11 May 2007

Follow the money... where?

Victor Comras at Counterterrorism Blog has a new post up on Anti-Money Laundering work that is being amalgamated across a few Federal Agencies. And the key paragraph is, thankfully, right at the top, so that we can get an idea of the scope of this:

Crafted by the Department of the Treasury, along with Justice, State, Homeland Security, the Federal Reserve, Comptroller of the Currency, and the Federal Deposit Insurance Corporation, it sets forth a new Administration focus on money laundering as a direct threat to our national and economic security. Previous AML strategies had co-mingled, and encompassed, combating both money laundering and terrorism financing. But, this strategy tackles money laundering independently. As it contains no call for additional resources, it may portend a shift in resources from terrorism financing investigations to new AML priorities. This could have a negative impact on the Administration’s ability to effectively address new and emerging terrorism financing schemes and mechanisms.
You mean they haven't been doing this? I have taken a basic look at some of this before with The Web of the supernote, which looks at how illegal drugs, terrorist funds, third country bank transfers, technology transfers and counterfeit $100 bills all interplay in a pretty nasty web with multiple lines of connection between Rogue Nations, terrorist groups and standard black market work. That was built upon the basic understanding of connections between and amongst terrorist groups in Template of Terror. It is that basic interconnectedness that is the problem, with new institutions rising and falling that they will utilize to do their work. The reason I looked into those is because of the informal money networks that grow up around small communities and their larger scale interlinking globally and with organized crime. It is this sort of network that is specifically mentioned by the 9/11 Commission Report on p. 171:
Al Qaeda frequently moved the money it raised by hawala, an informal and ancient trust-based system for transferring funds. In some ways, al Qaeda had no choice after its move to Afghanistan in 1996: first, the banking system there was antiquated and undependable; and second, formal banking was risky due to the scrutiny that al Qaeda received after the August 1998 East Africa embassy bombings, including UN resolutions against it and the Taliban. Bin Ladin relied on the established hawala networks operating in Pakistan, in Dubai, and throughout the Middle East to transfer funds efficiently.Hawaladars associated with al Qaeda may have used banks to move and store money, as did various al Qaeda fund-raisers and operatives outside of Afghanistan, but there is little evidence that Bin Ladin or core al Qaeda members used banks while in Afghanistan.
While the hawala system is Middle East indigenous, most if not all poor, rural, non-industrialized Nations have similar that grow up within and amongst them. Notice that this is 'networks' as in plural or multiple networks with differing levels of connectivity between and amongst them. In the notes on the footnotes for the report this is looked at a bit more:
A hawala, at least in the “pure” form, transfers value without the use of a negotiable instrument or other commonly recognized method for the exchange of money.For example, a U.S. resident who wanted to send money to a person in another country, such as Pakistan,would give her money, in dollars, to a U.S.-based hawaladar.The U.S. hawaladar would then contact his counterpart in Pakistan, giving the Pakistani hawaladar the particulars of the transaction, such as the amount of money, the code, and perhaps the identity of the recipient.The ultimate recipient in Pakistan would then go to the Pakistani hawaladar and receive his money, in rupees, from whatever money the Pakistani hawaladar has on hand. As far as the sender and ultimate recipient are concerned, the transaction is then complete.The two hawaladars would have a variety of mechanisms to settle their debt, either through offsetting transactions (e.g., someone in Pakistan sending money to the United States using the same two hawaladars), a periodic settling wire transfer from the U.S. hawaladar’s bank to the Pakistani hawaladar’s bank, or a commercial transaction, such as the U.S. hawaladar paying a debt or an invoice, in dollars, that the Pakistani hawaladar owes in the United States. Hawalas typically do not have a large central control office for settling transactions, maintaining instead a loose association with other hawaladars to transfer value, generally without any formal or legally binding agreements. See Treasury report,“A Report to Congress in Accordance with Section 359 of the [USA PATRIOT Act]”Nov. 2002;Treasury report,“Hawala:The Hawala Alternate Remittance System and its Role in Money Laundering,” undated (prepared by the Financial Crimes Enforcement Network in cooperation with INTERPOL,probably in 1996).
Basically a homegrown system with some high level interconnectedness. It is typified by: low overhead, low accountability, low traceability and flies below the large funds transfer systems that banks use. By being a person-to-person system that is arranged on the fly, the ability of National governments to regulate or even track it is limited. Note that commercial transactions, such as purchase of goods can, itself, be done through yet another party with payment in one Nation and delivery of goods in another without the funds originating in the second Nation. This is a distributed funds system that is not highly amenable to investigation as it has multiple links and sources between each point on the network. Further the intermingling of funds between various sources makes it virtually impossible to distinguish low funds transfers that are more or less legitimate between individuals, and distributed funds transfers for terrorist or criminal operations.

