Financing Terror

A spotty record of inconsistent enforcement and few successes raises the question: Are laws targeting terrorists' bank accounts worthwhile?

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.)