Are We Winning the War on Terror Finance?

A few days after the most successful terrorist attack in U.S. history, President George W. Bush stated, “Money is the lifeblood of terrorist operations. Today we are asking the world to stop payment.” Ten years later, has that request been fulfilled?

The short answer is both “yes” and “no.” Completely eradicating terror finance is impossible. There is no doubt that our financial countermeasures have not been as smart or efficient as they could be. However, after ten years of concerted effort, it is also now harder, costlier, and riskier for terrorists to raise and transfer funds, both in the United States and around the world.

The learning curve has been steep. For example, in the years immediately after September 11th, policymakers within the Treasury Department were convinced that “financial intelligence” was the key to following the terrorist money trail. They had misplaced faith in the approximately 18 million pieces of financial intelligence that are filed annually with Treasury, and in the countless million pieces of additional financial information filed by members of the international community. The intelligence comes from a wide variety of sources, including banks, money service businesses, and individuals. Financial intelligence was initiated during the early years of the “War on Drugs,” when the enormous proceeds of the international narcotics trade regularly sloshed around western financial institutions. The financial reports were not originally designed to combat terror. Not one piece of financial intelligence in the United States or overseas was filed on any of the 19 September 11th hijackers. The same dearth of financial intelligence has subsequently held true for major terrorist attacks from Bali to Baghdad.

Should we be surprised? Shortly after September 11th, when he was still located in the mountains of Afghanistan, Osama bin Laden was interviewed by a Pakistani journalist. He was asked about finance, and whether he was afraid the West would identify and seize al-Qaeda’s assets. He replied: “Attempts to find and freeze assets will not make any difference to al Qaeda or other jihad groups. Al Qaeda is comprised of modern, educated young people who are as aware of the cracks in the Western financial system as they are of the lines in their own hands. These are the very flaws in Western financial system which is becoming a noose for it.” And over the last ten years, our adversaries have proven time and time again that they have identified these “cracks.”

For example, after authorities intercepted a plot in the Gulf to send explosive-laden packages into the United States hidden in a printer, mobile phones and other devices aboard air freight flights, al-Qaeda in the Arabian Peninsula (AQAP) broadcast the following statement; “It is such a good bargain for us to spread fear amongst the enemy and keep him on his toes in exchange for a few months’ work and a few thousand dollars.” The operation cost the terrorists approximately $4,500. Simply put, it is very difficult for law enforcement and intelligence officers and analysts to detect small amounts of money that could be used to finance terrorism.

In another recent attempted terrorist attack against the United States, the Pakistani Taliban avoided financial transparency reporting requirements and financed an attempted bombing in New York’s Times Square. It is estimated that the operation cost approximately $12,000.

Seizing terrorist assets has been another major “metric” used by Treasury officials to judge success in the War on Terror Finance. In fact, the 9/11 Commission’s Public Discourse Project awarded Treasury its highest grade, an “A-,” in large part due to the statistics of seized terrorist assets provided at the time. In reality, however, the government’s freezing/seizing efforts have been inconsistent at best, leading some to believe that Washington may be “cooking the books” and “hiding behind the numbers.”

Indeed, despite earlier statements from Treasury that boasted of blocked and seized terrorist assets that total in the hundreds of millions of dollars, former Under Secretary Stuart Levey told the Senate Finance Committee in 2008 that only $20,736,920 in terrorism-related funds had been blocked (not forfeited) between September 2001 and December 2007. To put things in perspective, this number should be contrasted with the approximately $207 million seized during a March 2007 operation against a Mexican methamphetamine ring. In other words, a single drug bust yielded nearly ten times as much money in one day as did U.S. counterterrorist finance efforts in six years.

Not all the news is negative, however. The U.S. government is developing some innovative financial tools and procedures. Departments and agencies continue to be reorganized. Bureaucracies are becoming much better at sharing information. Progress has been made in providing training and technical assistance and helping countries to help themselves. We are beginning to understand that some of the money laundering and terrorist finance methodologies and techniques that governments around the world are confronting do not have realistic or cost-effective solutions.

For example, it has been nearly a year since the United States and its allies strengthened economic sanctions against Iran in an effort to force the Islamic Republic to abandon its nuclear weapons program. Thus far, these measures have yielded positive results; more than 80 financial institutions—including Credit Suisse and Deutsche Bank—have reportedly completely cut off or significantly reduced their relationship with the Islamic Republic. More specifically, major international financial institutions that once provided credit lines to Iran’s commodities industry have reportedly stopped. In particular, Iran is finding it increasingly difficult to get banks to process oil and gas payments, which represent about 80 percent of the Islamic Republic’s export revenue.

Additionally, the U.S. intelligence community has developed robust geospatial and network analysis tools to attack various networks and financial nodes. These types of advances make it easier to track the financial flows of terrorist financiers and operators alike.

Money is the necessary ingredient for both state sponsors of terrorism and radical organizations. Simply put, without money there is no terrorism. Unfortunately, the bottom line ten years after the September 11th attacks is that there is no doubt that terrorist networks retain access to financial sources, retain the ability to self-finance operations that do not cost much money, and can move and transfer both money and value to bankroll the next terrorist plot.

John Cassara and Avi Jorisch are former Treasury Department officials and co-authors of On the Trail of Terror Finance: What Law Enforcement and Intelligence Officials Need to Know (Red Cell Publishing, 2010)