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RESPONSE TO TERROR | SUNDAY REPORT

Emirates Looked Other Way While Al Qaeda Funds Flowed

Finance: For years the Persian Gulf country shrugged off warnings from U.S. officials about money laundering.

January 20, 2002|JUDY PASTERNAK and STEPHEN BRAUN | TIMES STAFF WRITERS

Until Sept. 11, Osama bin Laden's terrorists in Afghanistan used the Persian Gulf crossroads of the United Arab Emirates as their lifeline to the outside world. Poor oversight in the loose federation of seven tiny sheikdoms allowed Bin Laden's Al Qaeda network and Taliban agents to set up clandestine arms-trading and money-laundering operations, according to accounts from American, United Nations, Afghan and U.A.E. sources.

In the emirate of Sharjah, Afghan-based militants linked up with Victor Bout, a Russian arms dealer accused of repeatedly violating United Nations weapon sanctions. And millions in Al Qaeda funds cascaded through the freewheeling financial institutions of the neighboring emirate of Dubai. Terrorists used a Somali warlord's money exchange, an Islamic bank once headed by the emirates' finance minister and currency houses that touted their ability to wire $1 million abroad overnight.

The U.S. investigation into the Sept. 11 attacks on the World Trade Center and the Pentagon already has exposed trails leading back to the U.A.E. More than $120,000 was channeled through emirate bank accounts to suicide pilot Mohamed Atta and other suspected hijackers.

The suicide attacks finally prompted U.A.E. officials to crack down on Al Qaeda and its front ventures. But the sudden burst of urgency followed years of passivity.

The U.A.E. was one of only three countries that maintained diplomatic relations with the now-toppled Taliban regime. Despite quiet but persistent prodding by U.S. and other Western diplomats, the emirates' ruling elite was hesitant to reckon with the growing terrorist presence. Regulations that would target terrorists would also interfere with a laissez-faire economy that has bolstered the wealth of their entwined desert kingdoms.

Strategically located between the Arabian Peninsula and South Asia, the emirates' oil-rich confederation is barely 30 years old, a cash-stoked economic wonderland. The emirates are one of the world's busiest sea and air trade hubs, where both legal and illicit freight travels on ancient dhow sailing ships and aging Soviet-era cargo planes.

The emirates' rapid economic progress won admiration from American officials. But the U.S. also grew concerned as prominent entrepreneurs forged financial ties with Islamic militants.

The emirates "moved much too slowly and without adequate dedication to really putting controls into place," said Jonathan Winer, a former deputy assistant secretary of State for international law enforcement.

The U.S. pressed the emirates for tighter banking controls but moved delicately, not wanting to offend an ally in an already-complicated relationship. The emirates allow U.S. naval ships to berth in its harbors but also oppose America's pro-Israel tilt.

Officials with the U.A.E. government, Central Bank and airports in the emirates of Sharjah and Dubai all insisted that the emirates have been vigilant foes of terrorism. "The U.A.E. has been consistent in its cooperation," a Ministry of Information spokesman said. All of the U.A.E. officials declined to be identified by name.

U.S. authorities publicly compliment the emirates on a stepped-up campaign against terrorism since Sept. 11. "I think they get it and are truly being responsive," said R. Richard Newcomb, director of the Treasury Department's Office of Foreign Asset Control. One Western diplomat based in the emirates said emirate officials "were horrified by what happened."

But current and former U.S. officials who urged the U.A.E. government to take action against Al Qaeda before Sept. 11 worry about the durability of the new commitment.

Even in the two months after the Sept. 11 attacks, "we certainly have evidence of money, fees and commissions being directed" to Al Qaeda from the now-closed exchange run by the Somali warlord, said Jimmy Gurule, Treasury's head of enforcement.

Under pressure from international finance ministries, the emirates finally agreed last year to bar their banks and currency exchanges from concealing funds illegally obtained or meant for criminal purposes, otherwise known as money laundering.

By then, though, Al Qaeda and Taliban operatives had burrowed deep inside the emirates. Bin Laden's terrorists found "deep-pocket contributions, government assistance, charities, banks, couriers and other ways of making money," said one U.S. official. The emirates' "assistance" took the form of "preventing information, preventing action," said one former National Security Council official.

At times, even the emirates' rulers betrayed sympathy for some of Bin Laden's aims.

One telling comment came during a 1999 meeting in the emirates between emirate and American officials on the sensitive topic of money laundering. The session was so important to the U.S. that the request had come from President Clinton himself, in a letter to the emirates' president, and in another from Defense Secretary William S. Cohen to his emirates counterpart.

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