Staff Report to the Commission

entire counterterrorism effort and other agencies can still contribute expertise in

particular cases through the JTTF. Of course, giving the FBI the lead requires continuing

vigilance to ensure that the FBI properly shares information and willingly coordinates

with its JTTF partners.

U.S. foreign intelligence collection and analysis

The day after the September 11 attacks, the CIA began beefing up its effort on terrorist

financing and by mid-month had created a new section dedicated to terrorist financing,

whose purpose was to create long-term intelligence capacity in this area. It is staffed with

personnel from the FBI, NSA, and DoD and it absorbed the CIA intelligence analysts

working on terrorist-financing issues in the Office of Transnational Issues, thereby

correcting the perceived structural defect previously identified. This new section’s

mission is to use information about terrorist money to understand their networks, search

them out, and disrupt their operations. The CIA has devoted considerable resources to

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

movement of money. It appears that the CIA is devoted to developing an institutional and

long-term expertise in this area.

37 See chapter 6 (discussing reaction to non-terrorism conviction of the executive director of the

Benevolence International Foundation).

38 This designation occurred in a May 2003 memorandum of understanding (MOU) between the secretary

of the DHS and the attorney general. The MOU became necessary to resolve turf battles between the FBI

and ICE, largely resulting from Operation Green Quest, which began as a U.S. Customs–led initiative to

investigate terrorist financing after 9/11 and followed Customs when it moved from Treasury to become

part of DHS/ICE. For a report on the success of the MOU, see GAO Report 04-464R, Investigations of

Terrorist Financing, Money Laundering and Other Financial Crimes (Feb. 20, 2004).

Terrorist Financing Staff Monograph

45

The FBI and CIA report that the information sharing between the FBI and the CIA is

excellent, and that FBI personnel assigned to the CTC’s new unit have duties

indistinguishable from those of the CIA personnel and have complete access to all CIA

data systems, subject to a need-to-know requirement. The CIA has access to FBI data as

well. The CIA distributes its information to the FBI through criminal information

referrals, liaisons at the field-level JTTFs, and interactions between their respective

headquarters units.

Economic and diplomatic efforts

On September 23, 2001, President Bush signed Executive Order 13224 against al Qaeda,

Bin Ladin, and associated terrorist groups, freezing any assets belonging to the listed

terrorists or their supporters and blocking any economic transactions with them.

Thereafter, the U.S. government embarked on a public course of issuing additional lists

of designated terrorist supporters—a pattern that continued into the winter of 2002. The

goal was to try to deprive the terrorists of money, but this approach also served to assure

the general public that action was being taken in the area of terrorist financing and to

keep the intelligence and world communities focused on identifying terrorist financiers.

The United States, understanding that an executive order covered only U.S. persons and

transactions, pushed at the United Nations for a near-universal system of laws to freeze

terrorist assets worldwide. The United Nations Security Council, galvanized into action

as a result of the attacks, passed Resolution 1373 on September 28, mandating member

nations formulate laws to designate individuals and entities as supporters of terrorism and

freeze their assets. In the weeks after 9/11, in an intense effort around the world, more

than 100 nations drafted and passed laws addressing terrorist financing or money

laundering. Worldwide, more than $136 million, including $36 million in the United

States, has been frozen. Currently, approximately 170 nations have the legal ability to

freeze terrorist assets. Moreover, the United States engaged in a broad diplomatic and

educational offensive to make other countries aware of some of the basic methods of

raising and moving money in support of terrorist activities.

There are significant multilateral norms now in place to set standards for ensuring that

terrorists do not use the formal financial system. Chief among these are the efforts of the

Financial Action Task Force (FATF), which, prior to 9/11, had been the multilateral body

responsible for setting international standards for the detection and prosecution of money

laundering. In the months after 9/11, the FATF expanded its remit to include setting

standards for terrorist financing, and made eight recommendations to prevent terrorist

financing. These recommendations included, for example, creating the ability to freeze

terrorist assets, licensing informal money remitters, and regulating nongovernmental

organizations.39 While setting standards is a necessary exercise, far more will depend on

each country’s diligently implementing and enforcing these standards.

