THE BUSINESS OF TERRORISM

Submitted for publication by the Centre for Strategic and Global Studies, Moscow.

Some of the argument is taken from an article previously published in the Journal of Money Laundering Control

This article explores such information as exists with regard to funding firstly in relation to the IRA, and then to activities associated with Osama bin Laden and al Qaeda.

The purpose is to demonstrate the complexity of organizations that are called “terrorist” and to examine whether it can be demonstrated that there is convergence with organized crime groups. It begins by discussing Gambetta’s work on organized crime as a business before recording the Financial Action Task Force’s statement on sources of terrorist financing. It then looks at the variety of funding mechanisms known to have been used, first by the IRA and secondly by Osama bin Laden and Al Qaeda.

Any study of a terrorist organisation raises questions about the legitimacy of the state and the morality of challenging it by violent means. Although individual terrorists are charged before the courts with individual criminal acts, there is an acceptance that the phenomenon is primarily a political one and that a debate is possible over the relationship between a just cause and the employment of illegal means to achieve it. There is little study of terrorism as an economic phenomenon and the methods by which organisations fund themselves. Elsewhere, this author has argued that successful terrorist groups survive by resorting to funding methods copied from organised crime [Tupman 1998].

This raises several interesting theoretical and practical questions. If funding follows the organised crime model, how much effect has this had on the structure of the organisations concerned? Gambetta and others have argued that organised crime is increasingly a business [Fiorenti and Peltzman 1995]. It follows the successful contemporary business model characterised by networks, or loose associations of individuals and groups. It is no longer dominated by centralised , hierarchical organisation. If a group such as the IRA has gone down the same road then how “terrorist” is it? An organisation may be called “terrorist” because it engages in acts of paramilitary violence. Those organisations that survive for a significant period of time, however, do so by engaging in many activities other than paramilitary violence. Funding has already been mentioned, but they also have to recruit; they have to train; they have to engage in peaceful political activity and so on. The individuals that engage in these latter activities are much more loosely organised than the individuals that engage in the paramilitary violence, yet are associated with them in a non-hierarchical relationship.

Organised crime has also converged to some degree with "terrorist" organisation, copying the cellular structure. Increasingly it consists of networks of people who may only come together for a specific operation and the rest

of the time may be engaged in completely different organisations and completely different and even legal work, especially where these individuals are lawyers or accountants. The same individuals engaged collectively in illegal activity may also simultaneously be engaged collectively in legal activity. This is equally true of the IRA. Post 1968 terrorism was based on 5 man cells, or Active Service Units [ASUs] in the Northern Ireland context. These are operationally autonomous and may have been engaged in their own fund raising as well as other activities quite independently of the central Army Council, the body that allegedly “runs” the IRA. We need to know the degree to which these operations were audited by a central body, or whether the IRA has followed organised crime in becoming what Van Duyne has described as “non-organised”. [Van Duyne 1993 p10]. This would also provide those attempting to control money-laundering in this area with some clues as to where to look.

Gambetta has also argued that violence is itself a business; that it is a service that can be bought and sold. Terrorist organizations are well placed to sell violence and to replace the traditional purveyors of violence to organized crime. Terrorists also need weapons. In the process they have to set up smuggling services. They thus have a second business activity from which they can sell spare capacity. It is only a small step from that realization to the linked idea that it makes sense to smuggle small volume, high value goods in order to obtain the funds necessary for the weapons themselves. Drugs and high value raw materials such as diamonds and other precious and semi-precious stones are obvious commodities.

There is a third relevant aspect of Gambetta’s analysis which began with a study of the Sicilian Mafia. Where the state is weak, it is difficult for suppliers and purchasers of goods to enforce contracts. Those who can sell violence can, in effect, become contract insures and enforcers. It is only a short step to becoming licensers of business activities. Organised crime, too, has a problem of contract enforcement. It is no good taking someone to court for failure to pay for a consignment of illegal narcotics. Terrorist movements that survive over a period of years can move into this role, particularly where they have effective control of neighbourhoods or regions.

In 2001, the Financial Action Task Force identified the following major sources of terrorist funding:

Their pre-September 11th discussions concluded that with the decline in state sponsorship of terrorism, terrorist groups increasingly resort to criminal activity to raise the funds required. The world moved on with the attack on the twin towers. Consequently, FATF decided to expand its mission to focus on combating terrorist financing as well as money-laundering.This makes redundant previous disagreement about funds raised by terrorist organisations from non-criminal activity and whether this could strictly be said to constitute money-laundering. There is still disagreement about the need for special legislation. Some of the FATF experts believed existing legislation adequate for dealing with terrorist money-laundering while others thought terrorist money-laundering to be a distinct variety of money-laundering that required special measures. The origin of terrorist funds is often quite legal, but the purposes to which they are put are not. They thus can behave differently from funds derived from illicit business in that they do not have to be moved around quite so quickly. They can be invested and accumulate before being diverted to illicit purposes. This has led to the growth of perfectly legal business enterprises that in effect wholly or partly belong to terrorist organisations.

When discussing terrorism, the definitional problem still remains central. What is a terrorist organisation and how is it to be distinguished from national liberation movements? It has become more acceptable to refer to “the paramilitaries” in the context of the Northern Ireland peace process. This has the advantage of being value-neutral. The UN also continues to find this a political conundrum, especially where the Arab-israeli dispute is concerned. The US has followed British legal practice of listing proscribed movements and includes Hezbollah, Hamas and the PFLP, without whose consent a peace settlement in the Middle East is simply unachievable. Nevertheless executive order 13224 blocks their assets and property.

Only a small number of the hundreds of terrorist and paramilitary groups that have existed since the 1960s have survived into the third millennium. In Northern Ireland, there is the Irish Republican Army [IRA] and a number of Protestant paramilitaries: the Ulster Defence association [UDA] with which is associated the Ulster Freedom Fighters [UFF]; the Ulster Volunteer Force [UVF] and its breakaway movement, the Loyalist Volunteer Force [LVF]. Of these, the majority are supposed to be on cease-fire and involved in the “peace process”, but all continue to maintain their organization and are alleged to be involved in various forms of violence.

In Spain, the Basque separatist movement, ETA [Euskadi ta Askatasuna –Basque Fetherland and Liberty]

In the Middle East, a number of paramilitary organizations associated with the PLO and Hezbollah.

And perhaps the first truly globalised group, the Afghan veterans association known to us as al Qaeda.

The article concentrates on the IRA and al Qaeda, because it is easier to document a variety of funding sources with which they have been involved. Later studies will examine the other groups.

Following the Gambetta school, I have attempted to produce an analysis of the finances of the IRA in the form of a business prospectus. Previous versions of the table that follows have appeared in the proceedings of International Symposium of Organised and Economic Crime and an analysis of the funding of all UK terrorist groups has been published elsewhere [Tupman 1998]. An updated version of the prospectus follows:
Table 1

A small international company providing executive and leisure services in the British Isles and North West Europe. Overseas offices in the United States and Australia. Courier services available to various parts of he world.

Subsidiary companies provide construction and demolition services. IRA PLC also franchises clubs and a “get you home” service. Private security services also provided for housing estates. Insurance quotations against bomb damage can also be brokered.

The company has recently secured a niche in the import-export market, particularly of livestock and CDs.

In discussing the income and expenditure of the IRA one is immediately involved in propaganda. It clearly suits the security forces to portray the IRA as no more than another organised crime group. This is of course to paint a distorted picture of the IRA, who are not primarily in business for the purposes of making money but who need to have ways of making money in order to stay in business. Indeed, although “IRA-PLC” is a catchy title, it would be more correct to talk of “Republican Movement PLC”. Irish commentators prefer to use this latter term. The former title gives the impression that the IRA controls all branches of the Republican Movement and this cannot safely be asserted. Sinn Fein, the women’s movement, social clubs, Gaelic Sports associations, the Catholic ex-Servicemen’s Association, prisoners' support organisations and various businesses are all organisations within a broader movement. Who controls whom, who interacts with whom and how are not only matters for research but occasionally matters disputed before the courts. The money-making ventures alluded to in the prospectus may or may not be under the control of the Army Council, may or may not pay a percentage to the Army Council and may or may not take place in areas considered to be under Republican Movement “control”.

