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Crackdown on Terror Funding Is Questioned

Finance: U.S. officials say a lack of evidence and fighting among agencies have hampered the drive.

April 07, 2002|JOSH MEYER and ERIC LICHTBLAU | TIMES STAFF WRITERS

WASHINGTON — The U.S. government's much-touted financial war on terrorism has been hamstrung by bitter turf battles among federal agencies, questionable evidence against targeted Middle Eastern groups and a lack of cooperation by foreign allies, senior government officials said.

In recent months, President Bush and his top Cabinet members have hailed the U.S. government's effort to "shut down the money pipeline" as an increasingly important, and successful, component of the broad counter-terrorism strategy in the United States and abroad.

But privately some administration officials are voicing growing concern that the strategy isn't working as advertised.

"You read the papers and it seems like everything is going great," said one senior law enforcement official. "But this is no way to run an investigation. And the worst part is that this is the biggest case in existence. And so much is at stake."

Debate over the problems has occurred at the highest levels, according to interviews with more than a dozen law enforcement, intelligence and counter-terrorism officials familiar with the financial crackdown. Among the concerns:

* Infighting between the Justice and Treasury departments has spawned two parallel and often conflicting bureaucracies pursuing financial investigations of suspected terrorists, sending confusing signals to law enforcement and intelligence agencies here and abroad over who is in charge.

Privately, some Treasury and Justice officials blame each other for refusing to work together, withholding information and lacking the required financial training, even as both concede that the current system squanders precious resources, money, time and investigative leads.

* At least some of the financial crackdowns on groups with suspected terrorist ties, resulting in the freezing of tens of millions of dollars in assets, were launched prematurely or based on insufficient evidence.

The asset seizures have triggered lawsuits from targeted groups, as well as a backlash from Muslims who say they are being unfairly branded as terrorists. Some prosecutors now say they are concerned about whether the seizure cases will hold up in court.

* The United States is receiving far less cooperation than it needs from many allied nations, which have pledged to help choke off the terrorist money supply but lack the political will, technical know-how and legal framework to make that happen.

As a result, the financial crackdown risks being little more than a symbolic effort because only a tiny fraction of the money believed to be supporting terrorist activity resides within U.S. financial institutions.

* Key financial provisions of last year's Patriot Act, which granted authorities broader powers to track suspected terrorist money, are too unwieldy and unrealistic.

The law subjects an array of businesses--from currency transfer and exchange firms to pawnbrokers and even car dealerships--to new auditing and reporting requirements to help authorities detect potential terrorist activity. The legislation gives an April 24 deadline for the new regulations, but many businesses say they have no system for taking on their expanded role as money cops, and authorities complain that they will be overloaded with information.

Leaders of the financial war on terrorism acknowledge the investigations' shortcomings, but they point to success in some areas.

The campaign has been instrumental, for instance, in determining who was behind the Sept. 11 attacks and in establishing connections among the 19 hijackers and other co-conspirators around the world. It also has provided a clearer picture of how Osama bin Laden's Al Qaeda network and other terrorist organizations operate, officials said, adding that the financial component of the war on terrorism ultimately could prove to be instrumental in U.S. efforts to avert another attack.

"Naturally, there are a few growing pains, but I don't detect a systemic problem here," Deputy Treasury Secretary Kenneth Dam said Friday. "No doubt there will be glitches here and there, but that doesn't detract from the point that it's just an incredible joint effort, and it's made a major impact on Al Qaeda and their ability to finance themselves."

Last week, FBI Director Robert Mueller said the crackdown has damaged the ability of Bin Laden and other suspected terrorists to keep their operations going.

Dam, Mueller and other high-ranking leaders say they base those assessments on classified information, intelligence and other indicators that, as Al Qaeda's funding dries up, its cells are withering on the vine.

So far, authorities have frozen more than $100 million in alleged terrorist money, about $70 million of it overseas. Several major charities have been targeted for allegedly helping terrorist organizations, as have currency transfer businesses that are popular means of routing money from the United States to Africa and the Middle East.

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