THE PAPER TRAIL
Congress is now reviving a proposal killed last year by Senator Phil Gramm,
the Texas Republican who was then chairman of the Senate Banking
Committee. The bill, introduced by the Clinton administration, would give the
Treasury secretary broad power to bar foreign countries and banks from
access to the American financial market unless they cooperated with
money-laundering investigations. It was strongly opposed by the banking
industry and Mr. Gramm.
Roadblocks Cited in Efforts to Trace BIN LADEN's Money
By TIM WEINER and DAVID CAY JOHNSTON
From The New York Times
September 20, 2001
six-year struggle to uncover Osama
bin Laden's financial network failed
because American officials did not skillfully
use the legal tools they had, did not realize
they needed stronger weapons, and faced
resistance at home and abroad, officials
involved in the effort say.
Federal officials say they have not
persuaded foreign banks to open their
books to investigators and that in this
country, a law that would have allowed the
United States to penalize foreign banks that
did not cooperate was blocked last year by
a single United States senator.
Current laws and regulations give the
government less authority to seize the assets
of terrorists than of drug cartels, one federal
investigator said; it may seize only assets that
are the direct proceeds of terrorist violence.
For drug cartels or organized crime gangs, it
can seize any assets used to support their
activities.
Investigators also attribute their inability to
pierce Mr. bin Laden's financial network to
an ancient system of cash transfers based on
trust, not detailed records, that they say has
spread from countries like Pakistan into the
United States.
Since last week's attacks, proposals to curb
money laundering by terrorists have
suddenly gained support among old
opponents — including the Bush
administration — after languishing for two
years. The White House says it now wants
an aggressive attack on money laundering,
including stepped-up seizure of assets.
The bin Laden organization operates in 35 countries and needs to move
money to its members, American intelligence officials say. Tracing the money
could reveal not only terrorists' sources of support, but their intentions.
But present and former government officials say that since the mid- 1990's,
they did not fully use the legal tools they had to wage this difficult fight. "We
could have starved the organization if we put our minds to it," said Richard
Palmer, who gained experience in money laundering as the Central
Intelligence Agency's station chief in Moscow during the 1990's. "The
government has had the ability to track these accounts for some time."
Congress is now reviving a proposal killed last year by Senator Phil Gramm,
the Texas Republican who was then chairman of the Senate Banking
Committee. The bill, introduced by the Clinton administration, would give the
Treasury secretary broad power to bar foreign countries and banks from
access to the American financial market unless they cooperated with
money-laundering investigations. It was strongly opposed by the banking
industry and Mr. Gramm.
"I was right then and I am right now" in opposing the bill, Mr. Gramm said
yesterday. He called the bill "totalitarian" and added, "The way to deal with
terrorists is to hunt them down and kill them."
But the bill is gathering support from both parties. "I would be amazed if
there is not a sea change," said Senator John Kerry, the Massachusetts
Democrat, who is sponsoring the bill with Senator Charles E. Grassley,
Republican of Iowa. He said the opposition was based on "ridiculously
phony" arguments.
Even after the attacks last week, the banking industry continues to doubt the
need for new rules to combat money laundering, a LOBBYIST said.
Most experts say the funds used to finance the attacks here probably came
into this country in small amounts either through wire transfers or through the
use of brokers that belong to a paperless underground banking system.
That system of brokers is often referred to by its Hindi name, "hawala,"
meaning "in trust." It enables individuals to transfer sizable sums of cash from
their country to recipients in another country without the funds ever crossing
borders. The system, which has spread to the United States, is particularly
popular in countries like Pakistan and India where people want to avoid
paying taxes or bribes to officials when transferring money across borders,
experts said.
"Somebody will come into the office of a hawala broker in Pakistan and say,
`I want $100,000 to get to somebody in Vero Beach who is going to come
in and identify themselves as Cupid,' " said Jonathan M. Winer, who led the
State Department's international law enforcement efforts from 1994 to 1999
and now practices law in Washington.
The Pakistani broker, Mr. Winer explained, will contact a counterpart in the
United States, often using the Internet, then mail him a chit or agree on a
code word to complete the transaction.
Mr. Winer said such brokers might have been used to transfer sizable sums
of money destined for terrorists in this country because carrying large
amounts of cash posed too many risks.
"The two brokers have absolute trust in each other," said Rowan
Bosworth-Davies, an expert on money laundering at the Control Risks
Group. "They often come from the same clan and that is why nothing is
written down or records kept."
Congress passed a law in 1993 requiring check-cashing businesses and
informal financial enterprises like hawalas to register with the government and
report transactions over $3,000. But the Clinton administration did not
publish all the regulations until 1999. The BUSH administration ordered a
further delay until June 30, 2002. Jimmy Gurule, the Treasury under
secretary for enforcement, said yesterday that the administration, in light of
last week's attack, might move up the date.
The effort to track the bin Laden group's money began in earnest when
President Bill CLINTON signed a classified presidential order on Oct. 21, 1995.
The secret order, Presidential Decision Directive 42, ordered the
Departments of Justice, State and Treasury, the National Security Council,
the C.I.A. and other intelligence agencies to increase and integrate their
efforts against international money laundering by terrorists and criminals.
The government agencies joined together to try to penetrate the bin Laden
network of businesses, charities, banks and front companies. They failed.
The ball was handed to people who were generally incompetent to handle
the intricate task, said one Clinton administration official directly involved in
the effort to drain or divert the money flowing in and out of the bin Laden
organization.
The government agencies given the job suffered from "a lack of institutional
knowledge, a lack of expertise," said William Wechsler, a National Security
Council staff member under Mr. Clinton. "We could have been doing much
more earlier. It didn't happen."
Then attackers blew up two American embassies in Africa in August 1998.
Richard A. Clarke, the government's counterterrorism coordinator, set up a
new government team. He ordered it to find out how much money the bin
Laden organization had, where it came from, how it moved around the world
— and to stop it.
"We had only marginal successes," said Mr. Wechsler, who led the new
team in 1998 and 1999. The United Arab Emirates imposed money
laundering laws and China banned flights by the Afghan state airline, Ariana,
at the United States' urging, officials said.
The lack of great success was "mostly due to the limited assistance we
received from key countries abroad," Mr. Wechsler said. He blamed "their
lack of political will or weaknesses in their laws which fail to effectively
regulate their financial institutions and charities."
Until last week's attacks, the Bush administration was not much more
enthusiastic about new money laundering laws than Mr. Gramm. Led by its
chief economic adviser, Lawrence B. Lindsey, the administration did not
want to pressure international banks in the United States and elsewhere to
open their books.
Now the White House is setting up a new agency, called the Foreign
Terrorist Asset Tracking Center, run by the Treasury Department with help
from law enforcement and intelligence services, to try anew to track bin
Laden's finances.
The financial architecture of the bin Laden organization has not changed
radically since he set up operations near the Khyber Pass in the mid-1980's
and worked side by side with the C.I.A. to support the rebels fighting Soviet
forces in Afghanistan, United States officials said.
"The money movement and fund- raising system is the same," Mr. Wechsler
said.
nytimes.com |
