24 Terrorism Financing
What’s the sense of sending $2 million missiles to hit a $10
tent that’s empty?
George W. Bush, private Oval Office meeting,
September 13, 2001
We’ve got to go after the guts of this. This could be like a pla-
naria. If you just cut off its head and it regenerates another head,
that’s not going to be very helpful. So, while, of course, Osama
bin Laden and his lieutenants are part of the story, the real part
of the story is to choke off the bloodline of this network.
Condoleezza Rice, Fox News Sunday, September 23, 2001
The bloodline of terrorist networks is money. You can have
all the fanaticism and motivation in the world, but it’s no good
unless you can get out of that $10 tent and put it to some bad
use. In the case of Osama bin Laden and his 9/11 plotters, they
had plenty of money; they had enough to get all the way from
Kabul to New York and Boston, where their fanaticism could
play itself out in a spasm of horror that shook the world.
There’s a tendency to think of people like bin Laden as
leaders of a sort of ragtag, irregular version of armed forces,
and there are some similarities. al Qaeda, like most terror-
ist groups, has organization; a command structure; military,
political, and other wings; and, of course, lots of armed men
(though not as many as it used to).
Certainly a terrorist network, however extensive, is far
less costly to operate than a “conventional” military force.
The American juggernaut that overwhelmed Afghanistan’s
Taliban regime and then toppled Saddam Hussein spends
more money in 5 minutes than Osama’s bunch had in its entire
existence. The British, in their seemingly endless war against
the Irish Republican Army and its fellows, outspent their
rivals probably by a factor of thousands, if not millions.
Still, terrorists can get a lot of bang for their buck, as
Mohammed Atta and his crew demonstrated on September
11, 2001. And achieving maximum impact at the lowest pos-
sible cost has always been the goal of terrorist groups, which
are, after all, microscopically small organisms on the body
politic. They will always be forced to economize, but this
doesn’t stop them from attempting to raise enough money to
pay for all the mayhem they want.
What does terrorist financing have to do with money laun-
dering? Why is this chapter even in the book? The two best
reasons are that there are an awful lot of similarities between
terrorist financing and money laundering and that we can use
the same investigative techniques and procedures against this
criminal activity.
After 9/11, Congress and governments all over the world
made a startling discovery: It walked like a duck, quacked
like a duck, and did a few other things like a duck, but terror-
ist financing wasn’t a duck. At least, not the money laundering
duck everybody was used to. The most important difference
related to the source of the money. Money launderers, as we
know, can only be convicted of laundering money that comes
from some illegal source—a Specified Unlawful Activity
(SUA). But terrorists don’t always finance their operations
with money earned in some illegal activity. In fact, terror-
ists traditionally have obtained their funding from four main
sources, three of which, though not exactly legitimate, don’t
fit the definition of an SUA by a long shot.
In this chapter we will look at a couple of groups involved
in terrorism, examining their funding needs, sources, and
methods of operation. It will be useful to compare the two
groups—the Provisional Irish Republican Army (PIRA) and
Osama bin Laden’s al Qaeda—to see whether there are any
common characteristics or vulnerabilities.
As noted, terrorist financing comes from four main sources:
• Criminal activity
• Charitable contributions or donations
• Legitimate or semilegitimate business
• Government or state sponsorship
Keep in mind that only the first could constitute an SUA under
federal money laundering law, and then only if the offender had
one of the four “intents” prescribed by 18 U.S.C. §1956 (a) (1).
See Figures  24.1 and 24.2 for two important documents
relating to international efforts to suppress the financing of ter-
rorism: the United Nations International Convention for the
Suppression of the Financing of Terrorism and the FATF 8
Special Recommendations on Terrorist Financing, respectively.
It seems sometimes that the Irish have been fighting the
British for approximately forever, which is why the financing
activities of one of the leading Irish groups, the Provisional
Irish Republican Army (PIRA), make a good case study for us.
Born in 1969 as a descendant of the original Irish Republican
Army, itself founded in 1919, PIRA is best known for its
paramilitary campaign in Northern Ireland in the 1970s and
1980s. Closely coupled with a “political wing,” Sinn Fein,
PIRA provided the armed combatants, the “provos,” in the
long conflict with Great Britain in the North.
Some in Ireland and elsewhere would dispute the British
characterization of PIRA as a terrorist organization (certainly
the IRA and Sinn Fein would object), but it cannot be denied
that some of the group’s tactics, notably car bombings and
attacks on civilian targets such as subways and department
stores, fit the definition. PIRA argues that most of its actions
279
280 Money Laundering: A Guide for Criminal Investigators, Third Edition

are directed at military, police, or government targets, though
it admits to causing some collateral damage. At any rate, the
organization has been legally banned, which is why you hear
about the “outlawed IRA,” and there’s currently a truce under
way that has stopped most of the killing.
PIRA’s lengthy history and extensive experience make it a
good example of how terrorist (or, as they prefer, “paramili-
tary”) groups operate, as well as an especially good illustra-
tion of how they are financed and supported. In PIRA’s case,
it has obtained funding over the years from all four of the
sources listed earlier. Before we look at these sources, we
should see exactly what all that money gets spent on and why
terrorist groups need money in the first place.
NEEDS OF TERRORIST GROUPS
In the grand scheme of things, terrorism comes pretty
cheap—certainly compared with maintaining a fleet of
nuclear submarines or even a big school district. One PIRA
sniper with a rifle and a few bullets or a roadside bomb made
out of fertilizer and diesel fuel isn’t going to break the bank.
Still, there are a number of hidden costs, and these things do
add up, especially when the organization itself isn’t anywhere
near the size of its competition.
Weapons are a major expense, even in the smaller num-
bers that terrorist groups require. Rifles, explosives, mortars,
and similar low-tech equipment still cost money, especially
when they must be purchased on the black market and smug-
gled into the area of operations. Munitions are expendable,
and the more active the group is, the more it is expending, so
replacement or resupply is an issue. There is also the likeli-
hood that the opposition will capture some of the weaponry,
which means buying more than the group needs. And when
the group starts going high-tech, buying shoulder-fired mis-
siles or other big-ticket items, costs rise sharply.
Security costs can be substantial. Weapons and personnel
need to be kept secure in “safe houses” that are free from

Article 1
For the purposes of this Convention:
1. Funds means assets of every kind, whether tangible or intangible, movable or immovable, however acquired,
and legal documents or instruments in any form, including electronic or digital, evidencing title to, or
interest in, such assets, including, but not limited to, bank credits, travelers cheques, bank cheques, money
orders, shares, securities, bonds, drafts, letters of credit.
2. State or governmental facility means any permanent or temporary facility or conveyance that is used or
occupied by representatives of a State, members of Government, the legislature or the judiciary or by offi-
cials or employees of a State or any other public authority or entity or by employees or officials of an inter-
governmental organization in connection with their official duties.
3. Proceeds means any funds derived from or obtained, directly or indirectly, through the commission of an
offence set forth in article 2.
Article 2
1. Any person commits an offence within the meaning of this Convention if that person by any means, directly
or indirectly, unlawfully and willfully, provides or collects funds with the intention that they should be
used or in the knowledge that they are to be used, in full or in part, in order to carry out:
(a) A n act which constitutes an offence within the scope of and as defined in one of the treaties listed in the
annex; or
(b) A ny other act intended to cause death or serious bodily injury to a civilian, or to any other person not
taking an active part in the hostilities in a situation of armed conflict, when the purpose of such act,
by its nature or context, is to intimidate a population, or to compel a government or an international
organization to do or to abstain from doing any act.
2. (a) O n depositing its instrument of ratification, acceptance, approval or accession, a State Party which is
not a party to a treaty listed in the annex may declare that, in the application of this Convention to the
State Party, the treaty shall be deemed not to be included in the annex referred to in paragraph 1, sub-
paragraph (a).The declaration shall cease to have effect as soon as the treaty enters into force for the State
Party, which shall notify the depositary of this fact;
(b) W hen a State Party ceases to be a party to a treaty listed in the annex, it may make a declaration as
provided for in this article, with respect to that treaty.
3. For an act to constitute an offence set forth in paragraph 1, it shall not be necessary that the funds were
actually used to carry out an offence referred to in paragraph 1, subparagraphs (a) or (b).
4. Any person also commits an offence if that person attempts to commit an offence as set forth in paragraph
1 of this article.
5. Any person also commits an offence if that person:
(a) Participates as an accomplice in an offence as set forth in paragraph 1 or 4 of this article;
(b) Organizes or directs others to commit an offence as set forth in paragraph 1 or 4 of this article;
(c) Contributes to the commission of one or more offences as set forth in paragraphs 1 or 4 of this article by a
group of persons acting with a common purpose. Such contribution shall be intentional and shall either:
(i) Be made with the aim of furthering the criminal activity or criminal purpose of the group, where such
activity or purpose involves the commission of an offence as set forth in paragraph 1 of this article; or
(ii) B e made in the knowledge of the intention of the group to commit an offence as set forth in para-
graph 1 of this article.