A similar operation based on pesos is being looked at from the PBS report Mr. Comras is citing: US drug dealers go to peso brokers, the brokers would work with smugglers to get goods into Columbia without documentation (also known as the 'grey market' goods system), the goods are sold in Columbia for pesos and the broker gets reimbursement and then pays off the recipient in Columbia in pesos after taking the middle-man cut. A bit more complex than the hawala system but it encompasses the same person-to-person knowledgebase and is very difficult to crack and open as it is transnational in basis.

These sorts of systems create 'artifacts' or strange happenings that get noticed, such as individuals of low means getting a continual supply of money or goods and yet not having the income basis for such. Such artifacts could represent such things as: stolen US cars showing up whole (not piecemeal and reconstructed) in Iraq for use by terrorists, the utilization of front companies to mix in smuggling containers with legitimate goods, or the outright sale of goods to those that are prohibited from getting same.

More worrying, however, is things like credit card fraud as seen in this 24 AUG 2006 Jakarta Post article:
Police arrested the other suspect, Agung Setyadi, on Aug. 16 in Semarang, Central Java. Setyadi is accused of smuggling a laptop to Imam Samudera while he was detained in Krobokan prison in Denpasar, Bali, after being sentenced to death for his role in the 2002 Bali bombing

"Setyadi used a delivery service to send the laptop to the address of an official at the Krobokan prison, who then forwarded it to Imam," said Golose

He said Imam used the laptop to communicate with Setyadi and other militants about how to use the Internet to carry out credit card fraud to fund terror attacks, before he was moved to the high-security Nusa Kembangan prison in October following the second Bali bombing on Oct. 1, 2005

Imam also allegedly engaged in intense communication with unidentified people before the second Bali attack, but police have yet to find evidence he was in contact with anyone directly involved in that bombing, added Golose

The police said they seized a laptop along with its warranty card from the suspected terrorists, as well as two cell phones, three Subscriber Identity Module (SIM) cards, one flash disk, one Bluetooth USB, two hard disks, six CDs, one CD box, two bank books, and several documents released by Osama bin Laden, plus his picture and a photograph of Setyadi.
Simple credit card purchases of low cost items used to sustain terrorist networks and make them less traceable *also* work just as well for the informal funds transfer networks. Counterterrorism Blog has this lovely entry for Hezbollah agents working in the US:
* U.S.A. v. Mohamad Youssef Hammoud et al., Charlotte, North Carolina: 25 individuals charged in connection with cigarette smuggling, money laundering, credit card fraud, marriage fraud and immigration violations. Four individuals were charged with providing “material support or resources to a foreign terrorist organization,” Hizballah, specifically providing “currency, financial services, training, false documentation and identification, communications equipment, explosives, and other physical assets to Hizballah, in order to facilitate its violent attacks.” In 2003, Mohamad Hammoud was sentenced to 155 years in prison, while his brother, Chawki, was sentenced to 51 months.

* U.S.A. v. Elias Mohamad Akhdar et al. (pdf), Dearborn, Michigan: 11 co-defendants charged with racketeering related to the Charlotte, North Carolina scheme. In January, 2004, Akhdar was sentenced to 70 months in prison and was fined over $2,000,000 after having pled guilty in July, 2003.

