The Komisar Scoop Reports & Analysis by Investigative Journalist Lucy Komisar

Friday, December 20, 2002

Funding Terror: Investigating the role of Saudi banks

Filed under: offshore,Scoops — Tags: — Lucy Komisar @ 2:59 pm

By Lucy Komisar
In These Times, Dec 20, 2002

Having a quarter of the world’s oil reserves may mean never having to say you’re sorry to Washington. Instead, when Newsweek reported in December that checks from the wife of the Saudi ambassador to the United States had been sent to associates of two of the September 11 hijackers, Saudi and Washington officials revved up their spin machines.

When the reports surfaced, Haifa bint Faisal, wife of Saudi ambassador Bandar bin Sultan, acknowledged that she sent nearly $150,000 to the wife of a Saudi living in San Diego. The recipient, Majeda Ibrahin Dweikat, signed over some of the checks to a friend whose husband, Omar al-Bayoumi (with Dweikat’s husband), helped hijackers Khalid Almidhar and Nawaf Alhazmi find housing in San Diego, open bank accounts, get Social Security cards, pay expenses and arrange flying lessons in Florida.

U.S. authorities suspected days after September 11 that al-Bayoumi, by then in Birmingham, England, had helped the hijackers. The British arrested him and, in a search of his house, found phone records showing calls to two diplomats at the Saudi Embassy in Washington. Lacking conclusive evidence, they released him, and he is now believed back in Saudi Arabia.

U.S. authorities continued to investigate his connections. FBI spokesman Ed Cogswell told In These Times that the bureau had discovered the bint Faisal money transfers when it examined al-Bayoumi’s accounts. (Records would have included the check endorsed to al-Bayoumi’s wife.) Bint Faisal insists she did not knowingly aid the terrorists—that she did not even know the woman—but was only giving charity to Dweikat, a thyroid patient, whose husband had written seeking funds to pay medical bills.

Yet the revelation again raises questions about U.S. policy, which has consistently supported the Saudi oil monarchy in spite of its refusal to cooperate with the United States in investigations of terrorist attacks against Americans.

The links between bint Faisal’s powerful Saudi family and financing of terrorism are even more extensive, however. The trails of both Omar al-Bayoumi, the man who aided the hijackers, and that of the financial network of bint Faisal’s family each lead to Osama bin Laden.

According to a 1996 U.S. State Department report, al-Shamal Islamic Bank in Khartoum, Sudan, was capitalized by bin Laden and wealthy members of Sudan’s National Islamic Front. Bin Laden invested $50 million in the bank. Mohammed al-Faisal, bint Faisal’s brother, is an investor and board member at al-Shamal.

Al-Shamal appears to have been a bin Laden bank of choice. Al-Qaeda members had accounts in al-Shamal, according to testimony during U.S. trials surrounding the 1998 attacks on American embassies in Kenya and Tanzania. One al-Qaeda collaborator, Essam al-Ridi, recounted how bin Laden transferred $230,000 from al-Shamal to a bank in Arizona to buy a plane to fly Stinger missiles from Pakistan to Sudan.

One of the bank’s three founding members and major shareholders is Saleh Abdullah Kamel. A major financial and media power in the Arab world, he is in addition the chairman of the Dallah al-Baraka Group (DBG). Al-Bayoumi was assistant to the Director of Finance for Dallah Avco, a DBG company that works with the Saudi aviation authority. The Wall Street Journal has reported that the United States believes the Dallah al-Baraka Bank, another DBG company, was also used by al-Qaeda.

Mohammed Al-Faisal is president of Dar al-Mal al-Islami (DMI), the House of Finance of Islam. This Geneva-based bank is charged with distributing subsidies of the royal family in the Muslim world. DMI, founded in 1981 and with assets of an estimated $3.5 billion, also has connections to the bin Laden family: Its 12-member board of directors includes Haydar Mohamed bin Laden, Osama bin Laden’s half-brother, and Khalid bin Mahfouz. Bin Mahfouz was indicted by the United States in the notorious BCCI banking scandal, which defrauded depositors of $9 billion, and in 1995 paid a $225-million fine.

DMI and al-Shamal are not the only banks that link al-Faisal to Osama bin Laden. Al-Faisal’s DMI is also a major shareholder of al-Taqwa, the bank registered in the Bahamas and based in Switzerland that was shut down last November after Washington blacklisted it as a centerpiece of bin Laden’s financial network. The United States has not, however, blacklisted al-Shamal.

These banking connections are compounded by long-standing questions about the function of some Saudi charities. At a December press conference in Washington, Saudi adviser Adel al-Jubeir said, “We have not found a direct link or support from the Saudi charities to terrorist groups.”

Despite al-Jubeir’s claims, one major Saudi charity—the International Islamic Relief Organization (IIRO), which directs millions of dollars a year to fundamentalist movements—has strong connections to bin Laden. A 1999 Jordanian intelligence report, obtained by In These Times, said that Islamic Relief, “used by bin Laden’s men,” was active in the Balkans, Chechnya, Azerbaijan and Kashmir.

In September 2001, after the terrorist attacks in the United States, Britain’s Charity Commission took the IIRO off its list of registered charities on grounds it did not function as one. It is not, however, on the U.S. terrorist blacklist.

The administration treads gingerly in targeting institutions that could lead to the Saudi royals and influentials. In December, Sens. Bob Graham (D-Florida) and Richard C. Shelby (R-Alabama) accused the Bush administration of refusing to declassify information that showed possible Saudi Arabian financial links to terrorists because it didn’t want to embarrass the Saudis and endanger its political ties. Shelby, sworn not to reveal classified material, said the information could involve “a lot of their leaders and probably even the royal family.”