FIGURE 24.1  United Nations International Convention for the Suppression of the Financing of Terrorism, adopted by the General Assembly of the
United Nations in resolution 54/109 of December 9, 1999. (Source: Financial Crimes Enforcement Network.)
Terrorism Financing 281

I. Ratification and implementation of UN instruments

Each country should take immediate steps to ratify and to implement fully the 1999 United Nations International Convention
for the Suppression of the Financing of Terrorism.
Countries should also immediately implement the United Nations resolutions relating to the prevention and suppression of
the financing of terrorist acts, particularly United Nations Security Council Resolution 1373.
II. Criminalising the financing of terrorism and associated money laundering
Each country should criminalise the financing of terrorism, terrorist acts and terrorist organisations. Countries should
ensure that such offences are designated as money laundering predicate offences.
III. Freezing and confiscating terrorist assets
Each country should implement measures to freeze without delay funds or other assets of terrorists, those who finance terror-
ism and terrorist organisations in accordance with the United Nations resolutions relating to the prevention and suppression
of the financing of terrorist acts.
Each country should also adopt and implement measures, including legislative ones, which would enable the competent
authorities to seize and confiscate property that is the proceeds of, or used in, or intended or allocated for use in, the financing
of terrorism, terrorist acts or terrorist organisations.
IV. Reporting suspicious transactions related to terrorism
If financial institutions, or other businesses or entities subject to anti–money laundering obligations, suspect or have rea-
sonable grounds to suspect that funds are linked or related to, or are to be used for terrorism, terrorist acts or by terrorist
organisations, they should be required to report promptly their suspicions to the competent authorities.
V. International co-operation
Each country should afford another country, on the basis of a treaty, arrangement or other mechanism for mutual legal assis-
tance or information exchange, the greatest possible measure of assistance in connection with criminal, civil enforcement,
and administrative investigations, inquiries and proceedings relating to the financing of terrorism, terrorist acts and terrorist
organisations.
Countries should also take all possible measures to ensure that they do not provide safe havens for individuals charged with
the financing of terrorism, terrorist acts or terrorist organisations, and should have procedures in place to extradite, where
possible, such individuals.
VI. Alternative remittance
Each country should take measures to ensure that persons or legal entities, including agents, that provide a service for the
transmission of money or value, including transmission through an informal money or value transfer system or network,
should be licensed or registered and subject to all the FATF Recommendations that apply to banks and non-bank financial
institutions. Each country should ensure that persons or legal entities that carry out this service illegally are subject to admin-
istrative, civil or criminal sanctions.
Countries should take measures to require financial institutions, including money remitters, to include accurate and mean-
ingful originator information (name, address and account number) on funds transfers and related messages that are sent, and
the information should remain with the transfer or related message through the payment chain.
Countries should take measures to ensure that financial institutions, including money remitters, conduct enhanced scrutiny
of and monitor for suspicious activity funds transfers which do not contain complete originator information (name, address
and account number).
VIII. Non-profit organisations
Countries should review the adequacy of laws and regulations that relate to entities that can be abused for the financing of
terrorism. Non-profit organisations are particularly vulnerable, and countries should ensure that they cannot be misused:
i. by terrorist organisations posing as legitimate entities;
ii. to exploit legitimate entities as conduits for terrorist financing, including for the purpose of escaping asset freezing mea-
sures; and
iii. to conceal or obscure the clandestine diversion of funds intended for legitimate purposes to terrorist organisations.
IX. Cash couriers
Countries should have measures in place to detect the physical cross-border transportation of currency and bearer negotiable
instruments, including a declaration system or other disclosure obligation.
Countries should ensure that their competent authorities have the legal authority to stop or restrain currency or bearer nego-
tiable instruments that are suspected to be related to terrorist financing or money laundering, or that are falsely declared or
disclosed.
Countries should ensure that effective, proportionate and dissuasive sanctions are available to deal with persons who make false
declaration(s) or disclosure(s). In cases where the currency or bearer negotiable instruments are related to terrorist financing
or money laundering, countries should also adopt measures, including legislative ones consistent with Recommendation 3 and
Special Recommendation III, which would enable the confiscation of such currency or instruments.

FIGURE 24.2  Financing the PIRA.

