Small Sums, Few Triggers Hamper Banks' Ability to Flag a Money Trail
By PAUL BECKETT, CARRICK MOLLENKAMP and MICHAEL PHILLIPS
Staff Reporters of THE WALL STREET JOURNAL
October 10, 2001
Last year, Mohamed Atta, the suspected ringleader in Osama bin Laden's terrorist plot, was sent $100,000 in several transfers from the United Arab Emirates. At the time, at least one bank was suspicious enough about the transaction to file a report with federal authorities.
It triggered no action.
In the month following the disaster, U.S. investigators have focused intensely on the complex money trail left behind by the 19 suspected terrorists and those who may have financed them. Although much of the suspected terrorists' financial dealings remain cloaked in mystery, this much is clear: The capacity of the U.S. banking system to detect possible terrorists is extremely limited -- and potential clues went unheeded.
In fighting the financial war on terrorism, the government has now turned up the heat on the nation's 8,000 banks. President Bush has asked them to freeze the assets of organizations and individuals that are believed to have links to Mr. bin Laden's al Qaeda network. An Oct. 5 letter sent by the Federal Reserve and other regulators instructed banks to designate a "senior-level" point person to funnel information about suspected terrorists to law-enforcement authorities. The Treasury Department has asked the American Bankers Association to help it in coming weeks to develop guidelines on how banks can spot suspected terrorist activities.
Tuesday, Jimmy Gurule, the Treasury Department's official in charge of law enforcement, said his agency is prepared to use all the tools at its disposal "to combat the financial underpinnings of terrorist operations world-wide." Financial institutions "can play a vital role in this effort," he adds.
The latest moves to give banks more snooping power are likely to spark opposition. When regulators a few years ago tried to pass rules that would force banks to create profiles of customers to help them spot possible money launderers, the plan generated a fight on Capitol Hill and about 300,000 complaints from citizens
To date, the ability of banks to provide financial reconnaissance about terrorists has proved limited. For one thing, banks' detection systems are geared -- not very successfully -- toward catching drug lords who try to launder large amounts of cash. In some cases, the 19 suspected terrorists appear to have avoided banks altogether. But when the suspected hijackers did make use of the U.S. banking system, they did so in a way that made them virtually indistinguishable from any other small-time bank customer.
"There's nothing about the way these terrorists have been operating that would have provided a clue," said Jerome Walker, a former senior enforcement official at the Office of the Comptroller of the Currency, the nation's largest bank regulator. "It's not like they walked into a bank looking or acting like terrorists working for Osama bin Laden."
Lately there has been a flurry of activity -- from a new hotline for banks to report suspicious activity to legislation on Capitol Hill -- to try to improve the detection of terrorists.
'Look Out for This'
Particularly popular both with many lawmakers and the banking industry is a provision in a Senate banking committee bill that would allow law-enforcement and intelligence agencies to share tips on suspects with banks. "For the first time, the intelligence agencies can say to the banks, 'Look out for this, this and this,' " says Democratic Sen. Charles Schumer of New York.
Already, regulators have begun encouraging banks to write the word "terrorism" in the box marked "Other" on the suspicious-activity reports they send to law enforcement. Until now, none of the 20 categories -- from "check fraud" to "mysterious disappearance" -- has squarely addressed the possibility of terrorism.
Banks are required by the government to report cash deposits or withdrawals of more than $10,000. But the suspected terrorists rarely dealt in that kind of money. It is estimated they may have spent up to $500,000 in total, a relatively modest sum given the damage they caused. But expenditures were made in many venues and in small increments.
On Sept. 10, for instance, Mr. Atta and fellow suspected hijacker Abdulaziz Alomari were videotaped at 8:31 p.m. at a Key Bank ATM machine in South Portland, Me. The maximum withdrawal allowed from the machine was $300.
When several of the suspected hijackers opened a total of nine accounts at SunTrust Banks Inc. in Florida, they each only used a few thousand dollars in cash and travelers checks to do so, people familiar with the matter say. And accounts at Dime Bancorp Inc. of New York belonging to two terrorists also appear to have involved only small amounts of money, these people say.
"As long as you have Mohamed Attas who are students and get a few hundred dollars a month, detection is virtually impossible," says Urs Roth, chief executive of the Swiss Bankers Association.
Beyond banks, the suspected hijackers made use of money orders and check-cashing services, which are much less regulated than banks. Around July, Mr. Atta paid cash for hard-to-trace U.S. Postal Service money orders in amounts ranging from $100 to $200, according to the owner of the small-package shipping company in Punta Gorda, Fla., where he bought them. He also is believed to have used a Western Union facility based at a Mail Boxes Etc. outlet in Laurel, Md., to send money to Pakistan days before the attacks.
