Funding terrorism in Southeast Asia: the financial network of Al Qaeda and Jemaah Islamiya.
The war on terror has continued apace in Southeast Asia, and the governments in the region deserve credit for the arrests of some 150 Jemaah Islamiya (JI) members through April 2003. Several of the members of JI's regional shura (council) were arrested, including Mohammed Iqbal Rahman (Abu Jibril), Agus Dwikarna, and Faiz bin Abu Bakar Bafana. These arrests were significant, especially as the JI is not a large organization, with probably no more than 500 members. The fact that they are now focusing on soft targets such as tourist venues rather than hard, though symbolic, targets may indicate institutional weaknesses, the result of 20 mouths of intensive investigations and arrests. They are less able to plan and execute terrorist attacks than they were a year ago, though they still maintain their capacity to attack soft targets. That said, one would be foolish to underestimate JI's capabilities or goals. As many of the key operatives are still at large, the organization retains the capacity and will to launch devastating attacks throughout the region.
The glaring exception to the success in fighting terrorism has been on the financial front: mechanisms for funding terrorism have continued unabated in Southeast Asia, and to date no terrorist assets or funds have been seized in the region. Two leading members of Jemaah Islamiya, Hambali and Abu Jibril, had their assets blocked by the United States under Executive Order 13244 on 24 January 2003 (18 months after Abu Jibril was arrested). Indeed, this is a worldwide problem: as of January 2003, only US$113 million in Al Qaeda-linked assets had been frozen.
In early 2003, the U.S. Department of Treasury's Office of Foreign Asset Control drew up a list of 300 individuals, charities and corporations in Southeast Asia believed to be Al Qaeda and Jemaah Islamiya funders. Due to inter-agency politics, the list was winnowed down to 18 individuals and 10 companies. But even at the time of writing in early April 2003, the list was still unannounced due to diplomatic and bureaucratic pressure.
Yet Southeast Asia seems to have gained in importance to Al Qaeda's money men, according to U.S. law enforcement officials. The head of the terrorist financing tracking unit at the Federal Bureau of Investigation (FBI), asserts that, with the crackdown on Middle Eastern funding mechanisms, especially the financial centres in Abu Dhabi and other parts of the United Arab Emirates, Al Qaeda has increasingly relied on Southeast Asia to move its money and hide its assets. (1)
Al Qaeda's financial network is very sophisticated and complex, dating back to the late-1980s to early 1990s. Osama bin Laden set out to establish an organization that would be self-sustaining over time; one part self-reliant, another part reliant on the ummah, the Muslim community. Built on "layers and redundancies", Al Qaeda's financial backbone was built on a foundation of charities, non-governmental organizations, mosques, websites, fund-raisers, intermediaries, facilitators, and banks and other financial institutions that helped finance the mujiheddin throughout the 1980s. This network extended to all corners of the Muslim world. (2)
"The goal of counter-terrorism", according to Mathew Levitt, "should be to constrict the environment in which terrorists operate", including "their logistical and financial support networks", which "denies terrorists the means to travel, communicate, procure equipment and conduct attacks". (3) This is arguably the most difficult part of the war on terror, as terrorist organizations use myriad ways to fund their operations, legal and illegal, overt and covert, with paper trails or without. Tracking this funding was also never a priority for law enforcement or counter-terrorist officials--terrorist financing was always seen as ancillary to counter-terrorist operations, but never a primary agenda in its own right.
How does Al Qaeda fund its operations in Southeast Asia? How does its regional arm, the JI, support itself? (4) Malaysian intelligence officials believe that Hambali, the head of JI's operations and a member of Al Qaeda's shura, has approximately US$500,000 in assets at his disposal for use in operations. There are eight primary sources of income, both internal and external, though most funds come from external sources. As Mukhlas (Ali Gufron), the leader of the cell that perpetrated the Bali attack said, "Hambali is not known to have any big [local] funding sources". To that end, Indonesian investigators unequivocally stated that "Jemaah Islamiya's jihad operations were funded by Al Qaeda". (5) The sources of funding include:
* cash brought into the country by individuals
* funds skimmed from Islamic charities
* corporate entities (some very overt, others are self-sustaining fronts for terrorist activities)
* proceeds from hawala shops and gold sales
* contributions (zakat and infaq) from its own members
* contributions (infaq) from outsiders
* Al Qaeda investments and accounts already established in the region, especially in the region's Islamic banks, and
* petty crime, racketeering, extortion, gun-running and kidnapping.
None of these funding mechanisms has been effectively shut down since the war on terror began. In part it has been due to the near impossibility of shutting down, for instance, hawala networks, or stopping petty crime. In part, it is also due to bureaucratic inertia, a lack of political will, and diplomatic pressure. Indeed, one of the aspects that made Southeast Asia so appealing to the Al Qaeda leadership in the first place was the network of Islamic charities, the spread of poorly regulated Islamic banks, business-friendly environments, and economies that already had records of extensive money laundering. Al Qaeda saw the region, first and foremost, as a back office for their activities (especially to set up front companies, raise funds, recruit, forge documents, and purchase weapons); only later was it seen as a theatre of operations in its own right. As Al Qaeda's affiliate organization in Southeast Asia, the Jemaah Islamiya developed its own capabilities.
Southeast Asia has long been a centre for transnational criminal activities such as drug and gun-running, money laundering, people smuggling, and document forging. Indeed money laundering has still not been made a criminal offence in all Southeast Asian states--the OECD's Financial Action Task Force (FATF), still has Indonesia, the Philippines and Myanmar on its blacklist. In most cases, terrorists differ from transnational criminal organizations, which are driven by profit motives. But if you strip away terrorist actions themselves, terrorists require the same infrastructure as transnational crime. Southeast Asia, thus, becomes an important area of operations.
It is also important to realize that fairly modest sums of money are all that are needed to perpetrate acts of terror. The Bali bombing in which 202 people were killed, and led to the estimated loss of more than US$1 billion in tourist revenue for Indonesia, cost under US$35,000--terrorism is truly asymmetrical warfare.
Funding Jemaah Islamiya
Bags of Cash
The most direct way that the JI is funded is through deliveries of cash by personal couriers. This is literally impossible to stop. According to Malaysian and Singaporean intelligence reports, the JI received some Rp1.35 billion from Al Qaeda since 1996. According to regional intelligence officials, that year, the JI received Rp250 million, Rp400 million in 1997 and Rp700 million in 2000 (roughly US$40,000 and US$70,000 respectively). (6) 0mar al-Faruq testified to transferring US$200,000 to the JI's Indonesian cell after 2000. (7)
Sheik Abu Abdullah al-Emarati, an alias of Osama bin Laden, was also involved in funding JI operations. He purportedly gave US$74,000 to Omar al-Faruq to purchase three tons of explosives for JI operations. The Bali attack likewise was funded by US$35,000 transferred by Wan Min Wan Mat, believed to be an important JI treasurer in Malaysia, (8) to Mukhlas and Imam Samudra, the leading perpetrators in the Bali bombings.
A Jordanian man, Hadi Yousef al-Ghoul was arrested in his home west of Manila, Philippines, on 27 December 2001. Police officials contended that "Al-Ghoul is a member of one of the terrorist cells in the Philippines assigned to carry out a string of bombings in Metro Manila", but more importantly, he was seen as a mid-level Al Qaeda money man, who provided cash to locally-based Jemaah Islamiya operatives to whom he was believed to be financially supporting. (9)
Mohammed Mansour Jabarah, a Canadian-Kuwaiti Al Qaeda operative, was dispatched to Southeast Asia in 2001 with some US$10,000 in seed money provided by Khalid Sheikh Mohammed, Al Qaeda's chief of operations. To conduct operations against U.S. targets in Singapore and Manila, Jabarah was given US$30,000 in three US$10,000 instalments in November 2001 from a man he identified as Al Qaeda's main money man in Malaysia. Jabarah was the primary conduit for Al Qaeda funds to Fathur Rohman al-Ghozi, the head of JI operations in the Philippines, who was responsible for purchasing TNT for operations in Manila and Singapore. When Jabarah left Singapore for Kuala Lumpur and later Thailand when he was on the run, the Canadian Security and Intelligence Service interrogation report states that he relied on infusions of cash from Al Qaeda operatives based in the region. (10)
As one Indonesian intelligence official said, "you could bring a container of cash into the country without being noticed." As it is impossible to halt this source of funding, short of searching everyone entering the country, we should focus on sources of funding that we have a chance to stop.