39 FATF, “Special Recommendations on Terrorist Financing,” Oct. 31, 2001 (online at

http://www1.oecd.org/fatf/pdf/SRecTF_en/pdf); FATF, “Guidance for Financial Institutions in Detecting

National Commission on Terrorist Attacks Upon the United States

46

As part of the USA PATRIOT Act, Congress enacted financial institution regulations that

had been largely rejected before the attacks; many were only tangentially related to

terrorist financing. In part, they give the Secretary of the Treasury the power to name

countries, institutions, or transactions found to be of primary money-laundering or

terrorist-financing concern and implement new requirements that banks more closely

scrutinize their relationships with foreign persons and banks. A broader range of

industries—insurance companies, money services businesses, broker-dealers, and credit

card companies, for example—were potentially subject to a host of new requirements,

including reporting suspicious financial activity on the part of their customers to the

Treasury Department. Federal Reserve examiners now inspect banks for compliance with

antiterrorism directives. As noted in chapter 4, private financial institutions provided, and

continue to provide, significant assistance in investigating terrorist groups.

Although Saudi Arabia’s cooperation on al Qaeda financing was limited and inconsistent

in the first year and a half after the September 11 attacks, the situation changed

dramatically after the May 12, 2003, al Qaeda attacks in Riyadh. Saudi leadership, now

finally understanding the al Qaeda threat, is by all accounts providing significantly higher

levels of cooperation. Much of the Saudi government’s efforts understandably focus on

killing or capturing terrorist operatives, but the Saudis also have moved against fundraisers

and facilitators, shared intelligence, and enacted financial controls, such as

requiring that all charitable donations destined for overseas be administered by the

government and banning cash donations in mosques. They have taken significant action

against al Haramain, for example, a charity suspected of funneling money to terrorist

organizations, and seem prepared to go further. In addition, the Saudis are participating in

a joint task force on terrorist financing with the United States, in which U.S. law

enforcement agents are working side by side with Saudi security personnel to combat

terrorist financing. To further this effort, the Saudis have accepted substantial—and much

needed—U.S. training in conducting financial investigations and identifying suspicious

financial transactions, help that the Saudis had long refused. Although Saudi Arabia

likely remains the best and easiest place for al Qaeda to raise money, the Saudi

crackdown appears to have had a real impact in reducing its funding. In addition, the

Saudi population may feel that as a result of the attacks against their own people, they

should be more cautious in their giving.40

The Saudis have demonstrated they can and will act against Saudi financiers of al Qaeda

when the United States provides them with actionable intelligence and consistently

applies high-level pressure on them to take action. At least until recently, as noted in

chapter 7, the Saudis have generally moved slowly, and only after considerable U.S.

prodding. Because Saudi Arabia remains the primary source for al Qaeda fund-raising, it

is in a better position than the United States to identify the fund-raisers and collect

intelligence about their activities. Apparently the Saudis may now be willing to take the

Terrorist Financing,” Apr. 24, 2002 (online at http://www1.oecd.org/fatf/pdf/GuidFIT01_en/pdf); Jaime

Caruana and Claes Norgren, “Wipe Out the Treasuries of Terror,” Financial Times, Apr. 7, 2004, p.17.

40 See chapter 7, the case study on al Haramain, and chapter 2, on al Qaeda financing, for more on these

issues.

Terrorist Financing Staff Monograph

47

initiative. Certainly, the joint task force, their willingness to accept U.S. training in

conducting financial investigations, and their recent successful actions against key

facilitators are significant steps in the right direction. Time will tell whether the Saudis

follow through on these efforts and accept their responsibility to lead the fight against al

Qaeda fund-raising by Saudi sources.

Intergovernmental coordination and policy development

Terrorist financing is now, and has been since the attacks, the subject of extensive

interagency coordination mechanisms involving the intelligence community, law

enforcement, Treasury, and State. An NSC-level Policy Coordinating Committee (PCC)

on Terrorist Financing was established in March 2002 to replace the ad hoc structure that

had arisen in the immediate aftermath of the attacks. The PCC was chaired by the

General Counsel of the Department of the Treasury until he left government service in

November 2003. The process, often driven by force of personality rather than by any

structural mechanism, appears to have worked well in resolving differing points of view

on terrorist-financing policy and operational differences. The key participants in the

interagency process, especially the leaders of the CIA and FBI terrorist-financing units,

have lavishly praised each other’s commitment to cooperation and information sharing.

The PCC often was not fully integrated into the United States’ broader counterterrorism

policy and Saudi relations, however.

An Assessment

After 9/11, the government, in an attempt to “starve the terrorists of money,” engaged in

a series of aggressive and high-profile actions to designate terrorist financiers and freeze

their money, both in the United States and through the United Nations. Donors and al

Qaeda sympathizers, wary of being publicly named and having their assets frozen, may

have become more reluctant to provide overt support. The overall or long-term effect of

these actions, however, is not clear.

