Now, Darkazanli’s import-export business is suspected of being a front for Osama bin Laden’s Qaeda terrorist network.
The investigation of the suicide bombers’ money trail has put the spotlight on just how easy it is for terrorists to exploit the world’s financial systems. While tiny Caribbean and Pacific island banking centers like to portray themselves as discreet harbors for the wealth of the rich and powerful, investigators believe they have become money-laundering havens for terrorists and other criminals. The IMF estimates that global money laundering represents as much as 5 percent of the world’s GDP–about $1.5 trillion. Despite all the talk of greater “transparency” in the global age, the international banking system still allows for a network of tax havens, offshore banking centers and regulatory loopholes in which savvy criminals can easily conceal funds. The current EU directive against money laundering targets drug traffickers–not other criminals, including terrorists. Even in better-regulated private banking centers like Switzerland and Luxembourg, secrecy can provide unintended shelter to the wrong sorts.
Financial authorities are working fast to shed more light on the money trail in the aftermath of the Sept. 11 attack. G7 Finance ministers have announced that they will work with the U.S. government’s Foreign Terrorist Asset Tracking Center to follow the trail across borders. The Swiss and the Germans, realizing that the status quo won’t do, have set up special task forces to look for clues in their own banking systems. Britain is introducing a package of legislation to increase the policing of financial markets and will also sponsor a new U.N. resolution that would increase penalties and sanctions on countries with lax financial systems. The EU has moved with unprecedented speed, fast-tracking directives on money laundering and market manipulation.
All over the continent, regulators and police are tracking the money that leads to bin Laden, whose wealth has been estimated in the hundreds of millions of dollars. The investigations have already raised embarrassing questions about possible ties between major financial institutions and minor ones connected to known terrorists. For example, the Dutch bank ABN AMRO has a 40 percent interest in Saudi Hollandi Bank in Jidda, the largest non-Saudi-owned bank in the country. Saudi Hollandi has a relationship with the Sudanese Al Shamal Islamic Bank, said to have been founded by Osama bin Laden. ABN AMRO is now reviewing the exact nature of the ties between the two banks.
The investigations will likely drag on for months, if not years. Acting on U.N. Security Council resolutions, Europeans had already frozen more than $100 million worth of Taliban funds since last March. In addition to investigating a list of 27 names given by the United States, Europeans are now looking at other individuals and institutions that might be connected to terrorism. A master list of nearly 400 names is being circulated by the Basel Commission on Banking Supervision.
It’s not very hard for criminals to hide illegitimate money in legitimate banks. Terrorists can raise money by setting up legal publications or other businesses, collecting donations through charitable fronts or (as is suspected of the Qaeda network) trafficking in heroin culled from Afghan poppy fields. According to the Paris-based Financial Action Task Force on Money Laundering (FATF), whose work is sponsored by the Organization for Economic Cooperation and Development, a Middle Eastern terrorist typically will begin by depositing these funds in small amounts in various local banks. Then, says Willy Bruggeman, deputy director of the Pan-European police agency Europol. “They’ll look for a weak link in the [global] financial system.”
The weakest links are well known. According to the FATF, there are 19 particularly vulnerable states, including Russia, Hungary, the Philippines, Indonesia, Myanmar, Egypt, Guatemala and tiny nations like Nauru. Financial regulation in these countries is lax at best. So terrorists can hide their tracks by moving money into these areas, and switching it around as many as 200 times in a tactic called “layering.” The trail is further obscured by the use of false fronts, including charities, foundations, shell corporations and trusts. “There are huge problems with this, particularly in offshore financial centers,” says Patrick Moulette, executive secretary of the FATF. In fact, the U.S. most-wanted list includes three charities and one corporation.
By the time terrorist money makes its way into a major financial center like London or New York, it may look pretty clean. Nearly all Western financial institutions, even highly secret Swiss banks, have strict “know your customer” rules. But terrorists and other criminals with detailed knowledge of global financial markets have proved that they can beat the system. The notoriously corrupt late Nigerian dictator Sani Abacha simply asked his son (who has a different name) to open an account for him at Credit Suisse. And banking secrecy hinders police use of the strategy that brought down Al Capone–prosecuting major criminals on relatively minor financial charges like tax evasion–because tax evasion is effectively legal in banking havens like Switzerland and Luxembourg.
The sheer complexity of global financial transactions can also shelter terrorists. Jermyn Brooks, the executive director of Transparency International, an anti-corruption nonprofit organization, has worked with major banks like Citibank, Chase, Morgan Stanley, Credit Suisse, UBS Warburg, Barclays, HSBC, Societe General and ABN AMRO on how to spot dubious transactions. “They are very concerned,” he says. “They recognize that given the volume of their business, it’s quite possible that mistakes can be made.”
Around the world, legislators are trying to make sure that law-enforcement has the tools to uncover terrorist funds. In the United States, two new anti-money-laundering proposals are making their way through Congress. Germany’s brand-new Financial Intelligence Unit may end up relaxing bank-secrecy laws. In Britain, a new “proceeds of crime” bill will ease law-enforcement access to financial information. U.K. Chancellor of the Exchequer Gordon Brown has pointed a finger at the Swiss for not opening their books fast enough, and would like to see tax reform in places as close to home as the Isle of Man and the Channel Islands. Work on a new EU money-laundering directive is likely to expand the rules beyond drug trafficking to all organized crime, including fraud and terror. The new law will cover not only banks, but also real-estate agents, lawyers, casino owners, jewelers and anyone else who might have financial dealings with criminals. As money becomes a weapon against terror, Europe is joining the war.
