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October 9, 2001
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How militant groups stash cash for attacks

Money launderers weave tangled webs using false names, offshore accounts and legitimate businesses to muddy the money trail, making tracking 'terror funds' almost impossible, international experts say.

Laundering methods are part of a feverish search to root out financial backing behind last month's attacks in the United States, but strings of small, unsuspicious transactions carried out by ordinary, low-profile people easily mask the trail.

"Bombers are always paid in cash, and they don't have an upfront, suspicious lifestyle," said Juval Aviv, president of Interfor Inc, New York-based private investigators who specialise in asset recovery around the world.

Experts say the US attacks were probably funded by drug money -- Afghanistan is notorious for its opium trade -- as well as donations from dubious charities and the personal fortune of Saudi-born millionaire and chief suspect Osama bin Laden.

But it is hard to be sure.

"To identify the source of terrorist funding is very complicated. It's time-consuming and tedious work to understand the number of people behind it," Aviv said.

The finances behind the US carnage would have touched many palms in many countries and legal, law-abiding citizens and businesses probably had a hand in distributing the money.

SPINNING THE WEB

Once it has gathered funds, a group will use banks who back the cause or are close ideologically, ethnically or politically.

Right from the start, false names are a must.

"You don't see many accounts in the name 'mafia'," said Mark Pieth, a professor of criminal law and criminology at Basel Univesity and an expert on money laundering.

Pieth said bin Laden and associates could have used banks in traditional banking centres such as Lebanon and Cyprus as well as Pakistan. Aviv noted that a bank may wire funds to and from a series of major financial centres to complicate matters further.

These banks employ a financial intermediary who is far removed from the cause and cannot be labelled a sympathiser, who hires yet another intermediary, usually an offshore financial firm, whose job it is to design the financial puzzle.

"They build a structure using offshore companies which have accounts at under-regulated financial resorts with strong bank secrecy who are unlikely to give mutual assistance," Pieth said.

Bringing in a lawyer at this stage provides yet another layer of secrecy because under their professional code, lawyers cannot divulge any information about their clients.

LEGITIMATE, USEFUL FIRMS

As part of this structure, the offshore trust fund or holding company buys legal firms, often cash-generating businesses such as hotels, restaurants, travel agencies and car hire firms which bank in other offshore havens.

"These companies are used as vehicles to accommodate terrorists when they travel," Aviv said. "The group is then in a position to hide its activities in those companies."

The initial owner of the funds, who probably gave a false identity, is now practically untraceable.

For example, Aviv said, investigators would have to prove that a legitimate restaurant in Paris which banked in Monaco was in fact owned by a holding company based in the Cayman islands which was owned by a lawyer in Switzerland.

"And that's where they would stop," Aviv said.

"You would have to prove he was not just a lawyer but also a financial operator," agreed Pieth.

Only at this stage do the big institutions come into play, when the offshore banks deposit funds to take advantage of large banks' speedier cross-border transfer mechanisms.

"These large commercial banks find it difficult to go back and make the deduction that the money might be related to someone sympathetic to Bin Laden's cause," Pieth said.

As a result, 'Know Your Customer' rules, supposed to prevent banks from dealing with clients who give the smallest hint of having dealt with corrupt funds, are useless.

Tracing the payment of bombers' 'salaries' is made even more difficult because the 'paymasters' who help transport the money will have little idea about the funds' intended use.

"The paymaster is a legitimate citizen with no criminal record but who is part of the cause. He could be an accountant or lawyer," Aviv said.

In a web of blind contacts, the paymaster takes cash from accounts and stashes it in a safe deposit box while another person unknown to the paymaster uses that money to pay 'staff'.

OFFICIAL METHODS WON'T WORK

Initiatives that focus on major banks such as the KYC rules, and Washington's list of suspect accounts it wants blocked, do not delve deep enough and are 'nave', Pieth said.

Aviv believes that even when these KYC rules are in place, banks may also turn a blind eye for the sake of profit.

"Sometimes the banks play games. They don't want to lose the deposits so they are co-operating and pretending they don't know the legal owners," he said.

The weakest link in this discreet chain may be the offshore players, according to Pieth, as they are the ones who have the most information and the most to lose if they get caught.

"They are frightened. If they are found out they will not be able to operate for the rest of their lives. They may be willing to share information with law enforcement officers," he said.

However, Aviv says the only way to get to the bottom of the money trail is to operate illegally.

"If you do it in the legitimate way, requesting assistance etc, it will take months if not years, because at every stage, someone will challenge, and unless you can prove with hard evidence that the company with the restaurant chain belongs to the terrorist, then you will get nowhere," he said.

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The Attack on US Cities: Complete Coverage

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