Related problems must appear frequently on the agenda of IRA Army Council meetings. How far should they engage in fundraising and how far in armed operations? Should the same personnel be involved in both? Should they be kept totally separate? How can they be used against the movement as propaganda? The essence of every act of terrorism is propaganda. Terrorism could be said simply to be armed propaganda. So fundraising in itself presumably should be used as a weapon to undermine British state. Fraud committed against the northern Ireland Housing Department would be legitimate, as would fraud against the Ministry of Agriculture Food and Fisheries, customs duties evasion or similar. Fraud against domestic Irish credit unions would presumably be unacceptable.

Equally dealing drugs in the UK might be acceptable where dealing drugs in Belfast would not be. In Dublin, however there are strong suspicions that IRA personnel are involved in trafficking in soft drugs, if not in street dealing. Certainly the IRA has taken a leaf out of the pages of their Basque colleagues, ETA, in gaining popular support by kneecapping or placing orders of exile on well known drug dealers in Belfast, Derry city and elsewhere. Equally what the British security forces would call protection rackets the IRA would say are in the nature of a revolutionary tax, following the Basque model again.

Another problem in discussing this subject is the nature of the sources. Various officers of the RUC and Garda Siochana have briefed study groups led by the author in the past, but where documentary material has been shown, it has been on a confidential basis. The figures given above have had to be justified by reference to press sources, and these are often dubious. At one stage the stories were all about security forces' successes against the IRA's financial network. At another the IRA’s links with the US were exaggerated to bring pressure to bear on visiting US politicians. At all times stories are exaggerated in order to sell newspapers and the Sunday Times clearly thinks IRA scare stories keep its readers interested. Nevertheless, it has received a number of major security forces leaks over the years and devotes more space and depth to Northern Ireland than its broadsheet rivals. The problem of verifiability needs to be borne in mind constantly when considering the pseudo data of which the IRA-PLC prospectus consists.

Returning to the prospectus: post office and bank raids throughout Ireland are used as acceptable ways of blooding recruits and finding out how serious their commitment may be. Unattributable briefings given the author allege that 50% of post office and bank raids in the south have some form of IRA connection. The figure in the Table above reflects the total amount stolen in post office and bank raids in Ireland and 50% of that total has been calculated and entered in the Table as income.[Unattrib 1995]

The figure of contributions from overseas subsidiaries reflects published statements of the North American organisation Noraid which vary annually from $160,000 to $800,000. [Bishop and Mallie 1988 p297. See also McKinley pp203-218.] Added to this are contributions from the UK, Australia and Canada [McKinley pp201-3 analyses the Canada connection in some detail]. Early in the 1970s contributions were also made by Libya. [Bishop and Mallie p305, McKinley p196 gives a figure of £5million by 1977] This is generally presented as being money raised for the welfare of prisoners’ families and is balanced in the statement of expenditure by an estimate that money to prisoners’ families costs the republican movement as a whole £2million. This illustrates the problem of distinguishing between legal and illegal aspects of the business of the republican movement. Noraid would presumably claim that to support the families of prisoners is legitimate business and in no way relevant to the IRA as an armed illegal organisation. These categories remain in my statement of income and expenditure because there have long been allegations that funds raised for prisoners' families have been used for other purposes. [McKinley p208 alleges that up to $4million per annum was actually being remitted from the US to Ireland.]

Contributions from overseas obviously fluctuate. When the British security forces have carried out high profile operations such as the killings in Gibraltar contributions tend to rise significantly. Collections are regularly made in various public houses in English and Scottish cities as well as the more formal fundraising organisations in the United States, Canada and Australia. One and a half milllion pounds is probably on the low side for these contributions. The point needs to be made however that very little of this money would have anything to do with weaponry or bombmaking equipment in the 1980s and perhaps the 1970s because of the amount of munitions smuggled in from Libya during this period. [unattrib. 1996] Libya apparently admitted to shipping 130 tonnes of weaponry between 1985 and 1987, of which about half has been used or found by security forces.[ Sunday Times, 24 Dec 1995 journalist's claim supported by unattributable briefings.] Iran has also been accused of maintaining a £20million slush fund in the mid to late 80s, of which some went to the IRA.[Sunday Times 21 Aug 1994]. Taking clandestine contributions from states together with declared and undeclared contributions through individual sympathisers, £1,500,000 seems a fairly conservative figure.

"Shebeen subsidiaries" refers to one of the curious consequences of "the Troubles". During the early 70s many pubs were bombed. As a result shebeens or illegal unlicensed drinking clubs grew up as places where the community could drink safely. In the 1970s it was very difficult to tell to what degree these were actually ‘owned’ by the paramilitaries on both sides. Whoever "owned" them, they certainly provided opportunities for fundraising or for money laundering. In 1989 new regulations were brought in by the authorities to try to estimate the income of gambling machines and so on and compare that with figures returned by the legal accounts of these businesses for taxation purposes. [Sunday Times 1st Aug 1993] Again in discussing this it is difficult to decide where the Republican Movement ends and the IRA begins. Where these bars are run by committees from the community and everything is done in a legal fashion they may simply be involved in the payment of "protection" to the IRA rather than being wholly owned businesses.

The heading "Import- Export Business" covers the increasing allegations that the "IRA” is involved in the import of counterfeit computer software, videos and music CDs. The security forces apparently attribute this to their “success” in clamping down on the drinking clubs, which they estimate cost the IRA £7million per annum [Sunday Times 1st Aug 1993}. If this is true, the figure given in the table for income from clubs and gaming machines is an under-estimate pre-1989 and an overestimate for post-1989. When discussing illegal imports, the problem is two-fold: the degree to which the IRA shades into Northern and Southern Irish organised crime groups and the degree to which the reports in the Sunday Times are propaganda aimed at discrediting the movement with the community. On the other hand, the community is hardly going to be antagonised by the provision of the above commodities at cheap rates, so if this is propaganda, it can't be terribly effective! Nevertheless an early attempt to estimate income from these activities alleged £1million per annum from fraud and extortion, £2million from smuggled goods and video piracy, £750,000 from the black taxis, £500,000 from fruit machines , £250,000 from charities ,and £250,000 from overseas sympathisers [Sunday Times 12 March 1995

UCLAF, the fraud investigation unit of the European Commission, has alleged that the IRA is also involved in the movement of cattle across the northern-southern Irish border and back again in order to attract import subsidies and evade various forms of duty.[Fight Against Fraud 1995] If this is being carried out by individual members of families normally associated with IRA membership, it may not necessarily follow that these individuals consider the activity to be IRA activity as opposed to private enterprise. Again our friends in the Sunday Times and the Times linked the “IRA” to a South African fraud of £41million,[Times 20 May 1995], a US heist of $7million, [Times 15 Nov 1993], a London bond robbery of £292 million, and a US bank fraud of £150 million [Sunday Times 22 May 1994]. If all this is true, then the IRA could probably buy Executive Outcomes to do its job for it! The table above gives a more sober figure.

The Sunday Times also has the IRA smuggling £2million a year in stolen antiques to dealers in the British Midlands, selling illegal growth promoters for cattle to farmers, selling counterfeit designer jeans, computer games and videos and engaging in major building -site fraud. [ Sunday Times 1st August 1993] Again, these activities may be taking place, but the IRA cannot have the time or the personnel to run them all. Much more likely is that, as with legal businesses, illegal businesses pay a “licence fee” to the IRA to operate. This is one way of explaining the different signals coming from the security forces on drugs. Indeed, there are suggestions, that, in the case of drugs, some of this licensing was freelance. During the ceasefire, the IRA turned to attacking drug dealers to keep its activists battle-hardened, but it was possible to pay local commanders to prevent one's name being put forward for approval as a target by the Army Council [Sunday Times 31st Dec 1995].

