate al Qaeda financing by

Saudi sources. The U.S. government must assist by continuing to provide

actionable intelligence and much-needed training to the Saudis. At the same time,

the Saudis must take the initiative to develop their own intelligence and disrupt

terrorist financing without U.S. government prompting.

Overall effectiveness of the U.S. government’s efforts on

terrorist financing since 9/11

* All relevant elements of the U.S. government—intelligence, law enforcement,

diplomatic, and regulatory (often with significant assistance from the U.S. and

international banking community)—have made considerable efforts to identify,

track, and disrupt the raising and movement of al Qaeda funds.

* While definitive intelligence is lacking, these efforts have had a significant impact

on al Qaeda’s ability to raise and move funds, on the willingness of donors to give

money indiscriminately, and on the international community’s understanding of

and sensitivity to the issue. Moreover, the U.S. government has used the

intelligence revealed through financial information to understand terrorist

networks, search them out and disrupt their operations.

* While a perfect end state—the total elimination of money flowing to al Qaeda—is

virtually impossible, current government efforts to raise the costs and risks of

gathering and moving money are necessary to limit al Qaeda’s ability to plan and

mount significant mass casualty attacks. We should understand, however, that

success in these efforts will not of itself immunize us from future terrorist attacks.

Terrorist Financing Staff Monograph

17

Chapter 2

Al Qaeda’s Means and Methods to Raise, Move, and

Use Money

There are two things a brother must always have for jihad, the self and money.

An al Qaeda operative5

Al Qaeda’s methods of raising and moving money have bedeviled the world’s

intelligence agencies for good reason. Al Qaeda has developed “an elusive network…an

unconventional web”6 to support itself, its operations, and its people. Al Qaeda has

demonstrated the ability, both before and after 9/11,7 to raise money from many different

sources, typically using a cadre of financial facilitators, and to move this money through

its organization by a variety of conduits, including hawaladars (see the discussion of

halawas, below), couriers, and financial institutions. These sources and conduits are

resilient, redundant, and difficult to detect.

Contrary to popular myth, Usama Bin Ladin does not support al Qaeda through a

personal fortune or a network of businesses. Rather, al Qaeda financial facilitators raise

money from witting and unwitting donors, mosques and sympathetic imams, and

nongovernment organizations such as charities. The money seems to be distributed as

quickly as it is raised, and we have found no evidence that there is a central “bank” or

“war chest” from which al Qaeda draws funds. Before 9/11 al Qaeda’s money was used

to support its operations, its training and military apparatus, the Taliban, and,

sporadically, other terrorist organizations. Since 9/11 al Qaeda’s money supports

operations and operatives and their families.

Since 9/11 the disruption of al Qaeda’s sources, facilitators, and conduits, primarily

through deaths and arrests, has made funds less available and their movement more

difficult. At the same time, al Qaeda’s expenditures have decreased since 9/11 because it

no longer supports the Taliban, its training camps, or an army. That said, al Qaeda still

appears to have the ability to fund terrorist operations.

Intelligence Issues

There is much that the U.S. government did not know (and still does not know) about Bin

Ladin’s resources and how al Qaeda raises, moves, and spends its money. The

combination of Bin Ladin’s move to Afghanistan in 1996 and his censure by the

5 Intelligence reporting, Apr. 13, 2004. The discussion of al Qaeda financing in this chapter is derived from

an extensive review of documents from State, Treasury and the intelligence community, as well as

interviews of intelligence analysts, law enforcement agents, and other government officials.

6 Intelligence reporting, Apr. 12, 2001.

7 Our pre-9/11 analysis focuses on al Qaeda after Bin Ladin arrived in Afghanistan in 1996, and especially

after he firmly established himself there by 1998.

National Commission on Terrorist Attacks Upon the United States

18

international community following the 1998 East Africa bombings contributed to the

difficulty in tracking this money.8

The CIA expressed the extent of the problem in April 2001:

Usama Bin Ladin’s financial assets are difficult to track because he uses a

wide variety of mechanisms to move and raise money[;]…he capitalizes

on a large, difficult-to-identify network with few long-lasting nodes for

penetration. It is difficult to determine with any degree of accuracy what

percentage of each node contributes to his overall financial position. Gaps

in our understanding contribute to the difficulty we have in pursuing the

Bin Ladin financial target. We presently do not have the reporting to

determine how much of Bin Ladin’s personal wealth he has used or

continues to use in financing his organization; we are unable to estimate

with confidence the value of his assets and net worth; and we do not know

the level of financial support he draws from his family and other donors

sympathetic to his cause.9

Even after the September 11 attacks, the intelligence community could not estimate the

total income or the relative importance of any source of Bin Ladin’s revenue stream.

