Financing Terror

Center on National Security in The National Interest, March 16, 2012

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Since 9/11 and the Patriot Act, Congress and the administration have sought to cut off would-be terrorists at the source: their bank accounts. But a more thorough examination of these procedures shows that there are both limits and costs to vigorous terror-finance prevention.

Late last month, the Fordham Law Center on National Security brought together experts from finance, law, government, NGOs and law enforcement for a conference on preventing and combating terror financing. For the most part, they confirmed the conventional wisdom: thwarting and preventing new attacks is important, and there is an extensive and expanding tool kit for choking off terror at the purse strings. The methods include new banking regulations to monitor financial transactions, the Treasury Department’s Office of Financial Asset Control (OFAC) to freeze assets of suspect groups and criminal sanction for capaciously defined “material support” for terrorism.

But the experts must grapple with one unavoidable fact: acts of terror, even the most calamitous, don’t always take all that much money. “Money is the lifeblood of any organization,” said Don Borelli, a twenty-five-year veteran of the FBI. “But the bottom line is that it doesn’t take a lot of money to wreak havoc on the economy.” The 9/11 Commission’s estimate of the cost of al-Qaeda’s attacks on New York and Washington bears these claims out: at $400,000–500,000 the effort came in at around one-third the average price of a Manhattan apartment.

Other experts hedge. “Terrorist attacks are not expensive, but maintaining the infrastructure is expensive,” said Brian Wilson, a sanctions expert at the UN Security Council. But how many acts of terror actually require this costly infrastructure? Faisal Shahzad’s attempted Times Square bombing in 2010 was not part of any large, organized group and had a bargain-basement price tag. The Atocha bombings in Madrid—the largest single act of terrorism in the West since 2001—were perpetrated not by al-Qaeda but by a group of locals operating on the cheap.

Legislative Loopholes

Ezra Levine, an attorney who helps companies like Western Union comply with post-9/11 regulations, contends that the Bank Secrecy Act (BSA) is “a failure” at monitoring or disrupting terror funding. Enacted in 1970 and updated sporadically since, the act’s many reporting requirements do not articulate a definition of terror financing and task both banks and other financial institutions with law-enforcement functions for which they are ill-equipped. And the BSA doesn’t even apply to couriers of cash. In fact, the 9/11 hijackers, upon landing in the United States, truthfully filled out their disclosure forms: yes, they were all carrying more than $10,000 in cash, and they provided their real names and addresses on the form—but none of this triggered a timely response. According to Levine, surveillance of financial transactions yields useful intelligence only if the transacting agent is already a terror suspect.

In the past ten years, law enforcement’s use of the terror-finance tool kit has been selectively ambitious. Both governmental and third-party national-security institutions have labored to establish financial ties between al-Qaeda and the diamond trade and between al-Qaeda and the poppy trade. Duncan DeVille, who leads Booz Allen Hamilton’s Anti-Money Laundering/Counter-Terrorist Financing program, is concerned about the inroads allegedly made by Middle Eastern terror groups in Latin America. Many counterterror professionals have labored mightily to find a strong connection between Hamas and Hezbollah on the one hand and Latin American drug cartels on the other, and DeVille tried gamely to connect them in a PowerPoint talk lubed with phrases like “no one can confirm it, but…” and “are said to have…”.

But this nexus, a kind of Northwest Passage to many in the security business, could well be illusory. When DeVille said that “Everybody sees a connection between the Mexican drug cartels and Mideast terrorist groups,” he meant that this link is recognized by the world of counterterror entrepreneurs, bloggers and consultants, some of whom have valuable law-enforcement experience—and many of whom do not.

Who are the Real Terrorists?

The laws and policies designed to thwart terror finance are applied erratically and inconsistently. When asked about the apparent absence of investigation into the well-funded lobbying drive on behalf of the Mujahedeen-e-Khalq (MeK), an Iranian expat group based in Iraq and on the State Department’s terror list, the experts’ expansiveness suddenly grows demure. If a deep-pocketed group began funding advocacy for Hamas, wouldn’t there be a mad rush to shut it down? Anne Marie McAvoy, a former federal prosecutor, volunteered that “the FBI keeps it close to their vest, otherwise the bad guys get tipped off.” No doubt. But political clout seems to be trumping the law: the MeK, a neoconservative darling, has expensively recruited high-profile figures like Howard Dean, Mike Mukasey, Louis Freeh, Fran Townsend and Rudy Giuliani as advocates. (The Treasury recently announced a probe into Ed Rendell’s paid speaking for the MeK, but one doubts that he will meet the same kind of penalty as, say, Javed Iqbal, a Staten Island satellite-TV salesman in federal prison for including Hezbollah’s channel in some customers’ cable packages.)