"Fire and bomb damage insurance" refers to the allegation that various businesses pay money to the IRA to protect themselves from a bombing campaign. The Sunday Times alleged that a major bakery chain for example paid £2million a year to the IRA through an international security consultancy to prevent its bakeries being destroyed. In fact it appears that this was not an annual payment but related to the kidnapping of Don Tidey, an executive.[Coogan 1987, p 659.] A one-off payment of £2million for one large business suggests that a total of £6milllion for all businesses to insure against kidnapping and bombing is not actually that high and the income in this area may indeed be higher. Again the same paper, the Sunday Times, in one of its colour supplements, quoted a meeting of “black taxi” drivers as being called on to raise their weekly contribution to £8. [Sunday Times 1996] That would give a figure of £400 per driver per year, which needs to be multiplied by the number of drivers. Similar calculations need to be made for other individual small and large businesses, legal and illegal, around Northern Ireland. But as already mentioned above, elsewhere, the same newspaper has quoted security forces sources as calculating an income of £750,000 per annum from taxis.

The heading "Construction" refers to fraud carried out against the Northern Ireland Housing Office during the reconstruction of bombed buildings. An estimate of £15million lost has been given in newspapers. [Times] There have also been allegations of IRA involvement in social security fraud on the British mainland. Again the problem is that anything with an Irish connection is going to be called ‘IRA’.

Turning to the expenditure statement, the category of “executives in the UK” is based on the assumption that the IRA have moved away from the totally independent 5 man cell [ASU] as their basic unit. They now use surveillance and intelligence teams whose job it is to set up particular operations. These are represented by the category “20 warehouse and support staff”. Operatives tend to operate in pairs when actually carrying out a bombing or shooting. These are the “4 executives”. The table is based on the assumptions that full time personnel would be provided with an income of £20,000 per year and that the whole team would have access to a budget for hiring cars as well as stealing them and for obtaining legitimate accommodation.

These figures may be high and on the Northern Ireland side have been halved on the assumption that the individuals concerned are drawing unemployment benefit or obtaining incomes from legitimate sources. The total assumed by the security forces of full time genuinely IRA units is about 100. [“If the politicians would only let us take 100 of them out, this nonsense would all be over”]. [unattrib.]This table doubles that assumption to err deliberately on the expensive side. 50 are allocated to the South of Ireland, 24 to the UK and 100 to Northern Ireland, 40 in the executive role and 60 in the warehouse and support role. This may be a complete misunderstanding of the way the IRA operates and the idea that there genuinely are 100 full time personnel is probably be a security forces fantasy. Such an assumption leads to the conclusion that all that has to be done in Northern Ireland is to lock up 100 people and everything will stop.

As long as the Republican Movement remains as multi-faceted as it is at present, this is clearly not the case and the notion that there is such a thing as a full time IRA operative is not borne out by such memoirs as have been produced from within the organisation.[Collins 1997 ] In fact a survey produced in New Society in the late 1970s argued that something like three quarters of all the personnel in prison for IRA membership in the north of Ireland had actually been in work at the time of their imprisonment. [New Society 1976] The notion that the IRA consists of unemployed personnel hanging around street corners waiting for a bombing to be suggested is a newspaper fantasy rather than a security forces one.

The obvious point to be deduced from the Table is that the IRA is actually quite a cheap organisation to run. As the Libyan weapons and explosives cache is exhausted this will of course change. The second point is that it is a profitable operation. Somewhere those profits have been invested. The figures given are of course purely speculative, and other, more official sources would put the figure at £10 million profit per annum [unattrib 1995], whereas this table estimates it as closer to £15 million. To reiterate a word of caution, these figures probably refer to the Republican Movement as a whole, and it may or may not be mistaken to leave the reader with the impression that the IRA runs the whole Republican Movement.

The IRA has a long history of involvement with various forms of what we now call money laundering and fraud. Back in the 1916-22 period money was raised for the independence of Ireland and according to Tim Pat Coogan’s biography of Eamonn de Valera a large proportion of it was siphoned off by de Valera to found a newspaper under his own control. Not only did it remain under his own political control but also, as the majority share holder, it became his family’s business and this lasted right through into the early 1960s. [T.P.Coogan 1993 pp417-21] Tim Pat Coogan discusses the legality and morality of this. He also discusses the role of the famous American fundraiser Joe McGarrity who kept the IRA going during the 30s and 40s.[Coogan 1993 pp193-4] There is further discussion of the role of members of the Irish government in the setting up, funding and arming of the IRA after 1968 in another of Tim Pat Coogan’s books.[ Coogan 1987 ]

Certainly the leaders of the Provisional IRA had mostly been in prison during the 1956-62 campaign and mostly held in English jails because of a refusal to treat them as political prisoners. [ Coogan 1987 }Without reading their memoirs, if they ever come out, it is impossible to know to what extent they formed links with English and Scottish criminals during that period. Joe Cahill, allegedly the IRA’s financial expert, was in jail during this period. [Sunday Times 28 March 1993]. It is more certain however that the members of the IRA and other republican groups arrested during the mainland campaign after 1973 and held in British and Irish jails rather than the H-blocks would have had the opportunity to make links with organised crime circles and to learn their techniques. The criminal spirit of the 70s and 80s was certainly entrepreneurship . Research may eventually demonstrate that the real intermediaries were the cannabis dealers of the early 1970s who saw themselves as part of an ideological commitment to change society rather than as simply involved in the process of making money. Howard Marks’ autobiography suggests that such thoughts did motivate people like himself and entrepreneurs in the cities of Cork, Limerick, Dublin would almost certainly have been motivated similarly. His autobiography also describes a network of connections between himself, Jim McCann of the IRA and Dutch interests in the early 1970s. [Marks 1996 pp77-107]

He actually claims to have pointed out to McCann that , if you can smuggle arms you can smuggle drugs. The principle was reversed when the last four shipments of arms from Libya were brought in by a professional smuggler, who was paid a £100,000 fee for arranging shipment. [Unattrib. 1995] The US fiasco alluded to above also involved an arrangement with an alleged professional arms dealer. [Bishop and Mallie] The arms trade is thus another source of contacts between terrorism and organised crime.

Increasingly in Dublin, Limerick and to a lesser extent other towns in Ireland the IRA finds itself having to take policy decisions about its relationship with domestically based organised crime. The shooting of Martin Cahill “the General” in Dublin in 1994 by the IRA was a clear warning to organised crime that the true holders of the monopoly of violence were neither the state nor the “state within the state” of nonpolitical organised crime but the provisional IRA. [Independent 12 May 1996]

In addition, although it was found by the courts to be a case of CIA entrapment, during a US trial links were claimed between the American end of the Republican Movement and a figure “close to the Mafia” in a conspiracy to supply arms to the IRA. The USA is thus another possible place where connections to organised crime might have been created. [Bishop and Mallie 1988 p 298]

The role of IRA members in the drugs business needs more research. Marks suggests that members of the IRA were involved in smuggling marijuana, an "acceptable" drug. It is alleged that the Provisionals did briefly lose a lot of street credibility in the 70s when they were identified with heroin dealing in Belfast ghettoes and very quickly had to remove themselves from the trade. [unattrib ] That they were involved in heroin suggests that they had been involved in other drugs previously and certainly it has been alleged that they remain involved in trafficking and wholesaling but not in retailing and street dealing both south and north of the border. This has equally been alleged of Protestant paramilitaries. There have been further allegations that in the drug trade all the paramilitaries actually work together and have the turf well divided up in northern Ireland.[unattrib ] Protestant paramilitary organisation would presumably also reach into the west of Scotland just as IRA organisation reaches down into the south of Ireland. If the intelligence organisations of the paramilitaries are as efficient as they are supposed to be, it is hard to believe that drugs can be sold in the areas under their control without their knowledge. The introduction of Ecstasy as a youth drug of choice has created new opportunities for profit, not only from selling the drug but by providing secure venues for “raves” to take place. Ecstasy has broader ideological acceptance in the community. It is seen as being in the same category as marijuana rather than heroin.