Much of Al Qaeda's funding is thought to come from charities, either unwittingly or intentionally siphoned off. This is possible as Al Qaeda inserted top operatives in Southeast Asia into leadership positions in several Islamic charities. Indonesian intelligence officials estimate that 15 to 20 per cent of Islamic charity funds are diverted to politically motivated groups and terrorists. (11) In the Philippines, estimates range from 50 to 60 per cent. (12)
In Islamic culture, Muslims are expected to donate 2.5 per cent of their net revenue to charity, known as zakat. (13) "In many communities, the zakat is often provided in cash to prominent, trusted community leaders or institutions, who then commingle and disperse the donated moneys to persons and charities they determine to be worthy." (14) This practice is unregulated, unaudited, and thus leads to terrible abuse by groups such as Al Qaeda. There are some 300 private charities in Saudi Arabia alone, including 20 established by Saudi intelligence to fund the Afghan Mujiheddin that send upwards of US$6 billion a year to Islamic causes abroad. (15) It is estimated that US$1.6 million per day is donated by wealthy Saudis alone. More disturbing, a Canadian intelligence report concluded that Saudi charities alone were funnelling between US$1--2 million annually to Al Qaeda's coffers. (16) The Council on Foreign Relations, which published one of the most authoritative accounts of the problems facing the war against terrorist funding, concluded that "For years, individuals and charities based in Saudi Arabia have been the most important source of funds for Al Qaeda; and for years, Saudi officials have turned a blind eye to this problem". (17) One Saudi analyst believed that between US$40 to US$58 million that was donated to legitimate Saudi-based charities "has gone astray" in the past few years, with no legal or diplomatic repercussions. (18) A former senior U.S. Treasury official, Stuart E. Eizenstat, stated that Saudi Arabia was treated "with kid gloves," even though U.S. officials were aware of the use of Saudi charities by terrorists. (19)
The four most important Saudi charities are the Islamic International Relief Organization (IIRO), which is part of the Muslim World League, a fully Saudi state-funded organization whose assets were frozen by the U.S. Treasury; the Al Haramain Islamic Foundation, also based in Saudi Arabia; Medical Emergency Relief Charity (MERC); (20) and the World Assembly of Muslim Youth. (21) The President of the World Assembly of Muslim Youth is Sheikh Saleh al-Sheikh, the Saudi Minister of Islamic Affairs. He is also the "superintendent of all foundation activities for Al Haramain. In March 2002, the United States froze the accounts of Al Haramain's offices in Bosnia and Somalia. The Bosnian branch was re-opened in. August 2002 under Saudi pressure. (22) In September 2002, Bangladeshi authorities raided Al Haramain's offices in Dakha, which they suspected of funnelling Saudi money to recruiting Bangladeshis to fight in Kashmir and Afghanistan. (23) Although most donations to Islamic charities go to legitimate social work, albeit to win political support, such as mosque construction, charities, cultural centres, and NGOs, a significant amount of money is diverted to terrorist and paramilitary activities. To be sure, it is doubtful that the leadership of any of these charities has set out to assist terrorists, but there is a surprising lack of knowledge of what their branch offices are doing on the ground. There is paltry oversight of how their funds are actually being used and allocated.
Zakat donations are common throughout Southeast Asia, indeed in late 2001, the Indonesian government agreed to make zakat tax deductible in order to encourage charitable donations. In addition to zakat donations, which are obligatory, there are also infaq and shadaqah donations--both are voluntary and made depending on individual circumstances. Yet, unlike Western closely regulated and audited NGOs and charities, those in Southeast Asia are almost completely unregulated, allowing for financial mismanagement and the diversion of funds to terrorist cells (though, even in the United States, two large Muslim charities were shut down post September 11 for their ties to terrorist organizations: the Benevolence International Foundation and the Holy Land Foundation for Relief and Development). For this reason, Osama bin Laden's initial foray into the region came in the form of charities run by his brother-in-law, Mohammed Jamal Khalifa, in the Philippines, including a branch of the IIRO.
Mohammed Jamal Khalifa's Philippine Charities
In 1988, bin Laden dispatched his brother-in-law Mohammad Jammal Khalifa (24) to the Philippines to recruit fighters for the war in Afghanistan. Khalifa was already engaged in radical Muslim politics and was a very senior member of the Muslim Brotherhood in his native Lebanon. Starting in 1985, Khalifa ran the Peshawar office of the Sandi Muslim World League, where he was active in sending recruits to join the mujiheddin. He had close ties to two of bin Laden's top financiers, Wael Hamza Jalaidin and Yasin al-Qadi, who was the head of the Muwafaq Foundation that was designated by both the Saudis and the Americans as a terrorist front. Muwafaq, which had a US$20 million endowment, was found to have sent millions of dollars to Al Qaeda in the 1990s before it was shut down. (25)
Khalifa established several other charities and Islamic organizations in the Philippines, ostensibly for charity and religious work, which channelled money to extremist groups, including a branch office of the Saudi charity MERC International and two local NGOs, Islamic Wisdom Worldwide and the Daw'l Immam Al Shafee Center. He established Al Maktum University in Zamboanga using funds from IIRO. (26) He also established a branch office of the IIRO in Zamboanga. According to IIRO's office in Saudi Arabia, its activities include an orphanage and dispensary in Cotabato City, dispensaries and pharmacies in Zamboanga, including a floating dispensary that served remote coastal communities in Western Mindanao. It provides food and clothing to internally displaced people who fled war zones. In addition, IIRO funding went to schools and scholarships. The IIRO asserted that it always did this, if not in cooperation with the government, with at least official approval. (27) All of these projects, though legitimate charitable work, were located in MILF zones or in urban population centers where the MILF was trying to make inroads as they began to focus on a political strategy and pursue an East Timor-like referendum process.
Perhaps the most important charity established by Khalifa was the little known International Relations and Information Center (IRIC), which engaged in numerous activities, for the most part philanthropic: livelihood projects, job training (carpentry, fish farming, farming), orphanages, Islamic schools and other social work. (28) The IRIC was also the primary funding mechanism for Khalid Sheik Mohammed, Ramzi Yousef, and Wali Khan Amin Shah's attempt to blow up 11 American jetliners in early 1995, in what was known as Oplan Bojinka.
According to the Philippine National Security Advisor, Roilo Golez, Khalifa "built up the good will of the community through charity and then turned segments of the population into agents". (29) Yet, the IIRO quickly attracted the interest of the Philippine police and military intelligence which saw it as a front organization for insurgent activities. "The IIRO which claims to be a relief institution, is being utilized by foreign extremists as a pipeline through which funding for the local extremists are being coursed through", a Philippine intelligence report noted. (30) An Abu Sayyaf defector acknowledged that "The IIRO was behind the construction of mosques, school buildings and other livelihood projects" but only "in areas penetrated, highly influenced and controlled by the Abu Sayyaf". (31) For example, in Tawi Tawi, the director of the IIRO branch office was Abdul Asmad, who was the Abu Sayyaf's intelligence chief until he was killed on 10 June 1994. The defector said the IIRO was used by bin Laden and Khalifa to distribute funds for the purchase of arms and other logistical requirements of the Abu Sayyaf and MILF: "Only 10 to 30 per cent of the foreign funding goes to the legitimate relief and livelihood projects and the rest go to terrorist operations". (32)
The Philippine government has asserted that all the charities run by Khalifa in the Philippines used to funnel money to the Abu Sayyaf group and the MILF have been shut down? (33) Yet, one senior intelligence official complained to me, "We could not touch the IIRO". (34) It took the Philippine government almost six years to shut their office in the Philippines; from 2000 until September 2001, the IIRO still funded projects in the country through its representative offices in Malaysia and Indonesia. The IRIC's operations and staff were taken over by another Islamic charity, the Islamic Wisdom Worldwide Mission, headed by a close Khalifa associate Mohammed Amin al-Ghafari in 1995. (35) The Daw'l Immam Al Shafee Center, likewise, remains operating.
Why was the IIRO allowed to stay open? The simple answer was that there was intense diplomatic pressure from Saudi Arabia on the government of the Philippines. It is a very well connected charity, whose supporters include the Saudi royal family and the top echelon of Filipino society. Their most important source of leverage was the visas and jobs for several hundred thousand Filipino guest workers. One of the board members of the IIRO Philippine office was, not coincidentally, the Saudi Ambassador.
Unfortunately, the Philippine experience is not as unusual as it seems. For example, although the United States and Saudi Arabia shut down the Somali and Bosnian offices of Al Haramain on 11 March 2002, by August 2002, the Saudi Arabian government had applied enough diplomatic and financial pressure that the charities' assets were released and licences were restored. (36)
Malaysian and Indonesian-based Charities
Al Qaeda established a number of other charities in the region. In Malaysia, Hambali, established a charity, Pertubuhan al Ehasan, in 1998, in order to fund jihad activities in the Malukus. The charity remained open until its closure in 2002 and in total raised Rp500,000 (roughly US$200,O00). (37) The money went to purchasing weapons, training, clothing and feeding recruits for the jihads in the Malukus and Poso. Much of the money came from donors within Malaysia, though foreign donors were solicited through the Internet. It is not clear if the donors were aware that their money went to militant activities, as they were told that their money went to humanitarian causes in the Malukus.
In Indonesia, a similar development of charities as terrorist fronts occurred. JI and Al Qaeda leaders assumed leadership positions, often becoming regional branch chiefs, or formed alliances with several important Saudi-backed charities, including MERC, the IIRO and Al Haramain.
One of the most important charities in all of this was the Komite Penanggulangan Krisis, better known as KOMPAK, an independent arm of the Dewan Dakwah Islam Indonesia (DDII), founded on 1 August 1998. The Dewan Dakwah is one of Indonesia's most important Islamic social organizations that was founded in February 1967, and to the degree that it survived under the New Order regime, it earned the respect of the community for frequently standing up to the Suharto administration and pushing for Islamic causes.
The Dewan Dakwah established KOMPAK to address humanitarian needs that arose from the sectarian conflict that erupted in the Maluku Islands in 1998. KOMPAK officials, while acknowledging that they operate in regions struck by sectarian conflict (Aceh, Poso, Malukus, and Bangunan Beton Sumatra), assert they are there to alleviate the crises and provide necessary relief. They deny any links to "jihad activities". (38) "We never give our money to the mujiheddin or terrorists. We give our money to the needy, unemployed of the ummah". The official stated that "I have no comment on the conflicts" and that the "link between KOMPAK and terrorism is not true." Undoubtedly, KOMPAK has been involved in charitable work: there is ample evidence that it has distributed food, clothing and medicine.