* U.S.A. v. Imam Mohamad-Musbah Hammoud, et al., Michigan, Canada (Ontario, Quebec), Lebanon: In March, 2006, 19 co-defendants charged with a racketeering scheme involving contraband cigarettes, counterfeit Zig Zag rolling papers and counterfeit Viagra, counterfeit cigarette tax stamps, transporting stolen property, and money laundering. A percentage of the profits derived from the illegal enterprise were given to Hizballah. On July 7, two of the defendants, Imad Majed Hamadeh and Theodore Schenk, 73 pled guilty (pdf). Hamadeh and Schenk face a maximum possible penalty of 20 years imprisonment and a $250,000 fine.
While these may be low-level operatives, note that they are *not* working alone and have some sort of contact and support system amongst them. And while the counterfeit Viagra may have been done locally, there is yet *another* source of that which is *better* than what is produced at the pharmaceutical companies. From US News & World Reports, 22 MAY 2005:
As North Korea pushes forward with its increasingly worrisome nuclear program, the Bush administration is moving to squeeze the regime by cracking down on its far-flung criminal trade, which brings it millions in desperately needed hard currency. Pyongyang has responded by diversifying its key rackets--trafficking in drugs and counterfeit greenbacks--to bogus cigarettes and pharmaceutical products, analysts say. Among the sham North Korean products seized recently: cases of Marlboros and a knockoff version of Viagra (aka Neo Viagra Youth Restoration)--said also to work for hepatitis, obesity, and pain. The regime's state-sponsored racketeering generates as much as $700 million in profits annually--equal to nearly two thirds of its legitimate exports, according to the Congressional Research Service. Seizures of counterfeit U.S. dollars alone have totaled $45 million since 1989, notes CRS's Raphael Perl. "The regime has become increasingly criminalized," he says, "and they always seem to be one step ahead of us."
North Korea is noted for limited output, but very high quality production of narcotics, knock-off pharmaceuticals, and counterfeit bank notes. This was noted in Congressional testimony on 20 MAY 2003, which also reported the movement of North Korea from standard small time supplier to wholesaler across a large number of Asian Nations. There is interconnection to criminal operations by terrorists in the US as seen from this further down in the Counterterrorism Hezbollah in the US article:
* U.S.A. v. Mohammad Shabib, Cleveland, Ohio: Federal prosecutors charged Mohammad Shabib with hiding his role in a drug ring which profits were funneled to Hizballah. Shabib, a gas station owner, had $8,000,000 in a Chicago bank account, which authorities say Shabib amassed by shipping roughly 3 tons of pseudoephedrine from Canada to California, which he would sell to Mexican gangs who would use the drugs to produce methamphetamine. (See: Amanda Garrett, “Terrorists’ Money Takes Convoluted Path in U.S.,” The Cleveland Dealer, January 18, 2004).
Actually, that is quite brazen the movement of such large amounts from North to South across the US and points to someone who actually expected to get away with the crime. But the real kicker comes from this, which now links up 'grey market' goods, organized crime and Hezbollah:
* Hizballah-linked Counterfeit Goods Ring in Los Angeles (pdf), Los Angeles, CA: Testimony of Lieutenant John C. Stedman, Los Angeles County Sheriff’s Department, May 25, 2005: “There are also indicators that some associates of terrorist groups may be involved in (Intellectual Property Right/)IPR crime. During the course of our investigations, we have encountered suspects who have shown great affinity for Hezbollah and its leadership. The following are just two examples: during the search of a residence pursuant to an IPR related search warrant, I saw small Hezbollah flags displayed in the suspect’s bedroom. Next to the flags was a photograph of Hassan Nasrallah whom I recognized as the leader of Hezbollah. The suspect’s wife asked me if I knew the subject of the photograph. I identified Nasrallah and the wife said, ‘We love him because he protects us from the Jews’. Also in the home were dozens of audio tapes of Nasrallah’s speeches. During the search, one of my detectives also found a locket which contained a picture of the male suspect on one side and Sheik Nasrallah on the other. In 2004, detectives served an IPR search warrant at a clothing store in Los Angeles County. During the course of the search, thousands of dollars in counterfeit clothing was recovered as were two unregistered firearms. During the booking process, the suspect was found to have a tattoo of the Hezbollah flag on his arm.”

* In 2003, Hizballah’s website carried a page on Hajj with Hizbollah, complete with contact information for regions around the world. The page listed a Canadian phone number soliciting Muslims interested in going on the annual pilgrimage to Mecca. Other phone numbers included Beirut; Conakry, Guinea; Sweden; Switzerland; Ivory Coast; Denmark; Sierra Leone; Togo; Ghana and Gambia for people interested living in those places.
From this is gathered a highly distributed system of contacts, money and goods interchange and flow back of funds to Hezbollah via this system. But that isn't all of it, either. When looking into Iranian influence in Bosnia, and the general intermingling of terrorists in the Balkans, this popped up from written testimony presented to the Judiciary Subcommittee on Crime, 13 DEC 2000 from Ralf Mutschke, Interpol's Assistant Director, Criminal Intelligence Directorate:
Structural links between political terrorism and traditional criminal activity, such as drugs trafficking, armed robbery or extortion have come increasingly to the attention of law enforcement authorities, security agencies and political decision makers. There is a fairly accepted view in the international community that in recent years, direct state sponsorship has declined, therefore terrorists increasingly have to resort to other means of financing, including criminal activities, in order to raise funds. These activities have traditionally been drug trafficking, extortion/collection of "revolutionary taxes", armed robbery, and kidnappings. The involvement of such groups as the PKK, LTTE, and GIA in these activities has been established.