More recently there is evidence of the emergence of a network of different individuals specialising in different roles. To that extent the structure of the IRA appears to be converging with the changing structure of organised crime. A network of specialists is coordinated by a central planner for a one-off purpose or for a more long term enterprise. Just as organised crime has its ‘enforcers’, its specialists in violence, so too do the IRA. Equally organised crime has its smuggling or transportation specialists. Here the IRA either has its own or buys in a specialist from organised crime, as it did to move the consignment of arms and explosives from Libya. [unattrib 1995]. This might point to a centralised laundering operation via a financial specialist employed for the purpose either in the USA or Caribbean.

There is, thus, some evidence that the IRA has moved into contract enforcement and licensing for those involved in illicit businesses in both Northern and Southern Ireland. There is evidence of organizational change, but changes in the organization of “terrorist” incidents have more to do with security requirements than with the impact of fund-raising activities. One of the most interesting aspects of the IRA is the way in which it has succeeded in maintaining its political priorities despite its ventures into a variety of questionable fund-raising areas. The mechanisms by which it preserves a high degree of integrity and thereby legitimacy with significant sections of the Catholic community in Northern Ireland, Southern Ireland and the United States require further study.

Al Qaida's funding and Osama bin Laden's business affairs are difficult to disentangle as they involve organizations which perform totally legitimate functions as well as being used as conduit for his activities. He has used the hawala system as well as Islamic banking. “His” companies have made profits from legitimate business. Companies such as al Taqwa and al Barakat have been added to the list of proscribed organisations by the USA under suspicion that they are used by al Qaida for the movement of money and that they may even pay a proportion of their profits to bin-Laden’s central bankroll. Nevertheless, closing them down will harm their smaller customers, in particular the ability of the Somali overseas workforce to repatriate funds to their families.

Extortion from private individuals has taken place on a scale unimaginable in the West to the tune of over $1 million per individual. Wealthy individuals in the Islamic world now have to choose between risks: detection by the US or murder by al-Qaida. Equally charitable donations by governments to foundations which dole out money to Islamic causes will have to be more carefully monitored by the donors as will the performance of the charities themselves.

At first sight bin Laden has a complex track record. Honey traders, internet providers, hawala banking, cattle breeding, shrimp boats, construction, import-export, stock market trading and perhaps manipulation, even drug smuggling and other illegal businesses all had a place in his empire. He is alleged to have spent large sums on infrastructural projects for governments. Before his expulsion he carried out many philanthropic projects for the Sudanese government and more recently is alleged to have bankrolled the Taliban. He has run training camps and allegedly put armies into the field in Chechnya, Bosnia and Kosovo as well as Afghanistan. Individual terrorist cells seem to have been kept on a shoestring, resorting to credit card and cheque fraud to stay operational. Cells even repatriated money to the Middle East, the reverse of what might have been expected. The other organisations associated with al-Qaida have still to be investigated financially and may present a different picture. If anyone emerges from the caves around Jalalabad and Kandahar to employ lawyers to fight the confiscation of assets around the world, it will be a truly fascinating case. The business of terrorism appears to have been raised to a new plateau.

Al Qaida was formed in 1988. In 1998 Osama Bin Laden formed an umbrella organisation called "The Islamic World Front for the struggle against the Jews and the Crusaders" [ Al-Jabhah al-Islamiyyah al-'Alamiyah li-Qital al-Yahud wal-Salibiyyin]. This organisation included the Egyptian groups al-Gama'a al-Islamiyya and al-Jihad, the Egyptian Armed Group, the Pakistan Scholars Society, the Partisans Movement in Kashmir, the Jihad movement in Bangladesh and the Afghan military wing of the "Advice and Reform" commission led by bin Laden himself. This represented a move from cooperation between organisations to a new level. A shura or consultative council was established led by Osama Bin Laden. An Arab security service has estimated that Al-Qaida has 2,830 members of which 594 are Egyptians, 410 Jordanians, 291 Yemenis, 255 Iraqis, 162 Syrians, 177 Algerians, 111 Sudanese, 63 Tunisians, 53 Moroccans and 32 Palestinians. 1 The Centre for Non-proliferation Studies commenting on these figures says that they should be taken as an indication of the proportions of the origins of membership, not as an exact count. To these figures need to be added Pakistanis, Kashmiris, Chechens, and links with Bosnians, Albanians and Philipinos. Saudi Arabians are also absent. All in all a perfect network for laundering funds.

It needs to be borne in mind, therefore, that the wider structure of al-Qaida involves a number of pre-existing groups with their own sources of funding as well as Osama bin Laden's personal financial empire.

His family is rich. His father owned a major construction company. He is, however, only one of 52 siblings. The size of his personal fortune during the pre-Afghanistan period is a matter of dispute. Figures range from $30 million to $300 million.

He and his colleagues are alleged to have raised money both from his family and from other important Saudi families, and from others in the Gulf for the struggle against the USSR and the regime it had imposed after 1978. the Pakistan intelligence service was involved There are even alleged to have been donations from the US intelligence services. Funding from Islamic governments and charities continued into the 1990s with the war in Bosnia and in Chechnya and even Albania/Kosovo. Most of this money was channelled through either pre-existing Islamic humanitarian aid organisations or, one created specially for the purpose and controlled by himself and his associates. The struggle to create independent, and possibly Islamic states, from the states that succeeded Communism was seen by many as a legitimate cause.

He emerged from Afghanistan with an international network of veterans who had difficulty adapting to a peaceful existence.

It was the American intervention in Somalia that turned bin Laden into an enemy of the USA. In Afghanistan, Chechnya and perhaps even Bosnia and Albania, his goals had been congruent either with mainstream US foreign policy or with that of individual American right-wingers. It is probably for this reason as well as the involvement of Gulf and other interests that it is fairly difficult to obtain hard information on funding before this period. Funding to the Balkans is alleged to have been funneled through the Albanian-Arab Islamic Bank and the Advisory and Reformation Committee, established London 1994.

The main source of information for this period is a tainted one: the supergrass Jamal Ahmed Al-Fadl and the evidence he gave in the trial of bin Laden's associates in Manhattan in early 2001. It is tainted because he admits he had to flee al Qaida after he was discovered to have embezzled some of its funds. It also suffers the same problems as all defector testimony: the danger of repeating a story that his interrogators want to hear and the danger of exaggerating what he knows in order to increase his importance. Nevertheless, it is the most important published source for this period.

In 1991 bin Laden was expelled from Saudi Arabia. He is alleged to have received anywhere between $30 and $300 million before being cut off by the family. Subsequent investigation has failed to demonstrate any further financial link to his family. He moved to Sudan and invested in commercial enterprises and infrastructural projects. He was highly valued by the regime and is unusual for a terrorist in that both in the Sudan and in Afghanistan he has a track record of subsidising governments in their political and economic programmes. In this period he was associated with:

Because of sanctions against Sudan, his financial committee had to learn how to disguise the origin of his products routing them through various countries, including Cyprus. He claimed to have lost $150 million on farming and construction projects while in the Sudan. Nevertheless, there is evidence of a world-wide empire: ostrich farms and shrimp boats in Kenya, forests in Turkey, diamond mining in Africa, agriculture in Tajikistan. The minor enterprises were themselves used as cover for terrorist operations. All enterprises in Sudan were supposedly liquidated when he left [expelled] in 1996.

The picture that emerges from this period is one of a large diversified enterprise with highly-paid specialists at the top. The central bureaucracy expanded faster than the income and this may be why subsequent organisation has appeared to be more penny-pinching. It is worth noting that a construction company is, by chance, central to the operation. His father had founded such a company, and bin Laden’s original expertise was in that area. Construction work was also related to the Republican movement, again presumably because so many Irishmen went to Britain to do casual work in the building trade. Their return during the early years of Thatcher, when infrastructural programmes were choked off to cut government spending may simply have created a need to institute a job-creation programme. If you can plant bombs that can destroy buildings, you can create construction opportunities. You can also create insurance fraud for proprietors who would like a refurbishment programme.