Yet there is also considerable evidence that KOMPAK played an important role in supporting sectarian conflict in the Malukus and Poso while channelling money from Al Qaeda to these causes. Even their humanitarian work--medicine and food distribution--supported the Muslim paramilitaries, fleeing up the latter's own resources for weapons and salaries. KOMPAK has never been neutral; it was founded and coalesced around the issue of sectarian fighting in the Malukus and South Sulawesi.
Many KOMPAK officials themselves have been linked to terrorism. The former chairman of KOMPAK's South Sulawesi office was Agus Dwikarna, and the head of the Jakarta office was Tamsil Linrung. Linrung, a member of the DDII and the former treasurer of the National Mandate Party (PAN) before quitting the post in January 2002, was identified by Omar al-Faruq as a JI operative and a participant in the three Rabitatul Mujiheddin meetings in Malaysia from 1999--2000. (39) One of Abu Bakar Ba'asyir's top lieutenants, Aris Munandar, suspected of purchasing much of the explosives for the bombings across the region on the anniversary of 9/11, was the head of KOMPAK. Dwikarna was the head of a group called the Committee to Implement Sharia in South Sulawesi and the number four official in Abu Bakar Ba'asyir's overt civil society organization, the Mujiheddin Council of Indonesia. He established one of the JI's two paramilitary organizations, the Laskar Jundullah, and was arrested at Manila's international airport in March 2002 carrying C4 explosives in his suitcase. (40) When asked about that, the Secretary of KOMPAK stated, "What he does outside of KOMPAK is not our responsibility." (41) When asked how they could be sure that none of their money goes to the Laskar Mujiheddin or the Laskar Jundullah, KOMPAK's secretary general curtly replied, "We have no link to them." (42)
KOMPAK also produced propaganda and recruitment videos for Dwikarna's paramilitary group, the Laskar Jundullah, and Abu Jibril's Laskar Mujiheddin, emphasizing both their military strength and sense of Muslim persecution. (43) The videos are graphic and one-sided, portraying the Muslim communities being victimized by Christian vigilantes, and small groups of poorly armed Muslims fighting back. Although the KOMPAK videos do show the organization distributing food aid to beleaguered refugees, the context of the documentaries is biased. Their graphic footage conveys a sense of brutality and utter victimization, justifying self-defence. Several of the videos have professionally produced footage, soundtracks, and minimal narration. In KOMPAK's Jakarta headquarters, officials denied all knowledge of the videos but a number of them viewed by the author were clearly produced by KOMPAK, with their logo on the screen throughout.
In addition to these senior KOMPAK officials being arrested for, or detained on, suspicion of terrorism, KOMPAK has joint projects with important Saudi charities, notably, the IIRO, Al Haramain, and MERC, often serving as their executor or sub-contracting agency. Both MERC and the IIRO were engaged in "projects" in Ambon and Poso. (44)
MERC too has been engaged in "documentary film-making" in Indonesia. Unlike KOMPAK's videos, MERC's do not show fighting or convey any sense of hope by showing Muslim militias or jihadis fighting back. MERC's videos are of a very high quality; produced by their own information office and production company, they focus on the innocent victims of sectarian conflict and show makeshift hospital wards or squalid refugee quarters. The videos stay close to MERC's core mission of providing emergency medical and humanitarian relief. Like the KOMPAK videos, they convey a sense of Muslim victimization at the hands of Christian militias. With their emotionally evocative music, they would be very effective fund-raising tools.
Al Haramain was also tied in with militant groups and the Jemaah Islamiya in Southeast Asia. Again, a similar cast of characters emerges, with overlapping leadership. Agus Dwikarna was the local representative of the Saudi Charity Al Haramain in Makassar in South Sulawesi, which al-Faruq admitted was the largest single source of Al Qaeda funds into Indonesia. (45) Al-Faruq lived near Agus Dwikarna in Makassar (Ujung Pandang) in South Sulawesi and was the key backer of Dwikarna's Laskar Jundullah, one of the JI's two paramilitary organizations. (46) Al-Faruq also worked closely with Ahmed al-Moudi, the head of the Al Haramain Foundation office in Jakarta.
Indonesian intelligence sources contend that the head of Al Haramain's headquarters in Saudi Arabia, a Saudi citizen they identify only as Sheikh Bandar, was a frequent visitor to Indonesia, as he kept a wife in Surabaya. A senior Al Haramain official, he was known to deliver briefcases of money on his visits to Indonesia, which were delivered through Ahmed al-Moudi. (47)
A figure central to all of this was not even Southeast Asian, but Middle-Eastern. In CIA's September 2001 Orange Alert document, one of the key financiers in Southeast Asia, according to al-Faruq, was Rashid, a senior lieutenant of Osama bin Laden: "Rashid also acts as a representative of a committee of Gulf-state sheiks who are Al Qaeda financiers and who have committed ample funds, weapons, ammunition and computers to support this war. Funds are channeled through the Al-Haramayn NGO". Badan Intelijen Negara's (BIN) report on Omar al-Faruq, corroborated this account: "Faruq was given orders by Rashid to get money transferred to the foundation's [al Haramain] office in Jakarta through Ahmed Al-Moudi". (48)
The investigation of Reda Seyam, the man BIN officials believe to be the most senior Al Qaeda financier in Southeast Asia, a former Islamic charity official in Bosnia in the mid to late 1990s, uncovered further links to al Haramain and KOMPAK. He was a trained cameraman--indeed, he had applied to Al Jezeera in Jakarta for a job, but was turned down. Reda had 18 videos of training camps and sectarian conflict in his possession, three of which had been edited professionally for distribution. Reda was engaged in similar activities for Al Qaeda in Bosnia in the late 1990s, where he was believed to be the producer of an Al Qaeda documentary "The Martyrs of Bosnia". In Indonesia, his videos were produced under the pseudonymn Yayasan Aman (Peace Foundation) and were important propaganda tools for recruitment and fund-raising for Al Qaeda operations. Other videos were produced by Aris Munadar, who is an official of Al Haramain, and a right hand man of Abu Bakar Ba'asyir.
Front and Absentee Companies
The modus operendi of so many Al Qaeda cells was that they are given some seed money and additional funds, but most cells are expected to become self-sustaining over time. Southeast Asia, the fastest growing region in the world in the early to mid-1990s, had business-friendly environments and encouraged the proliferation of firms and general trading companies. Two different types of firms were established. The most important were front companies--corporate entities that were established with minimal capital investment, that generated few (if any) profits, and whose primary purpose was to purchase materials or mask other aspects of terrorist operations. The second type of company was those that were given Al Qaeda funds for start-up capitalization, but whose primary purpose was for revenue generation. Front companies are a serious challenge. The real problem for the Americans is not freezing bank accounts but perhaps stopping the unknown number of apparently legitimate businesses set up to move money around the globe to terrorists.
The most important front companies were established by JI's Malaysian cell. Malaysia had a very business friendly environment in the late 1980s and 1990s and encouraged investment. In the mid-1990s, Malaysia began to re-orient its foreign policy away from its ASEAN-centric position and began to embrace a more "pro-Muslim" foreign policy. To that end, it encouraged foreign investment, trade and tourism with the Middle East. At the same time, Malaysia emerged as an international centre of Islamic banking. Indeed, one of the mitigating factors when the Asian economic crisis hit Malaysia in 1997 was the continued flow of Middle Eastern capital through its banking system.
Al Qaeda front companies were established at a rate of more than one a year in Malaysian between 1993 and 1996. Most had overlapping board members. Green Laboratory Medicine was established on 6 October 1993. Its director was Yazid Sufaat, a former Malaysian army captain who studied bio-chemistry at California State University in the 1980s. Upon his return to Malaysia, he was reproached by his family for his loss of Islamic values while abroad, and began attending prayer sessions where he came into contact with a militant preacher, Riduan Isamuddin, aka Hambali. Sufaat was sent to Pakistan for religious training when he was recruited into Al Qaeda/JI. In June 2001, Sufaat travelled to Afghanistan where he was trained by Al Qaeda. He was arrested in mid-September 2001, when he tried to return to Malaysia from Afghanistan. This firm was instructed to purchase 21 tons of ammonium nitrate to be used in terrorist attacks in Singapore.
Konsojaya, established in 1994, was a trading company that ostensibly exported Malaysian palm oil to Afghanistan and imported honey from Sudan and Yemen. The firm was capitalized with RM100,000, and 5,998 of the 6,000 shares were controlled by Wali Khan Amin Shah and Medhat Abdul Salam Shabana. Konsojaya's original board of directors also included Hambali and his wife, Noralwizah Lee Binti Abdullah. At a later date, a new five-member board was elected, and did not include Hambali, his wife or Amein Mohammed. The company played an important role in Ramzi Yousef and Khalid Sheikh Mohammed's Oplan Bojinka, an attempt to simultaneously destroy 11 US jetliners over the Pacific in 1995, as a front for moving money and purchasing chemicals and equipment for bomb-making. (49) Ramzi Yousef and Wali Khan Amin Shah established another shell company, the Bermuda Trading Company, in 1994, as a cover to import chemicals for bomb-making.
