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Some of bin Laden's money is in mainstream institutions--the Saudis froze his assets after the 1998 U.S. embassy bombings in Africa, though he may have money in Switzerland, England and numerous other countries--but al-Qaeda also makes heavy use of hawala, an informal Islamic banking network that has operated for generations in Asia and the Middle East. Hawala, Hindi for "in trust," links brokers around the world who advance funds to depositors on a handshake and, sometimes, a password. In remote areas, a broker may have little more than a rug and a phone. In larger cities, including some in the U.S., brokers often operate from the back of a store. With no wire transfers, balance sheets or financial statements, hawala leaves no trail for law enforcement to follow. It's like the Mob, says William Wechsler, a former National Security Council official who chaired a task force on bin Laden's finances. "There's no shortage of will to attack the Mafia, but we haven't completely destroyed its financing system," he says. "Imagine the difficulty of going to these other countries where you have no banking system and questionable political will."
The U.S. has made halting efforts to grab bin Laden's funds. The Clinton Administration issued an Executive Order targeting them in 1998 and froze the assets of Afghanistan's Ariana Airlines, which allegedly transported bin Laden's forces and equipment. But it never got bin Laden's money.
Now, the feds say, things will be different. President Bush is rolling out the Foreign Terrorist Asset Tracking Center, designed to dismantle terrorists' financial bases. Past efforts have focused on financial data relating to a single crime. But FTAT will look at terrorist organizations worldwide. The information gathered, says Treasury Under Secretary Jimmy Gurule, will be used "for the express purpose of identifying and disrupting" terrorists' funding. Switzerland has agreed, and Sudan and the Cayman Islands reportedly agreed, to open their books to U.S. investigators. The Administration has also been asking governments like those of Saudi Arabia and the United Arab Emirates to cut off funds from individuals and companies that fund bin Laden. And some Islamic charities will be coming under increasing IRS scrutiny.
Treasury Secretary Paul O'Neill has announced that Treasury, the FBI, the Securities and Exchange Commission and the Chicago Board of Options Exchange have launched a "full-fledged investigation" of the short selling. If the trades originated in the U.S., brokers may have records of who did the buying. But if they came from overseas, where buyers can hide their identities, they will be harder to trace. Last week regulators from Germany, Britain and other countries held a conference call to coordinate their inquiries. None has reached a conclusion.
If al-Qaeda engaged in short selling, brokerage records may point to as-yet-undiscovered conspirators. There could be pressure to change how stock transactions are cleared, making it harder to act anonymously. That would take away from bin Laden and other terrorists their most ghoulish form of financing: cashing in on the carnage they create.
--By Adam Cohen. Reported by Michael Weisskopf and Adam Zagorin/Washington and Bruce Crumley/Paris