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U.S.: Washington Struggles To Wage Effective Financial War On Terror

  • Andrew Tully

The U.S. war against international terrorism is two years old. Many members of Al-Qaeda, the Taliban, and other groups have been killed in battle in Afghanistan or arrested, including some identified as senior members of the groups. But terrorist attacks have stubbornly persisted, indicating that as some leaders or low-ranking members are caught, there are more to take their places. And terrorist groups apparently can still afford to continue their operations, despite efforts to crack down on the groups' financial networks. RFE/RL looks at whether the drive against terrorist financing has been adequate.

Washington, 24 October 2003 (RFE/RL) -- Thirteen days after the terrorist attacks of 11 September 2001, U.S. President George W. Bush stood outside the White House to announce what he called a major financial front in the war on terrorism.

Bush said U.S. banks already had been ordered to freeze the assets of suspected terrorist groups. But he said most of their money is held overseas, so he demanded that foreign banks do the same.

"We are putting banks and financial institutions around the world on notice: We will work with their governments, ask them to freeze or block terrorists' ability to access funds in foreign accounts. If they fail to help us by sharing information or freezing accounts, the Department of the Treasury now has the authority to freeze their bank's assets and transactions in the United States," Bush said.

Six weeks later (7 November 2001), Bush announced the first major assault in the financial front of his war against terror. He said raids were conducted both in America and overseas. The yield: One arrest and the freezing of assets of nine organizations and two individuals.

"Today's action interrupts Al-Qaeda's communications, it blocks an important source of funds, it provides us with valuable information, and sends a clear message to global financial institutions: You are with us, or you are with the terrorists. And if you're with the terrorists, you will face the consequences," Bush said.

So far, however, estimates say only a little more than $100 million in assets linked to Al-Qaeda has been frozen worldwide, about one-third of it in the United States.

Washington has acknowledged that its effort has stalled somewhat. Last year, for example, Robert Mueller, the director of the U.S. Federal Bureau of Investigation (FBI), told Congress that the efforts of investigators in America and abroad are being stymied to some extent because terrorists are converting money into diamonds and gold, which are harder to trace than cash.

But the man who once served as the United States' top official on terrorism told RFE/RL that the problem lies not so much in the terrorists' financial maneuverings, but within the U.S. government itself.

Richard Clarke, who until recently was the head of the White House's counterterrorism office, told the Senate Banking Committee this week (22 October) that creating the Department of Homeland Security in the midst of the war on terror, and shifting responsibility for the financial front, hurt the effort. "Reorganizing the federal government in the middle of a war on terrorism was perhaps not the brightest thing we could have done," he said.

Ideally, Clarke told the senators, a "fusion center," as he put it, in the Treasury Department should be the coordinator of the financial front in the war against terrorism. But he stressed that any federal agency would probably do the job right -- with the exception of the FBI, which now maintains that control.

"The FBI by tradition doesn't cooperate well with other federal agencies, and it doesn't share information, treats other federal agencies as second-class participants in the overall effort," Clarke said.

Clarke also said the United States should put pressure on foreign financial institutions to cooperate. One effective way to do that would be to freeze all U.S. currency held by such a bank. In many cases, such "dollar accounts," as they are called, make up a significant part, and sometimes the majority, of a foreign bank's holdings. "[Freezing dollar accounts] effectively kills a financial institution, and it is the nuclear bomb of the international finance industry," Clarke said.

But getting cooperation from banks is not as easy as Clarke suggests, according to David John, an economist with the Heritage Foundation, a private policy center in Washington.

John, once an official with a major New York bank, told RFE/RL that the debate about the best way to track suspect money has been going on for years. Previously, John said, the concern was how to track the money of organized crime groups. More recently, the target was drug lords. Now the focus is on terrorists.

But no matter who is involved, John said, the challenges are the same. He said all criminal depositors have learned to change their behavior frequently and use other strategies to keep their banking activity from being scrutinized. "What [maneuvers] a criminal uses will change very rapidly," he said. "So what [information] you need to have today may not be what you need to have tomorrow."

John said the most effective maneuver a criminal uses when depositing money in a bank is to have an employee on his organization's payroll who can tip off a criminal to the kinds of banking activities that are coming under scrutiny.

As for freezing a bank's assets, John said he is not certain that such a tactic would work. He said a bank in Italy, for example, can have another bank in any country outside the United States convert its dollars to a different currency without any intervention of the U.S. Treasury.

John said there is, however, an equally potent tactic that Washington can use: It can cut off a noncomplying bank's access to the United States. That, he said, would have the so-called "nuclear bomb" effect cited by Clarke in his Senate testimony.

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