Infocus Technology was established on 13 July 1995, also by Yazid Sufaat. Infocus Technology hired Zacarias Moussaoui, the alleged 20th hijacker in the September 11 attacks, as a marketing consultant and was able to get him a visa to the United States. Infocus was to pay Moussaoui a lump sum of US$35,000 and then a monthly stipend of US$2,500 to pay for his flight training in the United States. (50) Yazid Sufaat has told Malaysian investigators that the money was never paid but there is no evidence to support or counter his statement.
Another front company was Secure Valley, established on 4 October 1996. Little is known about the purpose or operations of this general trading company, but it had many of the same boards of directors as the other three JI-linked firms.
In addition to these, there were several other JI-linked front companies. Faiz bin Abu Bakar Bafana, according to the Canadian Security and Intelligence Service, owned a security company in Kuala Lumpur, MNZ Associates, at whose premises many key meetings took place. (51) Ibrahim bin Maidin, the spiritual leader of the Singapore JI cell, had attempted to establish several small chemical fertilizer import corporations, obviously as a legal cover to import ammonium nitrate.
Another JI-firm was uncovered in February 2003, with the arrest of Abdul Manaf Kasmuri, a former Malaysian army colonel, who headed a United Nations peacekeeping operation in Bosnia in the mid-1990s. Kasmuri was a high-flyer in the military. He attended Malaysia's Royal Military College and then Sandhurst, the British Military Academy where he won three batons of honour on graduation, including best foreign student. Kasmuri led the Bosnian peacekeeping operation with distinction until he became disenchanted with the United Nation's failure to protect the Bosnian Muslim community, especially after the massacres following the Serbian invasions of the six UN-designated "safe havens". Kasmuri began to support the Bosnian army's 7th and 9th Battalions which were comprised of foreign jihadis, many of whom were Al Qaeda members and veterans of the Mujiheddin in Afghanistan. When he became too close to them, he was recalled and forced to take early retirement in 1995. He returned to Bosnia and became involved in aid work, when he was recruited into Al Qaeda. He spent time in Afghanistan, posing as a Filipino. He returned to Malaysia, and though by that time he was wanted by Malaysian police, he became the human resources manager for an Islamic financial institution Koperasi Belia Islam, (52) based in Kuala Lumpur, that has close ties with the Islamic Youth Movement (ABIM) founded by jailed former deputy prime minister Anwar Ibrahim. Kasmuri was also significantly involved in a JI-linked company called Excel Setia, as a shareholder and director.
Excel Setia was a privately owned general trading company that was run out of the off-shore tax haven of Labuan. Two of the other four directors/shareholders were senior JI officials, Zulkifli Marzuki and Faiz bin Abu Bakar Bafana, both of whom are now under detention, one in Malaysia and one in Singapore. (53) Zulkifli Marzuki, an accountant, was the auditor for most of the JI related companies including those set up by Yazid Suffaat, Infocus Technology and Green Laboratory Medicine.
In addition, there are ongoing investigations of between three to six general trading companies in Bangkok that have been linked to firms on the UN list of designated terrorist-supporting organizations. These include three Middle Eastern general trading companies that have had offices in Thailand since 1997, including Al Jallil Trading Co. Ltd, Al Amanah Enterprise Co. Ltd, and Sidco Co. Ltd. These three firms were raided by Thai intelligence officials following joint investigations with U.S. and Israeli intelligence officials. (54)
Front companies were not the only businesses established by Jemaah Islamiya. There are also cases in which JI members established businesses, received contracts and businesses from JI supporters and then plowed the proceeds back into the organization. According to the Singapore Government's White Paper on JI, "All JI-run businesses had to contribute 10% of their total earnings to the group. This money was to be channeled into the JI's special fund called Infaq Fisbilillah (Contributions for the Islamic cause or jihad fund)." (55)
A prime example is the Al Risalah Trading Company of Malaysia. The Al Risalah Trading Company was established by the son-in-law of Abdullah Sungkar, Feri Muchlis bin Abdul Halim, with some RM25,000 in startup capital. Halim, a 46-year old, was an Indonesian with permanent residency in Malaysia. His firm obtained a coveted licence that allowed it to tender for government contracts. It had been awarded contracts to install water pipes in Selangor, to provide stationary for a school, and had just received a contract to build two schools in Selangor. (56) In the first two cases, the person who accepted the tender was a suspected member of Jemaah Islamiya; and both have been detained under Malaysia's draconian Internal Security Act. Halim was arrested in 17 April 2002 for suspected involvement in JI and the Kumpulan Mujiheddin Malaysia (KMM). The KMM was founded on 12 October 1995 by Zainon Ismail. (57) From 1999 to his arrest in May 2001, Nik Adli Nik Aziz, the son of PAS' spiritual leader Nik Aziz Nik Mat, led the KMM. Both Zainon Ismail and Nik Adli had fought against the Soviets and had returned to found their own madrasah and the militant wing that was closely linked to the Jemaah Islamiya.
The Mujiheddin Council of Indonesia, considered the public face of the Jemaah Islamiya, has several Indonesian-based publishing houses and video production companies, such as Front Line Publishers. The most important of these is the Hidyatullah press based in Jogyakarta, which is run by Irfan S. Awwas, Abu Bakar Ba'asyir's right hand man and the Director of the MMI.
Hawala and Gold Shops
The primary conduit for terrorist financial transfers is through the unregulated remittance system, known as hawala. The Chinese have had a system known as feiqian, literally "flying money", in place to facilitate commerce for thousands of years. In the Middle East, this informal banking system is known as the hawala or "trust" system, in which no money is ever wired, nor are names or accounts of either senders or receivers used, nor are records kept. With commissions of only 1-2 per cent, compared to average bank transfer fees of up to 15 per cent, hawala is the transfer system of choice. In Pakistan, for example, of the US$6 billion in foreign exchange that is remitted to the country annually, only US$1.2 billion arrives through the banking system, (58) Although the U.S. Treasury Department froze the assets of some 62 subsidiary and affiliated organizations of two of the world's largest hawala networks, Al-Barakat and Al-Taqwa, in November 2001, most hawala operators are so small as to go unrecognized. As one Singaporean hawaladar said, "My company does not question the amount or the purpose of sending the money. They trust us, and I don't ask questions. Why would I, when I have a licence to operate." (59)
Hawala is used extensively in Malaysia, Singapore and the Philippines, which has considerable financial exchanges due to the 1.4 million Filipino guest workers in the Middle East. A World Bank report dated 30 December 2002, estimated that the share of hawala transfers as percentage of total private transfers in 2000 was, 5 per cent for the Philippines, 21 per cent for Indonesia and 50 per cent for Pakistan. (60)
In downtown Manila's Ermita district there are blocks upon blocks of hawala shops. Over US$6 billion is remitted annually to the Philippines, mainly through the hawala system. Overseas workers, who represent 10 per cent of the labour force, have literally kept the Philippine economy afloat in the past two decades. In 2000, they remitted some US$6 billion, and in 2001, US$5.4 billion. (61) Although overall remittances from overseas foreign workers dropped by 13 per cent in the first half of 2001, compared to the first half of 2000, from US$3.1 billion to $2.7 billion, receipts from the Middle East actually rose in that period, from US$270 million to US$352 million, up 30.3 per cent. (62) The Philippines has a weak banking sector, with little regulatory oversight, especially over the flow of remittances, so it is easy to make fund transfers.
Wali Khan Amin Shah, Khalid Sheikh Mohammed and Ramzi Yousef, used an account of the Al Ansari Exchange Establishment (AAEE) to transfer funds for Oplan Bojinka. The AAEE, (sometimes known as the Reza al-Ansari Exchange), is based in Abu Dhabi in the United Arab Emirates, and had extensive ties with money launderers and banks across Europe and the Middle East, including two other major hawaladars, A.M. Shouman and Sons and Al Reems Exchange. The AAEE was used extensively by the Middle Eastern based terrorist organizations, Hamas and Hizbullah. Hamas used an account belonging to an UAE-based charity "Human Appeal International". The United Arab Emirates was a favorite hub of terrorist funding as it had lax financial reporting and banks and financial institutions did not have to report cash deposits. The AAEE provided legitimate exchange services, in particular for Philippine overseas foreign workers in the Middle East. In one advertisement in the Gulf News, the AAEE offer "fast and reliable door to door remittance service to the Philippines through an excellent arrangement with the Bank of the Philippine Islands". (63)
Hawala become even more important in countries that have currency controls. For example, in late 1998, when the Malaysian government imposed capital controls and stopped the conversion of the ringgit in order to prevent capital flight, the hawala system was one of the few sources of foreign exchange. (64) Likewise, after the Philippines abolished exchange controls in 1992, remittances through the legal and regulated banking sector quadrupled. (65)
The economies in the region are so dependent on hawala networks that there is a reluctance to crack down on them. Even if they did, one regional intelligence official conceded, that it would simply drive the brokers underground, making monitoring and regulation even more problematic, though they concede that it is the primary way that money moves around the region and from the Middle East.
Donations from JI Members (zakat and infaq)
Several JI members were quite wealthy and gave considerable amounts to the organization. Faiz bin Abu Bakar Bafana, a Malaysian businessman and former Singaporean, was a key aid to Hambali. He travelled to Afghanistan in 1999 to meet with Al Qaeda leaders to discuss operations in Southeast Asia. Bafana ran a large construction firm in Malaysia, Marebina, and was an important financial backer of the JI, becoming a member of its regional shura. (66) As one regional intelligence official said, "Faiz was pretty well-off, his companies won decent sized contracts and his personal donations [to Jemaah Islamiya] were pretty large". (67) This tended to be the exception, and most JI members lived fairly humble lives.