prying eyes or government interest. Arms may be cached, as
the PIRA has, in secret bunkers built in Ireland and Northern
Ireland. Costs may also be incurred in securely transport-
ing the weapons (or personnel) to other safe houses or to an
operational area.
PIRA and other groups rely on supporters within the com-
munity to provide some of these services, but they also buy or
rent property, and they reimburse those who allow them use of
homes or businesses. When it had access to the entire country
of Afghanistan, al Qaeda was able to set up large, semiper-
manent camps or even take over small towns to train and
support its personnel. PIRA doesn’t have this luxury; it gets
by with more limited and more transient accommodations.
Security costs also include such things as false identifi-
cation and other concealment mechanisms. You’ll note the
similarity here to more conventional criminals, who incur
expenses relating to hiding their assets or laundering their
money. Terrorist groups may have access to false identification
282 Money Laundering: A Guide for Criminal Investigators, Third Edition
documents such as passports from friendly governments, but
they might not want the attention that comes with a pass-
port from some country on the US State Department’s list of
countries sponsoring terrorism.
Communications also cost money. al Qaeda is known
to use satellite telephones and the Internet, but much com-
munication is still done the old-fashioned (and expensive)
way—by courier and messenger. This has the advantage of
being difficult to intercept, but it means paying for transpor-
tation and for the courier. Prior to the 9/11 attacks, some of
the communication took place by e-mail, but many of the
plotters traveled extensively to meetings where they could
communicate directly. In Iraq, American forces captured
valuable information, including a letter to Osama bin Laden,
contained on a CD-ROM. The disk was being transported by
an al Qaeda courier, a graphic illustration of the melding of
old and new technology in communications.
Modern organizations do use more up-to-date methods;
radios, cellular phones, and the computer are used by the
legitimate and illegitimate alike. The cost of cellular service
is relatively low, but it still contributes to budget concerns.
Personnel costs are generally the largest in any organiza-
tion, legitimate or illegitimate. PIRA and other groups tout their
use of “volunteers”—people willingly serving a cause without
compensation. Mohammed Atta, lead hijacker of the 9/11 plot,
would have scorned the idea that he should be paid for his role
in the attacks, an attitude common to fanatics everywhere.
Still, there are many personnel expenses, all of which add
up, and not all of the PIRA personnel went unpaid. After
all, they needed to support themselves and their families
while they were on “active service,” often for extended peri-
ods. British antiterrorism experts estimated that payments to
PIRA personnel could have amounted to £12,000 per week
or more, serious money, and only the tip of the iceberg.
A similar situation existed in the Middle East, where the
Palestinians seemed to have an endless supply of volunteers
wishing to “martyr” themselves by packing a suicide bomb
into an Israeli pizza parlor. These folks might have been true
volunteers, but the Israelis have thoroughly documented the
support payments made to their families by governments such
as those in Saudi Arabia and Saddam Hussein’s Iraq, as well as
by terrorist organizations such as HAMAS or Islamic Jihad.
You’ve also got to take care of the relatives of jailed PIRA
men, those who supported the organization with services such
as housing and transportation, and the “widows and orphans”
who were at the center of IRA fundraising campaigns in
years past. I don’t know if many al Qaeda or PIRA men live
to retirement age, but one would suppose there would be a
need for some form of pension benefits for those too old to
pull a trigger. (An IRA IRA, perhaps…)
Costs may even be incurred to pay members to stop mak-
ing mischief or going “off the reservation.” Idle terrorists
(or “paramilitary operatives”) are the devil’s workshop, you
might say, and British and Irish intelligence have described
situations when the organization paid off PIRA men who
might have caused trouble by breaking a truce or attacking
an unapproved target.
Some of the most expensive personnel costs relate to
training. Setting up and maintaining those terrorist training
camps that President Clinton tried to hit with cruise missiles
is a major endeavor. Sometimes a friendly government will
pick up the tab; Libya and Saddam Hussein’s Iraq had a repu-
tation for generosity in this area. In other hot spots, notably
Colombia, Indonesia, the Philippines, and various African
locations, the camps have to be established somewhere in
relatively safe territory controlled by the terrorist group or a
friendly warlord. You then have to transport your trainees to
the camp; feed, clothe, house, and equip them; and then send
them off when they’ve completed the course. Even on an ad
hoc basis, this can get quite expensive.
Related activities also cost a terrorist organization. Sinn
Fein, the legitimate side of the IRA, incurs all of the nor-
mal costs associated with running a political party. It, too,
needs to raise money, and the British long suspected that
contributions to Sinn Fein were being channeled to its darker
side. Many groups, Hizballah and HAMAS in the Middle
East being prime examples, operate charitable, social, and
public service sides, providing medical care, social services,
and related benefits to the populace from which they draw
their support. It’s great PR, and these related activities make
it possible for donors to give to the cause without directly
supporting the terrorist side of the house. “Sure, I give to
HAMAS because they run medical clinics in the Palestinian
community” is the rationalization.
SOURCES OF FUNDING
Over the years, various estimates have been made of the total
amount of funds raised by PIRA to support its operations.
Since it’s not a publicly traded company, there’s no annual
report detailing the source and application of funds, but the
best guesses range from $8 million to $15 million annually.
Ironically, now that the cease-fire is in effect and Sinn Fein’s
political profile is much higher, the costs are probably much
greater. At any rate, keeping this money stream flowing
becomes a high priority for the organization.
For decades, PIRA has relied on all four means of funding:
one very overt, one very covert, and two that everybody knows
about but the IRA doesn’t advertise. On the overt side, PIRA
actively solicits donations and contributions, both in Ireland
and abroad, particularly in North America. The Northern
Aid Committee (NORAID) and Friends of Sinn Fein (FOSF)
present a very high public profile, actively going out into Irish
communities to solicit contributions from individuals and
businesses.
The funds raised serve not only to support the activities
of Sinn Fein and the IRA, but also as a cover for money
laundering and a placement mechanism for the money that
comes from less reputable sources. PIRA would have every-
one believe that the vast majority, if not all, of its funding
comes from little people putting something in the jar on the
bar at the pub or writing out a small check to Sinn Fein. This
is a good public image—one that played well for decades
in Irish-American communities, where NORAID cans were
Terrorism Financing 283
stuffed with “something for the widows and orphans.” Irish
fund-raisers would travel regularly to New York and Boston
to solicit funds, and these trips have gotten an even higher
profile now that Sinn Fein is a recognized political party in
the North and a partner in the ongoing peace process.
The fund-raising profile is also high; NORAID and the
Irish Northern Aid Committee, Inc. (INAC) maintain slick
websites and very open points of contact. INAC claims rec-
ognition by the IRS as a 501 (c) (3) nonprofit organization.
Is there any evidence that funds donated to these groups are
used to support terrorist (or paramilitary) operations? Cases
in the past have linked NORAID money to weapons ship-
ments, and there is no doubt that all of the funds raised by or
on behalf of PIRA are commingled and spent on operations
legal or illegal without regard to the source. What is clear is
that there is no evidence that any of the contributed money
comes from an illegal source or SUA, and tracing it from the
NORAID, FOSF, INAC, or Sinn Fein account into a weapons
purchase or other illegal use is going to be tough.
At the opposite and very covert end of the spectrum are the
monies and other items of value PIRA gets from state spon-
sors. PIRA is never going to admit it got a penny from the
likes of Libya’s Muammar Khadafi, but that’s what British
intelligence seems to think.
State sponsorship is sort of like the pot of gold at the end
of the rainbow, to borrow an appropriate Irish expression.
After all, nobody’s got more money than the government,
with the possible exceptions of Sam Walton or Bill Gates, nei-
ther of whom is in the terrorism-supporting business. Having
a whole country’s support, particularly one like Libya that
pumps money out of the ground, is too good to be true.
It’s also too sensitive to be admitted because most govern-
ments that are inclined in this direction fear the consequences
of getting caught at it. This was even truer after the Taliban got
thoroughly kicked to the curb (and out of power) when they
tried it in Afghanistan. Some governments—and the United
States maintains a list of the ones that qualify—are known or
suspected of “repeatedly providing support” for terrorism and
are subject to sanctions. According to the State Department:
Countries determined by the Secretary of State to have
repeatedly provided support for acts of international terror-
ism are designated pursuant to three laws: section 6 (j) of the
Export Administration Act, section 40 of the Arms Export
Control Act, and section 620A of the Foreign Assistance Act.
Taken together, the four main categories of sanctions result-
ing from designation under these authorities include restric-
tions on U.S. foreign assistance; a ban on defense exports and
sales; certain controls over exports of dual use items; and
miscellaneous financial and other restrictions. Designation
under the above-referenced authorities also implicates other
sanctions laws that penalize persons and countries engag-
ing in certain trade with state sponsors. Currently there are
six countries designated under these authorities: Cuba, Iran,
Libya, North Korea, Sudan and Syria.
This list is important because it emphasizes the inher-
ent danger in having countries in the terrorism business.
This danger extends to the financial realm because gov-
ernments can launder money very efficiently themselves
or they can simply turn a blind eye to things like terror-
ist financing and money laundering taking place in their
banks or on their soil.
Governments also buy a lot of weapons; they’ve got armies
and navies, after all, that may be armed to the teeth but go for
years without having anybody handy to shoot. A government
such as Libya, for example, that held a grudge against another,
much more powerful government, such as Great Britain, for
instance, might slide a few of those weapons under the table
to some paramilitary operatives who were willing to put them
to productive use somewhere like Northern Ireland.
Libya wouldn’t want to get caught at this, no doubt fearing
the appearance of F-111s over Tripoli or sharing the fate of the
Taliban in Afghanistan, so it would make its PIRA buddies
promise never to tell where the Kalashnikovs or plastic explo-
sives came from. PIRA wants to keep that little secret, too, hop-
ing to get more goodies in the future. PIRA is also extremely
wary of the bad publicity sure to follow the disclosure of a
link to the man whose agents blew up Pan Am Flight 103 over
Scotland. Both sides will work hard to layer these transactions.
al Qaeda was the king of government sponsorship, hol-
ing up first in Sudan, one of the countries on the State
Department’s list, before moving to very accommodating
Afghanistan. Here, al Qaeda had the ability to set up large
training camps, recruit followers, and engage in fund-raising
activities unimpeded by any government restrictions.
Most terrorist groups aren’t that lucky, and after 9/11 most
countries are going to be very reluctant to allow terrorist
groups to operate so openly; the consequences are too severe,
and the United States demonstrated in Iraq and Afghanistan
that if we can’t take it out directly on the terrorists them-
selves, we’ll hammer their sponsors. (The list used to include
Iraq and Afghanistan, but they were removed after we took
them out of that business.) Sponsors in the rogue states on
the list and elsewhere are going to be a lot more circumspect,
making our ability to track the money flow more important.
Terrorist groups are also into legitimate business for many
of the same reasons that money launderers use businesses.
According to John Horgan and Max Taylor, who studied
PIRA financing:
Legitimately-owned businesses have included private security
firms, the “black” taxi cabs in Belfast…at least two known
hackney cab services in Dublin, construction firms, shops, res-
taurants, courier services, guest houses, cars and machinery,
pubs which at one time or another have included at least one in
Boston in the United States, two small pubs in Finglas, two in
Coolock, also in Dublin with several more in the city centre,
three in Letterkenny, three in Cork (including one Cork hotel),
and more small pubs “scattered about” the country.
That’s a pretty diversified mix of business interests, but
they are sensible choices for the organization. The cab com-
panies generate income in cash and have the added benefit of
being available to transport personnel or materiel. Pubs also
bring in cash, make good meeting places, and are vehicles for
284 Money Laundering: A Guide for Criminal Investigators, Third Edition
raising money through contributions. All of the businesses
can be used for the placement of laundered funds, and most
can be used to integrate money as well.
Income from legitimate business, some of which may actu-
ally be reported to the taxing authorities, can be funneled
directly into PIRA coffers or routed through banks or shell
corporations, just as a money launderer would do. There is
substantial intelligence that al Qaeda, too, relies on legitimate
business as part of its financial schemes; the aspirin factory in
Sudan that President Clinton ordered bombed was supposed
to have been connected with Osama bin Laden’s outfit. Osama
himself is supposed to be the scion of a wealthy family and was
alleged to have invested his money in his terrorist enterprise.
Another possibility involves the manipulation of financial
markets, something that can generate profits for an organiza-
tion or individual. Groups in the Middle East are known to
be involved in the gold trade, and they may traffic in other
legitimate commodities. These activities, particularly those
on the fringes of (or all the way inside) the black market,
can be very profitable. Groups in South America have been
observed moving and selling blue jeans, electronic goods,
and other products.
Finally, terrorist groups have always relied on money from
illegal sources—money that they not only have to make, but
also have to launder. Some of the more popular methods are
the ones you might expect: kidnapping for ransom, extortion,
and armed robbery. These are exactly the sorts of crimes
toward which a large group of heavily armed, well trained,
and very organized individuals might lean.
In December 2004, such a group raided Northern Bank
in Ulster, grabbing £22 million in bank notes. It was one
of the largest robberies ever, and the IRA was immediately
suspected. Although the IRA and Sinn Fein denied involve-
ment, it is generally thought that only the IRA had the ability
to (a) pull off the heist in the first place and (b) launder the
incredibly large number of £20 and £100 notes. (The bank, in
response to the theft, has recalled all notes in these denomi-
nations and issued new ones that are substantially different
in color and design. This action may make most of the stolen
money worthless.)
PIRA and its fellows have been associated for so long
with fund-raising through bank robbery and other crimes
that many in Ireland and Northern Ireland now assume their
involvement in a heist. Even some of their supporters now
question the need, with a cease-fire in place and political
discussions under way, for a heavily armed cadre of trained
fighters to continue to raise money by ripping off banks. In
his book, Revolution in the Revolution, Regis Debray notes
that as a terrorist organization loses a clearly defined focus
or political objective, the group continues to exist but mem-
bers may drift into activities they have been trained to do
well. This would certainly seem to apply to the IRA and its
involvement in bank robbery.
People have also noticed other PIRA fund-raising activi-
ties in the illegal sphere, including extortion of legitimate
business and the always lucrative drug trade. Both of these
are perfect fits. It’s not a long step, after all, from asking a
pub owner to put a contribution jar on the bar to telling the
owner he or she had better put one out, or else. And pretty
soon there’s a quota that had better be met. Or maybe some of
the “hard men” come in and just make a naked threat.
As the IRA has gotten into legitimate business, the extor-
tion racket has become more sophisticated. Now, a PIRA rep
can approach a businessperson and suggest that it would be
a good idea to hire an IRA-controlled or -owned security
company. The reluctant businessperson might get a graphic,
even forceful, demonstration of why this would be so. There
are currently dozens of security firms in Belfast, many of
which are connected to the movement. These companies
provide employment opportunities for PIRA personnel and
fund-raising opportunities as well.
Another lucrative extortion possibility involves shaking
down people in illegal businesses, notably drug traffickers.
Imposing a “tax” on somebody unable to complain about it
has all sorts of advantages. A drug dealer has little choice
but to pay up; the terrorists are always going to be better
armed and more organized, and they get a cut of the drug
profits without having to dirty their hands by dealing heroin
or marijuana.
The question of whether PIRA is actively involved in the
drug trade itself is hotly disputed. There’s no doubt that al
Qaeda is a player. With the majority of the world’s opium
supply in its backyard, established routes of clandestine
communication, and a network of contacts and safe houses,
the terrorist group is perfectly positioned to reap some of the
huge profits from the heroin business.
Narcotrafficker–terrorist connections are well established
all over the world. In Colombia, Southeast Asia, Europe,
and Afghanistan, ties between drug traffickers and terrorist
groups are quite close, and money flows both ways. Terrorist
groups are well armed and well positioned to provide ser-
vices (or make trouble) for drug trafficking groups. There are
numerous reports of terrorist groups’ extorting money from
narcotraffickers, “taxing” drug shipments, and collecting
protection money for allowing shipments through the terror-
ist group’s area of operations. These groups have also been
known to provide protection or security for drug shipments—
something of which the IRA has been accused in the past.
It’s a logical connection; for a dope dealer or a “paramilitary
operative,” the government is the enemy. And the money is
huge, so siphoning some off to the terrorist group makes very
good business sense for the drug trafficker. After all, he or
she doesn’t need any additional problems with heavily armed
and highly motivated individuals operating in the same patch
(see Figures 24.3 and 24.4).
In the United States, at least one major drug investiga-
tion, DEA’s Operation Mountain Express II, detected links
between traffickers in pseudoephedrine, a precursor for meth-
amphetamine, and Middle East terrorist groups Hezbollah
and HAMAS.
Some illegal activities are closer to the line between legiti-
mate commerce and crime, such as the smuggling of cigarettes
from low-tax states to high-tax jurisdictions and trafficking in
counterfeit merchandise. In a recent California case, the Los
Terrorism Financing 285

