West seeks to stem flow of terror funds in Dubai

Banking methods turn United Arab Emirates into a conduit for groups


DUBAI, United Arab Emirates - Every day, millions of dollars sluice through bank accounts held in luminescent office towers overlooking the Persian Gulf, testimony to how this old trading port, with its lucrative oil supplies starting to run thin, has recast itself as the ultramodern Switzerland of the Arab world.

But Western law enforcement and intelligence officials say Dubai's free-wheeling financial environment - a mix of modern wealth and ancient commerce - has allowed the country to become an important crossroads for financing terrorism.

U.S. officials are focusing closely on Dubai, looking for ways to stop the flow of terrorists' funds. But experts say there are daunting difficulties to penetrating the maze.

"Contraband of all kinds moves through there - liquor, cigarettes, precious gems, you name it," said Larry Johnson, a former counterterrorism official with the CIA and the State Department. "Dubai is going to emerge as one of the battlegrounds in terrorist financing. It's a real, real problem, and I don't know anyone who has a handle on what's going on there."

Describing the United Arab Emirates as a clandestine rendezvous for planners of the Sept. 11 attacks on the United States, the officials say half of the plotters' money - about $250,000 - was wired from banks here to operatives of al-Qaida in the United States. Also, U.S. intelligence agencies have tied al-Qaida money in banks here to the U.S. Embassy bombings in Kenya and Tanzania in 1998.

Dubai's conduits for terrorist money, experts say, include thriving Russian and Indian organized crime syndicates as well as the emirates' many free trade zones, which allow the commingling of legal and illegal commerce. But the most significant, elusive conduit is the informal international money-transfer network known as hawala.

The emirates are home to about 50 banks. There are even more hawala operators - about 80, most of them concentrated in Dubai and many operating out of its fabled gold souk, or market, its storefront windows adorned by strands of intricately braided gold.

Largely relied on by Middle Eastern and Asian communities around the globe, hawalas allow users to deposit money in one country and have the sums honored by related dealers elsewhere - permitting expatriate workers here to send small monthly sums home. Transfers from Dubai to the Indian subcontinent represent a significant sum: Laborers from southern Asia make up about half the emirates' population.

"Hawalas are the 1,000-pound beasts in this whole terrorist financial system," said a senior U.S. counterterrorism official here. "We think billions of dollars move through hawalas annually, and we don't know what percentage of that is dirty."

The Western officials assert that Dubai, along with Pakistan and India, forms the backbone of a system that abets terrorism. At a private dinner here Sept. 20 with financial ministers from Dubai and other Middle Eastern nations as well as Pakistan and India, U.S. Treasury Secretary John W. Snow asked his guests to tighten their scrutiny of hawalas.

Others share Snow's concern.

"It's convenient and cheap for Osama bin Laden to transfer cash from accounts in Pakistan and southwest Asia through Dubai," said Moyara Ruehsen, an international policy professor at the Monterey Institute of International Studies in Monterey, Calif. "He doesn't need to use a bank if he doesn't want to."

Officials of the emirates argue that since the attacks in the United States, they have strengthened their financial regulations and that hawala dealers were recently required to register with the government.

Sultan bin Nasser al-Suwaidi, governor of the emirates' Central Bank, said in a recent interview here: "We don't have the causes of money laundering: We don't have drugs, and corruption and crimes are very limited."

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