Saudi Arabia is prime source of terror funds, U.S. says

Stuart A. Levey, a Treasury undersecretary, told a Senate committee that the Saudi government had not taken important steps to go after those who finance terrorist organizations or to prevent wealthy donors from bankrolling extremism through charitable contributions, sometimes unwittingly.

"Saudi Arabia today remains the location where more money is going to terrorism, to Sunni terror groups and to the Taliban than any other place in the world," Levey said under questioning.

U.S. officials have previously identified Saudi Arabia as a major source of funding for extremism. But Levey's comments were notable because, although reluctant to directly criticize a close U.S. ally, he acknowledged frustration with administration efforts to persuade the Saudis and others to act.

"We continue to face significant challenges as we move forward with these efforts, including fostering and maintaining the political will among other governments to take effective and consistent action," Levey said, later adding: "Our work is not nearly complete."

Levey was the sole witness before the Senate Finance Committee, which Tuesday ordered an independent review of the efforts to choke off financing used by Al Qaeda and other extremist groups.

Sen. Max Baucus (D-Mont.), the committee chairman, announced the review at the end of the hearing held to assess the money-tracking campaign by Treasury's Office of Terrorism and Financial Intelligence, headed by Levey.

The Bush administration created the office in 2004 to spearhead efforts to disrupt the flow of money to extremist causes, primarily from wealthy donors in Saudi Arabia and elsewhere in the Persian Gulf.

However, U.S. officials and counter-terrorism experts have said that international support for the effort has waned while terrorist groups have found ways around the financial restrictions. At the same time, there have been turf battles among the 19 federal agencies that work on the problem.

Senators praised work done by Levey but expressed concerns about the overall U.S. effort. The committee's Democratic and Republican leaders cited a Los Angeles Times report last week detailing problems undermining the effort.