FIGURE 24.3  DEA “wanted” poster connecting Colombian cocaine traffickers to terrorist activity. (Source: DEA.)

FIGURE 24.4  Receipt for 70 kg of cocaine base from “Guillermo” of FARC, the Revolutionary Armed Forces of Colombia, a designated
terrorist organization. (Source: DEA.)

Angeles Times (May 26, 2005) reported that federal agents and
prosecutors suspected that Hezbollah operatives in the United
States and other groups accused of terrorist activity were rais-
ing as much as $30 million a year in America through the sale
of counterfeit merchandise and other criminal enterprises and
sending unknown but substantial sums back home.
INVESTIGATION OF TERRORIST FINANCING
Legal Measures
The September 11, 2001, terrorist attacks jolted the American
government (and, to some extent, governments around the
world) into action. Although some measures taken to counter
the terrorist threat involved the use of military force and intel-
ligence assets, Congress acted quickly to pass provisions such
as the USA PATRIOT Act and other measures, closing loop-
holes in the federal laws dealing with terrorism. One area of
specific concern was the problem of terrorist financing. The
primary statutes in this area are found in 18 U.S.C. §2339A,
§2339B, and §2339C.
Section 2339A prohibits providing material support for
terrorists or “concealing the nature, location, source, or
ownership of material support or resources.” This language
should be very familiar to us because it closely resembles
that in the money laundering statutes. The astute investiga-
tor would suppose, therefore, that the techniques involved in
investigating and proving this crime would be very similar,
as indeed they are.
We immediately see the financial component, although
“material support” is not necessarily limited by the statute to
money or other financial resources. In fact, the statute states:
286 Money Laundering: A Guide for Criminal Investigators, Third Edition
“Material support or resources” means currency or monetary
instruments or financial securities, financial services, lodg-
ing, training, expert advice or assistance, safe houses, false
documentation or identification, communications equipment,
facilities, weapons, lethal substances, explosives, personnel,
transportation, and other physical assets, except medicine or
religious materials.
The law also has a rough equivalent to money laundering’s
SUA, in that those providing the material support must know
or intend that it is to be used in preparation for or in carrying
out a violation named in a list of federal offenses that broadly
relate to terrorism or acts of violence.
This second element will probably be a greater sticking
point in most 2339A investigations. As noted earlier, many
terrorist organizations maintain legitimate fronts, political
wings, or public service components that ostensibly do not
engage in terrorist activity. Contributors or others provid-
ing material support to HAMAS could claim that they never
had any intent to finance the nastier aspects of HAMAS’s
program, perhaps noting that the organization runs medical
clinics and other social services in Gaza and the West Bank.
Someone shipping weapons or explosives to the same address
would be less successful in this argument.
In the case of the IRA, someone making a contribution to
the “widows and orphans” fund or to one of the NORAID,
FOSF, or INAC websites would have no knowledge of the
ultimate destination of the funds or the uses to which they
might be put. Because this intent requirement is more difficult
to prove, a second provision, 2339B, addresses the question
more directly. It reads as follows:
§2339B. Providing material support or resources to desig-
nated foreign terrorist organizations
(a) Prohibited Activities.—
(1) Unlawful conduct.—Whoever, within the United
States or subject to the jurisdiction of the United States,
knowingly provides material support or resources to a for-
eign terrorist organization, or attempts or conspires to do so,
shall be fined under this title or imprisoned not more than 15
years, or both, and, if the death of any person results, shall be
imprisoned for any term of years or for life.
This statute simplifies matters for the government. Once a
foreign terrorist organization has been identified or designated,
anyone who provides material support or resources to that
organization is guilty of a 2339B violation and subject to the
15-year penalty. We do not have to show that the money was
intended to be used for some bad purpose—only that it went
to a bad group, one the government designated as a terrorist
organization under §219 of the Immigration and Nationality
Act. See Figure 24.5 for a list of designated foreign terrorist
organizations.
This law is aimed directly at the money and at cutting the
flow to groups the government deems terrorist risks. Other
provisions in the statute require financial institutions that
have “possession of, or control over, any funds in which a
foreign terrorist organization, or its agent, has an interest”
to maintain control of the funds and notify the Treasury
Secretary of the money.
The final section addresses the providing and collecting of
funds to be used to carry out terrorist acts. It reads as follows:
§2339C. Prohibitions against the financing of terrorism
(a) Offenses.—
(1) In general.—Whoever, in a circumstance described in
subsection (b), by any means, directly or indirectly, unlawfully
and willfully provides or collects funds with the intention that
such funds be used, or with the knowledge that such funds are
to be used, in full or in part, in order to carry out—
(A) an act which constitutes an offense within the scope
of a treaty specified in subsection (e) (7), as implemented by
the United States, or
(B) any other act intended to cause death or serious
bodily injury to a civilian, or to any other person not taking
an active part in the hostilities in a situation of armed con-
flict, when the purpose of such act, by its nature or context, is
to intimidate a population, or to compel a government or an
international organization to do or to abstain from doing any
act, shall be punished as prescribed in subsection (d) (1).
Since the devil (quite literally in this case) is in the details,
the law defines “provides” as including “giving, donating,
and transmitting” and defines “collects” as including “raising
and receiving.”
The penalties of this provision apply, therefore, not just to
those who are out collecting money on behalf of HAMAS,
Islamic Jihad, or al Qaeda, but also to those who are donat-
ing or transmitting the money. The days when representatives
of designated terrorist organizations (DTOs) could openly
fund-raise in the United States—formerly a major source
for some groups—are over. If they’re smart (and they are),
fund-raisers for the DTOs will rely more heavily on front
groups, “charitable organizations,” and other entities to layer
the monies collected.
This will mean additional work for the investigators, who
will be required to trace funds from the source, through
domestic and international financial institutions, and on to
accounts, companies, or individuals known to be associated
with the DTOs. In this sense, a terrorism financing investiga-
tion becomes more like a money laundering case, with inves-
tigators working to overcome the smoke and mirrors thrown
up by the criminals to conceal or disguise the movement of
money or the source, ownership, or control of assets. The high
stakes—10- to 20-year penalties—and the international char-
acter of terrorist groups mean that DTOs will rely on increas-
ingly sophisticated means of conducting their business.
As if to illustrate this point, the statute also addresses
those in the United States (or who are US nationals outside
the country) who knowingly “conceal or disguise” the
nature, location, source, ownership, or control of any mate-
rial support, resources, or funds, knowing or intending that
the support or resources were provided in violation of section
2339B of this title; or knowing or intending that any such funds
or any proceeds of such funds were provided or collected in
violation of subsection (a).
Terrorism Financing 287

