War on Al Qaeda Funds Stalled
Network 'Fit and Well,' Ready to Strike, Draft of U.N. Report Says

By Colum Lynch
Special to The Washington Post
Thursday, August 29, 2002; Page A01

UNITED NATIONS, Aug. 28 -- A global campaign to block al Qaeda's access to money has stalled, enabling the terrorist network to obtain a fresh infusion of tens of millions of dollars and putting it in a position to finance future attacks, according to a draft U.N. report.

In the months immediately following the Sept. 11 attacks, the United States and other U.N. members moved to shut down al Qaeda's financial network, freezing more than $112 million in assets belonging to suspected members and supporters of the organization.

But only $10 million in additional funds has been blocked over the past eight months, according to the 43-page draft report, which was written by a U.N. panel responsible for monitoring the enforcement of an arms, travel and financial embargo against al Qaeda and its associates.

Al Qaeda continues to draw on funds from the personal inheritance of Osama bin Laden, the Saudi-born militant who heads the network, as well as from investments and money diverted or embezzled from charitable organizations, according to the draft report.

The report of the Monitoring Group on al Qaeda, which is expected to be released next week, offers a rare survey of the state of the financial war on terrorism. In the aftermath of the attacks in New York and on the Pentagon, President Bush announced the freezing of assets of dozens of organizations and individuals linked to al Qaeda, and U.S. diplomats harnessed the authority of the U.N. Security Council behind the effort. The Security Council adopted a resolution requiring the United Nations' 189 members to seize the assets of individuals placed on a U.N. list of suspected associates of al Qaeda.

Despite this campaign, the report says, al Qaeda's financial backers in North Africa, the Middle East and Asia manage at least $30 million in investments for the group, with some estimates going as high as $300 million. The money reportedly includes investments from Mauritius, Singapore, Malaysia, the Philippines and Panama, it says.

Al Qaeda is also suspected of having bank accounts under the names of unidentified intermediaries in Dubai, Hong Kong, London, Malaysia and Vienna. And private donations to the group, estimated at $16 million a year, are believed to "continue, largely unabated," the report says.

"Despite initial successes in locating and freezing" al Qaeda assets, the network "continues to have access to considerable financial and other economic resources," the report says, adding that it has proven "exceedingly difficult" to identify these funds.

"Al Qaeda is by all accounts 'fit and well' and poised to strike again at its leisure," it says. "The prime targets of the organization are likely to be persons and property of the United States of America and its allies in the fight against al Qaeda, as well as Israel."

The U.N. panel says the task of blocking al Qaeda's funds has been frustrated by the group's decision to shift its assets into precious metals and gems, and to transfer its money through an informal money exchange network, known as hawalas, that is virtually impossible to trace. Revenue from hard-to-track "illegal activities including smuggling, petty crime, robbery, embezzlement and credit card fraud augment these funds," it says.

But the effort to shut down al Qaeda's financial network has also been hampered by the inadequate auditing of religious charities, the lax border controls in several European countries -- members of the Schengen Area group, which allow travelers to cross their borders with a single visa -- and the "stringent evidentiary standards" required by European governments before they will seize an individual's assets, the draft report says.

The report says the Schengen Information System -- a computer program used to monitor border crossings in the group's 15 member states -- holds in its database only 40 of the 219 names on the U.N. list. Several members of the Schengen group said their "national laws precluded them from placing" their citizens' names on "national watch lists without appropriate judicial basis," according to the U.N. report.

The Schengen group is made up of 13 European Union members as well as Norway and Iceland. Britain and Ireland are the only EU members that are not part of the group.

The U.N. panel warns that the refusal of key European countries to fully comply with the Security Council's sanctions could have a "derogatory impact" on the effort to shut down al Qaeda's financial operations.

European governments have faced legal challenges from citizens on the U.N. list who say they have been denied their right to a trial, which is enshrined in the Council of Europe's Human Rights Charter. They have expressed concern that the procedures for placing individuals on the sanctions list lack the legal safeguards required by their own courts for the freezing of assets.

"Several states have indicated that they are facing legal challenges to the blocking of assets," the report says. They have also cited humanitarian concerns and the dearth of evidence linking suspects to terrorist activities.

Luxembourg told the U.N. sanctions monitors that it recently released the assets of an unidentified organization allegedly linked to Al Barakaat, a Somali-based money exchange company that the Bush administration charges has been used by al Qaeda. The Luxembourg government said the country's banking regulatory agency "did not have access to releasable intelligence information related to the case." Luxembourg had previously frozen the group's assets at the request of the United States, according to diplomats.

Switzerland has "indicated that it has released small amounts of money from frozen accounts for personal and business expenses where account holders have demonstrated hardship," the report says. Swiss officials said that a government decree authorizing the blocking of assets requires that funds be made available to enable account holders to meet basic humanitarian needs.

Germany has signaled that it may face "legal constraints" in the blocking of assets of individuals being pursued by the United Nations, the report says. "German authorities are closely cooperating with the [U.N.] monitoring group to reach full implementation of the U.N. Security Council sanctions," said Dirk J. A. Rotenberg, a spokesman for the German mission to the United Nations. But he added that any action must conform with Germany's legal system and the "rule of law."

In its report, the U.N. panel says that scores of individuals who have been linked to al Qaeda -- including Suleiman Abu Ghaith, bin Laden's Kuwaiti spokesman, and Gulbuddin Hekmatyar, a powerful Afghan chieftain -- have not been placed on the list, making it difficult for governments to freeze their assets. It also says 38 individuals who have been arrested in 13 countries -- including the United States, Italy, Pakistan and Morocco -- have not been added to the U.N. list. The panel does not name them.

In response to those concerns, the United States and Italy today jointly introduced to the Security Council committee that oversees the al Qaeda sanctions list the names of 11 individuals and 14 businesses that are allegedly linked to al Qaeda.

The United States has also sought to address some of the European concerns by proposing a Security Council resolution allowing suspected supporters of al Qaeda to withdraw money to meet their basic living needs. But Washington has continued to press its European allies to fully comply with the U.N. sanctions. "We are concerned about it, and we have raised this issue bilaterally with the Europeans," a U.S. official said. "We have been told that it's not as big a problem as claimed in the report."

The U.N. panel's report also cites the failure of the U.S. and other governments to provide complete information about the suspected al Qaeda members. It warns that the publication of distinct terrorist lists by the United Nations, the European Union, the United States and other countries is creating confusion and undermining the efforts to freeze al Qaeda assets.