All JI cells were expected to be self-sufficient, but clearly the Singapore cell had a primary role in fund-raising for the group, owing to the relative wealth of its members. According to detained JI personnel, members of the Singapore JI cell donated 2 per cent of their salaries to the JI in the early 1990s; and 5 per cent by the end of the decade. Singaporean investigators believed that 25 per cent of the funds raised were given to the Malaysian JI cell, and 25 per cent to the Indonesian cell. The transfers were conducted by individuals. The remaining funds were used by the Singaporean fiah for equipment, operations, and overseas training, as well as donations to the Taliban regime in Afghanistan. (68) The Malaysian and Indonesian cells, likewise, required their members to make both zakat and infaq contributions to the movement, though they were able to contribute relatively less.
In addition for fund-raising for the JI, the Singaporean JI cell was also very involved in fund-raising for the Moro Islamic Liberation Front (MILF) which was waging a secessionist war in the Southern Philippines. The MILF, which had long-standing ties to Al Qaeda, provided training facilities and hosted Al Qaeda trainers at its base Camp Abu Baker to instruct JI operatives. These trainers included Omar al-Faruq, Omar al-Hadrani, al-Mughira al-Gaza'iri and Fathur Rohman al-Ghozi. Of the 36 people detained in Singapore between December 2001 to August 2002, 4 were not found to be JI members, but active supporters and fund-raisers for the MILF. For example, Husin Abdul Aziz, a 52-year old Singaporean who had trained at an MILF camp, not only donated US$20,000 of his own money to the movement, but raised in Singapore an additional US$20,000 for the MILF. (69) Another person detained in August 2002, Habibullah Hameed, also raised US$40,000 over many years for the MILF.
Contributions from Outsiders
Again, this is impossible to quantify without access to detailed financial records, if they exist at all. It is clear "that groups such as the Laskar Jundullah, Laskar Mujiheddin and the MMI were quite able to solicit donations from supporters and sympathizers, though perhaps not members. For example, Omar al-Faruq confessed that he worked closely with a Muslim-Chinese from Singapore, al-Bukhari, who was an important financier for the group though he is not known to be a member.
Individuals, such as Fuad Bawazir, are suspected of using the Komite Indonesia Untuk Solidaritas Dunia Islam [the Indonesian Committee for Solidarity with the Muslim World (KISDI)] and United Action Group of Indonesian Muslim Students (KAMMI) as vehicles to transfer large amounts of elite Indonesian money to small radical groups, such as Dwikarna's Laskar Jundullah. KISDI was established in the early 1990s, by a firebrand Wahhabi preacher, Ahmad Soemargono, with alleged covert government support. KISDI was closely connected with a military think-tank, the Center for Policy and Development Studies, which was the "headquarters" of the military's "green faction". A prominent member of this group was Lt Gen. Prabowo Subianto, Suharto's son-in-law.
Another important source of funds for JI were donations by Indonesians living overseas, in particular those in Australia. In the 1990s, Abdullah Sungkar and Abu Baker Ba'asyir made a total of 11 trips to Australia where they preached before audiences of Indonesian exiles. (70) They solicited donations for their sermons and sold audio recordings. Although there is considerable evidence that JI ceils hoped to expand to Australia, an area they called Mantiqi IV, it is clear that their real priority for Australia was in fund-raising.
Al Qaeda Investments and Accounts
An important source of funding is likely Al Qaeda investments and bank accounts long established in the region. Osama bin Laden's family business, the Bin Laden Group, had extensive holdings and investments in Malaysia and received some of the tenders to build the north-south highway, amongst other things. Although he was disowned by his family, bin Laden, himself a businessman and financier, would not have been unaware of the investment climate or the Islamic banking sector there Malaysia is one of the world's pre-eminent Islamic banking centres. (71) Jamal al-Fadl, a former member of Al Qaeda and one of bin Laden's top financial officials, who later turned himself in to the Americans and testified against Ramzi Yousef and in the West Africa embassy bombings case, stated that bin Laden frequently used Islamic banks in Malaysia. (72)
Islamic banks, themselves, are not conspiratorial funders of terrorist acts. It is that many Islamic banks happen to be in countries with weak financial oversight and lax supervision. Their religious nature also accords them a greater degree of autonomy. As Islamic banks were established to circumvent the practice of paying and charging interest, they often conmingle funds to create investment vehicles, "creating ready opportunities for anonymous money transfers and settlements". (73)
Brunei, which hitherto has avoided much of the terrorism-related problems facing its neighbours, is a cause for alarm on the financial front. In an attempt to diversify its economy, the Brunei International Finance Center was established in July 2000 to tap the lucrative niche of Islamic banking. Yet the country has a weak legal and regulatory framework. Brunei passed a money laundering ordinance in 2000 and has tried to improve its oversight capacity in the past few years, but it is clearly one of the less regulated financial markets in the region. To date, no terrorist-linked funding has been frozen in Brunei, but that is not to say that the funds are not well hidden in front accounts. Without considerably more financial oversight capacity, Brunei has the capacity to be an important financial centre for Al Qaeda, much the way that the network has used the poorly regulated United Arab Emirates.
In addition to Brunei, there is also concern over Malaysia's own off-shore banking centre on Labuan Island. In order to make Malaysia more attractive as an international off-shore banking center, Malaysia established the Labuan Offshore Financial Centre on 1 October 1990. Labuan's financial sector is subject to less stringent oversight, disclosure, and accounting rules, and has been of major concern to law enforcement officials since its founding, despite the establishment in 1996 of the Labuan Offshore Financial Services Authority to provide greater oversight.
Across the region, with the exception of Singapore, banking and financial sectors are poorly regulated, especially the fairly new Islamic banks, which facilitates transfers and money laundering.
It should be noted that not a single bank account linked to Al Qaeda had been frozen in Southeast Asia by March 2003. That is not to say that there are no Al Qaeda accounts, but more likely that they are disguised. Al Qaeda had years of operation around the world when few governments or security services were aware of them and their activities. They have had years to hide and launder their accounts and corporate holdings. It is absolutely inconceivable that there are no Al Qaeda investments or holdings in the region.
Petty Crime, Racketeering, Extortion and Kidnapping
We also cannot overlook the nexus of terrorism and transnational crime. Because of Thailand's place in the international drug trade, there is a culture of money laundering, corruption and operating in the shadows. According to the Thai government some 100 billion baht--roughly US$2.2 billion--in drug money is laundered annually through financial institutions in Thailand. It is estimated that some 40 per cent of Thailand's GDP is underground, unregulated and untaxed. Indeed, the global scope of money laundering is thought to be as high as US$2 trillion annually, or 2.5 per cent of global GDP. The Philippines and Indonesia, despite anti-money laundering bills passed in 2001 and 2003, respectively, both remain on the OECD's Financial Action Task Force's black list.
Another window into Al Qaeda financing appeared in the summer of 2002. Omar Shishani, a naturalized U.S. citizen from Jordan, was arrested on 17 July 2002 when he tried to enter the United States from Indonesia with some US$12 million in high quality forged bank cheques. (74) Shishani has denied any wrong-doing, asserting that he is a financial broker, putting together commercial borrowers with private lenders, and that he was in Indonesia for two months on business. Both the quality of the forgeries and the amount that he was caught with greatly alarmed U.S. officials who noted that the 11 September attacks cost less than US$500,0007. (75)
Large-scale money laundering operations may be important to Al Qaeda as a whole, but they have limited utility to the JI, which tends to engages in smaller-scale crime. The first break authorities had in uncovering the Jemaah Islamiya network came months before September 11 and the beginning of the war on terror. The Malaysians were on heightened alert already following the 18 May 2001 botched robbery of Southern Bank in Petaling Jaya. Although two suspects were killed, one survived and his interrogation led to the arrest of nine others; this was what led authorities to begin uncovering the JI-linked Kumpulan Mujiheddin Malaysia.
The cell that was responsible for the Bali attack funded itself in part through the robbery of jewellery shops. Four of the sixteen people arrested in conjunction with the Bali attack had robbed the Elita Gold Store to help fund the operation. Imam Samudra, one of the leaders of the Bali plot, was also involved in credit card theft to fund his operations. Samudra purchased items online, especially jewelry, using stolen credit card numbers and then resold them. (76) The Indonesian investigators for the Bali case later stated that, in the course of their investigation, they broke up a plot to blow up a bank and had arrested 13 suspects. (77) It seems odd that the terrorists would put their entire operations in jeopardy by engaging in risky and low-yield criminal ventures, but they continue to do so.
Thailand is a centre of much JI/Al Qaeda financial operations. In December 2001, Thai police with the assistance of the CIA broke up two counterfeiting rings run by Dawood in Bangkok. In March 2002, Thai authorities arrested 25 Middle Eastern men suspected of laundering Al Qaeda funds in the Kingdom. In addition, several of the suspects were charged with forging travel documents, passports and visas, for Al Qaeda members. (78) Two small radical Muslim groups in Southern Thailand, the Wae Ka Raeh (WKR) and the Guragan Mujiheddin Islam Pattani, were brought into an enlarged Jemaah Islamiya organization, the Rabitatul Mujiheddin. The head of the WKR fought with the Mujiheddin in Afghanistan. For the most part, though, they are criminal gangs. The WKR is thought to earn 10 million baht (roughly US$225,000) a year in contract killings and "enforcement". (79) Both Thai groups were also very involved in gun-running from the arms markets along the Thai-Cambodian and the Thai-Burmese borders to Southern Thailand, where weapons were purchased by Acehnese GAM rebels and MILF officials, as well as criminal gangs.