Armed Islamic Group (GIA)

Asbat al-Ansar
Aum Shinrikyo
Basque Fatherland and Liberty (ETA)
Communist Party of the Philippines/New People’s Army (CPP/NPA)
Continuity Irish Republican Army
Gama’a al-Islamiyya (Islamic Group)
HAMAS (Islamic Resistance Movement)
Harakat ml-Mujahidin (HUM)
Hizballah (Party of God)
Islamic Movement of Uzbekistan (IMU)
Jaish-e-Mohammed (JEM; Army of Mohammed)
Jemaah Islamiya organization (JI)
al-Jihad (Egyptian Islamic Jihad)
Kahane Chai (Kach)
Kongra-Gel (KGK, formerly Kurdistan Workers’ Party, PKK, KADEK)
Lashkar-e Tayyiba (LT; Army of the Righteous)
Lashkar i Jhangvi
Liberation Tigers of Tamil Eelam (LTTE)
Libyan Islamic Fighting Group (LIFG)
Mujahedin-e Khalq Organization (MEK)
National Liberation Army (ELN)
Palestine Liberation Front (PLF)
Palestinian Islamic Jihad (PIJ)
Popular Front for the Liberation of Palestine (PFLF)
PFLP-General Command (PFLP-GC)
al-Qa’ida (or al Qaeda)
Real IRA
Revolutionary Armed Forces of Colombia (FARC)
Revolutionary Nuclei (formerly ELA)
Revolutionary Organization 17 November
Revolutionary People’s Liberation Party/Front (DHKP/C)
Salafist Group for Call and Combat (GSPC)
Shining Path (Sendero Luminoso, SL)
Tanzim Qa’idat al-Jihad fi Bilad al-Rafidayn (QJBR; al-Qa’ida in Iraq; formerly Jama’at al-Tawhid wa’al-Jihad, JTJ, al-Zarqawi Network)
United Self-Defense Forces of Colombia (AUC)

FIGURE 24.5  Designated foreign terrorist organizations (FTOs).

Once again, note the similarity to the wording of the
money laundering statutes, particularly the parts about
concealing and disguising and about the “nature, location,
source, ownership, or control” of funds. The means used to
prove this element—all of the financial investigative tech-
niques discussed so far—will be very familiar to anyone who
has worked money laundering cases.
Finally, a word about the law’s definition of “funds”: It’s
pretty encompassing, and it takes us back to the first chapter,
in which we looked at the nature of money itself. According
to the statute:
[T]he term “funds” means assets of every kind, whether
tangible or intangible, movable or immovable, however
acquired, and legal documents or instruments in any form,
including electronic or digital, evidencing title to, or interest
in, such assets, including coin, currency, bank credits, travel-
ers checks, bank checks, money orders, shares, securities,
bonds, drafts, and letters of credit.
That’s painting with a broad brush, indeed, and an excel-
lent description of the concept of money. It is certainly rec-
ognition by Congress that terrorism may be financed in a
myriad of ways and by any type of scheme—legal or illegal.
By enacting these three statutes, lawmakers sought to pro-
vide law enforcement with tools to fill holes in the money
laundering and other measures that left the nation vulner-
able to a new and frightening peril. Fortunately for the finan-
cial investigator, enforcement of the new laws will require
use of the same techniques employed in solving other, more
familiar crimes.
MONEY LAUNDERING AND
TERRORISM FINANCING
Is it possible to use the money laundering statutes in a ter-
rorism prosecution? Yes. Many terrorist offenses are SUAs,
and if we’ve got an SUA and a financial transaction, we’ve
got a money laundering violation. One SUA that has been
employed in the prosecution of terrorist financing cases is
the little-known Section 206 (relating to penalties) of the
International Emergency Economic Powers Act. Found in
Title 50 United States Code, Chapter 35, Sections 1701–1708,
this statute permits the president to take steps in emergencies
against money transfers and other transactions.
Under this section, the president can
[i]nvestigate, regulate, or prohibit any transactions in for-
eign exchange, transfers of credit or payments between, by,
through, or to any banking institution, to the extent that such
transfers or payments involve any interest of any foreign
288 Money Laundering: A Guide for Criminal Investigators, Third Edition
country or a national thereof, or the importing or exporting
of currency or securities.
Once these transactions have been regulated or prohib-
ited, further activity may be a financial transaction involving
funds derived from an SUA—a possible money laundering
violation.
Money laundering charges—specifically, §1956 (h) con-
spiracy charges and §1956 (a) (1) (A) charges—have been
brought under this theory, including one case we are going to
examine in a moment.
Investigative Resources
In his testimony “Progress Since 9/11: The Effectiveness
of U.S. Anti-Terrorist Financing Efforts,” before the House
Committee on Financial Services Subcommittee on Oversight
and Investigations, Steven Emerson stated:
The manner in which terrorists have raised money for their
operations has ranged from a variety of sources including, but
not limited to, the use of charitable organizations, corporate
“front” entities, tax fraud, coupon redemption programs, and
cigarette smuggling, as well as deliberately concealing their
activities behind the cover of academic, religious and civil
rights veneers. A common thread among these methods is
the utilization of U.S. financial institutions to support jihad.
Financial institutions are useful to terrorists groups for the
same reasons that money launderers need them: because they
are in the business of holding and moving money. They are, as
we have described, integral parts of the placement, layering,
and integration process.
Suspicious Activity Reports
Suspicious Activity Reports (SARs) are a great resource for
investigators. Bank employees read the newspapers, too, and
are conscious of what’s normal and what’s not in their finan-
cial institution. When it became widely known that some of
the 9/11 hijackers had attended flight schools and received
money from abroad, customers with similar characteris-
tics or backgrounds received extra scrutiny. As the chart in
Figure 24.6 shows, SAR filings relating to terrorism peaked
right after 9/11, with a gradual decline thereafter. Quite a few
of these transactions involved individuals or organizations on
government watch lists.
SARs are some of those little “dots” we’re all supposed to
be connecting better. Financial institutions and their employ-
ees should be encouraged to report activities they find ques-
tionable, especially in the area of terror financing. Because
banks and other financial institutions play key roles in so
many money laundering and terrorist financing schemes,
SARs can give us early warning of activity that otherwise
might not be detected until too late.
Figure 24.6, a document prepared by FinCEN, describes
SAR activity in the period following the September 11 ter-
rorist attacks.
Tax Returns and Tax Information
You wouldn’t normally think terrorist groups would take
much interest in complying with the tax laws, but they do;
like those in legitimate society, they take advantage of those
laws to conduct their business. Many of the front groups rais-
ing money for terrorist organizations are registered with the
IRS as 501 (c) (3) nonprofit organizations. This status pro-
vides the groups with certain tax advantages and may make
some or all of the contributions to the group’s “charity” tax
deductible to the donors.
With this status come certain responsibilities, such as the
requirement to file tax returns regularly with the IRS, returns
that must accurately reflect how much money came in and
the uses to which the money was put. Since the organizations
know that the federal government doesn’t recognize transfers
to HAMAS or al Qaeda as legitimate uses of the “charitable”
or nonprofit status, they are compelled to lie about where the
funds ended up. Filing a false tax return is a felony.
Investigators can still get valuable information from tax
returns, even those that are false or fraudulent. Background
information on the organization’s officers and operations,
references to banks, and transfers to overseas entities that
may be fronts for terrorist groups are all likely to be con-
tained in the organization’s tax filings. And because the
law requires accurate record-keeping to support the returns,
additional information may be available at the offices of the
organization.
There are numerous examples of groups that have used
­section 501 (c) (3) as part of their fundraising appeal, notably
the Holy Land Foundation and the IRA’s supporters. Since 9/11,
the IRS has monitored these groups more closely, and indict-
ments, such as that of the Holy Land Foundation’s officers,
have included counts relating to the filing of false tax returns.
TERRORIST FUND-RAISING AND FINANCING:
THE AL QAEDA TERRORISM MONEY TRAIL
Since 9/11/2001, al Qaeda and its leadership have been at the
center of America’s war on terror. The story is well known,
but it bears repeating, since the group has demonstrated
rather graphically its willingness and ability to commit mass
murder in the United States.
Osama bin Laden (see Figure  24.7), son of a wealthy
Saudi businessman, was widely reported to have inherited
a large fortune that he used to indulge his main interest:
destroying the United States. Bin Laden had fought with
Afghans in their war against Soviet occupation in the 1980s
and held the belief that if he and his fellow Islamic warriors
could defeat one global superpower, the second (and sole
remaining) superpower couldn’t be too much tougher.
He had some evidence in support of this hypothesis: The
United States had absorbed a series of terrorist attacks around
the globe spanning over 20 years, and the response hadn’t
amounted to much—some criminal investigations and a few
cruise missiles fired at some of those empty tents President
Bush mentioned in the quote at the head of the chapter.
Terrorism Financing 289