Bin Laden, however, was, during his time in the Sudan, trading skills in upgrading infrastructure for a sanctuary from which operations can be planned and fighters trained. It could be argued that these businesses would not have been a primary focus of interest for his group. Skills learnt, however, would become useful in unexpected ways. In a globalised political system, many things other than weapons need to be transported: money, information, orders and potential soldiers. These required new businesses and created new business opportunities.

By the time bin-Laden left the Sudan, his money was supposed to be scattered around Europe and Arab world. For example, the Ottawa Sun on the 8th November 2001 announced that the investigation into the activities of al Barakaat and al Taqwa in Canada had discovered Internet Service Providers linked to US companies alleged to have provided al-Qaida terrorists with Internet service, secure telephone communications and other ways of sharing information. The crash in IT-related companies may have affected the total assets of Al Qaida, but it is worth noting that owning an ISP is an excellent way to guarantee the security of internal communication. Al Barakaat and al Taqwa have a number of variants in a number of countries, and al Taqa in Lugano had changed its name to Nada Management early in 2001.

Al Qaida and the other groups in the Front have continued to tap various Islamic charitable and relief organisations for funds. Funding for Chehchen fighters is alleged by Al Fadl to have been $1500 per head. The Wafa Humanitarian Organisation has been identified by the US Treasury as one of the organisations supporting terrorism.

Private individuals have continued to donate money, either because they believe in the cause or to avoid unpleasant consequences [ie protection money]. This may well be the single largest source of funding for the movement and needs to be addressed. Such individuals will need to be guaranteed protection if they are both to come forward and give an account of the moneys passed to al Qaida and to feel safe enough to discontinue paying. Some of these people are victims of extortion, not necessarily zealots.

As with the IRA, there have been continuous whispers of al Qaida association with drug trafficking, mostly opium from Afghanistan. Al Qaida militants are alleged to have acted as smugglers or smugglers escorts. It is not yet known as to how high a degree opium has been used as a funding source, but there was no ideological problem with the Canadian and North American cell resorting to petty crime such as credit card fraud to fund itself during 2000. Al Qaida morality seems to be extremely flexible when it comes to Western-regarding behaviour.

We must beware of turning Osama bin Laden into a Superman. Successful terrorist organisations have had to solve the funding problem. Analysis of the Republican movement suggested that it was making a profit of £10-15 million per annum durin the 1990s. ETA still extracts a 10% levy on income from its supporters. Given the personal funds with which bin Laden and his associates started, they will have been able to achieve more. They have been more successful at using new businesses as cover for their activities and, so far, at obtaining safe havens in individual states. Whoever succeeds both bin Laden and Al Qaida will develop these strategies further and will learn from organised crime in their turn.

The major problem in discussing this period is a lack of knowledge of al Qaeda's aims, who is running it on a day to day basis and whether the Afghanistan theatre needs to be distinguished from other theatres around the world. Without a clear notion of the enemy's goals, it is rather difficult to measure the effectiveness of the response.

It has been argued that bin Laden may actually want the USA to have a military presence in Afghanistan, Kirgizia, Turkmenstan, Georgia and other former Soviet republics, because he wishes to refight the war against the USSR that he considers he and his brethren won. He, or whoever is in charge, be it Mullah Omar [if the resistance in Afghanistan is a matter for the Taliban, rather than al Qaeda] or others, still possess whatever funds were in the Afghan Government Treasury when the Taliban left. These have presumably passed through one of Afghanistan's neighbours since then. Finance will come from and through the tribal areas of Pakistan.

But in addition to funding a guerilla war in Central Asia, it must be assumed that the individual groups comprising al Qaeda continue to require funding for their domestic causes, be these in North Africa, East Africa, South East Asia the Caucasus, the Balkans or the Indian sub-continent. Arms, training and subsistence all cost money, although many were already in place at the fall of the Afghan cities. It is unclear how many al Qaeda veterans made their way home and how many have stayed to fight in Afghanistan. Individual soldiers in individual conflicts were funded through the charitable foundations and expansion of these numbers should have been disrupted by the steps taken after September 11th.

Next, it must be assumed that funding is required for the cells that remain in Western Europe and the USA. Western Europe still remains a recruitment target and perhaps a target for a spectacular atrocity, as does the USA. The problem is predicting the nature of the planned atrocity and the funding that might be required to achieve it. Previous operations suggest a diversity of modus operandi, including petty fraud and the use of businesses as cover.

Although the war on terrorism seeks to identify and confiscate the assets of al Qaeda, it does not appear to be Osama bin Laden's assets that have been successfully identified and seized so far. Concentration has been on routes along which funds have travelled. In the process of blocking these, many innocent people have found themselves with frozen accounts. There was a global emergency in September 2001 which justified harsh measures. But by the middle of 2002 we should have moved to more sophisticated instruments so as to reduce potential pools of recruitment for terrorism.

The US Treasury, May 3rd 2002, summarised the blocking of assets of 210 alleged Terrorist-related entities and individuals in the US as amounting to $34 million and by its international partners as $82 million, totalling $116 million worldwide. So far, 161 countries and jurisdictions have been involved in this campaign. The UN at the end of March, estimated that 144 countries had been involved in blocking $103.8 million in assets of which approximately half represents assets connected with Osama bin laden and Al-Qaida. The majority of these funds had been blocked by December 2001. If there are new leads, then they are being kept very quiet. This may be because it has been realised that money trails provide intelligence and help to identify possible sleepers and cells.

A large amount of the assets blocked belong to al Barakaat and al Taqwa. Al Barakaat is a Somali banking and telecommunications group. It may well be that al Qaeda took advantage of its services, but its closure has created wider problems for Somalis overseas, who used it to send funds home and to communicate with relatives. According to the BBC [12th March 2002], the transitional Somali government has proposed that an American Bank should take it over in order to unfreeze the thousands of accounts of individuals who have no link to al-Qaeda. According to the US Treasury's own News Release of March 11th, "disruption to al Barakaat's worldwide cash flows could be as high as $300 to 400 million per year. Of that…$15 to $20 million per year would have gone to terrorist organisations." There are several articles disputing this in the media. Colin Powell has claimed that 5% of turnover was going to Al Qaeda, but this would have left very little operating profit. Al Barakaat may simply be unfortunate in its Somali connection.

Al- Barakaat appears to be a legitimate business that has been used by terrorists for money-laundering. Al Taqwa, according to Lucy Komisar in an article in Salon, March 2002

is a more murky organisation and has been under investigation by the Italian secret Service and others since the mid-1990s. Its shareholders, however, include prominent figures from Saudi Arabia, the UAE and Kuwait. With headquarters in Lugano, Switzerland and renamed the Nada Management Organisation after its president, it is or was primarily a hawala operation. But it is alleged to have handled funds for the PLO, Hamas, the Algerian GIA, and the Egyptian Gama'a al-Islamiya as well as former Afghan Mujahedin with a connection to bin Laden. This information was originally published in 1995 in the Swiss newsweekly Facts.

Other assets blocked belong to charities; in December 2001, the assets of "the Holy Land Foundation for Relief and Development" were frozen. This was linked to Hamas, not to al-Qaeda. In March 2002 the Somali and Bosnia-Herzegovina branches of Al-Haramain Islamic Foundation were blocked jointly by the US and Saudi Arabia. These were linked, allegedly to al-Qaeda, the Somali group Al-Itihaad al-Islamiya and to the Egyptian group Al-Gama'at Al-Islamiyya. Suspicions were aroused from study of the accounts that money was being skimmed for the benefit of radical Islamic movements elsewhere.

The Benevolence International Foundation of Chicago has also been accused and is involved in a federal court case there with allegations of specific involvement in operations in Bosnia. Under Operation Green Quest a number of other organisations have been raided and evidence gathered that will result in a series of further prosecutions.

