Hitting bin Laden in the wallet not easy

Previous U.S. efforts to find, block his money were unsuccessful

Some cash moves in suitcases

Terrorism Strikes America

The Response

September 25, 2001|By Mark Matthews | Mark Matthews,SUN NATIONAL STAFF

WASHINGTON - In trying to cut off the money supply of Osama bin Laden and his terrorist network, the Bush administration is embarking on a route strewn with obstacles and marked by past failure.

Right now, no one seems to have a clear idea how much money bin Laden has, let alone where he keeps it.

His personal fortune has been estimated at $2 million to $300 million, and he and his associates have started and closed enterprises in a number of countries in the Middle East, Africa and Europe.

Previous efforts to block the flow of money to bin Laden's network have been unsuccessful.

Most notably, the United States and the United Nations tried but failed to trace and freeze his assets after the 1998 U.S. embassy bombings in Kenya and Tanzania. The United States has indicted him for both attacks.

The extent of the challenge is illustrated by the 27 bin Laden-linked people, groups and companies whose U.S. assets were frozen yesterday by President Bush.

They include a front company in Germany; charities in Pakistan and the United Arab Emirates; and operatives and associated groups in Pakistan, Algeria, the Philippines, Lebanon, Libya, Somalia, Egypt and Yemen.

These groups have abundant methods to move money around. U.S. law enforcement agencies have been frustrated for years in trying to trace and seize the vast profits laundered by drug kingpins through an archipelago of offshore tax havens in the Caribbean, Europe and elsewhere that invite illicit wealth with their bank-secrecy laws.

"We haven't had enough law enforcement personnel or coordination to effectively trace assets for either terrorism or transnational crime," said Louise Shelley, a professor at American University who specializes in international crime.

Crackdown proposals

Critics note that U.S. Treasury Secretary Paul H. O'Neill has been reluctant to back proposals by the Organization for Economic Cooperation and Development that would crack down on the tax havens.

The administration's position "makes it more difficult for an international regulatory regime to operate," Shelley said.

The Clinton administration had enthusiastically supported the OECD initiative.

However, O'Neill, under pressure from Republican conservatives in Congress, complained that it was "overly broad" and said the United States would oppose forcing sovereign countries to abandon their tax policies.

In June, a compromise was reached under which tax havens would have to provide information on specific individuals accused of crimes, or face sanctions from the OECD, an organization of 30 major industrial countries.

But implementation was pushed back to 2003.

The executive order signed by Bush yesterday gives U.S. authorities a powerful new tool to gain cooperation from foreign banks.

If they fail to freeze assets held by bin Laden or his associates, or fail to help with the U.S.-led investigation into the World Trade Center and Pentagon attacks, the Treasury Department has been empowered by Bush to block their crucial relationships with U.S. banks.

Such relationships are necessary in order to make wire transfers in dollars, the currency in which most international commercial transactions are conducted.

"This is hugely important," said Jack A. Blum, a Washington lawyer who specialized in laundering and international drug trafficking as a Senate aide.

"We've never done it in the drug area."

Foreign bank moves

Anticipating action such as Bush took yesterday, Sen. Carl Levin, the Michigan Democrat, has proposed legislation that would prevent foreign banks from using other institutions to get around the U.S. order.

In the past, U.S. administrations have avoided taking aggressive measures against foreign banks for fear of disrupting the international financial system.

Even more draconian measures than those authorized by Bush are possible if foreign banks fail to comply, said a knowledgeable former U.S. official who spoke on condition of anonymity: using covert agents to disrupt the bank accounts internally.

But banks are far from the only way that money can be moved. Many people unable or unwilling to wire-transfer money through banks use an underground banking system known as "hawala."

Under this system, someone wanting to make a payment overseas can deposit money with a storefront company in, for example, the United States.

This small company then contacts an affiliated firm in another country, which makes the desired payment.

No wire transfer has occurred. The transaction can be conducted by e-mail. For this method to work, trust between the two firms is paramount.

Terrorists are also known to move money by the least complex method of all: cash in suitcases.

Blum says the measures announced by Bush amount to "a first step that we have to take to trap the money."

"Will it solve the problem?" he asked. "I don't think so."

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