SARs Filed Relating to Terrorism for the 18-Month Period (by Calendar Year Quarters)

October 1, 2001–March 31, 2003

1000 985

800 645
567
600

400
168 169 121
200

0
4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr
CY 2001 CY 2002 CY 2002 CY 2002 CY 2002 CY 2003

As the chart in Figure 24.6 demonstrates, the number of filings began to steadily decline after the 4th quarter of calendar year 2001, the
three-month period directly following the September 11th terrorist attacks.
Following is additional information about the 290 SARs filed between October 1, 2002 and March 31, 2003 (the last 6 months of the study)
that reference terrorism and/or terrorist financing:

• Sixty-nine financial institutions, including five foreign banks licensed to conduct business in the United States, filed SARs (three
banks filed 155 of the 290 SARs or 53.4 percent of the SARs filed).
• The suspicious activity reported in the SARs occurred in 35 states and the District of Columbia.
• Alleged suspicious activity amounts ranged up to $193 million.

Eighty-four SARs (29 percent) filed were the result of apparent matches of names on OFAC’s list of Specially Designated Nationals and
Blocked Persons, from the USA PATRIOT Act’s Section 314 (a) Information Requests from law enforcement, names gleaned from media reports,
or as a result of subpoenas issued by law enforcement.
The activity described in the SARs remained consistent with the activity described in previously issued SAR Review Reports. The activ-
ity included wire transfers predominantly to and from Middle Eastern countries; frequent use of domestic and foreign Automated Teller
Machines (ATMs); and large currency transactions. The majority of the SARs filed (206 SARs or 71 percent) were a result of depository
institutions’ discoveries during the due diligence process. This denotes the first time since the events of September 11, 2001, that a marked
increase in independent depository institution filings occurred, i.e., without the aid of government published lists. It is also worth noting that,
previously, the filings were reversed in that 75 percent to 80 percent were filed based on government watch lists, while 20 percent to 25 percent
were filed at the depository institutions’ initiative.
The above-mentioned SARs were filed based on one or more of the following criteria, which the financial institution believed might be
associated with terrorist activity:

• Even dollar deposits followed by like-amount wire transfers;

• Frequent domestic and international ATM activity;
• No known source of income;
• Use of wire transfers and the Internet to move funds to and from high risk countries and geographic locations;
• Frequent address changes;
• Occupation “student”—primarily flight schools;
• Purchases of military items or technology; and
• Media reports on suspected/arrested terrorists or groups.

FIGURE 24.6  FinCEN document describing SAR activity following the September 11, 2001, terrorist attacks. (Source: Financial Crimes
Enforcement Network.)

These measures didn’t intimidate bin Laden too greatly,
and he and his like-minded companions (e.g., see Figure 24.8)
created an organization they hoped would be the centerpiece
of their effort to establish an Islamic caliphate across the entire
globe: al Qaeda, or “The Base.” Established in the mid-1980s,
al Qaeda expanded to form a junction of terror groups from
the Middle East, Asia, and Africa. Operating in safe areas in
Sudan and Afghanistan, bin Laden’s base established camps
that may have trained as many as 10,000 people from coun-
tries all over the world. al Qaeda also served as a model for
and supporter of groups active in the Philippines, Indonesia,
Thailand, Pakistan, India/Kashmir, China, Uzbekistan,
Russia/Chechnya, Egypt, Saudi Arabia, Iraq, Kuwait, Yemen,
Somalia, Ethiopia, Kenya, Tanzania, and Algeria, to mention
only a few of the hotter spots. As we now know, al Qaeda also
had terror cells in Europe and the United States.
An organization of this size, complexity, and ambition
needs money, and bin Laden took advantage of all four of the
primary means by which terrorist groups are funded. He had
some government sponsorship; certainly the Taliban govern-
ment of Afghanistan provided the sort of material support
that would be illegal under American law. Bin Laden was
also known to have interests in a number of income-produc-
ing businesses in Africa and the Middle East, particularly
290 Money Laundering: A Guide for Criminal Investigators, Third Edition

FIGURE 24.7  Osama bin Laden. FIGURE 24.8  Ayman al Zawahiri, Egyptian physician and lieu-
tenant to Osama bin Laden. (Source: FBI.)