Article on In These Times site

Thursday, December 19, 2002

Behind the faces of Annan’s finance and development gurus

Filed under: Citigroup,Debt & Development,offshore,Scoops — Lucy Komisar @ 2:57 pm

By Lucy Komisar
Earth Times News Service, Dec 19, 2002.

There is no little irony in United Nations Secretary General Kofi Annan appointing Robert Rubin (shown here), Robert Rubina chairman of Citibank, to serve on an advisory panel that will propose how to help poor countries where over a billion people suffer abject poverty. He might have some interesting conversations with another panel member, David Bryer, director of Oxfam. Oxfam recently condemned practices of banks such as Citibank as a major part of developing countries’ problems.

“Development cannot happen without resources, especially financial resources,” Annan said when he made the appointment on December 15.

He said official development assistance has been in steady decline for well over a decade and that poor countries are so far in debt that many of them are paying more in interest and loan payments to industrialized countries than they are receiving in aid from those countries. Developing countries owe over $2 trillion to rich nations and international financial institutions such as the World Bank and the International Monetary Fund. Of that, the lowest-income countries in the world owe around $250 billion. Annan said, “It is vital that we turn the situation around,” he said. “But how?”

Bryer might tell Rubin that one answer would be to change Citibank’s practice of helping dictators and corrupt officials in developing countries to launder stolen public money and bribes and of making it easy for rich people and corporations doing business in those countries to avoid payin taxes. Oxfam said in a report this year that the money sucked out of developing countries to tax havens is $50 billion a year, nearly the size of the $57 billion annual global aid budget, six times the estimated annual costs of achieving universal primary education, and almost three times the cost of universal primary health coverage.

Citibank, Citithe largest bank in the US, with more than $700 billion in assets, is the world’s largest financial services company. One of its profit centers is Citibank Private Bank, which in a dry August statement reported a record of quarterly earnings up 11 percent and private bank client business up 19 percent to $149 billion. It is the largest non-Swiss private bank in the world, advertising “personalized wealth management services for clients through 97 offices in 32 countries.” It is in all the major tax havens.

Citibank proclaims that its “private bankers act as financial architects, designing and coordinating insightful solutions for individual client needs, with an emphasis on personalized, confidential service.” That is so colorless. It might better have boasted, “We set up shell companies and secret trusts and bank accounts and dispatch anonymous wire transfers so you can launder drug money, hide stolen assets, embezzle, defraud, cheat on your taxes, avoid court judgments, pay and receive bribes, loot your country.”

It might have gotten testimonials from past prominent clients, including the sons of late Nigerian dictator Sani Abacha; Asif Ali Zardari, the jailed husband of Benazir Bhutto, former Prime Minister of Pakistan; El Hadj Omar Bongo, the corrupt president of Gabon; and Raul Salinas, jailed brother of the ex-president of Mexico. They all had Citibank private bank accounts, minimum balance required: $5 million. Citibank Private Bank has 40,000 customers, with 350 of them officials or their families.

At a recent meeting between top officials of African and European states, when the Europeans accused the Africans of corruption, the Africans responded, “You’re the ones that take the funds; give us our money back!”

The European ministers agreed in the Cairo agreement to support return of the stolen money.

Oxfam figures that $35 billion of the money lost to developing countries is tax money evaded by foreign corporations, often through “transfer pricing” that uses “creative accounting” to move profits to shell companies in tax havens. A company in country “A” sets up a subsidiary in tax haven such the Isle of Man or the Cayman Islands to act as a “marketing agent.” It sells the product to the subsidiary at a low price, then the shell company sells it to the real buyer at the market price. Profits are minimal for tax purposes in country “A,” and no taxes are required by the tax haven.

When Rubin was U.S. Treasury Secretary in the late 90’s, he didn’t show much interest in the offshore issue. At the G-7 finance ministers meeting in April 1999, he said publicly, “We are very worried about offshore havens,” but privately he turned down a proposal by French Finance Minister Dominique Strauss-Kahn that offshore centers that fail to properly regulate accounts or cooperate with law enforcement be cut off by the world’s financial powers. When I cited that to Rubin after a speech he gave in New York in October, he denied Strauss-Kahn’s assertion but would not discuss his version.

Jonathan Winer, who during Rubin’s tenure was Deputy Assistant Secretary of State for International Law Enforcement, told me, “Rubin’s attitude was this was law enforcement, this was cops stuff. It wasn’t where he lived. Treasury was looking to free up economies, not regulate them. There was a strong belief you needed to reduce regulation that could impair the free flow of capital.”

Jack BlumJack Blum, counsel to the U.S. Senate committee that investigated BCCI and co author of a 1998 report for the UN, “Financial Havens, Banking Secrecy and Money Laundering,” said U.S. policy was affected by the fact “the hot money from rest of world is fueling one of greatest booms in the stock market, a lot coming through private banking networks.”

The panel, known as the High-level Panel on Financing for Development, will present recommendations for an early 2002 meeting involving the IMF, the World Trade Organization and the World Bank. The Fund and the Bank have issued a spate of reports urging attention to third world corruption, which they say is blocking development. The reports don’t mention the Western banks that work through the offshore system to launder looted money.

(Also serving on the panel will be Jacques Delors, a former president of the European Commission and finance minister of France; Rebeca Grynspan, former vice president of Costa Rica; Abdulatif al-Hammad, president of the Arab Fund for Economic Development; Mary Chinery-Hesse, a former deputy director general of the International Labor Organization; Majid Osman, a commercial banker who was formerly finance minister of Mozambique; Manmohan Singh, former finance minister of India; and the chair, Ernesto Zedillo, the former president of Mexico.)

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