The Abu Sayyaf Group was founded in 1991 by Abdurajak Janjalani with seed money directly from Al Qaeda's coffers, and sustained throughout the early 1990s by funds skimmed from Al Qaeda charities. By 1995 it had apparently lost much of its money when bin Laden's brother-in-law Mohammed Jamal Khalifa (Al Qaeda's financial conduit into the region) was expelled from the Philippines. In December 1998, Janjalani was killed in a shootout with police forces, and the group lost much of their ideological fervour and mission. Kidnapping became the trademark of the Abu Sayyaf group in the southern Philippines. From 1996 to 2000, Abu Sayyaf engaged in some 266 terrorist activities. During this time, estimates of Abu Sayyaf's manpower and firepower by Philippine intelligence grew by 14 per cent annually. According to a Basilan politician, "It was easier to deal with them when they had a single leader--and an ideology. Now, these guys are in it for the money, and there's no stopping them." (80) The demands for US$1 million ransom per hostage led many to consider the Abu Sayyaf as nothing more than a criminal menace rather than a secessionist insurgency with legitimate grievances. As the Philippine National Security Advisor Roilo Golez said, "We have no evidence that Abu Sayyaf has gotten financing from bin Laden recently. Otherwise they would not have to resort to kidnapping." (81) One Abu Sayyaf defector said that he quit the movement "because the group lost its original reason for being. The activities were not for Islam hut for personal gratification. We abducted people not any more for the cause of Islam but for money" . (82) In addition to kidnapping, the group engages in extortion, taxes from peasants, fishermen, coconut growers, and businessmen. Abu Sayyaf also engages in marijuana cultivation, and on 24 July 1999 PNP forces destroyed some 70,000 marijuana plants worth P20 million (US$10 million). (83)
Combating Terrorist Funding
The OECD's Financial Action Task Force, has come up with eight recommendations for states to establish a baseline international standard for combating terrorist financing:
* ratfying and implementing UN instruments;
* criminalizing the financing of terrorism and associated money laundering;
* freezing and confiscating terrorist assets;
* reporting suspicious transactions related to terrorism;
* formalizing greater international cooperation through treaties of other agreements;
* licensing and registering businesses engaged in alternative forms of remittances (hawala);
* requiring accurate and meaningful originator data for wire transfers; and
* reviewing the adequacy of laws regulating non-profit organizations.
There has been some attempt to forge a multilateral solution to ending terrorist funding in Southeast Asia, but multilateralism has been weak and inconsistent. For example, only six Association of Southeast Asian Nations (ASEAN] states have signed the International Convention for the Suppression of the Financing of Terrorism (1999), while only three have ratified it. All ASEAN states endorsed the UN Security Resolution (1373), but have implemented the resolution to varying degrees.
ASEAN has made some attempts at multilateral solutions for combating terrorist funding. ASEAN hosted the Regional Conference on Combating Money-Laundering and Terrorist Financing in Bali in December 2002. The United States and Malaysia co-hosted the ASEAN Regional Forum Workshop on Financial Measures Against Terrorism in March 2002. In addition, in January 2003, the United States and Singapore co-hosted a conference aimed at choking terrorist funding.
Even the American effort has been negligible. The United States has added a few Southeast Asian terrorist suspects and companies to its Executive Order 13224: Al Haramain Islamic Foundation (11 March 2002), Jemaah Islamiya (23 October 2002), Abu Jibril and Hambali (24 January 2003). But this barely scratches the surface of Al Qaeda's financial operations in the region. There is also an issue of timeliness: despite being a wanted fugitive since mid-2000, and named as a leader of the JI/KMM since mid-2001, Hambali's assets were only frozen on 29 January 2003. The JI, itself, was only listed as a terrorist organization in mid-October 2002, eleven days after the Bali attack.
Much of the problem in designating individuals and companies is not in identifying them, but in the bureaucratic politics over what to do once the funders are identified. For example, in early 2003, the U.S. Department of the Treasury's Office of Foreign Asset Control drew up a list of 300 individuals, charities and corporations in Southeast Asia believed to be funding Al Qaeda and Jemaah Islamiya operations. Due to inter-agency politics and conflicting objectives, the list was pared down to 18 individuals and 10 companies. But even at the time of writing in early April 2003, the list was still unannounced due to diplomatic and bureaucratic competition over resources and missions. Although the Treasury Department wanted to include as many of the 300 as possible, diplomats from the State Department feared the diplomatic backlash and overall efficacy of such a mass designation. CIA officials wanted the known fronts to remain operating so that they could better monitor them and the associated individuals. The CIA also seemed more concerned that terrorists would be driven further underground and simply establish new funding mechanisms and companies that would have to be uncovered. As one U.S. official said: "Most of the really sensitive names have been dropped, so it won't have the kind of impact that the full 300 would have, though there'll still be a few surprises." (84)
The real problem with multilateral efforts is that successful multilateralism must be built upon the foundation of strong and effective domestic legislation and enforcement capacity. Both are lacking. The regulatory agencies around the region, with the exception of Singapore, are hampered by a lack of resources, trained staff, and a weak regulatory framework. Only two states in the region, Thailand and Singapore, are members of the Egmont Group, states with Financial Intelligence Units. Not all states in Southeast Asia have even criminalized money laundering or terrorist funding.
The Philippine's anti-money laundering law passed in late 2001 was announced touted as "an intensified campaign to prevent the use of our financial institutions as conduits for the finances of international terrorists". (85) This law will have little efficacy for stemming terrorist uses of Filipino financial institutions. For one thing, the original bill was watered down by legislators. The committee that drafted the law proposed setting the threshold at US$20,000, already twice the American limit of US$10,000. Yet the Philippine Congress quadrupled the amount, making it a crime to transact amounts greater than US$80,000 (4 million pesos)--but most terrorist wire transfers are small amounts through the unregulated remittance systems. (86) When the OECD's FATF kept the Philippines on their list of "non-cooperating countries who have made slow progress in fighting money laundering", (87) the Philippine government amended the law, to bring it more in line with international standards. The law also does not regulate the hawala system of money transfers that are the preferred financial mechanisms for terrorist cells that do not require vast sums of money for their operations.
Indonesia's initial lack of political resolve to fight the war on terror has also been seen in the financial front. Although the government pledged to freeze the accounts of any of the named individuals or organizations with suspected terrorist links that was issued by the Bush administration, Indonesia failed to ratify the UN Security Council Resolution 1373 on the Suppression of the Financing of Terrorism, issuing a Presidential Decree enabling it to access and freeze bank accounts of suspected terrorists instead. (88) In April 2002, the parliament passed a law on money laundering. Until that point, the government was unable to freeze accounts unless the "owner is officially a suspect or proven guilty in a criminal case". (89) Yet, to date no assets have been frozen. Many blame not just a weak commitment, but the unregulated and corrupt banking sector itself. (90)
Similarly, that there are no assets belonging to terrorist organizations in Indonesia is unlikely. Indonesia, with its weak and unregulated banking sector, corruptible regulators, and endemic corruption has long been a haven for money laundering. Despite new anti-money laundering laws passed in Indonesia in 2002, there are huge loopholes in them, and even if accounts linked to terrorist organizations were discovered, "it would take weeks to close them" complained one U.S. official to me. On 31 January 2003 the Minister of Finance signed a decree that required non-bank financial institutions to report suspicious financial behaviour and enact anti-money laundering regulations. (91) Indonesia, like the Philippines, has lobbied the FATF to be taken off the blacklist.
Thailand implemented a very robust anti-money laundering law in 1999 and established an anti-money laundering office that year. Though created to combat domestic corruption, these tools can be used against terrorist organizations. Yet Thailand's financial sector remains weak and highly unregulated. Strong on paper, it is weak on enforcement. Thai government officials acknowledged that more than US$2 billion in illicit drug money is laundered in Thailand each year. If this much is being laundered by drug syndicates, what is there to deter other criminal groups and terrorist organizations from doing the same? And there is little that the Thai government seems to be doing about this. There is now a law in the works that will make it illegal for individuals to bring in and take out more than US$10,000 in cash. (92)
Another country that is a real concern is Cambodia, which has neither laws nor enforcement capacity. A most unlikely channel of Al Qaeda funding was through the Om Al Qura Foundation in Phnom Penh. The Foundation, which has offices in Bosnia, Somalia and Southern Thailand, was ostensibly established to support Cambodia's small Muslim population, which had been decimated under the Khmer Rouge. There has been a steady inflow of Gulf money into charitable and religious projects in Cambodia as well as scholarships for the sizeable outflow of students to madrasas in the Middle East, Pakistan and Malaysia. (93)
According to Cambodian Ministry of Education documents, the Foundation funded and ran a school with approximately 580 students in Kendal province. Al Qaeda used the Om Al Qura foundation for "significant money transfers", believed to be several million dollars, for itself and for Jemaah Islamiya. On 28 May 2003, three foreign employees of the foundation were arrested for plotting to carry out terrorist attacks in Cambodia. (94) The operation, which was conducted with a tip from, and support of, U.S. intelligence officials, led to the deportation of 28 teachers and 22 dependents from the Al Mukara Islamic School. (95)
In addition to their role in money laundering, Cambodia officials said that the four Muslims arrested in Phnom Penh in May had US$50,000 from Al Qaeda to carry out an attack in the region. Moreover, Cambodia, emerged in the latter half of the 1990s as one of the most important money laundering centers for the Southeast Asian drug trade.