Terrorist Financing Scheme -

World Islamic Front for Jihad Against the Jews and Crusaders

Zakat Donations
Individuals
Companies
Banks

Charities and Relief

Bank Transfers
Organizations
Domestic
Overseas

Government Sponsorship
Hawala Transfers

Terrorist Organization
Al Qaeda

Local Criminal Schemes

FIGURE 24.9  Terrorist financing scheme for World Islamic Front for Jihad against the Jews and Crusaders.
Terrorism Financing 291
in Sudan. The big moneymaker for al Qaeda, however, was
donations and contributions. See Figure 24.9.
Osama bin Laden, with his Yemeni origins, wealthy
Saudi family ties, Wahhabi Muslim philosophy, and sustain-
ing hatred of America, was more than a figurehead leader;
he was an ideal fund-raiser as well. And past operations
in Africa and the Middle East, not to mention the carnage
on 9/11/2001, gave bin Laden and al Qaeda a proven track
record. Contributors know exactly what they’re getting for
their money.
Bin Laden raked in piles of money, often in very large
amounts, from Saudi, Yemeni, and other sources in the
Persian Gulf—like-minded individuals who backed up their
beliefs with cash. Some of the donations took the form from
zakat, the charitable contributions required of believers
by Islam. Other funds were unquestionably provided with
the clear understanding that they supported bin Laden’s
“jihad” against the West in general and the United States in
particular.
Intelligence agencies believe that substantial sums were
provided by prominent Sunni Muslims of the Wahhabi sect,
which dominates politics and government in the kingdom
of Saudi Arabia, including people close to if not within the
Saudi royal family. After 9/11, the United States made strenu-
ous efforts to shut down this portion of bin Laden’s money
pipeline. The Saudi government, chagrined to learn that 15 of
the 19 September 11 hijackers were Saudi (as was bin Laden
himself), has reportedly been much more cooperative in
addressing terrorist funding issues involving its citizens.
al Qaeda also profits from Afghanistan’s lucrative opium
and heroin trade. Intelligence reports have linked al Qaeda
to opium and heroin trafficking; Afghanistan is the world’s
largest producer of opium for the illegal drug trade. al Qaeda,
with cells in Europe and established communications chan-
nels between Afghanistan’s production area and European
markets, is perfectly positioned to take advantage of a very
lucrative black market. As government and Saudi funding
declined, al Qaeda undoubtedly turned to these darker alter-
natives for cash.
Investigating al Qaeda’s Funding
Jihad is an expensive proposition, especially when you have
global ambitions, as does al Qaeda. With terror cells in North
and South America, Africa, Europe, and Asia, al Qaeda’s far-
flung operations cost money to create and sustain.
Because al Qaeda’s funding comes from all four of the
terrorist financing sources—contributions, government spon-
sorship, legitimate business, and crime—an investigation of
the funding is going to follow multiple tracks. By this time,
American investigators have turned over every rock at least
once in their quest for Osama’s money. This investigation
started long before 9/11, though it became more important
on that day.
One money trail led backward from the hijacker cells in
the United States to Germany and the Middle East. Another
line went from other known al Qaeda operations in Yemen,
Saudi Arabia, and Africa backward along those money trails.
Investigators also looked at known funding sources in Saudi
Arabia and the Gulf states, some of which had been identi-
fied in previous cases, and they went to bin Laden’s home
turf in Afghanistan and Pakistan to look for traces of the
money flow.
All of these efforts created a very accurate picture of al
Qaeda’s funding. It also gives us a good idea about how the
organization moves its money around and spends it—impor-
tant clues for preventing the next terror attack. Investigators
were particularly interested in the roles played by banks and
financial institutions, and that of the hawala networks used
to move money around the world. Because all of these insti-
tutions make and keep records (though hawala records aren’t
as extensive), they may contain important leads to past and
future terrorist operations.
Sources of Information
Once again, the importance of the subject’s records cannot
be overemphasized. Investigators must always try to get their
hands on the books, papers, records, and documents kept by
the subject. al Qaeda is no different from any other organiza-
tion, legal or illegal, in that it creates records, some of which
are financial, to track its own activities. When American
troops captured the al Qaeda training camps in Afghanistan,
they didn’t just pick up the propaganda tapes showing hooded
terrorists doing the obstacle course. They also looked hard
for any financial records, hoping to trace money from
Afghanistan to terror cells in Europe or America.
The capture of top al Qaeda operative Khalid Sheikh
Mohammed in Pakistan also netted his computer and a wealth
of information in digital form. Investigators can’t afford to
overlook computer evidence today, particularly since terror-
ists and money launderers have taken to using computers so
routinely in their operations. The use of document warrants
should always include language to seize digital or computer
evidence, and these search warrants should be one of the
goals of any investigation of terrorist financing.
Suspicious Activity Reports and other cash transaction
reports may also provide good leads, especially when com-
bined with other evidence of terrorist activity. In the past,
SARs were not always linked to terrorist plots before the
action took place. Only afterward were investigators able
to follow the trail backward, sometimes using bank reports
or third-party records to see how monies were received,
spent, and distributed. In the future, federal law enforce-
ment is going to be more aggressive in analyzing any
SARs or transaction reports that are even remotely linked
to terrorism.
Witnesses and informants from within the organization are
obviously extremely valuable—one reason there’s a $25 mil-
lion bounty on the al Qaeda leadership figures. Osama bin
Laden might be gone, killed by Navy SEALS in May 2011,
but we would spend more money gladly for a lead to Zawahir’s
current whereabouts, and probably just for an idea about where
his records are kept.
292 Money Laundering: A Guide for Criminal Investigators, Third Edition

ZAKAT SCHEMES According to the indictment, the Holy Land Foundation

United States of America v. Holy Land
Foundation for Relief and Development
The indictment of the Holy Land Foundation for Relief
and Development, filed on July 26, 2004, in the Northern
District of Texas, provides a perfect road map of how this
type of organization funds terrorist activity—in this case, that
of HAMAS, a specially designated terrorist organization. See
Figure 24.10.
for Relief and Development (HLF) was created for the pur-
pose of providing financial and material support to HAMAS.
Created in California in 1989, it relocated to Richardson,
Texas, in 1992, where it was incorporated and “represented
itself to be a non-profit, tax exempt, charitable organization
designed primarily to assist needy individuals in the West
Bank and Gaza.” HLF also maintained offices in New Jersey,
California, Illinois, Jerusalem, the West Bank, and Gaza.
Some of the officers, directors, or representatives of HLF

Terrorist Financing Scheme -

HOLY LAND FOUNDATION

- Fundraising events
- Mosque services
- Seminars

Holy Land Foundation for Relief and Development

Shukri Abu-Baker
Mohammed El-Mezain
Ghassan Elashi
Richardson, Texas

Texas Bank Accounts

UNITED STATES
MIDDLE EAST

HAMAS Controlled Zakat Organizations

- Islamic Charity Society of Hebron - Dar El-Salam Hospital - Halhul Zakat Committee
- Islamic Relief Committee - Islamic Science & Culture Com. - Tolkarem Zakat Committee
- Ramallah Zakat Committee - Nablus Zakat Committee - Jenin Zakat Committee
- Qalgilia Zakat Committee

Harakat al-Muqawamah al Islamiya (HAMAS)

Political Bureau
Khalid Mishal, Chief
Mousa Abu Marzook, Deputy Chief

Gaza, West Bank

Dawa “Calling” (Social Wing)

Izz el-Din al-Qassam Brigades
(Military Wing)
Medical support
Suicide bombings Education
Terrorist attacks Social welfare

Support to:
Detainees
Activists
Families of suicide bombers

FIGURE 24.10  Terrorist financing scheme for Holy Land Foundation.