Exploiting Convenience
Indeed, Mr. bin Laden, the chief suspect in the attacks, has suggested that members of his organization, al Qaeda, deliberately exploited the convenience and accessibility of America's financial institutions. "Al Qaeda comprises of such modern educated youths who are aware of the cracks inside the Western financial system as they are aware of the lines in their hands," he said in an interview late last month in Pakistan's Ummat newspaper.
One obstacle faced by banks is that law-enforcement authorities often have been resistant to disclosing names connected to sensitive investigations before a crime has been committed.
In late August, the Central Intelligence Agency told the Immigration and Naturalization Service to place two of the suspected hijackers, Khalid Almihdhar and Nawaf Alhazmi, on a watch list that would bar their entry into the U.S. The INS's response: Both men were already in the country. The FBI then launched its own search, but never found them. All the while, Mr. Alhazmi was making purchases on a Visa card, issued by Dime bank in July, according to people familiar with the matter.
One purchase: A ticket for American Airlines flight 77 that crashed into the Pentagon. The ticket was purchased from Travelocity, the online travel agency on Aug. 27, using an address in Fort Lee, N.J.
If the bank had known that Mr. Alhazmi was a wanted man, "it could have picked up the phone and said, 'Do you want us to call you if he steps into the branch again?' " says Mr. Walker, the former senior bank regulator.
An FBI spokesman said senior agency officials were unavailable for comment. Dime declined to comment.
At least four other suspected hijackers also used Visa credit cards to purchase their Sept. 11 airline tickets online. And Swiss authorities disclosed that Mr. Atta used a credit card to buy two pocketknives and some chocolate during a layover in Zurich as he traveled to Madrid from Miami in July.
When it comes to flagging larger money movements, banks are better equipped because their software typically spots unusually large transactions in an account. That may explain why Mr. Atta's $100,000 worth of wire transfers were viewed as suspicious.
Banks, like anyone else, can call the police to report suspected crimes, but their official alerts are filed at an Internal Revenue Service computer center in Detroit. These suspicious-activity reports have to be sent by U.S. mail because the IRS computers can't accept electronic filings. Large banks usually file on magnetic tape or floppy disk, which is available to law enforcement within three days, according to government officials. But for authorities to get access to the information from small banks -- which usually file on paper forms -- the process is even more archaic. (Paper reports comprise about half of the more than 150,000 reports filed each year.)
After the paper reports arrive in Detroit, they are sent to a company in North Dakota that has a data-entry contract with the IRS. This company, in turn, sends some of them to the Turtle Mountain Band of Chippewa reservation in North Dakota. At a tribal-owned company called Uniband Inc., about 170 employees furiously transcribe the paper reports onto old-fashioned magnetic tape. The tape is then shipped back to Detroit where it is loaded into Internal Revenue Service computers for review by law-enforcement officials. Total elapsed time: up to nine days.
Richard Monette, the elected chairman of the Turtle Mountain tribal council, says that while the reservation has much more sophisticated data-entry equipment, it has been unsuccessful in persuading the IRS to update its methods. "That is pure craziness," he says.
A spokesman for the IRS declined to comment on any aspect of the reporting process, saying, "In light of the ongoing activities concerning the events of Sept. 11, we are not discussing sources, methods, or techniques related to investigative activities."
The bank that handled Mr. Atta's $100,000 transaction was sufficiently suspicious that some crime was involved that it alerted authorities last year, people familiar with the matter say. But the first time the Treasury Department's Financial Crimes Enforcement Network, which is the chief reviewer of these reports, became aware of the document in its own file was after Mr. Atta is believed to have flown a plane into the side of the World Trade Center.
Suspicious Behavior
James Sloan, director of Treasury's Financial Crimes Enforcement Network, declined comment on the report filed about Mr. Atta, citing legal constraints. But he says the FBI and other police officials regularly use the reports of suspicious behavior to help them solve crimes, though the results are rarely publicized.
There are limitations to the usefulness of what banks can provide to investigators. Shortly after the terrorist onslaught, Deutsche Bank AG handed over to U.S. and German investigators details on the accounts of Mamduh Salim, the suspected former finance chief of al Qaeda, and Mamoun Darkazanli, a Hamburg-based businessman whom the U.S. government has named as having financial links to international terrorism. Deutsche Bank's files show that Mr. Darkazanli, who says he is innocent, had power of attorney over Mr. Salim's bank account. But they don't show how, if at all, Mr. Darkazanli was involved in any particular operation by al Qaeda.
The bank also passed on files on numerous other clients' accounts. But little money actually passed through most of these accounts, people familiar with the bank's documents said. The bank's files appear to have generated more paperwork for the FBI than answers.
-- Marcus Walker contributed to this article.
Write to Paul Beckett at paul.beckett@wsj.com, Carrick Mollenkamp at carrick.mollenkamp@wsj.com and Michael Phillips at michael.phillips@wsj.com |