High-level policymakers were frustrated and characterized themselves as “seriously

challenged...by an inability to obtain on a consistent basis solid and credible background

information on targets for blocking of assets[.]”10 More than a year after 9/11, the head of

the government’s terrorist-financing coordination effort described this gap in knowledge:

[S]ometime in the next 3 months a Congressional committee is rightfully going to

haul us up to the Hill (or the President is going to call us into the Oval office) and

ask us 4 questions:

1. Who finances al Qaeda?

2. How?

3. Where is it?

4. Why don’t you have it (and stop it)?

Paul [O’Neill, secretary of the Treasury] could not [be able to] answer [those

questions] today.11

8 Mainstream Gulf area donors and the Bin Ladin family generally turned away from Usama Bin Ladin

after the East Africa bombings. Additionally, UN Security Council Resolution 1333 in December 2000

called on all member states to freeze funds in accounts associated with al Qaeda, a point discussed more

fully later in this monograph.

9 Intelligence reporting, Apr. 12, 2001.

10 State Department Memorandum, Dec. 3, 2001.

11 Treasury Department email, Nov. 14, 2002. The CIA contends it has much better intelligence about al

Qaeda financing than is indicated by this Department of Treasury document. In the CIA’s view, Treasury

was unhappy because the CIA’s intelligence was often extremely sensitive, so it could not be released to

support public designations.

Terrorist Financing Staff Monograph

19

The volume and quality of the intelligence appear to have improved since the summer of

2002, mostly because a flood of information is being derived from custodial interviews of

captured al Qaeda members. Reliance on this information, of course, has its perils.

Detainees may provide misinformation and may misrepresent or mischaracterize their

roles or the roles of others. As a result, corroborating their information, through other

custodial interviews, documentary evidence, or other intelligence collection, is critical in

assessing what we know about al Qaeda financing. Even if what detained al Qaeda

members tell us is accurate, the information can be stale, as it necessarily describes the

state of affairs before their capture, and it is unlikely to be “actionable”—that is,

sufficient to create an opportunity for disruption or to enable investigators to follow a

money trail forward to operational elements or backward to the donors or facilitators.

Understanding al Qaeda’s money flows 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.

Commission staff evaluated the existing information regarding al Qaeda’s financing,

before 9/11 and today, in light of these limitations. We describe what we know,

acknowledge where the information is simply insufficient, and discuss what we are

reasonably certain did not occur. The list of purported al Qaeda funding sources is

legion: counterfeit trademarked goods, consumer coupon fraud, drug trafficking, insider

trading, support from Gulf-area governments, and conflict diamonds are the most

common. In many cases, one or two threads of information make such theories

tantalizing; but after careful review of all of the evidence available to us, including some

of the most sensitive information held by the U.S. government, we have judged that such

theories cannot be substantiated.

Al Qaeda’s Financing: Sources, Movement, Uses

Where did al Qaeda get its money?

Al Qaeda relied on fund-raising before 9/11 to a greater extent than thought at the time.

Bin Ladin did not have large sums of inherited money or extensive business resources.

Rather, it appears that al Qaeda lived essentially hand to mouth. A group of financial

facilitators generated the funds; they may have received money from a spectrum of

donors, charities, and mosques, with only some knowing the ultimate destination of their

money. The CIA estimates that it cost al Qaeda about $30 million per year to sustain its

activities before 9/11, an amount raised almost entirely through donations.