Terrorism Financing 293
were associates of HAMAS members back in the West Bank
and Gaza, and some were related by blood or marriage.
The indictment documents numerous transfers from HLF
to HAMAS and top HAMAS leaders. Some of the transfers
were to these individuals, and others were made to accounts
of entities controlled by HAMAS, such as the Islamic Center
of Gaza, the headquarters of HAMAS spiritual leader and
founder Sheikh Ahmed Yassin. As shown in Figure 24.10, the
HAMAS-controlled zakat organizations served as conduits for
the money sent by HLF, forwarding it through the HAMAS
political bureau to its military and “calling” wings.
HLF raised funds in the United States by sponsoring con-
ventions, seminars, and rallies, the purpose of which was
ostensibly to support Palestinian causes. On many occasions,
radical Islamic clerics and HAMAS officials were brought to
the United States to speak and to encourage contributors. On
occasion, HLF paid for this travel.
HLF’s scheme was simple and direct, although things got
a little complicated after HAMAS became a specially des-
ignated terrorist organization in January 1995. HLF actively
solicited contributions and zakat donations from American
Muslims and immigrants from the Middle East. Prior to
1995, it was no secret that at least some of these funds were
going directly to HAMAS. Nor was it any big surprise to
the contributors that the money was going to be used for
HAMAS’s stated goal of eliminating the state of Israel, by
violent means if necessary.
Funds were raised in seminars and rallies that featured
skits of Jews being killed and of terrorist actions. Speeches by
radical Islamic clerics employed fiery rhetoric to encourage
donations, and, even after 1995, donors were made aware that
some of the funds were going to support the same causes—
and the same group—as before.
When monies came in, these were deposited into banks in
the Richardson area and then wire-transferred to the accounts
of HAMAS-controlled zakat organizations in the West Bank
and Gaza. The indictment documents numerous transfers,
and the sums were substantial. The indictment charges that
“between 1992 and 2001, the defendants…reported approxi-
mately $36,230,891 on Line 13 of the HLF’s ‘Returns of
Organization Exempt from Income Tax.’” This was money
HLF claimed it sent to the Middle East for such things as
“assistance to non-profit medical/dental clinics, orphanages,
schools, refugee camps, and community centers.” In fact,
these monies were distributed to individuals associated with
and organizations controlled by HAMAS.
Investigating a Zakat Scheme
Fund-raising organizations aren’t very covert, although they
may try to hide some aspects of their operation, such as a
direct link to a DTO. Fund-raising events are widely publi-
cized or advertised, and appeals in mosques and other public
settings are intended to garner lots of attention (hopefully
followed by lots of money).
Once the money arrives, it must be moved elsewhere to
the beneficiary, whether it is a DTO on the West Bank or
a terrorist cell in Hamburg. This means transferring funds,
which, as we’ve seen previously, involves wire transmission
and the creation of tracking records.
Following the money will be one of the most important
parts of this type of case because it has to be proved that the
funds were raised and transferred with the intent to support
a terrorist organization. This is where financial investigative
techniques will be most helpful.
Sources of Information
There should be a wealth of information in the organization’s
records—if you can find them. These enterprises, especially
the ones with tax-exempt status, maintain extensive books
and records, usually in a visible location. The group may
have multiple offices in different states, and it may commu-
nicate frequently between offices. The connections to benefi-
ciaries in the Middle East will also be documented, although
the threat of prosecution under American terrorist financing
legislation now requires additional layers to protect parties
on both ends. Some organizations have deliberately situ-
ated their offices in places where records are more difficult
to acquire, such as Switzerland and the Gulf States in the
Middle East.
Tax returns may be valuable, particularly those of the
organizations themselves. Individuals may claim deductions
for charitable contributions, and these can be matched against
those of the 501 (c) (3) organization.
Suspicious Activity Reports may be filed by financial
institutions or money transfer businesses. These may name
individuals, the organization, or both. SARs will provide
leads to bank accounts and to the origin and destination of
funds being transferred. Of particular importance is the des-
tination of wired monies. Having the cash wired directly to
an account held in the name of HAMAS or Osama bin Laden
certainly makes your case much easier for the jury to follow.
Document search warrants at the organization’s offices,
the residences of officers or directors, and other locations
where financial records are likely to be found have been key
parts of terrorist financing cases to date. These warrants
will not only uncover evidence of financial transactions and
money transfers—crucial elements in the criminal case—
but also uncover evidence of links to the designated terrorist
organization and to individuals also on the government’s list.
Evidence that the charity knows the illegal uses to which the
money will be put is also helpful.
Informants from within the organization can direct inves-
tigators to important events, individuals, or transactions.
Informants may also be able to penetrate some of the layers that
the fund-raisers try to place between themselves and the DTO.
HAWALA SCHEMES AND INFORMAL
VALUE TRANSFER SYSTEMS
Nobody’s ever lost money in a hawala; that’s the claim of the
people who run this ancient form of transferring value that
probably predates banks.
294 Money Laundering: A Guide for Criminal Investigators, Third Edition
Terrorist Financing Scheme -
HAWALA TRANSFERS
Ahmed - Karachi
$20,000
Cash
Hawaladar - Karachi
PAKISTAN
Communication
Hawaladar – New York
$20,000
Cash
Omar – New York
FIGURE 24.11  Terrorist financing scheme using hawala transfers.
Case Example
Ahmed and Omar are big believers in the hawala sys-
tem, which has worked well for people in their region for
centuries. People in Pakistan didn’t always need to send
money to New York or vice versa, but in the modern world
you have to change with the times. See Figure 24.11.
Today, Ahmed, an al Qaeda operative in Karachi,
wants to send $20,000 to Omar, a member of a terror
cell in New York City. Ahmed has a couple of problems
with using banks or Western Union for this transaction.
First, both are likely to ask questions about the cash deal,
especially in America, where the law requires large cash
transactions to be reported. You also have to present
identification in most situations, something Omar might
not want to do.
Second, the cost of sending the money by wire may
be a factor. Western Union charges big fees, and even
bank fees might be substantial. Finally, there’s the conve-
nience factor; Western Union isn’t everywhere, although
it is in Karachi, and banks are more limited.
The solution is easy. Ahmed goes to a hawaladar,
the broker for the local hawala money transfer network.
UNITED STATES
Khalid has been in business a while and has a number of
contacts in places to or from which Pakistanis frequently
want to send or receive money. Khalid isn’t everywhere,
either, but if he didn’t have someone in New York, Ahmed
could go to another hawaladar who did.
Ahmed gives Khalid the $20,000 in cash and a com-
mission, along with the name of the person who’s going
to be collecting the money on the other end. They work
out a password to secure the transaction, but there’s little
risk to the money.
Khalid sends a fax to Ayman, his partner in New York
City, instructing him to pay $20,000 to Omar when he
shows up with the password. Omar comes in, gives the
word, and walks out with $20,000 in cash, to be used for
some future terrorist action. Ayman is now out $20,000,
but he knows there will be other Pakistanis in New York
who will want to send money to Karachi, so he makes an
entry on his books and waits for the money to come in to
make them balance.
This informal value transfer system (IVTS) is sim-
ple, fast, safe, and effective, which is why it is popular
in immigrant communities whose access to banks may
be limited. The hawala gets things done, as it has for
Terrorism Financing 295
centuries. One thing that doesn’t get done is extensive
record-keeping. Neither Khalid nor Ayman is likely to
have any identification information on his clients. They
also aren’t going to have any record that this transaction
ever took place, at least not after it’s been concluded.
Once the account has been settled, the hawaladars are
probably going to shred the faxes and other records of
the transaction, partly for privacy, but mostly because
there’s no need to keep the unnecessary documentation.
This complicates an investigation of the deal, which suits
Ahmed and Omar just fine.
Investigating a Hawala Scheme
Good luck. This is like catching smoke or maybe catching
electronic blips as they fly through the atmosphere. That
might be one way to go about it. Using a wiretap or a fax
intercept on the hawaladar could be useful if the business
line can be identified. This presumes that you know about
him or her in the first place. Since hawaladars don’t adver-
tise in the Yellow Pages under “hawala,” you may not know
he or she exists, although you can be assured that there is a
hawaladar in any major city with a Middle Eastern or South
Asian population.
Sources of Information
Suspicious Activity Reports could be a good lead to the
American end of the hawala transaction. Sooner or later, the
hawaladar does have to go to the bank, and this person may
be making cash deposits that generate either an SAR or a
CTR. It isn’t likely, but Ayman may actually have obtained a
license from the state of New York to act as a wire remitter,
and he might be filing SARs and CTRs for his own large cash
transactions. Most hawaladars don’t bother, even though the
provisions of Title 18 U.S.C. §1960 relating to the operation
of an illegal wire transmitter business make prosecution eas-
ier and more likely.
The records of the hawala business are obviously the
best lead to Omar, the terrorist in New York City whom we
most want to nab. These aren’t going to amount to much:
contact information, phone and fax records, and probably
a ledger (maybe computerized) detailing past transactions.
Investigators have found that these ledgers often don’t con-
tain much more than the date, the amount, and the name of
the hawaladar on the other end. They’re mostly kept as a
means to settle accounts and make sure the books balance.
Still, there could be some identifying information for the per-
son who picked up the cash.
Document search warrants at Omar’s place may lead back
to the hawaladar; this might mean leads to other transactions
or other cell members. Officers searching terrorist suspects,
particularly those from the Middle East and Southwest Asia,
should be on the lookout for hawaladar contacts and look for
phone numbers and notes referencing the sending or receiv-
ing of money.
Informants from within the community should be asked
about hawala activities. Because these operations rely on
word-of-mouth advertising, only people from within the par-
ticular ethnic group or immigrant community are likely to
know about them. It doesn’t hurt to ask an informant if he or
she knows who is sending money back to the old country and
how they’re sending it. The answer will often be some local
businessperson, a travel agency, or some other respected and
established member of the community.
Investigating a hawala operation requires patience, rap-
port with witnesses and informants, and good intelligence.
Federal agencies have had some success in using infor-
mants or undercover agents to send money internationally
via hawala and other informal value transfer systems. This
technique implicates the people at both ends of the transac-
tion and makes a prosecution under 18 U.S.C. §1960 more
viable, but it needs a lot of coordination and usually a very
good informant. It also requires the government to give a
large amount of money to some man in a bazaar or strip mall
and then wait while it’s delivered to a similar person halfway
around the world. That takes some faith, but the hawaladars
will tell you that nobody’s ever lost money in a hawala.