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Extremists' financial 'tentacles' hard to
sever
By Alan Boyd
SYDNEY -
Afghanistan may have been the first phase in George W
Bush's crusade against terrorism, but it was never
intended that it would be the most important.
The real frontline was to be the labyrinth of
financial cells that prop up the murky operations of
extremist groups such as al-Qaeda, Abu Sayyaf and
Harakat ul-Mujahidin. Cut off the tentacles, declared
Bush, and the body will quickly wither away.
But
12 months on from that defiant challenge, the body is
still evidently well nourished and displaying a
reptilian-like ability to grow new tentacles in place of
disrupted supply lines.
While 142 countries
worldwide, including three dozen in Asia, have frozen
the assets of suspected terrorists, it is clear that
investigators are struggling to identify the scale of
the threat - let alone deal with it.
"We know a
lot more now than we did before [September 11, 2001]. We
have an improved state of alertness in the financial
community. We have governments with a better
appreciation of the problem. But are we still playing
catch-up? Undoubtedly," said a member of a US
economic-crimes agency.
In the United States
alone, the assets of 158 known terrorists, their parent
organizations and bankers have been frozen since
September 2001 because they were suspected to be funding
extremist activities. Yet it is the countless
unidentified activists, ranging from low- level
operatives and religious sympathizers to otherwise
respectable businessmen, who worry counter-terrorism
officials.
The Financial Action Taskforce on
Money Laundering (FATML), the main umbrella group
lobbying for tighter controls over the movement of
illicit funds, admitted several years ago that it was
not possible to determine accurately the scale of
laundering activities in the Asia- Pacific region.
The only authoritative country study was
completed by Australia back in 1995: it calculated that
criminals were disposing of US$2.8 billion worth of
assets each year, equivalent to 40 percent of the entire
national income of Zimbabwe.
FATML concluded,
with wry understatement, that it might help the success
rate of investigators if they had a better grasp of what
they were up against.
One problem is that the
profile of terrorism financing in Asia no longer fits
pre-September 11 perceptions, when it was generally
assumed that extremists relied upon a fairly narrow base
of ethnic or ideological support. It is now clear that
most get their cash from similar sources to conventional
criminals, and launder the proceeds the same way. This
makes it tough to find which tentacles need to be
severed.
As many as 60-70 percent of Asian
terrorism organizations are believed to be deeply
involved in narcotics trafficking; half are bankrolled
to some extent by prostitution, people-smuggling,
illegal gambling, loan-sharking, protection rackets or
document forgery.
A parallel thread of
operations can be found in white-collar crimes. FATML
believes terrorist cells are active in banking fraud,
credit card fraud, investment fraud, advance fees fraud,
bankruptcy fraud and embezzlement.
Then there
are the legitimate operations that act as fronts for
laundering activities. In Asia these are thought to be
mostly family- owned banks, real estate ventures, hotels
and travel agencies, gold shops and trading firms.
Monitoring such a diversity of activities
requires a level of resources and a breadth of
regulatory dexterity that was beyond most Asian
countries even before the escalation triggered by the
terrorist attacks on the US on September 11 last year.
According to the Asia-Pacific Group on Money
Laundering (APGML), 24 states in the region had ratified
the Vienna Convention on laundering activities prior to
the terrorism attacks in the US. Legislation
specifically aimed at the proceeds of narcotics offenses
was in use in 23 countries, 20 had laws relating to
"serious offenses" that included terrorism, and 21 had
set up reporting systems for suspicious transactions.
Malaysia, South Korea and the Philippines have
enacted anti- laundering laws since late 2001, though
these were already in the pipeline prior to the
September 11 attacks. The Philippines remains on the
FATML list of countries that have not done enough to
legislate against assets laundering, but is expected to
shortly be removed. Still blacklisted is Indonesia.
In the immediate aftermath of the attacks, the
United Nations sponsored a Convention on Suppression of
Terrorist Financing that was backed by most Asian
countries. It was beefed up this year through UN
Security Council Resolution 1390. On top of all these
measures, individual states have endorsed UN bans on
specific terrorism cells, including Pakistan's Umma
Tameer-e-Nau and Harakat ul-Mujahidin, Kashmir-based
Lashkar-e- Tayyiba and Abu Sayyaf Group of the
Philippines.
That regulators were unable to
control financial terrorism before the US crisis, and
are still struggling to do so, shifts the focus squarely
to lapses in the enforcement of the same laws.
A
crime investigator with an Asian organization said the
diversification of terrorist criminal operations had
created an inevitable problem of coordination at command
levels. "You might have one agency dealing with drugs,
one with sophisticated economic crimes, another with
trans-border cash movements. They might not share
computer codes. They might not even be familiar with one
another," he said. "So yes, you get a situation where no
one really has the grand picture of what is going on,
what you might call the complete jigsaw. Of course, the
picture is also changing all the time."
Changing
so rapidly that there is a whole growth industry of
experts tracking laundering trends, as terrorists keep
one step ahead through the simple process of monitoring
the monitors. As investigators tighten financial
systems, still the most obvious route for disposing of
illicit assets, savvy extremist groups are switching to
informal business networks that are harder to detect.
Hawala, the village-based underground banking
operations that have been used by predominantly Muslim
rural communities for generations, has been brought into
the electronic age. The basic formula remains the same:
two small businesses in different countries, often with
no obvious terrorism links, exchange laundered funds as
part of legitimate ordering transactions.
Smurfing, another time-honored process borrowed
from the local marketplace, has also been refined.
Numerous small amounts of cash are paid into separate
bank accounts, and then sent abroad. Small cash deposits
fall under the laundering threshold and are not checked.
Reversing the process with the same principle,
"collection" accounts are used to consolidate small sums
under one name.
Banks often play an unwitting
part by offering demand deposits for big offshore
clients, under which separate checks are merged into one
account and then transmitted abroad.
Other
terrorism groups use legitimate investment schemes to
cleanse their dirty money. Deposits are sent separately
overseas and then returned to the country of origin as a
loan or bank guarantee.
Even when banks have
effective surveillance systems, the sheer volume of
daily transactions makes it fairly easy to avoid
detection. As many as 25 percent of electronic transfers
are sent without ordering customer information that
could be used to trace recipients.
Banks are not
computerized in much of the South Asian subcontinent,
Indonesia, Thailand, the Pacific and Indochina. It is no
coincidence that close attention is being paid to
banking transactions in such places as Nauru and
Cambodia.
"Remittance offices, foreign exchange
booths, traveler's checks. They can't all be monitored
constantly. Smart cards are a worry, Internet is a
worry," said the American investigator. "If we know
about it, the extremists do too. Probably they got there
first."
(©2002 Asia Times Online Co, Ltd. All
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