The Terrorist Dollar

"follow the money" is the battle cry in the 21st century's first war

Tuesday. December 14, 1999: As the ferry from Victoria, British Columbia pulled into the Black Ball Terminal at Port Angeles, Washington, the small group of U.S. Customs officers prepared to wave through the usual assortment of Canadians heading south and Americans coming home. Then, one of the officers spotted a young man driving a rented Chrysler with Canadian plates and decided to look more closely. In the Chrysler's trunk were timing devices, a substance used to make military-grade C-4 explosives and a nitroglycerine equivalent in two glass jars.

Searching the driver, Customs officers found cash, false IDs and the business card of someone in England. The suspect wouldn't give his real name, so they fingerprinted him. Within hours, the prints linked the man, Ahmed Ressam, a 31-year-old Algerian, to a terrorist "sleeper" cell in Montreal.

Cops descended on Ressam's pals in Vancouver, Montreal, New York and London, who, along with Ressam, were all graduates of an Osama bin Laden training camp in Afghanistan. The timing device found in the car was identical to gear used by Bin Laden-trained terrorists in previous attacks. And the man in England turned out to be a liaison for Bin Laden, linking various terrorist cells around the world.

Their mission was to blow up Los Angeles International Airport, as close to the millennium celebrations as possible.

The Canadian connection raised eyebrows in Washington because the U.S. and Canada share the longest unprotected border in the world. The Canadian Security Intelligence Service eventually had to make the embarrassing admission that they had already identified some 50 terrorist groups in the country--comprising 350 people--and that Canada had become a sieve for terrorists.

It had also become home to more criminals, because the members of the Montreal cell had to earn a living while waiting to blow up the LA airport. They had run credit card fraud, counterfeited checks, sold stolen IDs, forged documents and broken into cars to steal computers and cell phones. Oddly, the crime they didn't commit was selling drugs. Or maybe they had and no one ever found out. What money they accumulated in excess of their living expenses was sent through an established network to finance terrorist cells in France, Belgium, Italy, Turkey, Australia and Bosnia.

The salient point is: Here were terrorists working as criminals, which is what terrorists usually do, because, in the end, the only difference between a terrorist and a criminal is that one thieves for politics, the other thieves for profit.

But the perpetrators of the World Trade Center atrocity appear to have been so well funded that they did not need to support themselves with crime. Indeed, it appears that the murderers benefited from an efficient money-moving system that paid for everything from lodging to flight training to purchasing airline tickets.

Two weeks after the attack, President Bush announced that the government was going after the financial assets of 27 organizations and individuals in the U.S. who might have been part of the terrorists' financial support system. That system undoubtedly stretches around the world, from financial capitals such as New York, London and Vienna, to unlikely places like Albania and the Sudan. In subsequent weeks, U.S. officials broadened their investigations and began seizing more accounts. Osama bin Laden mocked the American efforts. In an interview with Ummat, a sympathetic newspaper in Pakistan, he boasted that his organization, Al Qaeda, "has three alternate financial systems, which are separate and independent, being run by hundreds and thousands of highly educated youth around the world. And if the whole world, including the U.S., tries to remove them, they won't succeed."

The landscape in which money moves is one of the most important battlefields in the first war of the 21st century.

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The final decade of the 20th century saw the greatest leap in technology since man invented the wheel. Satellites, faxes, cell phones, the Internet and e-mail have reduced the planet to the size of a computer screen. At the same time, radical changes in transportation and communication have diminished governments' controls over the movement of goods, services, people and ideas. Borders, which once defined nations and national authority, have begun to evaporate.

Along with the confusion created by the global flood of goods, services, people and ideas has come a new kind of money; it's called megabyte bucks, electronic blips on computer screens that are not tethered to central banks or geography.

In 1993, when terrorists first attacked the World Trade Center, it was estimated that $100 billion to $300 billion in dirty money was circulating the world. Call that, if you will, the turnover of transnational organized crime. By September 2001, that figure was estimated at more than $500 billion. It includes money from drug trafficking and extortion, prostitution and alien smuggling, as well as frauds and counterfeiting. The figure also includes global terrorist money.

Until September 11, most politicians considered terrorism something that happened outside the U.S., and regarded organized crime as a local matter. The reasons are obvious: The politicians themselves couldn't do much about global terrorists except sit on committees, issue reports and point fingers. By insisting that crime was a local issue, they could get reelected.

