Financing Terrorism: Our Strategic Responses to Osama bin Laden

May 4th, 2011

Clark Gascoigne

Behind only fear and tragedy, Osama bin Laden’s most enduring legacy on our world will be the changes in national and international security.  Our response to his hate—and the attacks he orchestrated on September 11th—was overwhelming shaped by our collective realization that many of our security systems cannot protect against those who want so badly to do us harm.  The most conspicuous of these systematic changes was—of course—in air transportation, as anyone who has flown before and after 2001 can tell you.  The United States’ capacity to respond to terrorist attacks was also improved with the creation of the Department of Homeland Security, which marked the largest restructuring of the federal government in contemporary history.  Congress also passed the USA Patriot Act to detect and prosecute terrorists, which remains most famous for its reduction in the restrictions on law enforcement agencies’ ability to search telephone communications and other records.

Of course there have been many other changes—both large and small—for better or for worse.  But the U.S. did have one other important response to September 11th that is worth noting on this blog, particularly in light of recent events.  And that is the prioritization of and improvements in anti-money laundering legislation and the detection of terrorist financing.

In 1998, an article in the Washington Post argued bin Laden was able to “shroud his finances in such secrecy and with so many front companies that American officials acknowledge it could take years to decipher them.”  At the time, U.S. officials understood that the key to bin Laden’s power was wealth—which was extensive as he inherited a substantial sum of money from his prosperous Saudi father.  Yet they were often stymied in their ability to track his or other terrorists’ resources as they did not have the capability to comprehensively track, freeze, and seize assets.

After 9/11 that changed.  One important reason for the turnaround was the increased focus on terrorist financing by officials, academics, and intelligence officers, which resulted in a better understanding of the practice.  Jack Williams, an expert in Law and the Middle East at Georgia State University College, put it this way: “Post 9/11, we’ve learned an awful lot about how terror organizations finance themselves, how they select their targets, the importance financial institutions have for them as a target or for growing their enterprises.”

But more importantly, laws changed.  The USA Patriot Act—besides creating a lot of concern over wiretapping—significantly altered anti-money laundering enforcement by officials in the United States.  Among other advances, the Patriot Act sought to prevent foreign shell banks from having access to the U.S. financial system; encouraged cooperation and information sharing among law enforcement, regulators, and financial institutions; and required financial institutions to establish anti-money laundering programs.  As Tom Cardamone, managing director of Global Financial Integrity put it: “9/11 really focused everybody’s attention on money laundering and terrorist financing and how you get at it. The Patriot Act did that to a great degree.”

And now, in 2011, unlike in 2001, U.S. and international law enforcement officials are strategically placed to respond to Osama bin Laden’s death.  Many industry experts believe his death will cause disorder and confusion among the ranks of al Qaeda, which might create some new or unusual money movements in Northern Africa and elsewhere.  Another banker pointed out this might even create “a unique opportunity to choke off the funding during this period of transition for al Qaeda.”  Before 9/11, the world would not have been equipped to take advantage of such an opportunity.  Now it is.

Of course, improvements can and should still be made.  As Cardamone points out it is still easy—even in the United States—to establish a company that funnels profits to people or entities where the beneficial owner does not have to be identified, even to law enforcement.  This is clearly “a huge hole in law enforcement’s ability to see where money goes.”  The detection and freezing of terrorist financing is of vital importance in our national security apparatus and I hope the U.S. and world continues to recognize the importance of further improvements.

Written by Ann Hollingshead

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