On November 16th the Wall Street Journal published a piece by Robert Block and Daniel Pearl ("Much-Smuggled Gem Called Tanzanite Helps Bin Laden Supporters)." It claimed that tanzanite, a rare gem that comes from a small area near the base of Mt. Kiliminjaro, has been used by operatives of the Bin Laden network as a means of raising funds. Its popularity stems from the fact that Kate Winslet wore a necklace of it in the film "Titanic". It is high value, and easily transportable, like diamonds or cocaine and can thus be used as a substitute currency to move purchasing power from one economy t another. It now has a $380 million annual market in the United States.

It is alleged, partly as a result of evidence from the diary of Wadi el Haga, on trial for the bombings of US embassies in Nairobi and Dar Es Salaam, that a group of fundamentalist Muslim middlemen have taken control of a considerable share of the trade in tanzanite stones, which they channel through free trade zones in places like Dubai and Hong Kong, setting aside the profits for Al Qaeda and other fundamentalist Islamic networks and projects. The jewellry industry hotly denies that this is the case, presumably because the market would be badly hit if wearing tanzanite turned out to involve an unpatriotic act. Small miners in Tanzania have accused the South African company AfGem of leaking the stories in order to corner the market by insisting that all gems are branded for identification purposes, using technology that only it possesses. Pearl, of course, was later murdered in Pakistan by an al Qaeda associate.

It is difficult to know how to take the tanzanite story. It has the same ability to arouse incredulity as the allegation that Al Qaeda had a monopoly on the honey market in East Africa and the Gulf, or at least skimmed a percentage off the profits. But the victims of the embargo on sales of tanzanite by Tiffanys and the other big gemstone outlets of the US are small miners not Osama bin Laden.

Despite the tales told by defectors and other individuals turned State's evidence, al Qaeda seemed to adopt a policy post-Sudan of making each operation self-financing. On 23rd May, a UN group of experts warned that al_Qaeda appeared "to have diversified the base and security of their finances by acquiring valuable commodities and using the Internet to move money."

We need to anticipate their methods, not simply respond to what they did in the past. Generals tend to fight the last war, which is a guaranteed way of losing the present one.

The IRA has had to follow the changing fashions of organised crime to continue raising money. At one time armed robbers were the aristocracy of organised crime and for a period the IRA obtained its funding by robberies. As mentioned above this still goes on, but like organised crime, the IRA flirted with drugs and now has followed organised crime into the much lower risk area of fraud, especially cross border fraud and the importing of counterfeit products. It has also been suggested that, in order to obtain guns, vehicles and forged documentation, IRA operatives on the British mainland have begun to pretend to be “normal” criminals and have “infiltrated the criminal infrastructure”. [Independent 4 Mar 1996] But an equal possibility is that organised crime has infiltrated the IRA. In a world of interpenetrating networks, it is difficult to know who controls whom. It will make an interesting court case.

On the other hand, the IRA has deliberately engaged in what it calls “economic warfare” since the early 1970s. It may be that its “profits” have been used to regenerate places like Derry and West Belfast and that “one man’s construction fraud is another man’s job creation scheme. The relationship between business activities and organization is not a unideterminal one. The need to raise money can also produce opportunities to provide services where the state is failing. Contract reinforcement is not the only role played by the modern state. Security involves income now as well as freedom from violence. The picture is more complex than that of Nineteenth Century Italy.

Al Qaeda/ bin Laden has also made a virtue of economic necessity. For individual operations, companies have been set up to provide operational cover as well as income. Because the capital available has been greater, possibly more than any paramilitary group has ever had at its disposal, the businesses created have been more imaginative and wider-ranging in their technology and global scope. If the rumour of stock market movements ahead of 9/11 is true, then it may be possible to organize future operations, or even to threaten future operations, such as to make money out of the consequent movement in stock market prices. Just like the IRA, though, al Qaeda remains more than a business. Both are political organizations who require money but have managed to keep fund-raising subordinate to their political goals.

Such evidence as exists suggests that the form of organisation adopted by both organised crime and terrorism is also dictated by the nature of police response. The interest in cellular structure and network arrangements is partly to make prosecution on the basis of "shared purpose"

difficult to prove. The nature of business will affect the organisational structures of organised crime as a whole, but only the fund-raising structures of terrorist-related movements. The structure of the coercive apparatus will be governed by the relationship between the number required to deliver a violent event and the requirements of internal security. The specialised nature of a paramilitary arm of a political movement may make it attractive for organised crime to employ such a group for the purpose of contract enforcement on an occasional basis. There is no evidence of this as yet, although there have occasionally been allegations that individuals have been used to provide armed escort for consignments. As well as violence, the IRA has available for hire a relatively large network of disciplined individuals who can launder small sums through a multitude of bank accounts without triggering the existing alert systems, which are oriented to noticing the movement of relatively large sums.

Obviously, a great deal of further research is required, and the information on which much of this article is based is both controversial and unreliable. That has not stopped the international law enforcement community responding to 9/11 with anti-terrorist legislation providing for the confiscation of assets related to terrorism. Where long-lived terrorist groups rely on wider popular movements to sustain and support them, a double duty of care lies upon a banker or accountant to assess the ultimate source of the funds passing through accounts. Relationships between the components of these groups, who may be families, associates or merely resident in the same area, are complex and non-hierarchical. Freezing and confiscating assets without distinguishing between the innocent user and the “terrorist” will create more support for the terrorists in the long run.

A final area of interest for students of money-laundering is the question, how do the IRA and al Qaeda move their funds around? If they have set up independent systems are they available for use by other organisations, for a price. This is possibly yet another are where necessity has created another business opportunity. The lesson of Gambetta’s study of Sicily is that where the state cannot provide required services, others will step in. In the war on terrorism, it may be that international law enforcement approaches by making more activities illegal are merely creating new areas where contract enforcement cannot be carried out legally. Consequently, those organizations who can sell violence can expand their areas of operations. The policy may be aimed at destroying terrorism but it is in fact embedding it further into the illicit economy.

It may be of little comfort to those prosecuted for enabling the laundering of terrorist funds to know the following principle: the greater the devotion of manpower resources to fund-raising activities, the greater the likelihood, over time, that a political group will become an organised crime group in fact, though not in name. Both the Mafia and the Triads started out with political aims, but have become something quite different. The IRA is extremely unusual in maintaining its political priorities for such a lengthy period of time.

Arblaster A.[1977} ”Terrorism: Myths, Meanings and Morals” Political Studies XXV, 3, pp413-424

Beresford P.C.F.M. [1979] The Official IRA and Republican Clubs in Northern Ireland 1968-74, and their relations with Other Political and Paramilitary Groups PhD. Thesis, University of Exeter

Bruce S. [1994] Northern Ireland: Reappraising Loyalist Violence Conflict Studies 249 London

Chu Yiu Kong [1996] Hong Kong Triads: An Economic Analysis of Organised Crime Ph.D. Thesis University of Exeter

There are related sites for Customs including the site for Operation Green Quest and the Customs-Trade Partnership against Terrorism [C-TPAT] at:

The webpage contains a link to a self-assessment questionnaire for governments on terrorist money-laundering and other documents, including guidance for financial institutions at:

Tracing bin Laden's Money:
Easier said than done

Yael Shahar
ICT Researcher

In the wake of the terror attacks of “Black Tuesday,” investigators are seeking to follow the “money trail” back to the perpetrators, hoping to learn who ultimately gave the order. While American officials would like to see a clear trail leading back to the legendary wealth of Saudi fugitive Osama bin Laden, tracing this financial path back to him is likely to be difficult—perhaps more difficult even than finding the perpetrators themselves.

Osama bin Laden was named by the State Department’s “Patterns of Global Terrorism” report in 1996 as “one of the most significant financial sponsors of Islamic extremist activities in the world today.” The estimates of his personal fortune vary widely, from a few million dollars to $300 million or more.

In an attempt to find out who bankrolled the attacks on New York and Washington, U.S. investigators are expected to examine electronic banking systems and known offshore banking havens. They will also seek the cooperation of authorities in Malaysia, Singapore and other Asian countries where bin Laden is believed to have established bank accounts and “shell companies.”

