Staff Report to the Commission

were not willing to take the risk against such a speculative outcome. Obtaining foreign

financial records thus was often a practical impossibility.

As was true in other areas of counterterrorism, agents perceived themselves as being

stymied by rules regarding the commingling of intelligence and criminal cases. Chicago

intelligence investigators looking at a Hamas subject thought, for example, that opening a

criminal case precluded their ability to obtain approvals from the Justice Department for

a FISA (Foreign Intelligence Surveillance Act) warrant to tap telephones. The agents

believed that the Justice Department would think that the request under FISA would

appear to be simply a pretext to further the criminal case.21 No agents wanted to block

themselves from using what could be the most productive investigative tool they had—

FISA—so criminal investigations were not opened and potential criminal charges were

not seriously contemplated.

Some agents also hesitated because of the nature of the cases. Indicting or even

investigating an Islamic charity or group of high-profile Middle Easterners required

special sensitivity. Fears of selective prosecution or inappropriate ethnic profiling were

always a consideration in going after a high-profile and sensitive target. Certainly, the

evidence had to be strong before a prosecution would be considered. As one highly

experienced prosecutor told the Commission staff, if the FBI had aggressively targeted

religious charities before 9/11, it would have ultimately had to explain its actions before a

Senate committee.

Lastly, the legal tools in terrorist financing were largely new, untested, and unfamiliar to

field agents and prosecutors in U.S. Attorney’s offices. Congress in 1996 had made it a

crime to provide “material support” to foreign terrorist organizations.22 Before the

21 The actual procedures were somewhat different that the agent’s perceptions, however. See the 9/11

Commission, Final Report, at 78 to 80, and accompanying footnotes, for a discussion of the issue.

22 18 U.S.C. Section 2339B makes it a crime to provide “material support or resources to a foreign terrorist

organization.” The secretary of state designates foreign terrorist organizations in consultation with the

secretary of the treasury and the attorney general.

National Commission on Terrorist Attacks Upon the United States

32

enactment of this statute, prosecuting a financial supporter of terrorism required tracing

donor funds to a particular act of terrorism—a practical impossibility. Under the 1996

law, the prosecutor had only to prove that the defendant had contributed something of

value to an organization that had been named by the secretary of state, after a formal

process, as a foreign terrorist organization (FTO). Unfortunately, al Qaeda was not

named an FTO until 1999, so criminal prosecution could not be considered earlier. Even

then, there was little impetus to focus on prosecuting material support cases or

committing resources to train prosecutors and agents to use the new statutory powers. As

a result, the prospect of bringing a criminal case charging terrorist financing seemed

unrealistic to field agents.

It was far easier for agents to find a minor charge on which to convict a suspect, thereby

ultimately immobilizing and disrupting the operation. This strategy was used in San

Diego in 1999, for example; knowing that individuals may have been supporting a

specific terrorist group, the FBI and the U.S. Attorney’s Office for the Southern District

of California developed a case charging the individuals with relatively low-level fraud.

This prosecution effectively disrupted the operation. More often, however, agents knew

that it would have been hard to persuade a busy prosecutor to bring a case on low-level

fraud or minor money-laundering crimes. If the prosecutors knew the classified

intelligence underlying the case, the agents might have had a better shot at convincing

them. But sharing that intelligence was difficult, and required approval from FBI

headquarters and notice to OIPR. Additionally, some of these low-level crimes carried

no jail time, and most agents did not think prosecution for a crime ultimately ending in a

probationary sentence would have been sufficient to disrupt an ongoing funding

operation.

On a national level, the FBI never gained a systematic or strategic understanding of the

nature and extent of the jihadist or al Qaeda fund-raising problem within the United

States. The FBI did not understand its role in assisting national policy coordination and

failed to provide intelligence to government policymakers. For example, shortly after the

East Africa embassy bombings in 1998, a staff member of the National Security Council

was assigned the task of coordinating government resources in the hunt for Bin Ladin’s

finances and ensuring effective interagency coordination of the issue. The NSC wanted

the FBI to produce an assessment of possible al Qaeda fund-raising in the United States

by al Qaeda supporters, but the FBI shared little information regarding Usama Bin Ladin

or al Qaeda. The NSC therefore concluded that the FBI did not have relevant information.

The problem stemmed in part from the FBI’s failure to create high-quality analytic

products on al Qaeda financing or an effective system for storing, searching, or retrieving

information of intelligence value contained in the investigative files of various field

offices.23 There was very little finished intelligence that FBI program managers could use

to show trends, estimate the extent of the problem, or distribute to policymakers or other

agencies.

23 The Commission staff, in interviews with field agents and in searching the FBI’s automated case-tracking

system, found a treasure trove of information regarding suspected terrorist fund-raising organizations in the

United States, yet none of this information was readily accessible.

