The terrorists who attacked the World Trade Center in New York City in 1993 originally planned to use a larger bomb to bring down both towers by toppling one into the other. (2) They also wanted to amplify the carnage by augmenting their vehicle-borne improvised explosive device with a chemical or biological weapon to increase casualties and hamper rescue efforts. Their goal, however, went awry because they ran out of money.
Similarly, lack of funds limited the plans of another group that conspired in 2003 to simultaneously bomb the Egyptian, American, and other Western embassies in Pakistan. (3) Inadequate monetary resources forced the group to focus on attacking only the Egyptian embassy. "A short time before the bombing of the [Egyptian] embassy the assigned group ... told us that they could strike both the Egyptian and American embassies if we gave them enough money. We had already provided them with all that we had and we couldn't collect more money." (4)
A major source of terrorist funding involves criminal activities. Groups use a wide variety of low-risk, high-reward crimes to finance their operations. Those most likely encountered by local law enforcement involve six primary areas.
"If we cannot kill them with guns, so we will kill them with drugs." (5) Documented links exist between terrorist groups and drug trafficking, notably the smuggling of pseudoephedrine, a precursor used to manufacture methamphetamine. After purchasing the substance in multiton quantities, smugglers associated with one terrorist group moved truckloads of it into the United States to feed methamphetamine labs in California and neighboring southwestern states.
In three major drug investigations, DEA arrested more than 300 people and seized over $16 million in currency and enough pseudoephedrine to manufacture 370,000 pounds of methamphetamine. To put this quantity into context, the average annual seizure of methamphetamine throughout the United States in 2002 was 6,000 pounds. (6)
Frauds perpetrated by terrorist groups include identity theft for profit and credit card, welfare, social security, insurance, food stamp, and coupon fraud. Industry experts estimate that $3.5 billion in coupons are redeemed annually. (7) About 10 percent, or $3.5 million, is fraudulent.
In 1987, authorities disrupted a large coupon fraud ring involving more than 70 participants. (8) The conspirators were accused of sending a portion of the proceeds to Palestine Liberation Organization (PLO) bank accounts in the Middle East and Europe. A Palestinian operating several grocery stores in the North Miami, Florida, area was the key player in a nationwide money laundering and financing operation for the PLO. The investigation discovered that 72 individuals from throughout the United States gathered in Hollywood, Florida, to further the fraudulent coupon distribution network. One person was identified as a cell leader of a terrorist network. Members of the group also were involved in hijacking trucks and selling stolen food stamps and property. (9)
In 1994, New York City officials identified the head of a coupon fraud ring who had established a network of stores by targeting those owned and controlled by Middle Eastern businessmen willing to participate in schemes that defrauded American commercial enterprises. (10) Most of the time, a small store that normally submitted $200 to $300 in coupons monthly would suddenly begin sending in tens of thousands of dollars worth of them after joining the network. The store owners never saw the coupons; they only received the redemption checks. In many cases, the owners borrowed money or agreed to lease stores for a monthly fee set by the network. They used coupons to pay the debt on these loans, which sometimes required 49 percent interest per month. (11)
Stolen Baby Formula
In another scheme in the late 1990s, investigators in Texas discovered that organized shoplifting gangs paid drug addicts and indigent people $1 per can to steal baby formula. The groups repackaged the products in counterfeit cardboard boxes before shipping the bootleg formula to unsuspecting stores across the United States. One of the largest rings at the time netted $44 million in 18 months. (12)
As the terrorist attacks on September 11 unfolded, a Texas state trooper pulled over a rental van and found an enormous load of infant formula inside. Police later identified the driver as a member of a terrorist group and linked him to a nationwide theft ring that specialized in reselling stolen infant formula and wiring the proceeds to the Middle East. (13) The investigation led to felony charges against more than 40 suspects, about half of them illegal immigrants. Police also seized $2.7 million in stolen assets, including $1 million worth of formula. This investigation was only the beginning. In the years after September 11, police discovered and disrupted several regional and national theft rings specializing in shoplifted baby formula. At least eight of the major cases involved individuals of Middle Eastern descent or who had ties to that region. (14)
Intellectual Property Theft
According to media reports, the terrorists who bombed the World Trade Center in 1993 allegedly financed their activities with counterfeit textile sales from a store in New York City. (15) A raid on a souvenir shop led to the seizure of a suitcase full of counterfeit watches and the discovery of flight manuals for Boeing 767s, some containing handwritten notes in Arabic. A subsequent raid on a counterfeit handbag shop yielded faxes relating to the purchase of bridge inspection equipment. While investigating an assault on a member of an organized crime syndicate 2 weeks later, police found fake driver's licenses and lists of suspected terrorists, including the names of some workers from the handbag shop, in the man's apartment. (16)
Pirated software constitutes a tremendous source of funds for transnational criminal syndicates, as well as terrorist groups. It is not difficult to see why software piracy has become attractive. A drug dealer would pay about $47,000 for a kilo of cocaine and then sell it on the street for approximately $94,000, reaping a 100 percent profit. But, for the same outlay of $47,000 and substantially less risk, an intellectual property thief could buy 1,500 bootleg copies of a popular software program and resell them for a profit of 900 percent. (17) To put these numbers into context, the September 11 attacks cost approximately $500,000, or $26,000 per terrorist. One successful large-scale intellectual property crime easily could fund multiple terrorist attacks on the scale of those of September 11, 2001.