ICT’s Reuven Paz, an authority on Islamist organizations, has pointed out that any attempt to trace the money flowing into or out of al-Qaida’s bank accounts is likely to prove extremely difficult, if not impossible.

The problem is aggravated, paradoxically, by the decline in state-sponsorship of terrorism, according to Paz. “In recent years there has been a decline in the sponsoring of terrorism by states. What this means is that public support for terrorist groups has become the most essential element in fund-raising and the main source of finances.” Such public support means that one must trace, not one or two, but literally hundreds of thousands of transactions.

A legend of wealth
Osama bin Laden is one of 53 children of Saudi construction magnate Muhammad Awad bin Laden, who amassed a fortune from successful construction and contracting companies in Yemen and Saudi Arabia. Today, the bin Laden family fortune is estimated at $5 billion, of which Osama is reported to have received an estimated $300 million before his family disavowed him.

A graduate of King Abdul Aziz University’s management and economics department, Bin Laden sees himself as a model businessman, and has invested vast amounts of money in infrastructure projects in Sudan and Afghanistan.

Following the Soviet invasion of Afghanistan in 1979, bin Laden set out to liberate the land from the infidel invader, establishing along the way the framework of his al-Qaidah organization. He built roads and airports, bought weapons and built training camps. He also set up a worldwide network to finance the influx of young Arab volunteers to fight the Soviets.

In the years since the Soviets withdrew from Afghanistan, bin Laden’s financial network has expanded to fund Islamist conflicts all over the world, drawing on numerous charity organizations, private donors and commercial activities—both legal and illegal. Among the sources of Al-Qaida’s wealth are:

* Legitimate businesses

In 1991, bin Laden was expelled from his native Saudi Arabia and repudiated by his family. Together with a large band of followers, he moved to Sudan, where he became the darling of the ruling Islamist regime. He invested in a variety of commercial enterprises and infrastructure projects.

Bin Laden’s construction company “el-Hijrah for Construction and Development Ltd.”—in partnership with the National Islamic Front (NIF) and the Sudanese military—built the new airport at Port Sudan, as well as a 1200 km-long highway linking Khartoum to Port Sudan. The Sudanese government paid for at least part of this construction work by giving bin Laden ownership of the Khartoum Tannery.

Another company reputedly owned by bin Laden is the “Wadi al-Aqiq” Company, an export-import firm. For many years, bin Laden owned and ran the Taba Investment Company Ltd., which deals in global stock markets. He was also part-owner of the “el-Shamal Islamic Bank” in Khartoum, a joint effort with the NIF, in which bin Laden is said to have invested $50 million.

According to the testimony of witnesses in the U.S. embassy bombing trials, al-Qaida ran several farms in Sudan, raising a variety of crops, from peanuts to sunflowers. However, the land was also reportedly used for weapons and explosives training. Other enterprises in Sudan included the Laden International import/export company; a bakery; a furniture company; the Bank of Zoological Resource cattle-breeding operation; and the International al-Ikhlar Co., which made honey and other sweets.

The produce from these enterprises was routed through a number of countries, including Cyprus, to evade international sanctions against Sudan and to allow for a more profitable sale in Europe and America. Many of these Sudanese projects were likely motivated more by political motives than profitability, and won for bin Laden the status of state benefactor and protected person in Sudan. In 1996, bin Laden told Abdel-Bari Atwan, a London-based journalist, that he had lost “more than $150 million on farming and construction projects during his time in Sudan.”

Nonetheless, bin Laden’s organization is believed to have enough cash to sustain a worldwide empire. Al-Qaida has at one time operated ostrich farms and shrimp boats in Kenya, bought tracts of forest in Turkey, engaged in diamond trading in Africa and acquired agricultural holdings in Tajikistan. Many of these minor enterprises—such as the fishing business in Kenya—served as a cover for terrorist operations.

Sudanese president Omar el-Bashir recently announced that all of bin Laden’s businesses in Sudan were liquidated when he was expelled from the country in 1996. El-Bashir said he didn’t know if bin Laden maintains bank accounts in Sudan, but that if he still has investments there, they would be liquidated.

However, tracing all of bin Laden’s holdings may prove no easy task. One of bin Laden’s associates told a U.S. federal court last year that Osama’s money is now scattered among secret financial and commercial agencies in Europe and the Arab world, and that many of his business partners may not even know that they’re working with him.

* Charitable and relief organizations

A number of international charities that collect money for refugees and other relief works in the Middle East are known to be funneling money into terrorist activity, in some cases with the knowledge of contributors. Much of this money comes from the Gulf States, which in 1991 ended all financial aid to the PLO because of its position in the Gulf war. This decision led to a shift of financial support to Islamic groups, organizations and projects.

Countries such as Iran, Saudi Arabia, Kuwait, Sudan, and Pakistan, give—either directly, or through official and unofficial foundations and companies—enormous sums of money to Islamic movements. This money goes to a wide range of Islamic organizations and institutions all over the world. Many of these bodies serve as front organizations for groups that engage in terrorism.

Each year, the Saudi government hands over some $10 billion to Islamic organizations through the Ministry of Religious Works—largess designed to appease fundamentalists. Although the funds are supposed to be used for social, educational and humanitarian purposes, American officials believe that at least some of this money finds its way into bin Laden’s coffers.

A vast number of Middle-Eastern and Asian Islamic relief organizations are active in Western countries as well. There, protected by democratic freedoms, they can operate under much less supervision than they could in their countries of origin. Most of these groups maintain active Internet websites to promote their activities and their radical Islamist message, particularly to the younger members of the Muslim communities in the West.

* Private donors

Bin Laden’s organization draws large amounts of money from wealthy Islamic donors. Some give because they believe in bin Laden’s cause; others may be contributing to avoid potentially unpleasant consequences. The WasPost quoted a senior U.S. official as saying, “We believe a lot of guys have paid protection money.”

The vast majority of these donors live in Saudi Arabia and the Gulf States; though in recent years, donations have also been pouring in from wealthy expatriates in Western Europe and the United States.

According to Reuven Paz, donations to Islamic movements or projects are channeled through private foundations, but may still have the blessings of governments. “Although these donations are private, in most cases they come from officials or individuals of high public position in their countries, or even members of the royal families,” he said. “The donations are thus perceived as part of governmental support.”

* Drug trafficking

U.S. Senator John Kerry, a member of the Senate Foreign Relations Committee, said that there are strong indications that bin Laden’s al-Qaida network has profited handsomely from the opium trade. Al-Qaida militants have frequently been deployed as smugglers or as guard details for smugglers.

Opium, used in the manufacture of heroin and morphine, has an added attraction for terrorists because such drugs head to the United States and lead to problems such as addiction and crime, he said. “That’s part of their revenge on the world,” Kerry said. “Get as many people drugged out and screwed up as you can.”

Last year, the ruling Taliban cracked down on opium production. However, there are rumors that a special religious ruling (fatwah) was issued by Taliban authorities allowing the continued production of drugs for export.

Terrorism on a shoestring
Despite the reputedly vast sums controlled by Osama bin Laden and al-Qaida, the organization appears to be quite miserly with doling out cash for operational costs. Court records and government reports in the United States and elsewhere, tell a tale of financial constraints and shoe-string budgets. Many of bin Laden’s agents have carried out their operations on a paltry budget and miniscule salaries.

In fact, the disproportion between bin Laden’s legendary wealth, and his apparent miserliness where his agents are concerned has driven several of his formerly trusted aides into the arms of his enemies. One key witness in the U.S. embassy bombing trials testified that he had decided to betray his employer when bin Laden refused to advance him money for a Cesarean section for his wife.

Other witnesses told how al-Qaida operatives were forced to rent rooms in cheap hotels, at times to turning to petty crimes to raise money for living expenses. Some of his cadres supported themselves with such activities as identity theft and credit card fraud. A Jordanian cell arrested in December 1999, on suspicion of links to bin Laden, confessed to planning robberies in order to finance their activities, and to receiving very small sums of money—generally no more than $2000—from abroad. Such was also the case with a Palestinian Islamist group uncovered by Israeli security services in April-June 2000, whose leader was linked to Bin Laden. Most of their financing came from Hamas sources.