In addition to the problem of having a weak regulatory framework and enforcement capability, is a lack of political will. Several U.S. officials complained to me that the problem is that Southeast Asian governments have not taken the initiative to designate firms suspected of supporting terrorists. Any action only comes with the prodding of the U.S. government, which has diplomatic, political and geo-strategic complaints, not to mention a host of bureaucratic infighting and competing interests. What U.S. officials hope is that Southeast Asian governments will begin to take the lead in identifying and freezing the assets themselves. To that end, the United States is currently providing assistance for the training of financial investigators. This will have an effect in the long term, but in the short term America will maintain the initiative as there is almost no capacity in Southeast Asia. The problem with this of course is that the U.S. knowledge about terrorism in Southeast Asia is quite limited, though it has improved dramatically since September 11.
Although the war on terror has continued apace in Southeast Asia since the September 11 attacks on the United States, little has been done to disrupt the terrorist financial networks in Southeast Asia. Weak domestic legislation, resource-strapped financial investigative agencies, poor enforcement capacity, and a lack of political will have hampered this important front in the war on terror. To that end, Southeast Asia likely remains an important financial hub for the Al Qaeda organization and governments must be more proactive in their investigations and oversight.
First, all charities linked to Al Qaeda operations must be shut down immediately, regardless of diplomatic manoeuvering. Governments in the region must create a clearing house for all charities--both foreign and domestic--and introduce vigorous accounting requirements for them.
Second, corporate investigators must do a better job of tracking companies linked to Al Qaeda-Jemaah Islamiyah members and supporters. There need to be better relations between investigators and the private sector and "know your clients" provisions must be implemented.
Third, governments will have to improve the sharing of intelligence on individuals and funding mechanisms, as Al Qaeda has effectively learned to conceal its business and financial operations by working across multiple jurisdictions.
Disrupting the terrorist infrastructure and eliminating the space terrorists need to plan, train, and execute attacks must be given as much attention as the arrests of individual cell members. This will not be easy, as they have diversified these sources and taken advantage of legal loopholes and lax government oversight and enforcement. (96)
International Convention for the Suppression of the Financing of Terrorism (1999) State Signed Ratified Brunei -- 4 December 2002 Cambodia 11 November 2001 -- Indonesia 24 September 2001 -- Laos -- -- Malaysia -- -- Myanmar 12 November 2001 -- Philippines 16 November 2001 -- Singapore 18 December 2001 30 December 2002 Thailand 18 December 2001 -- Vietnam -- 25 September 2002
(1.) Jane MacCartney and Simon Cameron-Moore, "U.S. to Freeze 'Terror' Funds in SE Asia--Sources", Reuters, 13 March 2003. Agence France-Presse, "FBI Watching al-Qaeda Funds in Southeast Asia", Financial Times, 31 March 2003.
(2.) Terrorist Financing: Report of an Independent Task Force Sponsored by the Council on Foreign Relations (New York: The Council on Foreign Relations, October 2002), p. 7.
(3.) Mathew Levitt, "Stemming the Flow of Terrorist Financing: Practical and Conceptual Challenges", The Fletcher Forum of World Affairs (Winter/Spring 2003).
(4.) Although there are long-standing and close ties between the JI and the More Islamic Liberation Front (MILF) of the southern Philippines, this study does not specifically address the MILF's sources of funding. In addition to similar ways that the JI funds itself, the MILF also is able to exploit natural resources, sell timber concessions, mine coal, grow marijuana, and tax the peasantry.
(5.) Simon Elegant and Jason Tedjaskmana, "The Jihadis' Tale", Time Asia, 27 January 2002.
(6.) Derwin Pereira, "Is There an Al-Qaeda Connection in Indonesia?" Straits Times, 20 January 2002.
(7.) Ratnesar, "Confessions of an Al Qaeda Terrorist"; BIN, "Interrogation Report of Omar al-Faruq".
(8.) "Police: Man Sent Money to Bali Suspect", Associated Press, 10 December 2002.
(9.) Tonette Orejas, "Cops Nab Jordanian; Al Qaeda Links Eyed", Philippine Daily Inquirer, 28 December 2001; Interview with a Major in the Intelligence Service, Armed Forces of the Philippines (IS-AFP), Camp Aguinaldo, Quezon City, 24 January 2001.
(10.) Canadian Security and Intelligence Service, "Interrogation Report of Mohammed Mansour Jabarah".
(11.) Interview with a BIN official, Jakarta, 21 January 2003.
(12.) Interview with a Major of the IS-AFP, Camp Aguinaldo, Quezon City, 24 January 2001; Interview with a Colonel in Philippines National Police (PNP) Intelligence, Manila, 27 June 2002.
(13.) During the war against the Soviets, the Saudis established three charities, the Islamic International Relief Organization (IIRO), Al Haramain Foundation and the Islamic Relief Agency. Al Qaeda has established many more since then. Mark Hubard, "Bankrolling Bin Laden", Financial Times, 28 November 2001.
(14.) Terrorist Financing, p. 7.
(15.) Jeff Gerth and Judith Miller, "Threats and Responses: The Money Trail", New York Times, 28 November 2002; Brian Bennett, "Wahhabism: Money Trail", Time Asia, 10 March 2003.
(16.) Edward Alden, "The Money Trail: How a Crackdown on Suspect Charities is Failing to Stem the Flow of Funds to Al Qaeda", Financial Times, 18 October 2002.
(17.) Terrorist Financing, p. 8.
(18.) "The Iceberg Beneath the Charity", Economist, 15 March 2003.
(19.) Gerth and Miller, "Threats and Responses", p. A1.
(20.) MERC facilitated the 1998 bombings of the US embassies in Kenya and Tanzania. See Mathew Levitt, "The Political Economy of Middle East Terrorism," Middle East Review of International Affairs 6, no. 4 (December 2002): 56.
(21.) Matthew Levitt, "Combating Terrorist Financing, Despite the Saudis", Washington Institute for Near East Policy, Policy Watch 673, 1 November 2002.
(22.) See Levitt, "Combating Terrorist Financing, Despite the Saudis".
(23.) Brian Bennett, "Wahhabism: Money Trail".
(24.) The second of Khalifa's four wives is bin Laden's older sister.
(25.) Mathew Levitt, "Saudi Financial Counter-Terrorism Measures (Part II): Smokescreen or Substance", Washington Institute for Near East Policy, Policy Watch 687, 10 December 2002. Levitt, "The Political Economy of Middle East Terrorism", 51; Gerth and Miller, "Threats and Responses".
(26.) The IIRO was established in 1978 in Saudi Arabia as a non-governmental humanitarian organization. It has more than 30 offices, and its activities cover more than 75 countries in different parts of the world. It was used extensively by Saudi Arabian intelligence services to channel Saudi, American and Gulf-state funding to the Afghan Mujiheddin from 1979--89.
(27.) Dr Adnan Khalil Basha, "Largest Islamic Relief Organization Maligned", Letter to the Editor, Philippine Daily Inquirer (PDI), 22 August 2000.
(28.) PNP, After Intelligence Operations Report.
(29.) Mark Lander, "U.S. Advisors May Aid Philippine Anti-Terror Effort", New York Times, 11 October 2001, B4.
(30.) Quoted in Christine Herrera, "Bin Laden Funds Abu Sayyaf Through Muslim Relief Group", Philippine Daily Inquirer, 9 August 2000.
(33.) "Full Text of Palace Letter to the New York Times," Philippine Daily Inquirer, 12 October 2001.
(34.) Interview with a Major in the IS-AFP, Camp Aguinaldao, Quezon City, 24 January 2002.
(35.) Interview with a Colonel in the PNP-IS, Malate, 25 June 2002.
(36.) Mathew Levitt, "The Political Economy of Middle East Terrorism", p. 59.
(37.) "Terror Suspects Used Donations to Fund Bombings, Train Islamic Extremists," Associated Press, 1 January 2003.
(38.) Interview with Dr H. Asep R. Jayanegara, Secretary, Komite Penanggulangan Krisis, Dewan Dakwah Islam Indonesia, Jakarta, 8 January 2003.
(39.) Ratnesar, "Confessions of an Al Qaida Tarrorist" ; BIN Interrogation Report of Omar al-Faruq.
(40.) Dwikarna asserted that he was framed. "I Don't Have a History of Violence", interview with Agus Dwikarna, Tempo, 6 January 2003, 38--41; "Suspected Terrorists Arrested at NAIA', Philippine Daily inquirer, 15 March 2002; "Jakarta Asks Manila to Clarify Arrests", Philippine Daily Inquirer, 17 March 2002.
(41.) Interview with Dr H. Asep R. Jayanegara.
(43.) Dwikarna was also the head of the Dewan Dakwa Islam Indonesia, South Sulawesi branch. Dewan Dakwah founded KOMPAK (the Committee to Alleviate the Impact of Crisis). KOMPAK had very close ties with the Saudi Charity Medical Emergency Rescue Committee (MERC). Omar al-Faruq admitted to sending large amounts of aid through KOMPAK to Ambon and Poso. The funding of such video production was seen also in Bosnia. The charity Benevolence International Foundation (whose office in Chicago was raided in December 2001 by U.S. government authorities), also funded the production of similar propaganda videos. In March 2002, its Bosnian office was investigated for missing funds.