I would like to draw the particular attention of the Committee to the Groupe Islamique Armé (GIA), considering the events of December last year. On 14 December 1999, Ahmed Ressam, was arrested near Port Angeles, Washington State, while trying to enter the United States from Canada. He was in possession of a timing device, explosive materials and false identification documents. Ahmed Ressam is known to have shared a Montreal (Canada) apartment with Said Atmani, a known document forger for the GIA. It has been established that before Ressam attempted to enter the US, he was in the company of Abdelmajid Dahoumane in Vancouver (Canada) for a 3 to 4 week period. An Interpol Red Notice was issued regarding the latter. The investigation has revealed links between terrorists of Algerian origin and a criminal network established in Montreal and specializing in the theft of portable computers and mobile telephones. The group in Montreal was in contact with individuals involved in terrorist support activity in France, and with several Moudjahidin groups who are active in Bosnia.

Subsequent to the arrest of Ressam, the Montreal police arrested twelve persons who were committing theft of valuable goods in cars in the Montreal downtown area. The proceeds of these criminal activities were sent to an international network with links to France, Belgium, Italy, Turkey, Australia and Bosnia.

The events in Canada and the United States should be seen in a wider perspective. Indeed, intelligence shows that several Algerian terrorist leaders were present at a meeting in Albania, which could also have been attended by Usama bin Laden, who was believed to be in Albania at that time. It was during this meeting that many structures and networks were established for propaganda and fund raising activities, and for providing Algerian armed groups with logistical support. The arrest at the Canada-US border in December 1999 may indicate that the Algerian terrorists are prepared to take their terrorism campaign to North America.

The GIA is a very active and deadly terrorist organization operating mainly in Algeria but which has also mounted several terrorist attacks in France, including the hijacking of an Air France jetliner in 1994 and a bombing campaign in 1995. Their aim is the overthrow of the Algerian Secular Government and its replacement with an Islamic state. They have developed large scale support and financing activities in Europe and other parts of the world. An analysis recently conducted at the Interpol General Secretariat has revealed GIA involvement in a number of criminal activities in several European countries. Although the information received is fragmented, it has been established that GIA support networks are involved in extortion, currency counterfeiting, fraud, and money laundering.

The above examples concern traditional terrorist groups with a well-defined political ideology who are only involved in organized crime on a secondary level. However, two of the main emerging threats today seem to emanate, on the one hand, from more hybrid groups who operate in highly unstable, often war-torn countries or regions, and, on the other hand, loose alliances and cooperation among different, already existing transnational criminal organizations. Albanian crime groups are highly representative of this trend.


Finally, Albanian criminal groups frequently engage in burglaries, armed robberies and car theft in Europe and the United States.

There might still be links between political/military Kosovar Albanian groups (especially the KLA) and Albanian organized crime. Of the almost 900 million DM which reached Kosovo between 1996 and 1999, half was thought to be illegal drug money. Legitimate fundraising activities for the Kosovo and the KLA could have been be used to launder drug money. In 1998, the U.S. State Department listed the KLA as a terrorist organization, indicating that it was financing its operations with money from the international heroin trade and loans from Islamic countries and individuals, among them allegedly Usama bin Laden. Another link to bin Laden is the fact that the brother of a leader in an Egyptian Djihad organization and also a military commander of Usama bin Laden, was leading an elite KLA unit during the Kosovo conflict. In 1998, the KLA was described as a key player in the drugs for arms business in 1998, "helping to transport 2 billion USD worth of drugs annually into Western Europe". The KLA and other Albanian groups seem to utilize a sophisticated network of accounts and companies to process funds. In 1998, Germany froze two bank accounts belonging to the "United Kosova" organization after it had been discovered that several hundred thousand dollars had been deposited into those accounts by a convicted Kosovar Albanian drug trafficker.