Exploiting a considerable tax differential, smugglers bought van loads of cigarettes for cash in North Carolina and transported them to Michigan. (18) According to prosecutors, each trip netted $3,000 to $10,000. In 1 year, the recipient of the profits, who had links to a terrorist group, had deposited over $735,000 in bank accounts while paying for houses, luxury cars, and other goods with cash. The group sent items, such as night-vision goggles, cameras and scopes, surveying equipment, global positioning systems, and mine and metal detection equipment, to other terrorists abroad. (19) The ringleader was sentenced to 155 years in prison, and his second in command received a 70-year prison sentence.
Informal Value Transfer Systems
Informal value transfer and alternative remittance systems play a significant role in terrorism financing. One example, hawala, involves the transfer or remittance of money from one party to another, normally without the use of such formal financial institutions as banks or money exchanges. International financial institutions estimate annual hawala transfers at approximately $2 trillion dollars, representing 2 percent of international financial transactions. (20)
Because these systems operate below legal and financial radars, they are susceptible to abuse by criminal elements and terrorists. (21) Moreover, few elements of this informal transfer system are recorded, making it difficult to obtain records of the transmitters and the beneficiaries or to capture the scale and magnitude of such transfers. Although operators keep ledgers, their records often are written in idiosyncratic shorthand and maintained only briefly.
From stolen baby formula to intellectual property theft, terrorist groups employ a variety of criminal schemes to raise funds. And, as with other homeland security matters, countering terrorist financing is fundamentally a local law enforcement responsibility. The more familiar officers are with the criminal enterprises used by these groups to raise money, the more effective they will be in finding ways to counter such activities.
Countermeasures must disrupt terrorist financing and starve such groups of the money necessary to sustain their organizations and to perpetrate attacks. Without the financial means to carry out their missions, terrorists will find it increasingly difficult to continue their wanton acts of death and destruction.
(1) Interpol, Terrorism: The Financing of Terrorism (2005); retrieved July 2005 from http://www.interpol.int/Public/Terrorism/financing.asp.
(2) Loretta Napoleoni, Modern Jihad: Tracing the Dollars Behind the Terror Networks (Sterling, VA: Pluto, 2003), 4.
(3) Nick Kochan, The Washing Machine (New York, NY: Thompson, 2005), 34.
(4) Ibid., 32.
(5) Rachel Ehrenfeld, Funding Evil: How Terrorism Is Financed and How to Stop It (Seattle, WA: National Press, 2003), 123.
(6) Drug Enforcement Administration, More than 100 Arrested in Nationwide Methamphetamine Investigation, Federal News Service, January 10, 2002; retrieved July 2005 from http://www.usdoj.gov/dea/major/me3.html.
(7) B. Jacobson, Coupon Fraud, Testimony before the U.S. Senate Select Committee on Intelligence, Washington, DC, 1997.
(9) "U.S. Grocery Coupon Fraud Funds Middle Eastern Terrorism," New American 13, no. 5 (March 13, 1997); retrieved July 2005 from http://www.thenewamerican.com/tna/1997/vo13no05/vol3no05_coupon.htm.
(12) Mark Clayton, "Is Black Market Baby Formula Financing Terrorism?" Christian Science Monitor, June 29, 2005; retrieved August 2005, from http://www.usatoday.com/news/nation/2005-06-28-baby-formula_x.htm.
(15) John Nurton, "Why Counterfeiting Is Not So Harmless," Managing Intellectual Property, September 2002, 43.
(16) Kathleen Millar, "Financing Terror: Profits from Counterfeit Goods Pay for Attacks," Customs Today, retrieved June 2005, from http://www.customs.gov/xp/Customs Today/2002/November/interpol.xml.
(17) Jennifer L. Schenker, "Busting Software Pirates," Time 2002, 54.
(18) Patrick Fleenor, "Cigarette Taxes, Black Markets, and Crime," Policy Analysis, 2003, 13.
(19) Ibid., 57.
(20) Larry Lambert, "Underground Banking and National Security," Sapra India Bulletin, February/March 1996; retrieved July 2005, from http://www.subcontinent.com/sapra/bulletin/96feb-mar/si960308.html.
(21) Supra note 1, 37.
By DEAN T. OLSON, M.A.
RELATED ARTICLE: Items Common to Illegal Hawala Operations
* Spiral notebooks, scraps of paper, or diaries listing information for numerous financial transactions, which generally include the date, payer name, amount received, exchange rate, and payment method or remittance code
* An unusually high number of phone lines at a residence or business; short incoming calls and lengthy overseas calls
* Fax transmittal logs/receipts, which may contain name of sender, beneficiary, or a code
* Wire transfer receipts/documents
* Phone records/documents; multiple calling cards
* Multiple financial ledgers (one for legitimate transfers, one for criminal activity, and one possibly for settling accounts)
* Bank account information, particularly multiple accounts, under same name
* Multiple identification (false ID for the subject or for several other individuals)
* Third-party checks
* Evidence of other fraud activity
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|Author:||Olson, Dean T.|
|Publication:||The FBI Law Enforcement Bulletin|
|Date:||Feb 1, 2007|
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