Moreover, these initial designations were undertaken with limited evidence, and some

were overbroad, resulting in legal challenges. Faced with having to defend actions in

courts that required a higher standard of evidence than was provided by the intelligence

that supported the designations in the first place, the United States and the United Nations

were forced to “unfreeze” assets (see, generally, chapter 5).

The difficulty, not completely understood by the policymakers when they instituted the

freezes, was that the intelligence community “linked”  certain entities or individuals to

known terrorist groups primarily through common acquaintances, group affiliations,

historic relationships, phone communications, and other such contacts. It proved far more

difficult to actually trace the money from a suspected entity or individual to the terrorist

group, or to otherwise show complicity, as required in defending the designations in

court. Intelligence agents, long accustomed to the Cold War reality of collecting

intelligence for extended periods of time before public action was necessary, were now

National Commission on Terrorist Attacks Upon the United States

48

faced with a new demand for intelligence that needed not only to be immediately and

publicly acted on but to be defended in court as well. Policymakers, many newly thrust

into the world of intelligence, were sometimes surprised to find that intelligence

assessments were often supported by information far less reliable than they had

presumed.41

These early missteps have made other countries unwilling to freeze assets or otherwise

act merely on the basis of a U.S. action. Multilateral freezing mechanisms now require

waiting periods before money can be frozen, a change that has eliminated the element of

surprise and virtually ensured that little money is actually frozen. The worldwide asset

freezes have not been adequately enforced and have been easily circumvented, often

within weeks, by simple methods.

Treasury officials were forthright in recognizing the difficulty in stopping enough of the

money flow to stop terrorist attacks, but argue that such freezes and the prohibition of

transactions have other benefits. Designations prevent open fund-raising and assist, for

example, in preventing al Qaeda from raising the amounts of money necessary to create

the kind of refuge it had in Afghanistan, or from expending the sums necessary to buy or

develop a weapon of mass destruction. Moreover, freezing groups or individuals out of

the world’s financial systems forces them into slow, expensive, and less reliable methods

of storing and moving money. Additionally, there is significant diplomatic utility in

having the world governments join together to condemn named individuals and groups as

terrorists.

A far more nuanced and integrated strategy has since evolved. As the government’s

understanding of the methods al Qaeda uses to raise, move, and spend money has

sharpened, the United States has recognized that measures to counter terrorist financing

are among the many tools for understanding terrorist networks, to be used in conjunction

with and in close proximity to other types of intelligence. Moreover, these measures,

again when closely coordinated with the overall counterterrorism effort, can be used to

disrupt terrorist operations and support systems. Intelligence and law enforcement

agencies have targeted the relatively small number of financial facilitators—individuals

al Qaeda relied on for their ability to raise and deliver money—at the core of al Qaeda’s

revenue stream (see chapter 2), and appear to have reaped benefits as a result. The death

and capture of several important facilitators have decreased the amount of money al

Qaeda has raised and have increased the costs and difficulty of raising and moving that

money. These captures have additionally provided a windfall of intelligence, which can

then be used to continue the disruption.

Some entirely corrupt charities are now completely out of business, with many of their

principals killed or captured. Charities that have been identified as likely avenues for

41 Compare Tenet’s speech at Georgetown University, Feb. 5, 2004 (“In the intelligence business, you are

almost never completely wrong or completely right”) with Mueller’s testimony to the 9/11 Commission,

April 14, 2004, p. 126 (“If there’s one concern I have about intelligence, it is that often there are statements

made about an uncorroborated source with indirect access and then there is a stating of a particular fact.…I

think there has to be a balance between the information we get and the foundation of that information”).

Terrorist Financing Staff Monograph

49

terrorist financing have seen their donations diminish and their activities come under

more scrutiny. Controlling overseas branches of Gulf-area charities remains a complex

task, however. The sheer volume of charitable dollars originating in the Gulf region, the

nature of charitable giving in the Islamic world, and the austere and uncompromising

version of Islam practiced by many Saudis pose a daunting challenge.42 U.S. efforts have

shown that detecting and disrupting the terrorist money among the billions is extremely

difficult, even with the best capabilities and intentions.43

The May 2003 terrorist attacks in Riyadh, moreover, apparently have contributed to a

reduction of funds available to al Qaeda. Increased public scrutiny and public

designations of high-profile Gulf-area donors have made other donors cautious. The fight

has come to the Saudi homeland, and Saudis and their government (as well as other Gulfarea

governments) have come to realize the problems that unfettered financial flows may

bring.44 Although Saudi Arabia has by most accounts become more fully engaged in

stopping al Qaeda financial flows, the Kingdom requires considerable technical

assistance and must take the initiative in combating terrorist financing, as opposed to

merely responding to U.S. requests. The Saudi regime must balance its terrorist-financing

efforts, the legitimate charitable relief Saudi charities provide, and the need to maintain

its own stability. 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.