National Commission on Terrorist Attacks Upon the United States

20

Dispelling myths

For many years, the United States thought Bin Ladin financed al Qaeda’s expenses

through a vast personal inheritance or through the proceeds of the sale of his Sudanese

businesses. Neither was true. Bin Ladin was alleged to have inherited approximately

$300 million when his father died, funds used while in Sudan and Afghanistan. This

money was thought to have formed the basis of the financing for al Qaeda.12 Only after

NSC-initiated interagency trips to Saudi Arabia in 1999 and 2000, and after interviews of

Bin Ladin family members in the United States, was the myth of Bin Ladin’s fortune

discredited. From about 1970 until 1993 or 1994, Usama Bin Ladin received about a

million dollars per year—adding up to a significant sum, to be sure, but not a $300

million fortune. In 1994 the Saudi government forced the Bin Ladin family to find a

buyer for Usama’s share of the family company and to place the proceeds into a frozen

account. The Saudi freeze had the effect of divesting Bin Ladin of what would otherwise

have been a $300 million fortune. Notwithstanding this information, some within the

government continued to cite the $300 million figure well after 9/11, and the general

public still gives credence to the notion of a “multimillionaire Bin Ladin.”

Nor were Bin Ladin’s assets in Sudan a source of money for al Qaeda. Bin Ladin was

reputed to own 35 companies in Sudan when he lived there from 1992 to 1996, but some

may never have actually been owned by him and others were small or not economically

viable. Bin Ladin’s investments may well have been designed to gain influence with the

Sudanese government rather than be a revenue source. When Bin Ladin was pressured to

leave Sudan in 1996, the Sudanese government apparently expropriated his assets and

seized his accounts, so that he left Sudan with practically nothing. When Bin Ladin

moved to Afghanistan in 1996, his financial situation was dire; it took months for him to

get back on his feet. While relying on the good graces of the Taliban, Bin Ladin

reinvigorated his fund-raising efforts and drew on the ties to wealthy Saudi nationals that

he developed during his days fighting the Soviets in Afghanistan.

Financial facilitators and their donors

Al Qaeda depended on fund-raising to support itself. It appears that al Qaeda relied

heavily on a core of financial facilitators who raised money from a variety of donors and

other fund-raisers. Those donors were primarily in the Gulf countries, especially Saudi

Arabia. Some individual donors knew of the ultimate destination of their donations, and

others did not; they were approached by facilitators, fund-raisers, and employees of

12 Reporting from November 1998 concluded that although the $300 million figure probably originated

from rumors in the Saudi business community, it was a “reasonable estimate” as of a few years earlier,

representing what would have been Bin Ladin’s share of his family’s business conglomerate in Saudi

Arabia. The intelligence community thought it had adequately verified this number by valuing Bin Ladin’s

investments in Sudan as well as what he could have inherited from his fathers construction empire in Saudi

Arabia. Finished intelligence supported the notion that Bin Ladin’s “fortune” was still intact by concluding

that Bin Ladin could only have established al Qaeda so quickly in Afghanistan if he had ready access to

significant funds. Intelligence reporting, Nov. 17, 1998.

Terrorist Financing Staff Monograph

21

corrupted charities, particularly during the Islamic holy month of Ramadan. The financial

facilitators also appeared to rely heavily on imams at mosques, who diverted zakat

donations to the facilitators and encouraged support of radical Islamic causes. Al Qaeda

fund-raising was largely cyclical, with the bulk of the money coming in during the

Islamic holy month of Ramadan.

Charities

Al Qaeda’s charities’ strategy before 9/11 had two prongs. In some instances, al Qaeda

penetrated specific foreign branch offices of large, internationally recognized charities. In

many cases, lax oversight and the charities’  own ineffective financial controls,

particularly over transactions in remote regions of the world, made it easy for al Qaeda

operatives to divert money from charitable uses. These large international Gulf charities

donated money to end recipients, usually smaller in-country charities, whose employees

may have siphoned off money for al Qaeda. In the second class of cases, entire charities

from the top down may have known of and even participated in the funneling of money

to al Qaeda. In those cases, al Qaeda operatives had control over the entire organization,

including access to bank accounts.

Much has been made of the role of charities, particularly Saudi charities, in terrorist

financing. A little context is necessary here. Charitable giving, known as zakat, is one of

the five pillars of Islamic faith. It is broader and more pervasive than Western ideas of

charity, in that it also functions as a form of income tax, educational assistance, foreign

aid, and political influence. The Western notion of the separation of civic and religious

duty does not exist in Islamic cultures. The Saudi government has declared that the Koran

and the Sunna (tradition) of Muhammad are the country’s constitution, and the clergy

within Saudi Arabia wield enormous influence over the cultural and social life of the

country.