But when tainted money grows from $100 billion to more than $500 billion in so short a period of time, it sounds as if politicians don't know what they're talking about.

And until September 11, they clearly didn't. Look at the way they've dealt with money laundering. That's the process by which criminal groups, including global terrorists, move their ill-gotten gains through shell companies and across borders--jurisdiction stops at borders--and run them in and out of secret bank accounts, bringing the loot out the other end looking as if it has been legally obtained.

The trick is to obliterate the paper trail, so that even if the authorities try to find it, they can't. Making life especially easy for the bad guys are more than 50 jurisdictions around the world with banking secrecy as strict as, if not stricter than, Switzerland's.

The U.S. has the most stringent money laundering laws in the world. In the States, all cash transactions over $10,000 must be reported. That information is then fed into computers run by the Financial Crimes Enforcement Network in Virginia, where analysts watch who's moving how much where. It is certain that within hours of the World Trade Center attack, the Fincen computers were searching out money movements that could point to the terrorists.

But even with rigorous money laundering laws, the bad guys are still able to stash away huge amounts because of loopholes in the laws. Simply put, most money laundering laws dictate that bankers ask only who is opening the account. No one is required to know who the "beneficial owner," or ultimate source, of the money is. That's how lawyers, bankers, accountants, brokers and company formation agents all over the world have wound up doing the bidding of transnational organized criminals and global terrorists. Either they don't want to know who the beneficial owner of the money is, or they don't know enough to ask. Pablo Escobar was one beneficial owner. Osama bin Laden is another. Both of them have enjoyed the protection of "plausible deniability."

Granted, many lawyers, bankers and accountants in the U.S. today would not agree to do business with a global terrorist with a suitcase full of cash. But these same lawyers, bankers and accountants don't usually ask too many questions when the client in front of them is a suitcase-toting lawyer, banker or accountant.

If you earn your living doing business with money, and a professional client with all the right letters of introduction walks in, you don't push too hard. Someone else will gladly take the money. Never mind that the client represents an attorney in Liechtenstein who represents a company in the Bahamas with goods stored in Panama that must be moved to a shell company in Antigua that is represented by a lawyer in Hong Kong who has a line of credit in the Cayman Islands.

By adding enough lawyers, bankers and accountants to the equation, the respectable professional at the end of the money laundering cycle can plausibly deny that his client is a drug trafficker or a terrorist.

The bad guys know that. They organize their affairs to obscure the beneficial owner of the money. They have the best lawyers, accountants and financial advisors giving them access to the wealth-creating machines of the major financial markets.

Criminals and terrorists move money the same way corporations do. But until recently, it never dawned on most politicians that the best way to beat any corporation--or terrorist network--is to bankrupt it.

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Financial sleuths on the front lines of our new war would do well to understand the history of global crime and its connection with global terrorists. Nine years ago, when I began researching my book The Laundrymen, I was flabbergasted at how much dirty money was moving through the financial systems of the world. Money laundering was then, and today remains, the world's third largest business, after petroleum and foreign exchange, accounting for around two percent of the world's gross domestic product. A few years later, when I started researching the book's sequel--The Merger: The Conglomeration of International Organized Crime--I learned another disturbing truth from my law enforcement sources around the world. Joint ventures and strategic alliances have made criminal enterprises such as the Colombian cartels and terrorist networks such as Al Qaeda the most powerful special interest groups on the planet.

During the Seventies, Colombian cocaine dealers colonized Miami and, with their glass-fronted skyscrapers, condos and banks, transformed the place into the financial capital of Latin America. Soon they began doing business with the Italian Mob, which had been there since before World War II.

The Colombians wanted to open up new markets, so they shipped coke to Italy. The Italians paid for it with heroin, which the Colombians moved on to the Mexican drug cartels, who were already smuggling their cocaine into the U.S. The Italians, looking to move their coke through eastern Europe, turned to Moscow.

When the Soviet Union disintegrated, the Russian mafia was eager to get into the business. The Italians offered to provide them with coke. But the Russians had no money to speak of, and the best they could do was barter. The Italians asked, "What have you got?" The Russians answered, "Military surplus weapons and fissile materials."