While overall al Qaeda funding has apparently been reduced, it is nevertheless relatively

easy to fund terrorist operations. When investigators do not know where to look, the tiny

amounts of money needed for deadly operations are impossible to find and stop in a

multi-trillion-dollar global economy. The U.S. intelligence community has attacked the

problem with imagination and vigor, and cooperation among the world’s security services

seems to be at unprecedented levels, but terrorist financing remains a notoriously hard

target. The small sums involved, al Qaeda’s use of decentralized and informal methods of

moving funds (including trusted hawaladars and relatively anonymous couriers), and the

existence of a cadre of dedicated financial facilitators who raise money from potentially

unwitting sources all contribute to a significant and ongoing challenge for the intelligence

community for the foreseeable future.

42 See chapters 2 and 7 for a discussion of the role of charities in Saudi Arabia.

43 The United States perhaps leads the world in its ability to conduct financial investigations, yet often finds

itself stymied in doing the financial tracing and analysis necessary to detect terrorist money flows. See

generally chapter 6.

44 As noted in chapter 2, despite numerous allegations about Saudi government complicity in al Qaeda, the

Commission has found no persuasive evidence that the Saudi government as an institution or senior

officials within the Saudi government knowingly support or supported al Qaeda. A lack of awareness of the

problem and failure to conduct oversight over institutions, however, probably created an environment in

which such activity has flourished.

National Commission on Terrorist Attacks Upon the United States

50

The U.S. financial community and some international financial institutions have

generally provided law enforcement and intelligence agencies with extraordinary

cooperation, particularly in furnishing information to support quickly developing

investigations. Obvious vulnerabilities in the U.S. financial system, such as the largely

unchecked use of correspondent or private banking accounts by foreign banks or other

high-risk customers, have been corrected. However, no valid financial profile of terrorist

financing exists (despite efforts to create one), and the ability of financial institutions to

detect terrorist financing without receiving more information from the government

remains limited.

Law enforcement investigations often fail to prove the destination and purpose of money

transferred across continents in complex transactions, and transactions recorded in a bank

statement or a wire transfer say nothing about their source or purpose. Funds are sent

overseas through a charity; a fraction of these funds may then be diverted for terrorist or

jihadist purposes, often through additional charities and cash transactions. The

investigations of the Benevolence International Foundation (BIF) and the Global Relief

Foundation (GRF) vividly illustrate that even substantial intelligence of ties to terrorist

groups can be insufficient to prove a criminal case beyond a reasonable doubt (see

chapter 6). When terrorism charges are not possible, the government has brought

nonterrorist criminal charges against those suspected of terrorist financing. Such an

approach, while perhaps necessary, leaves the government susceptible to accusations of

ethnic or religious profiling that can undermine support in the very communities where

the government needs it most. Moreover, ethnic or geographic generalizations,

unsupported even by intelligence, can both divert scarce resources away from the real

threats and violate the Constitution.

Because prosecuting criminal terrorist fund-raising cases can be difficult and timeconsuming,

the government has at times used administrative orders under the IEEPA to

block transactions and freeze assets even against U.S. citizens and entities, as we show in

the case studies of the al-Barakaat money remitters and the Chicago charities (in chapters

5 and 6). In some cases, there may be little alternative. But the use of administrative

orders with few due process protections, particularly against our own citizens, raises

significant civil liberty concerns and risks a substantial backlash. The government ought

to exercise great caution in using these powers, as officials who have participated in the

process have acknowledged,45 particularly when the entities and individuals involved

have not been convicted of terrorism offenses.

The designated person or entity in such a situation does not have certain rights that might

be available in a civil forfeiture action, when the government in most circumstances must

file a lawsuit and bear the burden of proof by a preponderance of the evidence. As in any

other lawsuit, the owner of the property has the right to conduct discovery of the

government’s evidence, such as taking sworn depositions and obtaining documents.

Moreover, the defendant has the right to avoid forfeiture by demonstrating that he or she