Funding charitable works is ingrained into Saudi Arabia’s culture, and Saudi zakat has

long provided much-needed humanitarian relief in the Islamic world. In addition, a major

goal of Saudi charities is to spread Wahhabi beliefs and culture throughout the world.

Thus Saudi efforts have funded mosques and schools in other parts of the world,

including Pakistan, Central Asia, Europe, and even the United States. In some poor areas

these schools alone provide education; and even in affluent countries, Saudi-funded

Wahhabi schools are often the only Islamic schools available.

Since 9/11

Financial facilitators are still at the core of al Qaeda’s revenue stream, although there is

little question that the arrests and deaths of several important facilitators have decreased

the amount of money al Qaeda has raised and have made it more expensive and difficult

to raise and move that money. The May 2003 terrorist attacks in Riyadh, moreover, seem

to have reduced al Qaeda’s available funds even more—some say drastically—for a

National Commission on Terrorist Attacks Upon the United States

22

number of reasons. First, it appears that enhanced scrutiny of donors by the Saudi

government after the attacks may be having a deterrent effect. Second, Saudi law

enforcement efforts have reduced al Qaeda’s cadre of facilitators. Individuals such as

Riyadh, an al Qaeda facilitator, and “Swift Sword,”  known for their ability to raise and

deliver money for al Qaeda, have been captured or killed. Lastly, the Saudi population

may feel that the fight has come to their homeland, and that they should be more cautious

in their giving as a result.

Entirely corrupt charities, such as the Wafa Charitable Foundation, are now out of

business, with many of their principals killed or captured. Charities that have been

identified as likely avenues for terrorist financing have seen their donations diminish and

their activities come under more scrutiny. The challenge is to control overseas branches

of Gulf-area charities, prevent charities from reopening under different names, and keep

corrupt employees of nongovernmental organizations from corrupting other NGOs as

they move from job to job.

Despite the apparent reduction in its overall funding, al Qaeda continues to fund terrorist

operations with relative ease. The amounts of money required for most operations are

small, and al Qaeda can apparently still draw on hard-core donors who knowingly fund it

and sympathizers who divert charitable donations to it.

The exact extent to which the donors know where their money is going remains

unknown. Still, substantial evidence indicates that many Gulf donors did know and even

wanted evidence that the fund-raisers really were connected to al Qaeda. In addition,

some donations, while not completely sinister, are not completely innocent. For example,

many donors gave funds to support the families of mujahideen fighters in Afghanistan.

Such donors may not have intentionally funded terrorism, but they certainly knew they

were supporting the families of combatants. Moreover, there is evidence that donations

increased substantially after the United States attacked al Qaeda in Afghanistan,

suggesting considerable anti-U.S. sentiment among the donors. At the same time, it seems

very likely that facilitators diverted funds from unwitting donors. To stop such revenue

from well-intentioned donors, it is necessary to capture or kill the facilitators who raise

the funds or to remove the corrupt imans, NGO officials, or others who divert them to al

Qaeda.

Allegations of other sources of revenue

Allegations that al Qaeda used a variety of illegitimate means to finance itself, both

before and after 9/11, continue to surface. The most common involve the drug trade,

conflict diamonds, and state support; none can be confirmed.

After reviewing the relevant intelligence on al Qaeda’s involvement in drug trafficking

and interviewing the leading authorities on the subject, we have seen no substantial

evidence that al Qaeda played a major role in the drug trade or relied on it as an important

source of revenue either before or after 9/11. While the drug trade was an important

Terrorist Financing Staff Monograph

23

source of income for the Taliban before 9/11, it did not serve the same purpose for al

Qaeda. Although there is some fragmentary reporting alleging that Bin Ladin may have

been an investor, or even had an operational role, in drug trafficking before 9/11, this

intelligence cannot be substantiated and the sourcing is probably suspect. One

intelligence analyst described the reporting as “bizarre.”  Bin Ladin may, however, have

encouraged drug traffickers to sell to Westerners as part of his overall plan to weaken the

West (though much of that intelligence is also suspect).

It is even less likely that al Qaeda is currently involved in the drug trade. Substantial

post-9/11 intelligence collection efforts have failed to corroborate rumors of current

narcotic trafficking. In fact, there is compelling evidence the al Qaeda leadership does not

like or trust those who today control the drug trade in Southwest Asia, and has

encouraged its members not to get involved. Although some individuals with some