Reports & analysis by award-winning investigative journalist Lucy Komisar “”

Follow the money — through U.S. banks

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By Lucy Komisar
Sacramento Bee, Sept 23, 2001)

Terrorist networks all over the world depend on the international bank and corporate secrecy system to hide and move their money. This structure is allowed to exist by agreement of the world’s banks and financial powers. A lot of people make money from it, including the owners and managers of banks that hide customers’ deposits from tax authorities. But an unintended consequence is that it helps worldwide networks of terrorists.

Terrorists need a way to finance operations in dozens of countries around the globe, to pay for houses, salaries, transport, weapons and explosives.

They need to move millions quickly and without detection. They can’t carry the cash in suitcases. But transferring millions of dollars using secret bank accounts and shell companies is easy.

In many countries, known as “offshore” or “tax haven” countries, people can set up companies and open accounts without real names or identification.

Phony banks which are just letter drops funnel money to real banks. Real banks in the U.S. routinely ask no questions when the phony banks open “correspondent accounts” to move money here for their customers.

Right now, there’s nothing in U.S. law to stop the Al-Shamal Islamic Bank in Khartoum, Sudan, from opening an account in a U.S. bank to wire money to use here or in another country. That bank was set up by Osama bin Laden. If there’s a stop put on that bank, it can easily go through a third party in Nauru or Liechtenstein or some other offshore haven. Because U.S. banks are not required to ask about the owners of the money. The foreign banks bundle cash from numerous customers and send the lump sum to their correspondent accounts in the U.S. Then they move the money wherever their clients order.

The Sunday Times of London reports that a suspected bin Laden lieutenant, Saudi dissident Khalid al-Fawwaz, used an account at a branch of Barclays Bank in London to finance circulation of bin Laden’s edicts and contacts with other parts of the organization’s global network. Khalid al-Fawwaz is being held awaiting extradition proceedings to the United States for participation in the conspiracy to murder Americans.

Swiss federal prosecutors are investigating whether any money linked to the terrorists flowed through their banks. According to the Blick newspaper, Al Taqwa Management Organization AG, a financial services company based in Lugano, in the southern part of the country, had links with Osama bin Laden.

Lugano is notorious as a home for “financial services companies” whose function is to discreetly move money, and for shell companies and secret bank accounts.

The system is no surprise to the U.S. government, because it and its allies have used it, too. BCCI, the Bank of Credit and Commerce International, was a British-Pakistani bank that used secret offshore accounts to effect a global money-laundering fraud that cost victims $8 billion. Before it was shut down in 1991, it was used to fund the mujaheddin, then fighting the Soviet-supported government of Afghanistan. The money came from U.S. and Saudi intelligence.

Now many of the mujaheddin are members of bin Laden’s network. They know all about how to launder money through the international bank secrecy system.

If the U.S. wants to stop the money flow that supports terrorism, it needs to cut that pipeline. The administration should rethink its hostility to international efforts to pierce the bank secrecy essential to terrorists’ money laundering.

The first step should be immediate passage of legislation sponsored by Michigan Sen. Carl Levin (and opposed by Republican leaders last year) which has two key elements. It would bar U.S. banks from providing banking services to foreign shell banks with no physical presence in any country. It would require U.S. banks to conduct in-depth investigations when opening accounts for $1 million or more for foreigners or correspondent accounts for offshore banks or banks in countries with high money-laundering risks.

Other countries also need to change their practices. In London, a favorite center for Middle East money, banks connected to the Saudi royal family enjoy “sovereign immunity,” which England grants to monarchies. They are exempt from the scrutiny of the Financial Service Authority, which supervises banks and tries to head off money laundering.

And the U.S. needs to get behind efforts by the Organization for Economic Cooperation and Development and the G-7 to crack down on bank and corporate secrecy afforded by about 60 places in the world.

They should not be letting them off the hook, as the OECD did this year in response to Washington’s pressures.

We must realize that globalized terrorism is financed by globalized money.

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