(44.) Although the IIRO's office was shut down in the Philippines in 2000, they were still engaged in charitable work in Southeast Asia. IIRO has been linked to terrorism in other regions as well. According to Mathew Levitt, "In 1999 an IIRO employee in Canada was linked to the Egyptian Islamic Jihad. More recently, Official Palastinian documents seized by Israeli forces in April 2002 established that the IIRO donated at least $280,000 to Palastinian charities and organizations that U.S. authorities have linked to Haines". Levitt, "Stemming the Flow of Terrorist Funding".
(45.) BIN, "interrogation Report of Omar al-Faruq". The office was in Makassar, Sulawesi.
(46.) Al-Faruq organized training for the Leaker Jundullah at WAFA facilities and then at the Hidyatullah Islamic school, both in Balikpapan, Kalimantan.
(47.) BIN, "Interrogation Report of Omar al-Faruq".
(48.) Al-Moudi was the first person al-Faruq contacted after September 11. BIN, Interrogation Report of Omar al-Faruq.
(49.) PNP, After Intelligence Operations Report.
(50.) "The Trail to Kuala Lumpur", Straits Times, 29 January 2002.
(51.) Canadian Security and Intelligence Service, "Interrogation Report of Mohammed Mansour Jabarah".
(52.) Malaysiakini, "Ex-Army Officer Detained Under the ISA", 25 February 2003; Malaysiakini, "ISA Arrest of Ex-Colonel Must be in Good Faith--Sukham", 27 February 2003; also <http://abimjohor.org.my/kbi.htm>.
(53.) The firm was capitalized with RM$300,000. The shares were distributed as follows: Abdul Manaf Kasmuri, 83,999 shares (24%); Falz bin Abu Baker Bafana, 83,999 (28%) shares; Zulkifli Marzuki, 72,000 shares (28%); and Shaharudin Othman, 60,000 shares (20%).
(54.)Kavi Chongkittavorn, "Al Qaeda in Thailand: Fact or Fiction?" The Nation, 13 January 2003.
(55.) Ministry of Home Affairs, White Paper: The Jemaah Islamiyah Arrests and the Treat of Terrorism (Singapore, 2003), p. 6.
(56.) Wong Chun Wai and Lourdes Charles, "Terror Suspect Awarded Pipe Project", Star, 1 January 2003.
(57.) Patrick Sennyah, Ainon Mohd and Hayati Hayatudin, "KMM's Opposition Link", New Straits Times, 12 October 2001.
(58.) "Cheap and Trusted," Economist, 24 November 2001, p. 71.
(59.) Michelle Cottle, "Eastern Union: Hawala v. the War on Terrorism," New Republic, 24 October 2001, 24-8, see p. 27 in particular.
(60.) The World Bank and the International Monetary Fund, "Informal Funds Transfer Systems: An Analysis of the Hawala System", 18 December 2002.
(61.) Luz Baguioro, "Overseas Filipinos Feel Pinch of Global Slump", Straits Times, 14 December 2001. Also see "An Anthropology of Happiness", Economist, 22 December 2001, pp. 42-3.
(62.) "Filipinos Send Less Money Home Due to Global Insecurity," Straits Times, 1 November 2001.
(63.) PNP, After Intelligence Operations Report.
(64.) Cottle, "Eastern Union: Hawala v. the War on Terrorism", p. 27.
(65.) "Cheap and Trusted", Economist, 24 November 2001, p. 71.
(66.) Ministry of Home Affairs, White Paper: The Jemaah lslamiyah Arrests and the Treat of Terrorism.
(67.) Cited in Macartney and Cameron-Moore, "U.S. to Freeze 'Terror' Funds in SE Asia".
(68.) In a letter dated 16 August 1999, Singapore cell leader Ibrahim Maidin wrote to Taliban leader Mullah Omar in which the JI pledged its support for the Taliban and offered a S$1,000 donation.
(69.) Straits Times, 20 September 2001; Ministry of Home Affairs, White Paper: The Jemaah Islamiyah Arrests and the Treat of Terrorism.
(70.) Martin Daly, "Bashir's Secret Trips to Victoria", Age, 2 November 2002.
(71.) By June 2001, "total Islamic banking assets stood at RM51.97 billion, or 7.3 percent of overall banking assets". Between 1994 to 2000, Islamic banking assets increased by 64 percent. For more, see Baidura .Abroad, "Strong Growth Seen for Islamic Banking and Takaful", New Straits Times, 2 October 2001.
(72.) Dafna Linzer, "From New York to Kabul and Back: Star Witness at the Embassy Bombing Trial Revealed bin Laden's World", AP, in International Herald Tribune, 1 October 2001; John Williams, "Trail of Terrorist Dollars That Spans the World", Financial Times, 29 November 2001.
(73.) Terrorist Financing: Report of an Independent Task Force Sponsored by the Council on Foreign Relations, p. 10.
(74.) The cheques were "issued" by West American Bank. The name on six of the checks was Baharuddin Masse. whom he asserts is a business associate in Indonesia. Three of the cheques were left blank. Shishani originally came to the United States in 1979 and was naturalized a decade later. He had once filed for bankruptcy and had no visible means of financial support, other than his wife's salary. Robert E. Pierre and Douglas Farah, "Michigan Man Indicted in Case of Bogus Cashier's Checks", Washington Post, 24 July 2002.
(75.) Pierre and Farah, "Michigan Man Indicted in Case of Bogus Cashier's Checks".
(76.) Darmawan Sepriyossa and Wahu Mulyono, "Bag of Tricks", Tempo, 27 January 2003, p. 26.
(77.) "Bali Investigators Foil Fresh Plot to Blow Up Bank", Straits Times, 27 November 2002.
(78.) "Thailand a Transit Point for Terror Funds", Straits Times, 11 March 2002.
(79.) "Muslim Group Linked to Attacks in Thailand", Straits Times, 25 March 2002.
(80.) Tim McGirk, "Perpetually Perilous", Time Asia, 18 June 2001.
(81.) Carlos Conde, "Muslim Cleric Confirms bin Laden Visit to Mindanao", Philippine Daily Inquirer, November 2001.
(82.) Cited in Jose Torres Jr., Into the Mountain: Hostaged by the Abu Sayyaf (Quezon City: Claretian Publications, 2001), p. 41.
(83.) Rohan Gunaratna, "The Evolution and Tactics of the Abu Sayyaf Group", Jane's Intelligence Review, July 2001.
(84.) Cited in Simon Elegant, "Cash Flowing", Time Asia, 24 March 2003.
(85.) Juliet Javellana, Armand Nocum and Volt Conteras, "Bush Thanks RP for Passing Anti-Money Laundering Law", Philippine Daily Inquirer, 30 September 2001; Mark Landler, "The Philippines Moves Against Bank Secrecy", New York Times, 13 October 2001, C1, 2. Presidential Spokesman Rigoberto Tiglao cited in Martin P. Marfil, "Macapagal Orders: Track Down Abu Sayyaf Assets", Philippine Daily Inquirer, 1 October 2001.
(86.) Mark Landler, "The Philippines Moves Against Bank Secrecy", New York Times, 13 October 2001, C2.
(87.) See, Lira Dalangin, "FATF Slow to Remove RP from "Laundering' Watchlist: Senator", Philippine Daily Inquirer, 13 December 2001.
(88.) Tertiani Z.B. Simanjuntak and Tiarma Sibora, "Decree Readied to Freeze Terrorist Assets", Jakarta Post, 31 October 2001.
(89.) Bank Law No. 10/1998.
(90.) "No Proof Yet of Terrorist Money: Jakarta", Straits Times, 9 November 2001.
(91.) A'an Suryana, "Government to Sign New Decree on Money Laundering", Jakarta Post, 23 January 2003.
(92.) "$4b in Drug Money Laundered Annually", Straits Times, 10 November 2001.
(93.) Seth Mydans, "U.S. Fears Islamic Militancy Could Emerge in Cambodia", New York Times, 22 December 2002.
(94.) Already the threat of terrorism in the predominantly Buddhist nation was high. On the basis of Omar Al-Faruq's confession and the confession of Mohammed Mansour Jabarah, both in U.S. custody, U.S. embassies in Malaysia, Indonesia, Cambodia and Vietnam were shut down for the anniversary of the 11 September attacks. There was also concern that the ASEAN Foreign Ministers' Meeting, to be held in Phnom Penh in June 2003, would be targeted. Later a fourth individual, a Cambodian, was arrested. Ratnesar, "Confessions of an Al Qaeda Terrorist"; Raymond Bonner, "Plan to Attack Embassies in South Asia Cited for Terror Alert," NYT, 11 September 2002.
(95.) The Egyptian is Esam Mohamid Khadir Ali, and the two Thai Muslims are Haji Thiming Abdul Azi and Muhammad Jalludin Mading. The teachers hailed from Yemen, Sudan, Egypt, Nigeria, Pakistan and Thailand. See, Ker Munthit, "3 Muslim Foreigners Arrested in Cambodia," AP, 28 May 2003; Ek Madra, "Cambodia Cracks Down on Foreign Muslims," Reuters, 28 May 2003.
(96.) I would like to thank a number of individuals who have requested that their names not be published. They provided me invaluable insight and suggestions. I would also like to thank the two anonymous referees for their helpful comments and suggestions.
ZACHARY ABUZA is Associate Professor of Political Science and International Relations, Simmons College, Boston, USA.
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|Publication:||Contemporary Southeast Asia|
|Date:||Aug 1, 2003|
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