BANK SECRECY SPEEDS MONEY TO TERRORISTS
by Lucy Komisar
American Reporter Correspondent
New York, N.Y.
NEW YORK -- Terrorist networks all over the world depend on the interna= tional 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 financ= ial powers. A lot of people make money from it, including the owners and ma= nagers of banks that hide customers' deposits from tax authorities. But an = unintendedconsequence is that it helps worldwide networks of terrorists.
= Terrorists need a way to finance operations in dozens of countries around t= he globe, to pay for houses, salaries, transport, weapons and explosives. T= hey need to move millions quickly and without detection. They can't carry t= he cash in suitcases. But transferring millions of dollars using secret ban= k accounts and shell companies is easy.
In about 60 countries around the world, known as "offshore" or "tax have= n" countries, people can set up companies and open accounts without real na= mes 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 cust= omers.
Right now, there's nothing in U.S. law to stop the Al-Shamal Islamic Ban= k 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 Osma Bin Laden. = If there's a stop put on that bank, it can easy go through a third party in= Nauru or Liechtenstein or some other offshore haven. Because U.S. banks ar= e not required to ask about the owners of the money. The foreign banks bund= le cash from numerous customers and send the lump sum to their corresponden= t accounts in the U.S. Then they move the money wherever their clients orde= r.
The Sunday Times of London reports that a suspected bin Laden lieutena= nt, Saudi dissident Khalid al-Fawwaz, used an account at a branch of Barcla= ys 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 parti= cipation in the conspiracy to murder Americans.
Swiss federal prosecutors are investigating whether any money linked to = the terrorists flowed through its banks. According to the "Blick" newspaper= , Al Taqwa Management Organization AG, a financial services company based i= n Lugano, in the southern part of the country, had links with Osama bin Lad= en. Lugano is notorious as a home for "financial services companies" whose = function is to discreetly move money, and for shell companies and secret ba= nk accounts.
The system is no surprise to the U.S. government, because it and its all= ies 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 Mojahedin, then fighting the So= viet-supported government of Afghanistan. The money came from U.S. and Saud= i intelligence.
Now many of the Mojahedin are members of bin Laden's network. They know = all about how to launder money through the international bank secrecy syste= m.
If the U.S. wants to stop the money flow that supports terrorism, it n= eeds 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 M= ichigan Sen. Carl Levin (and opposed by Republican leaders last year) which= has two key elements. It would bar U.S. banks from providing banking servi= ces to foreign shell banks with no physical presence in any country. It wou= ld also require U.S. banks to conduct in-depth investigations when opening = accounts for $1 million or more for foreigners or correspondent accounts fo= r offshore banks or banks in countries with high money-laundering risks.
Levin is pressing to make it part of the anti-terrorism package that wi= ll be considered by Congress.
Other countries also need to change their practices. In London, a favori= te center for Middle East money, banks connected to the Saudi royal family = enjoy "sovereign immunity," which England grants to monarchies. They are ex= empt from the scrutiny of the Financial Service Authority, which supervises= banks and tries to head off money laundering.
Now, British Chancellor of the Exchequer, Gordon Brown, has called for g= lobal action to counter terrorist money laundering. He would give security = services access to secret banking systems in countries such as Switzerland = and require reporting to international institutions of "suspicious transact= ions involving what may be terrorist activities" so that there is "no hidin= g place for terrorist money." European Union governments are meeting to ado= pt a common position on the issue this weekend.
The administration needs to change a policy that has been hostile toward= challenging bank secrecy. It needs to get behind and strengthen existing e= fforts by the OECD and the G-7 to crack down on this perfidious system. We = must realize that globalized terrorism is financed by globalized money.
Lucy Komisar is a New York journalist who writes on foreign affairs and = in recent years has focused on offshore bank and corporate secrecy.