On November 7, 2001, agents from Customs, Immigration, the IRS, and the FBI burst into the Dorchester, Massachusetts, offices of al-Barakaat, a Somali conglomerate with branches in forty countries, and arrested Mo- hamed M. Hussein, treasurer of Barakaat North America, on charges of operating an unlicensed money transfer business, or, as it was known, a hawala. Al-Barakaat stood accused of raising, investing, laundering, and distributing money on behalf of al-Qaeda. Then–Treasury Secretary Paul O’Neill announced that its various companies were “the money movers, the quartermasters of terror.” Meanwhile, federal authorities were also conducting raids on suspected businesses in eight other American cities. It all had the appearance of a clean, efficient police sting.
The raids were the work of Operation Green Quest, a task force established after September 11, 2001, and designed to coordinate the efforts of various federal offices and agencies with experience in tracking suspicious financial transactions.1 While the FBI’s Financial Review Group was to concentrate on the funding of the September 11 hijackings, Green Quest had the more ambitious commission to “disrupt and dismantle” financial networks used by terrorists. Just as Treasury investigators brought down Al Capone for tax evasion, the thinking went, authorities might be able to follow a trail of dirty money from the ruins of the Trade Center all the way to Osama bin Laden’s caves in Afghanistan.
Three years later that initial optimism looks naive: the Bush administration’s efforts to comprehend, much less combat, terrorist financing have been an abysmal failure. Certainly, we know now a great deal about the economics of terrorism that we did not know then, but none of what we have learned is reassuring. We know that acts of terrorism are extremely cost-effective. According to the 9/11 Commission’s final report, the attacks of September 11 cost less than half a million dollars; the 2000 bombing of the USS Cole is estimated to have cost between $5,000 and $10,000. At the same time, the 9/11 Commission learned that prior to September 11, al-Qaeda had an annual budget of $30 million. The organization’s budget is now estimated to break down to roughly 90 percent for infrastructure—maintaining training camps and communications—and only 10 percent for financing actual terrorist attacks. This is alarming news for those seeking to prevent further attacks, because small amounts of money in transit are much harder to trace than large ones.
More alarming is what we have—and haven’t—learned about the sources of terrorist funding. In the summer of 1996, the State Department concluded that Osama bin Laden had a personal fortune of $300 million, and for many months after September 11, the image of a mad millionaire financing his own personal war against the West endured. But the findings of the 9/11 Commission point to a graver reality: al-Qaeda’s annual budget is maintained not out of bin Laden’s deep pockets, but by piecemeal fund-raising, often through charities in the Gulf countries, and particularly in Saudi Arabia, from supporters of violent jihad.2
Yet that is…
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