Terrorist Financing Staff Monograph

33

The FBI lacked a headquarters unit focused on terrorist financing. According to the thenhead

of its Counterterrorism Division, the FBI considered setting up such a unit prior to

9/11. However, the FBI viewed terrorist-financing cases as too difficult to make. It also

believed that fighting terrorist financing would have little impact, since most terrorist acts

were cheap. As a result, the issue was left to the FBI’s general counterterrorism program

office. Those agents, overworked and focusing on the day-to-day approvals and oversight

of the entire FBI counterterrorism program, had neither the time nor the expertise to wade

through reports, talk to case agents, or focus on the terrorist-financing problem.

For its part, the Criminal Division of the Department of Justice also lacked a national

program for prosecuting terrorist-financing cases, under the 1996 “material support”

statute or otherwise. The DOJ’s Terrorism and Violent Crime Section (TVCS) had played

a role in drafting the material support statute and took the lead in developing the

administrative record to support the first round of FTO designations in 1997. After such

designations began to be made, TVCS worked on developing a program to use the 1996

statute, but it had little practical success before 9/11.

The fundamental problem that doomed efforts to develop a program to prosecute terrorist

fund-raising cases was that DOJ prosecutors lacked a systematic way to learn of evidence

of prosecutable crimes in the FBI’s intelligence files. The prosecutors simply did not

have access to these files because of “the wall.”  Although the attorney general’s 1995

guidelines required the FBI to pass to the Criminal Division intelligence information

indicating potential past, current, or future violations of federal law, the FBI almost never

did so with respect to terrorist fund-raising matters. Lacking access to the relevant FBI

investigations, the TVCS made some efforts to investigate cases on its own, including a

cooperative effort with a foreign service to probe potential Hamas fund-raising in the

United States. These initiatives took a great deal of time and effort and did not produce

any solid criminal leads. As a small section with many responsibilities, the TVCS had

insufficient personnel for the resource-intensive task of investigating terrorist financing.

The wall may, in fact, have created a disincentive for FBI intelligence agents to share

evidence of prosecutable crimes with criminal prosecutors. One experienced prosecutor

believed that it would have violated every bone in their bodies for these agents—who

were evaluated in large part on the number and quality of their FISA investigations—to

share information with the Criminal Division and thereby jeopardize the continuing

viability of a successful intelligence investigation. Another experienced prosecutor

expressed the view that FBI agents were focused on potential violent threats and did not

think the uncertain prospect of bringing a fund-raising case justified the risk of losing a

FISA investigation that might locate terrorist operatives. In any event, the FBI and DOJ’s

relationship regarding terrorist financing was dysfunctional; FBI agents rarely shared

information of potentially prosecutable crimes with DOJ prosecutors, who, therefore,

could play no role in trying to develop a strategy to disrupt the fund-raising operations.24

24 Richard Clarke of the NSC, who was interested in terrorist fund-raising in the United States, expressed

concern about the lack of terrorist fund-raising prosecutions to the chief of the TVCS. Clarke actually

brought to a meeting material he had printed off the Internet indicating extremists were soliciting support in

National Commission on Terrorist Attacks Upon the United States

34

In early May 2000, in response to an inquiry from the NSC’s Richard Clarke, a TVCS

attorney drew up a detailed proposal for developing a program to prosecute terroristfinancing

cases, providing a sophisticated analysis of the relevant legal and practical

considerations. The memorandum pointed out that the “vast majority” of the FBI’s

terrorist-financing investigations were being run as intelligence investigations, and

contended that the FBI gave preference to intelligence equities at the expense of the

criminal when the two overlapped. To circumvent this problem, the memo proposed the

creation of a unit to identify and pursue potential fund-raising matters as criminal rather

than intelligence investigations, and described a systematic methodology to investigate

and prosecute domestic fund-raisers for foreign terrorist organizations.

The memorandum had no effect; no resources were allocated to pursue the proposal, and

it was not implemented. The FBI continued its intelligence investigations, and the

criminal prosecutors largely sat on the sidelines.

Most fundamentally, the domestic strategy for combating terrorist financing within the

United States never had any sense of urgency. The FBI investigations lacked an

endgame. FBI agents in the field had no strategic intelligence that would have led them to

believe that any of the fund-raising groups posed a direct domestic threat, so there was no

push to disrupt their activities. Without access to the intelligence files, prosecutors had no

ability to build criminal cases, and the DOJ was doing little on a practical level to change

the situation. As a result, FBI intelligence agents merely kept tabs on the activities of

suspected jihadist fund-raisers, even as millions of dollars flowed overseas.