So the Italian mafia supplied coke to the Russians and took payment in guns, rocket launchers, ammunition and uranium rods, which they then offered to any group with enough cash to buy the stuff--such as global terrorists.

Before long, those same terrorists were short-circuiting the systems by doing their own drugs-for-arms deals. As that market grew, so did the Russians' ambitions to move more weapons. In New York, for example, a band of Greek criminals showed up with five tons of radioactive zirconium for sale. A critical ingredient in nuclear reactors, it had been smuggled to the West by a Russian organized crime group who used the Greeks as their agents. They also had plutonium and enriched uranium to sell.

Business was booming and everyone was making money. And all this time, the cops in the U.S. were busy fighting the war on drugs by arresting kids on street corners.

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These mergers among a veritable UN of new and traditional criminals and steadily growing terrorist organizations garnered extraordinary power.

Consider the case of Ludwig Fainberg, a.k.a. Tarzan, an iron-pumping hustler born in Russia in 1958 who before coming to the States in the early Eighties had trained as a dentist. He bounced around Brooklyn's Brighton Beach for several years, working in furniture and video stores. Then he headed to Florida, where he ran a discount clothing business. By 1991 he'd ripped off enough of that business to buy a strip club.

Porky's, behind Miami International Airport, quickly earned a reputation for being sleazy even by Florida strip-club standards. Adding to the allure of the place was Fainberg himself. He was pumped up with steroids, sported a goatee and a blond ponytail, and his business card had a caricature of him as Atlas. He knew plenty of Russians in Brooklyn who vacationed in south Florida, and by knowing which visiting Russians to hook up with his strippers, Tarzan became a player in Miami.

"Porky's was the place for Russians to meet in Miami," said former FBI special agent Bob Levinson. "Tarzan hired Russian girls, and when the big spenders were in town, he'd make sure they never went back to their hotel suites alone. He ingratiated himself with the Mob guys. But he didn't just supply girls, he offered the men whatever they needed. He had people around him carrying guns, people who weren't afraid to take on anybody, so when the Russians needed muscle, Tarzan supplied it. When they needed hotels, cars or bank accounts, he helped them out. In turn, they became indebted to him."

While Tarzan was building a power base with the Russians, Latino traffickers started frequenting Porky's. Over time, they began mixing with the Russians.

Porky's was where the Russian-Colombian connection was born.

Two Cubans with Colombian connections whom Tarzan had befriended helped him arrange small shipments of cocaine (hidden in frozen shrimp) from Ecuador to Russia. When they informed him that the Colombians were always looking for weapons, Tarzan got into the arms business as a middleman, brokering drugs for guns.

Over time, Levinson explained, the Colombians grew more interested in Russian military surplus. So Tarzan and his amigos began supplying surplus equipment, from Kalashnikovs to Russian helicopters. Then he cooked up a plot to sell the Colombians the ultimate dope-smuggling device--a Russian-made Tango-class diesel submarine. The Colombians were interested enough to send Tarzan from Florida to Russia to look for a sub for sale. To everyone's surprise, he found one, complete with an admiral to command it and an 18-man crew. The price to Tarzan was $5.5 million. The Colombians deposited $35 million in a Swiss bank account, which Tarzan figured was enough to cover his expenses and retirement.

As it happened, the FBI and the DEA stopped the deal, having been tipped off by a Russian-speaking agent who had infiltrated Tarzan's organization. It was a good example of law enforcement using human intelligence to gather information the old-fashioned way.

Tarzan is now in a witness protection program, and everyone else involved is either in jail or is a fugitive outside the U.S. But their submarine venture suggests the enormous ambitions of the global networks of criminals and terrorists. Here, too, the bad guys took a lesson from global business, where no deal is dead forever. In September 2000, the Colombian national police broke into a warehouse west of Bogotá--and hundreds of miles from the sea--and discovered a steel-hulled submarine being built by Russian engineers.

In global business, that's the sort of project that is called a "technology transfer." The same approach could be used to deliver expertise in weapons of mass destruction to terrorists' arsenals.

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Financial sleuths have plenty of connections to examine these days.

Russian gangsters, for example, regularly huddle with Colombians in the islands of the Caribbean. Aruba, St. Vincent and Antigua are the usual venues, but the Dutch section of St. Martin has become popular in recent years. Russian mobsters and Colombian traffickers sail together on cruise ships out of those ports. Italians and Russians also get together in the islands. As a result of several such meetings, four Italian crime families and their Russian friends infiltrated two dozen brokerage 'houses along Wall Street.