In order to smuggle their illicit products into the U.S., Colombian drug cartels began forming alliances with Mexican groups, who have a well-developed smuggling infrastructure for transporting drugs across the vast border with the United States. As Mexicans began to charge more for their services, Colombians established relationships with various Dominican, Jamaican, Puerto Rican, and African-American groups which act as smugglers and retailers for Colombian wholesale cocaine. Colombians have also formed an alliance with some of the Nigerian drug trafficking groups based on product exchange. In the early 1990s, Nigerian groups supplied heroin to Colombian drug traffickers in exchange for cocaine. Colombians were able to develop their own heroin market, while Nigerians started selling cocaine in Western Europe. During the late 1980s and early 1990s, an important alliance was formed between Colombian drug cartels and the Sicilian Mafia. Since the cocaine market in the U.S. was saturated, and because cocaine could be sold with higher profit margins in Europe, Colombians wanted to enter the European drug market. The Cosa Nostra’s well established heroin network was easily applicable to cocaine. In addition, the Sicilians had an excellent knowledge of European conditions and were able to neutralize law enforcement officials through bribery and corruption more effectively than the Colombians. From the Sicilian perspective, the alliance with Colombians was an opportunity to regain part of the market that had been lost to Chinese heroin traffickers. In recent years, South American drug cartels have been forming alliances with East European/Russian Organized Crime Groups in order to support and diversify their operations. East European groups have offered drug cartels access to sophisticated weapons that were previously not available. Helicopters, surface-to-air missiles, rocket-propelled grenades, and even submarines are on the drug cartels’ "shopping list." The East European groups provided new drug markets in Russia, the former Soviet Republics, and Eastern Europe, while consumption was decreasing in the U.S. In 1993, Russian police intercepted a ton of South American cocaine which had been shipped to St. Petersburg by one Russian crime syndicate working with a Colombian drug cartel. In another example, a Russian crime leader was arrested in January 1997 in Miami by U.S. agents for the exportation of cocaine from Ecuador to St. Petersburg (Russia) and then to the United States. In exchange for these services, drug cartels pay for transactions with high quality cocaine. East European/Russian crime syndicates and corrupt military officers are supplying sophisticated weapons to Colombian rebels in exchange for huge shipments of cocaine. Although the Revolutionary Armed Forces of Colombia (FARC) receives most of the arms, some of them are distributed to Hezbollah factions.
That is an extremely complicated set of individuals and organizations to move money from illicit drug sales and other transactions via informal and illegal networks to Eastern European and Russian mafia groups for delivery of weapons to terrorist groups in S. America. By melding criminal activities with DIY banking and informal banking, supplementing that with organized crime trafficking, including human trafficking across the US border of Hezbollah and al Qaeda agents, the entire admixture is quite deep and distributed. And almost all of this is done person-to-person with only the surfacing of money 'laundering' when needed for legitimate goods trafficking.

So here is the question: if the Federal Agencies listed at the start of this, along with DoD cannot figure out how stolen cars are shipped WHOLE to Iraq for terrorist use, then what sort of job will they do in tracking money through illegal, quasi-legal and informal funds and goods systems? Remember that the contacts now go very deep on this and the network is highly informal and distributed reaching into Russia, Syria, North Korea, Venezuela and then onwards in multiple directions to more Nations in S. America, Europe and Africa. Exactly *how* will the US Government track this stuff or even come to some basis for handling it? While the major narcotics busts of the 1960's and '70's made great headlines, they did not stop the trafficking or major mafia groups from operating. Indeed, new groups sprung up on a global basis from S. America to Central Asia to Africa.

To attack this sort of thing a basic set of Goals on Transnational Terrorism have to be developed as a Foreign Policy for the United States. That means getting *serious* on banking and goods transport within a network of verified and legitimate sources. That sort of system holds accountability for goods and money flows within the system and harshly restricting outside flows into it, if not ending them completely. To enforce this is beyond the capability of one or even a sub-set of governments and requires a distributed and effective system of individuals and companies to monitor and stop trade with terrorists and other non-Nation State enemies.

Basically, that is 21st century privateers that are accountable and *live* within this distributed system and have warrant and letters to carry out activities of a military form against those using illegitimate warfare to attack the US and its friends and allies. All of the Federal Agencies and capabilities *combined* fail at this and giving more power to the Federal government or even inter-governmental Agencies like InterPol have failed over decades to stop just organized crime. Not to speak of terrorism. This is far too complicated for bureaucrats to do, who can only point out 'problem areas and groups' but *not* how best to go after them. To combat this without heading into authoritarianism or totalitarianism requires a change in commercial and personal outlook on the part of Citizens and Governments. No Government could get this sort of deep oversight and intervention power and BE trusted with it. Because this is understanding things on a personal scale and Governmental Agencies have proven ill-equipped to do this beyond basic crime fighting. As soon as it goes Transnational, the organs fail because they are not given scope to work so as to protect Liberty and Freedom at home.

The only People we trust is Ourselves as Citizens and those that join *with* us to confront and combat this.

If we dare to.

Otherwise the Nation State will prove the end of Freedom and Liberty in either not addressing this or in taking these things *from* Individuals as abilities. And when Governments can infiltrate down to the extreme personal level, the power to do that is then unlimited and uncheckable by any institution ever designed. To confront this takes something that Government inside the US is not given to do and so must call upon those that can do it.

We the People.

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