U.S. foreign intelligence collection and analysis

As we note in chapter 2, the CIA’s understanding of Usama Bin Ladin and al Qaeda

before the September 11 attacks was incomplete. The intelligence reporting on the nature

of his wealth was largely speculative, and sourced to general opinion in the Saudi

business community.25

The intelligence community learned the reality only after White House–level prodding. In

1999 Vice President Al Gore spoke to Saudi Crown Prince Abdullah during a visit to

Washington, DC about isolating and disrupting Bin Ladin’s financial network. The two

leaders agreed to set up a meeting on this issue between U.S. counterterrorism experts

and high-ranking Saudi officials. As a result there were two NSC-initiated trips to Saudi

Arabia, in 1999 and 2000. During these trips NSC, Treasury, and intelligence

representatives spoke with Saudi officials, and later interviewed members of the Bin

Ladin family, about Usama’s inheritance. They learned that the Bin Ladin family had

sold Usama’s share of the inheritance and, at the direction of the Saudi government,

placed the money into a specified account, which was then frozen by the Saudi

the United States and asked the TVCS chief what the DOJ was doing about the problem. The answer was,

unfortunately, not much.

25 For example, a 1998 intelligence report acknowledges that the CIA did not know the exact state of Bin

Ladin’s personal wealth, although it cited his inheritance as $300 million.

Terrorist Financing Staff Monograph

35

government in 1994. The urban legend that Bin Ladin was a financier with a fortune of

several hundred million dollars was nevertheless hard to shake, and U.S. government

intelligence documents even after the September 11 attacks sometimes referred to him as

such.

The lack of specific intelligence was a source of frustration to policymakers. As the

NSC’s Richard Clarke testified to the Senate Banking Committee in 2003:

The questions we asked then [in 1995] of the CIA were never answered—

and we asked them for six years: how much money does it cost to be al

Qaeda? What’s their annual operating budget? Where do they get their

money? Where do they stash their money? Where do they move their

money? How? Those questions we asked from the White House at high

levels for five or six years were never answered because, according to the

intelligence community, it was too hard.26

The CIA’s response to Clarke’s criticism was that terrorist financing was an

extraordinarily hard target and that, given the legal and policy limitations on covert action

against banks during this period, there was little utility in simply collecting intelligence

on terrorist financing.

The CIA obtained a very general understanding of how al Qaeda raised money. It knew

relatively early on, for example, about the loose affiliation of financial institutions,

businesses, and wealthy individuals who supported extremist Islamic activities. It also

understood that nongovernmental agencies (NGOs) and Saudi-based charities played a

role in funding al Qaeda and moving terrorist-related money. The problem, however,

was that the government could not disrupt funding flows, through either covert action or

economic sanctions, because the information was not specific enough. The CIA had

intelligence reporting on Sudan and the purported businesses Bin Ladin owned there, but

by the time of the East Africa embassy bombings this information was dated and not

useful. Much of the early reporting on al Qaeda’s financial situation and structure came

from a single source, a former al Qaeda operative, who walked into the U.S. Embassy in

Eritrea in 1996.

CIA devoted few resources to collecting the types of strategic financial intelligence that

policymakers were looking for, or that would have informed the larger counterterrorism

strategy. The CIA’s virtual station—ALEC station—was originally named CTC-TFL

(Counter Terrorism Center - Terrorist Financial Links), reflecting the CIA’s early belief

that Bin Ladin was simply a terrorist financier, as opposed to someone who actually

planned and conducted operations. However, the intelligence reporting was so limited

that one CIA intelligence analyst told Commission staff that, unassisted, he could read

26 Clarke testimony before the Senate Banking Committee, Oct. 22, 2003; see also Clarke testimony to the

Congressional Joint Inquiry. Contemporaneous documents support Clarke’s recollection concerning his

frustration. For example in November 1998, Clark wrote that four years after the NSC first asked the CIA

to track down UBL’s finances, the CIA can only guess at the main sources of Bin Ladin’s budget, where he

parks his money, and how he moves it.

National Commission on Terrorist Attacks Upon the United States

36

and digest the universe of intelligence reporting on al Qaeda financial issues in the three

years prior to the September 11 attacks. Another person assigned to ALEC station told

the Commission staff that while its original name may have been Terrorist Financial

Links, the station appeared to him to do everything but terrorist financing. Any

intelligence it had on terrorist financing appeared to have been collected collaterally, as a

consequence of gathering other intelligence. According to one witness, this approach

stemmed in large part from the chief of ALEC station, who did not believe that simply

following the money from point A to point B revealed much about the terrorists’ plans

and intentions. As a result, terrorist financing received very little emphasis. Another

witness recalled that ALEC station made some effort to gather intelligence on al Qaeda

financing, but it proved to be too hard a target, the CIA had too few sources, and, as a

result, little quality intelligence was produced.