Are there links between terrorists hiding in caves in Afghanistan and organized criminals hiding in dealing rooms a few blocks from Ground Zero in New York? Did one of those groups short airline and insurance shares with insider knowledge just before the attack on the World Trade Center? After all, globalization is all about joint ventures and strategic alliances.

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The Italians and the Russians are especially adept at cooking up various (continued to page 188) Terrorist Dollar (continued from page 74) multinational scams. In one, they hire Dominicans, Haitians and Nigerians to stage auto accidents, then escort the walking wounded to doctors and attorneys. Bills are run up to just under a threshold that would otherwise trip automatic investigations by the insurance companies. While medical insurance fraud doesn't bring in the same kind of money as other dodges do and isn't as sexy as drug trafficking, it is a multimillion-dollar industry that doesn't draw much police attention. Most law enforcement maintains a steadfastly local outlook, while global crime and terror mergers have burgeoned.

The more complicated the joint venture, the more difficult it is to identify and stop. Drug producers in Burma, Thailand and Laos, for example, rely on Asian organized crime groups--That, ethnic Chinese and Vietnamese--to handle their distribution in the U.S. Meanwhile, coke from Colombia heads south to Brazil--where at least one group actually bar-codes the packages to keep their accounting straight--and from there is moved to South Africa, where Nigerian and Italian gangsters ship it north into Europe.

Nigerian criminal entrepreneurs use the hundreds of millions of dollars they earn with various global fraud schemes to buy heroin in Thailand. Then they ship the heroin into U.S. ports--Newark is a favorite--where they double their money by trading it to Dominican and Colombian street gangs for coke. Then they smuggle the coke into Britain, where they sell it to Jamaican gangs, nearly doubling their money a second time.

Not to be outdone, heroin producers from Pakistan, Afghanistan and Iran warehouse drugs in Canada with Pakistani traffickers before shipping them south across the border. Lebanese traffickers also have bases in Canada and often use Hell's Angels gangs for transport into the States.

The Hell's Angels also provide muscle for Asian gangs running prostitution rings and have been involved in a joint venture with Vietnamese gangs in Canada to grow and distribute hydroponic marijuana. Over the past 10 years, they have linked their chapters with a secure intranet. When the Los Angeles chapter does a deal with the Mexicans to deliver methamphetamine to a Chinese gang in Seattle, or when the Chicago chapter does a deal with the Dutch chapter to move ecstasy across the Atlantic in their own chartered vessels, every other chapter around the world is alerted, within a few hours of the deal, and told to stay away.

Russian criminals have become particularly proficient at computer and Internet fraud, and at shaking down Western financial institutions through threats of computer sabotage. Former Soviet cryptography specialists, put on the unemployment lines by the fall of Communism, now work for the Colombians, tapping the DEA's phones. They also have been running computer virus courses in Bulgaria, teaching terrorist groups how to wage cyberwar. Meanwhile, many FBI agents assert that their office e-mail systems don't work.

Other Russians have found their niche in the service industry. The Korganskaya organization took Albert Anastasia's Murder Inc. as its role model, offering to do the "heavy lifting" for any person or terrorist group that wanted someone whacked.

As the world is slowly and painfully learning, terrorists don't hide their money in caves. Just like organized criminals, terrorists put their money into the banking system so they can finance their activities around the world. Financial investigators looking into the affairs of Osama bin Laden have directed some of their inquiries toward Albania.

By 1991 the war in Yugoslavia was seriously interrupting the traditional Balkan heroin routes, especially into Europe from Afghanistan, where heroin has been a major export since the CIA began to support the anti-Soviet Mujahideen in the early Eighties. In those days, Bin Laden was considered valuable by the CIA. In the early Nineties, a new route developed, which takes heroin through Kosovo and Albania. From there, Albanian gangs move drugs across the Adriatic into Italy, a process that created a new alliance between the Italian mafia and the Kosovo Liberation Army. Together they smuggle people from the Balkans into Italy, move counterfeit prescription medicines from Italy to the Balkans and trade drugs for arms. They also deal with the Russians, who pay for heroin with rocket launchers and automatic weapons.

