[iwar] [fc:Following.the.money]

From: Fred Cohen (fc@all.net)
Date: 2001-09-25 07:17:32


Return-Path: <sentto-279987-2343-1001427468-fc=all.net@returns.onelist.com>
Delivered-To: fc@all.net
Received: from 204.181.12.215 by localhost with POP3 (fetchmail-5.1.0) for fc@localhost (single-drop); Tue, 25 Sep 2001 07:20:20 -0700 (PDT)
Received: (qmail 10827 invoked by uid 510); 25 Sep 2001 14:18:08 -0000
Received: from n28.groups.yahoo.com (216.115.96.78) by 204.181.12.215 with SMTP; 25 Sep 2001 14:18:08 -0000
X-eGroups-Return: sentto-279987-2343-1001427468-fc=all.net@returns.onelist.com
Received: from [10.1.4.55] by f19.egroups.com with NNFMP; 25 Sep 2001 14:17:49 -0000
X-Sender: fc@big.all.net
X-Apparently-To: iwar@onelist.com
Received: (EGP: mail-7_3_2_2); 25 Sep 2001 14:17:48 -0000
Received: (qmail 96984 invoked from network); 25 Sep 2001 14:17:33 -0000
Received: from unknown (10.1.10.27) by l9.egroups.com with QMQP; 25 Sep 2001 14:17:33 -0000
Received: from unknown (HELO big.all.net) (65.0.156.78) by mta2 with SMTP; 25 Sep 2001 14:17:33 -0000
Received: (from fc@localhost) by big.all.net (8.9.3/8.7.3) id HAA26231 for iwar@onelist.com; Tue, 25 Sep 2001 07:17:33 -0700
Message-Id: <200109251417.HAA26231@big.all.net>
To: iwar@onelist.com (Information Warfare Mailing List)
Organization: I'm not allowed to say
X-Mailer: don't even ask
X-Mailer: ELM [version 2.5 PL1]
From: Fred Cohen <fc@all.net>
Mailing-List: list iwar@yahoogroups.com; contact iwar-owner@yahoogroups.com
Delivered-To: mailing list iwar@yahoogroups.com
Precedence: bulk
List-Unsubscribe: <mailto:iwar-unsubscribe@yahoogroups.com>
Date: Tue, 25 Sep 2001 07:17:32 -0700 (PDT)
Reply-To: iwar@yahoogroups.com
Subject: [iwar] [fc:Following.the.money]
Content-Type: text/plain; charset=US-ASCII
Content-Transfer-Encoding: 8bit

Wednesday, 19 September, 2001, 22:40 GMT 23:40 UK

Following the money

<a href="http://news.bbc.co.uk/hi/english/business/newsid_1553000/1553153.stm">http://news.bbc.co.uk/hi/english/business/newsid_1553000/1553153.stm>
&lt;http://news.bbc.co.uk/hi/english/business/newsid_1553000/1553153.stm

Financial authorities around the world are stepping up their efforts to
trace illegal money flows in the wake of the attacks inflicted on New
York and Washington DC on 11 September. 

Whoever proves to be behind the attacks, law enforcement agencies in the
US are well aware that one of the best ways to prove a case is to follow
the money. 

How were the hijackers supported? And how did the money make it into
their hands in the US and elsewhere without being traced?

No-one is under any illusion that the task will be an easy one. 

Tracing the flow of illicit money is a complicated, time-consuming
business, and the cards are stacked against investigators. 

To help boost the chances of finding a paper trail that could lead back
to the perpetrator, regulators are planning to upgrade their systems for
uncovering the laundering of dirty money. 

Transatlantic efforts

The Bush administration has unveiled a package of measures concentrating
on the biggest of money laundering operations. 

On 18 September the Federal Reserve ordered all banks, domestic and
foreign, under its jurisdiction to search through their records for any
accounts or transactions involving the 19 people identified by the FBI
as the hijackers. 


The government will also identify and focus on specific areas of the US
where money laundering is rife, via a new body to be called the Foreign
Terrorist Asset Tracking Center with staff drawn from all US law
enforcement and intelligence agencies. 

The aim is to "map" the finances of terrorist organizations. 

In the UK, Chancellor of the Exchequer Gordon Brown told the BBC's Today
program that banks needed to tighten their rules on oversight of
suspicious transactions. 

The reporting of suspicious transactions is seen as a cornerstone of
compliance with the global anti-money laundering effort, spearheaded by
an international Paris-based group, the Financial Action Task Force
(FATF), affiliated to the OECD. 

"It's necessary to create that wider (reporting) obligation on
international institutions," Mr.  Brown said. 

"But equally it's necessary to have a system of reporting so that
there's not only no safe haven (for terrorists) but no hiding place for
terrorist money."

One bank account supposedly connected to the US terrorists, at a
Barclays Bank branch in Notting Hill in London, has already been closed. 

Switzerland, a country whose reputation for banking secrecy has often
made its banks a prime suspect in money laundering investigations, says
its task force is "working at high speed" to see if any terrorist-linked
funds had flowed through Swiss institutions. 

And other European countries are following suit. 

Imprecise estimates

But experts believe the task is going to be an extremely difficult one. 

