The Money Trail,Terrorist money is a cornerstone of US counter-terrorism strategy

Terrorist money is a cornerstone of US counter-terrorism strategy that has achieved unwelcome results.A couple weeks ago, high-minded Al-Qaeda second banana Ayman a-Zawahiri delivered his first post-2008 election video message using the occasion to spew a racial epithet ('house negro') against President-elect Obama.Although this video message exposes the moral and intellectual bankruptcy of Al-Qaeda, it was clearly intended to show the incoming Obama administration that Al-Qaeda is still in business, despite killer robot airplanes, renditions, torture, black site prisons, Guantanamo, war in Afghanistan, and spying on Americans.Oh, and despite a international effort to disrupt Al-Qaeda's finances that has succeeded in offending America's allies, while failing to put Al-Qaeda out of business.A Washington Post article a few weeks ago detailed how the Bush administration's efforts to track and disrupt terrorist finances are nearing collapse. A United Nations sanctions program intended to cut off funding to Al-Qaeda and the Taliban has been challenged by the European Court of Justice. The court says that the lack of appeal procedures and other safeguards violate fundamental individual rights. Several European officials have complained that the "blacklist" of companies and individuals targeted by the UN sanction appears to be highly politicized.

Meanwhile, an upcoming report on terrorism finance titled "The Money Trail," authored by two former US Treasury officials, paints a picture of lax enforcement and controls, especially in the Gulf Arab states of Kuwait and the United Arab Emirates--major conduits for terrorist funds. The report goes on to describe how terrorist finances rely heavily on cash and the time-honored Middle Eastern business practice of hawalah, a sort of alternative banking method based on trust and personal connections. Hawalah has been a particularly difficult nut for US intelligence to crack, especially in view of the cultural and language finesse (not the strengths of US intelligence capabilities) underlying this ancient tradition.

Of course terrorists use cash and hawalah--everyone on the planet knows that US intelligence monitors the international banking network, even when it violates the privacy laws of US allies. In another example of US intelligence policy running afoul of allied governments, news broke in 2006 that the US Treasury Department regularly snoops around on an international system of inter-bank money transfers known as SWIFT. EU authorities are angered that the US government has subverted EU's stringent protections over individual confidentiality for its counterterrorism dragnet.The US government's recent record of targeting terrorist finances and fundraising has turned out to be somewhat of an embarrassment. For example, the ongoing case against the Oregon-based Al-Haramain Islamic Foundation has been marked by nearly incomprehensible government missteps. Much of the Al-Haramain case has been built up around secret evidence that the government will not share with defense attorneys. At one point, government officials inadvertently handed classified documents over to defense attorneys revealing warrantless wiretapping of US citizens, as well as the defense attorneys themselves. The incoming Attorney General Eric Holder could move to unseal the secret evidence on which the Al-Haramain case is currently based, if a judge doesn't throw out the government's secrecy claims in the case.Efforts to unravel terrorist networks by cutting off their funds were destined to come up short--it's too bad that they also have irritated America's allies. The methodology of financial traces and investigation proved useful in solving other thorny international intelligence problems, like drug and arms traffickers--and weapons of mass destruction proliferators. But there are huge differences in scale between the scant resources needed for the recent Mumbai attacks or an embassy bombing, and the tens of millions involved in procuring the exotic, expensive machinery needed for manufacturing nuclear material or purchasing squadrons of late-generation fighter planes. Explosives, small arms, rent money for a safe house are cheap, and likely to stay under the radar of major international finance. US diplomats and intelligence officials will do well in the coming years to undo policies--like overreaching to track terrorist money.