Drugs alone bring the KLA more than $2 billion a year and have turned Albania into the Colombia of Europe.

But drugs alone do not finance Bin Laden or whoever backed the World Trade Center and Pentagon attacks. Bin Laden is estimated to have a personal fortune worth possibly $300 million. He is believed to own or otherwise control businesses that include an import-export firm, a concrete factory, a plant that manufactures an important ingredient for the production of fruit juices, an investment house that supposedly maintains properties in the West and, perhaps most significantly, an Islamic bank.

Terrorist groups have taken their lesson from organized criminals--especially the Russian mafia--who buy banks instead of robbing them.

Al Qaeda maintains cells throughout the world--in Lebanon (for secret banking), Malaysia (home to organized Asian gangs), Uruguay (a money laundering paradise), the United Kingdom (offshore banking) and Canada (easy border access to the U.S.).

Again, enter here the KLA. Albanian refugees, like the Russian émigrés of the Seventies, have extended the reach of the KLA's criminal activities into Europe and North America, where they commit burglaries, armed robberies and theft. Some of those same refugees also raise money for Albanian and Kosovo charities.

Bank accounts related to the KLA and certain so-called Kosovo disaster relief charities have been located in Germany, Sweden, Italy, Belgium, Canada and the U.S.

Thus, if Bin Laden needs any money in the U.S.--and can't otherwise get it there--it would not be a problem for the KLA to become his banker.

It could provide him with funds it already has in the States. He could then repay the organization in Albania with Afghan heroin, or with money funneled through shell companies in Cyprus or cash via Dubai.

That's known as hawallah banking--moving people across borders and supplying them with money already sitting where it needs to be--and it has been a favorite technique throughout the Islamic world for centuries.

No, terrorists don't hide their money in caves.

Fifteen months before the attack on the World Trade Center, a report on America's ability to deal with international terrorism was submitted to Congress.

In it, the intelligence community took some direct hits: "The CIA has created a climate that is overly risk averse," the report said. "This has inhibited the recruitment of essential, if sometimes unsavory, terrorist informants and forced the U.S. to rely too heavily on foreign intelligence services."

Criticism was also leveled at the FBI: "Law enforcement agencies are traditionally reluctant to share information outside their circles so as not to jeopardize any potential prosecution. The FBI does promptly share information warning about specific terrorist threats with the CIA and other agencies. But the FBI is far less likely to disseminate terrorist information that may not relate to an immediate threat even though this could be of immense long-term or cumulative value to the intelligence community. The problem is particularly pronounced with respect to information collected in the FBI's field offices in the U.S., most of which never reaches the FBI headquarters, let alone other U.S. government agencies or departments."

The report also contained a warning that reverberates today: "Neither Al Qaeda's extremist politico-religious beliefs nor its leader, Osama bin Laden, is unique. If Al Qaeda and Bin Laden were to disappear tomorrow, the U.S. would still face potential terrorist threats from a growing number of groups opposed to perceived American hegemony. Moreover, new terrorist threats can suddenly emerge from isolated conspiracies or obscure cults with no previous history of violence. Transnational terrorist networks are difficult to predict, track and penetrate. They rely on a variety of sources for funding and logistical support, including self-financing criminal activities such as kidnapping, narcotics and petty crimes. Their networks of support include both front organizations and legitimate businesses."

That is as prophetic as anything found in any religious text.

So what will it take for the politicians who write the laws and fund the cops to understand that they are up against terrorists and drug traffickers who are, in a real sense, corporate entities? Just as those corporate entities form joint ventures and strategic alliances, opening overseas branches to expand established markets and gaining access where they once were forbidden, law enforcement must do the same.

Transnational criminal organizations and terrorist groups understand cash flow, reinvestment, franchising, time management and risk, and they construct and maintain networks of front companies and use the legitimate financial markets for their own ends. What will it take for politicians to create laws to combat them?

As long as we live in a world where a 17th century philosophy of sovereignty is reinforced with an 18th century judicial model, defended by a 19th century concept of law enforcement that is still trying to come to terms with 20th century technology, the 21st century will belong to criminals and terrorists.

And, over time, it will be impossible to tell the two apart.

The Italian mafia took payment in guns, rocket launchers and uranium rods, which they offered to sell to any group with enough cash to buy them.