Despite years of intense intelligence interest in Bin Laden - still the
prime suspect - estimates of his resources vary wildly. 

Some authorities quote figures of $50m a year drawn from investments
dating back to his youth in Saudi Arabia. 

Others say much of his fortune was invested on projects in his former
refuge, Sudan, and is now lost to him as a result of his forced
departure in 1996. 

In evidence presented at trials of his alleged comrades, some witnesses
talk of multi-million dollar bank accounts scattered across the Middle
East, the US, Europe and Asia and filled with funds creamed off Islamic
charities. 

But others point to parsimony, quoting examples of penny-pinching and
bare-bones operations. 

Cheap at the price

In any case, terrorism experts say that an operation such as the attacks
on the US would not necessarily have been all that expensive. 

"It would not be that expensive, not millions of pounds but hundreds of
thousands, provided that you have enough dedicated people," said Paul
Rogers, professor of peace studies at Bradford University. 

"Even if you had 50 people involved for a year, that would still not be
a tremendous amount of money."

But Prof Rogers said it was important not simply to focus on Bin Laden. 
"There could be lots of support from other sources than him," he said. 

Follow the money?

And setting aside the question of just how much money is involved, the
practical problem remains.  How do authorities trace the money in the
first place?

Suspicious transaction reports (STRs) are hardly reliable, many experts
fear.  Some banks are less than diligent about filing them, and not only
the "correspondent banks" which sometimes consist of little more than a
brass plate on a door and a nominated director in a house down the road. 

Even if the reports are filed, usually a required practice for any sum
over about £10,000, the regulators may be too snowed under to pay
attention. 

The US Financial Crimes Enforcement Network (FinCEN), which oversees
anti-money laundering efforts at the moment, is notorious in US banking
circles for having a huge backlog of STRs. 

And banks complain about being forced to be policemen. 

"Banks don't have the people or those with enough experience to play
Sherlock Holmes," said one senior UK banking executive. 

"The process are very skilled - they are run through 'legitimate'
companies.  How can you possibly detect all of them?" And the weight of
STRs, "know your customer" rules and other regulations is too much of a
burden, he says. 

"If we were to implement all the regulations, bankers would be doing
nothing else.  And the regulations are now so tight in some of the
offshore places, you might have a better chance getting money into a
retail bank in New York and London rather than Jersey."

That has certainly been proved in recent money laundering cases.  When
regulators probed the money stolen from Nigeria by former dictator Sani
Abacha, they found much of it had passed through London institutions. 

The regulators have to ensure bankers police themselves because the
money flows through the major banking centers are now so huge that
keeping track is near impossible. 

Avoiding the paper trail

But however clever a money laundering scheme might be, the aim is always
the same: disguising the paper trail of transactions from dirty money to
clean. 

Usually this happens through layers of "shell companies" - firms which
exist only on paper, perhaps with directors whose sole responsibility is
to be a front man with a sinecure - anonymous bank accounts, bearer
shares, over-or under-invoicing on general trade deals and a range of
other techniques. 

But what if you could avoid the paper trail altogether?

That could prove to be the real difficulty in tracing money back to
those responsible for the US attacks - especially if Bin Laden really is
behind them. 

The secret lies in an alternative banking system hundreds of years old,
known in India as hawala and in Pakistan - and Afghanistan and the
Middle East - as hundi. 

According to Prof Barry Rider, director of the Institute of Advanced
Legal Studies in London and an expert on financial crime, the
trust-based hundi system is entirely normal, and prevalent wherever
there is a South Asian or Middle Eastern diaspora. 

"Say I'm working in the UK and want to sent money back to a village in
Pakistan," he said.  "I could get a bank transfer, but that's going to
be at the official exchange rate.  And what good will it do my family in
a village with no bank?"

Instead, he says, you find the hundi broker - often a local small
businessman - give him the money, and after a short time his contacts
back home will deliver the money, at the black market rate, in local
currency and minus a handling fee, to your relatives. 

No paper trail, no fuss.  And no money ever crosses a border -
discrepancies in the two-way flow are settled up at the end of the
month, or perhaps every half year. 

Impenetrable

Which makes it perfect for drug traffickers, for example - Afghan drug
smugglers have used Pakistani hundi brokers for years. 

More recently, the Chinese "chop" system - where no money changes hands
at all, and instead "tokens" (often now passwords sent by email) are
used as the equivalent of letters of credit for gold or diamonds
deposited with trusted third parties - has been used by the Afghan drug
and arms trade. 

And many observers believe the chances are such a widespread,
impenetrable system is certain to be used by the likes of Bin Laden. 

"No intelligence organization - except the Directorate of Revenue
Intelligence in India, perhaps - has ever effectively cracked the
system," says Prof Rider. 

"You could count the number of successful penetrations on the fingers of
one hand."


------------------------ Yahoo! Groups Sponsor ---------------------~-->
Get your FREE VeriSign guide to security solutions for your web site: encrypting transactions, securing intranets, and more!
http://us.click.yahoo.com/XrFcOC/m5_CAA/yigFAA/kgFolB/TM
---------------------------------------------------------------------~->

------------------
http://all.net/ 

Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/ 



This archive was generated by hypermail 2.1.2 : 2001-09-29 21:08:49 PDT