Some attributed the problem to the CIA’s separation of terrorist-financing analysis from

other counterterrorism activities. Within the Directorate of Intelligence, a group was

devoted to the analysis of all financial issues, including terrorist financing. Called the

Office of Transnational Issues (OTI), Illicit Transaction Groups (ITG), it dealt with an

array of issues besides terrorist financing, including drug trafficking, drug money

laundering, alien smuggling, sanctions, and corruption. The ITG was not part of the CTC,

and rotated only a single analyst to the CTC. Moreover, ITG analysts were separated

from the operational side of terrorist financing at the CTC, which planned operations

against banks and financial facilitators. Members of the NSC staff stressed that this

structure was defective because there was almost no intersection between those who

understood financial issues and those who understood terrorism. As a result, the NSC was

forced to try to educate two different groups on the issues. Inevitable turf wars also

resulted.

Before 9/11, the National Security Agency had a handful of people working on terroristfinancing

issues. The terrorist-financing group had no foreign-language capability. As a

result, its collection had to focus on targets most likely to use the English language. The

NSA’s effectiveness was limited by sparse lead information from other elements of the

intelligence community on financing and, like the rest of the intelligence community, by

the wall between intelligence and law enforcement that gave it only limited access to law

enforcement information.

One possible solution to these weaknesses in the intelligence community was the

proposed all-source terrorist financing intelligence analysis center at Treasury’s Office of

Foreign Assets Control (OFAC), called the Foreign Terrorist Asset Tracking Center

(FTATC), which had been recommended in 2000 by the National Commission on

Terrorism (the so-called Bremer Commission). The NSC spearheaded efforts to create the

FTATC, but bureaucratic delays and resistance by Treasury and CIA officials delayed its

implementation until after the September 11 attacks. The delays resulted from the CIA’s

belief that the FTATC would duplicate some of its functions, the CIA’s unwillingness to

host the center temporarily until OFAC could accommodate it, and Treasury’s reluctance

to create a secure facility to host the center and allow OFAC direct access to intelligence.

Terrorist Financing Staff Monograph

37

The government also considered possible economic disruption, to be effected by targeting

Bin Ladin’s financial resources or by intercepting money couriers or hawaladars who

handled Bin Ladin’s money.

There is little doubt that the CIA had the authority to use methods of covert disruption to

go after cash couriers or hawaladars. Ultimately it was unsuccessful in doing so, either

because it was unable to identify specific useful targets or because such disruption was

judged to be too dangerous.

Economic and diplomatic efforts

Treasury’s Office of Foreign Assets Control had an early interest in searching out and

freezing Bin Ladin assets. Its primary tool, the International Emergency Economic

Powers Act (IEEPA), allows the president to designate individuals and entities as a threat

to the United States and thereby freeze their assets and block their transactions. OFAC,

for example, had long experience in freezing assets associated with Libya and Cuba. In

the 1990s the government began to use these powers in a different, more innovative way,

to go after nonstate actors. It first imposed sanctions against persons and entities

interfering with the Middle East peace process (MEPP) and then against other nonstate

threats, such as the Cali, Colombia, narcotics-trafficking cartel. OFAC personnel were

interested in trying to find and freeze Bin Ladin’s assets, but to do so required either a

presidential designation of Bin Ladin or the discovery of a link between Bin Ladin and

someone named for disrupting the MEPP. Efforts were made before the East Africa

bombings to link Bin Ladin to the names on the MEPP list, but their lack of usable

intelligence on the issue hampered OFAC analysts. OFAC did not collect its own

intelligence; rather, it relied on the intelligence community to collect and often analyze

the evidence, which it then used to make designations.

After the East Africa bombings in August 1998, President Clinton formally designated

Usama Bin Ladin and al Qaeda as subject to the sanctions available under the IEEPA

program, giving OFAC the ability to search for and freeze any of their assets within the

U.S. or in the possession or control of U.S. persons. OFAC had little specific information

to go on, however, and few funds were frozen.27 The futility of this effort is attributed to

the lack of usable intelligence, OFAC’s reluctance to rely on what classified information

there was, and Bin Ladin’s transfer of most of his assets out of the formal financial

system by that time. Even if OFAC had received better intelligence from the intelligence

community, it could have taken little effective action. OFAC has authority over only U.S.

persons (individuals and entities), wherever located. Because Al Qaeda money flows

depended on an informal network of hawalas and Islamic institutions moving money

from Gulf supporters to Afghanistan, these funds would stayed outside the U.S. formal

financial system.

27 OFAC did freeze accounts belonging to Salah Idris, the owner of the Al-Shifa facility bombed in

response to the East Africa embassy bombings. Idris filed suit against his bank and OFAC, and OFAC