Reuven Paz pointed out that there have been some rather odd transactions involved in many of bin Laden’s dealings. “An investigation into an alleged bin Laden network in the United States in 1999 discovered that about $11,000 was sent from the U.S. to an Islamist activist linked to bin Laden in the Middle East,” Paz said. “Certainly not the way it is supposed to work in the case of a terrorist network financed by Bin Laden.”

Compartmentalization and untraceable transfers
Money is transferred to terrorist organizations by means both sophisticated and secret, but in most cases legitimate. Transactions are routed through bank accounts in Europe, North America, Asia, and the Middle East. Some of the Islamic institutions in the West are used also to launder large sums of money transferred from different countries or wealthy individuals, primarily in Iran, Saudi Arabia, Kuwait and other Gulf states.

Many of al-Qaida’s cells are self-maintaining, generating their own finances through illegal activities in the countries were they operate. In such cases, there is no “central processing unit” for money transfers. Just as al-Qaida’s terrorist operations are fully compartmentalized, so too, are its financial enterprises.

All too often, al Qaida operations bypass the more traditional money laundering techniques—such as the use of electronic transfers and offshore accounts—that might provide clues to sources and methods. In many cases, there is no “paper trail” to follow; cash is simply slipped into a suitcase and carried by courier to designated recipients.

Jamal al Fadl, a key witness in the Embassy Bombings trials, told how he was given $100,000 in cash in $100 bills to carry to Amman, Jordan. Travel documents for the couriers are arranged by al-Qaida, and the courier is provided with an address or a description of a contact who will meet him at the airport. Once the money is handed over, often in a sealed envelope, the operative returns home. Most have no idea what is going on beyond their immediate task.

Another manner in which money can be transferred secretly is the traditional underground system known as hawala. From the Hindi word for “in trust,” the hawala system transfers money deposited with a hawala broker in one country to a second broker in another country. The system is completely unregulated, and is based solely on the relationship of trust between brokers. Organized through a series of informal chits and promises, such a system can move huge amounts of cash. None of it crosses borders, and apart from personal notes there’s no record of the transactions.

But even more traditional banking systems may prove an impenetrable wall to investigators. Consider:

* Supposedly “untraceable” financial services are advertised in more than 60 nations, from Andorra to Western Samoa. The tiny Pacific island of Nauru alone is home to some 400 “shell banks” whose purpose is to hide money. Accounts in such places could prove inaccessible to investigators.

* Throughout the British Virgin Islands, investors can set up an “anonymous corporation,” where owners can make deposits and withdrawals without being traced. The account is set up and managed by a bank-selected attorney, which means all the proceedings are protected by attorney-client privilege. Some banks even offer an “Anonymous ATM” card that allows unlimited withdrawals anywhere in the world.

* The laws of the Seychelles Islands give immunity to investors from all outside criminal charges. Investors can place $10 million or more into approved investment schemes, even if that money was originally obtained through acts of violence or drug trafficking. The government requires only that the investor not engage in illegal activities on the Seychelles chain itself.

* The foremost proponent of bank secrecy is Switzerland, even after the nation’s two largest commercial banks admitted their role in financing Hitler’s war machine. Strong Swiss support for the current system shows that there is unlikely to be any push to change banking laws anytime soon.

* An international Financial Task Force on Money Laundering published a list in June of this year containing nineteen countries that did not meet its reporting standards, including Egypt, Guatemala, Russia, and the Asia-Pacific islands.

And then there are the legitimate bank accounts. Bin Laden’s network is believed to have accounts all over the world—from Barclay’s Bank in London, where a suspect account was shut down by the British government last week, to Girocredit in Vienna. “There is a web of private accounts with Islamic interest-free banks in the Muslim world which serve as lifeline to al Qaida movement,” a former Pakistani military intelligence official told the Washington Post.

The United Arab Emirates is believed to be a major hub of bin Laden’s banking operation, due to its liberal banking system. It is also one of only three countries that maintains official relations with the Taliban; the others being Saudi Arabia and Pakistan.

After the attacks of “Black Tuesday,” the British government called for robust action from international banks, particularly in Switzerland, to ensure greater transparency in the global financial system. British finance chief Gordon Brown has said that the key to cutting off the flow of funds to terrorists is better reporting, and has urged all financial institutions to declare dubious transactions “so that there is not only no safe haven for terrorists but no hiding place for terrorist money.”

Roger Alford, a finance expert at the London School of Economics was quoted by the Agence France Presse as saying that the main task was tracing suspect transactions back with the help of the banks. However, this could pose legal problems. “The trouble is of course that a lot of these people—Middle East millionaires who are maybe financing terrorist groups—they also do all sorts of perfectly legal transactions as well,” Alford said.

Another financial expert, banking consultant Noel de Berry, pointed that any sort of financial regulation would be a complicated business. “People are allowed to have many bank accounts,” he said. “Transactions take place in seconds. There’s a lot more happening that can ever be tracked down. Money can be moved across the world, make three or four jumps in a very short time and come back again.”

Monitoring funds transfers to suspect charities and relief organizations may also prove problematic—more for political and legal reasons than technical ones. Even in cases where it is clear that Islamic terrorists are concealing their activities and sources of funds by fronting throught charitable organizations, these charities still do substantial community service work. Investigating these organizations would prove especially difficult in Western countries, and could raise allegations of targeting religious or ethnic groups.

History has shown that proving a terrorist link to such institutions is quite difficult, and has only been done in a few cases. In most cases, investigations into dubious transfers eventually reached a dead end. Foundations like Interpal in the UK, the Holy Land Foundation in Texas, the Al-Aqsa Foundation in Germany, and others, have been subject to investigation without any real success.

One reason for this lack of success has been the lack of cooperation between countries—particularly the European Commonwealth and the United States—who differ in their interpretation of what constitutes terrorism and how to deal with it. These differences exist not only between Western countries, but also between Muslim countries. The disputes in the Arab world are especially detrimental to countering the financing of Islamist terrorist groups, since a major part of the financing comes indirectly from Arab governments, institutions or wealthy individuals.

Counter-terrorism professionals have been pointing out the need to combat the financing of terrorism for years, only to be frustrated by a lack of common agreement on the nature of the target. If the atrocities of Black Tuesday teach us nothing else, they should teach us that we must cease asking “who is a terrorist,” and concentrate instead on “what type of act constitutes terrorism.” The death of more than 7,000 civilians in the destruction of the Twin Towers of New York’s World Trade Center, part of the Pentagon, and four large airliners, is terrorism by any definition.

For the first time, a single act of terrorism has transformed geopolitics practically overnight. Terrorism is a strategic problem affecting the world as a whole—including the global economy. The solution to dealing with terrorist financing—as with almost every other type terrorist activity—is dictated by the nature of the problem: the globalization of Islamist terrorism must be met by a similar globalization of the effort to combat terrorism.

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Contributions from overseas subsidiaries	1,500,000

Shebeen subsidiaries: bar and machines	4,275,000
Import-export business	2,250,000
Fire and Bomb Damage Insurance [Protection plc]		6,150,000
Construction	5,000,000
Involuntary bank and post office contributions	1,250,000
Total Cash		20,425,000

Non-cash contributions
Demolition equipment and executive toys	Too sporadic to quantify

Executives in UK [4] Salaries	80,000

Warehouse and Support staff UK [20] Salaries	400,000
Transport and accommodation	200,000

sub-total	680,000
Executives in Northern Ireland	400,000
Warehouse and Support staff	600,000

sub-total	1,000,000
BALANCE	1,680,000
Pay-outs from executive family insurance fund		2,000,000
Semi-retired staff in Eire [50]	1,000,000
BALANCE	4,680,000

Demolition equipment and executive toys [depreciation]	1,500,000
BALANCE	6,180,000
Investments	13,500,000

BALANCE	19,680,000
Petty cash fund	745,000


TOTAL	20,425,000