Consider the double standards at work here. The federal government prosecuted the Holy Land Foundation (HLF) for material support for terror; the U.S.-based Muslim charity had supplied funds to charitable Zakat committees in the West Bank that, they argued, are linked to Hamas. It mattered little that USAID, the European Commission and the International Committee of the Red Cross had all funded these very same Zakat committees, or that USAID continued to fund them even after HLF’s assets were frozen and the group was indicted. After a mistrial, federal prosecutor Richard Roper was eventually able to secured a guilty verdict against what was formerly the largest Muslim charity in the United States.

The government’s targeting of Muslim charities has been particularly intense, and not just in the form of criminal prosecutions. The Treasury Department’s Office of Foreign Asset Control (OFAC) has frozen the assets of the several groups deemed funders of terror. Concerns about the soundness of the OFAC process—which entails secret charges, secret evidence presented ex parte and only the most limited judicial review—are not confined to professional civil libertarians but were also strongly voiced by the 9/11 Commission in its 2004 monograph on terror financing and across the board in the humanitarian sector.

On the other hand, a 501(c)(3) charity like the Hebron Fund bankrolls the illegal colonization of portions of the West Bank that Israeli settlers have forcibly cleared of Palestinian inhabitants and owners. The settler groups who take part in this violent process might well meet the State Department’s legal definition of “international terrorist,” but there is zero likelihood that the Hebron Fund or its donors will ever be prosecuted for material support or have their assets frozen by the Treasury.

Double Standards at the Top

The inconsistency in enforcement goes all the way to the top. Not one of the experts at Fordham last month saw fit to bring up the remarkable fact that Rep. Peter King (R-NY), chair of the House Committee on Homeland Security, used to help raise money for what the State Department recognizes as a terrorist group. King’s fundraising for the Irish Republican Army has been widely reported and freely admitted by the congressman; his excuse is that the group never declared war on the United States—which of course is also true of the Tamil Tigers, the FARC, Hezbollah and most of the other groups on the terror list. (The IRA did kill some Americans in their bombings of nonmilitary targets like pubs and post offices.)

I asked Richard Roper, the former federal prosecutor, whether the theory of prosecution that eventually won him a guilty verdict against the Holy Land Foundation might work against Rep. King. “If the IRA persisted in their criminal activity after their designation, well then, yes.” Two IRA splinter groups are currently on the State Department’s Foreign Terrorist Organization list, so King might be, at least in theory, vulnerable to criminal or administrative sanction.

But King can, of course, sleep easy: due to our domestic tribal politics, his terror fundraising will never be prosecuted. “If you give to a group that’s well integrated into the United States—it doesn’t have to be Irish, it could also be Jewish—you won’t have any problem,” said Joshua Dratel, one of the attorneys who defended the Holy Land Foundation. “But if you give to a group that’s marginal–a Muslim group, or the Tamil Tigers–you’ll be prosecuted.” Having a lot of money also helps; if you are a large bank—say, Credit Suisse—and you are implicated in illegally handling Iranian funds in contravention of law-enforcement efforts to prevent Iran from acquiring arms, you will face a stiff fine but no criminal charges.

The side effects of this pattern are not trivial. According to Dratel, a decline in private giving contributed greatly to the famine last summer in Somalia; charity groups simply turned off the tap, fearful of criminal liability should their aid fall into the hands of al-Shabaab, a listed Somali terror group. Though the State Department told aid organizations that they would not zealously enforce the material-support law, Dratel said that Muslim charities had no reason to trust this assurance.

Counterterror tools like the policing of financial flows may be limited and heavily politicized, but this does not imply the methods are wholly worthless. All tactics have their limits and can be abused. But more examination of these tools is in order: the flaws, negative side effects and social costs of terror-finance policing have not been adequately reckoned.

Chase Madar is a lawyer in New York. He reviews and reports for the London Review of Books, Le Monde Diplomatique, the American Conservative Magazine and CounterPunch.