In a speech on September 24, 2001, President George W. Bush stated that "Money is thelifeblood of terrorist operations today. We're asking the world to stop payment." (1) Accordingly,during the past year the United States has mounted a wide-ranging domestic and international effortto freeze, seize, and intercept the flow of funds to terrorist groups. Since the September 11 attacks,roughly $121 million in terrorist assets has been frozen worldwide, but less than 20 percent of thistotal has been blocked in the past 11 months. (2) Fora variety of reasons that will be discussed in thisreport, traditional anti-money-laundering tools appear to be of limited use in disrupting terroristfinancing, which follows a dynamic different from that of traditional criminal organizations. Inaddition, pre-September 11 financial support for terrorism from Middle Eastern sources reportedlyhas continued. (3) Furthermore, there is an increasingconsensus that pursuit of terrorists' funds couldentail significant domestic and international political costs, e.g. infringing on civil liberties orreligious freedom, alienating large Muslim constituencies, inflicting harm on poor countries, andaggravating conflicts with Islamic states. Some observers also criticize the diversion of resourcesfrom traditional criminal investigations (such as ones focused on drug trafficking) to tracking the relatively minuscule amounts of money that find their way into terrorist cells through a host ofinformal channels. How efforts to "follow the money" should be prioritized in and integrated witha comprehensive global struggle against terrorism thus becomes an issue of considerable significancefor U.S. policymakers and for Congress. An overarching goal of U.S. counterterrorism policy since the September 11, 2001, attacks hasbeen to expose, disrupt, and incapacitate the financial networks of terrorist groups. In a speechdelivered on September 24, 2001, President George W. Bush stated: "We will direct every resourceat our command to win the war against terrorists, every avenue of diplomacy, every tool ofintelligence, every instrument of law enforcement, every financial influence. We will starve theterrorists of funding." (4) A key instrument in thiseffort was Presidential Executive Order 13224,issued on September 23, which blocked "all property and interests in property" of certain designatedterrorists and individuals and entities materially supporting them. (5) As of late November 2002, some250 individuals and groups, most of them al Qaeda-related, had been designated under the order and$36 million in terrorist-related funds in 92 separate accounts reportedly had been frozen by U.S.financial institutions. (6) The vast bulk of terrorist assets and funding sources, though, are considered to lie outside of the United States. Consequently, Washington has made considerable effort to enlist support of othernations in the campaign against terrorist financing. To some extent, international efforts havemirrored U.S. policy. For example, the United Nations Security Council (UNSCR), pursuant toUNSCR Resolution 1390 (January 16, 2002) and related preceding resolutions, maintains aconsolidated freeze list of some 300 individuals and entities linked to al Qaeda, Osama bin Laden,and the Taliban. (7) The European Union and a numberof individual states maintain their ownterrorism lists and blocking orders. As a result of these various activities, approximately $85 millionof terrorist bank funds reportedly has been frozen outside the United States in the post-September11 period. Of the total $121 million blocked worldwide, more than 75% reportedly has been linkedto the Taliban and al Qaeda and the rest to other terrorist entities. (8) The bulk of the activity hasoccurred in a few countries. Although almost 170 nations have blocking orders in force, only 4countries, including the United States, account for about two-thirds of the blocked $121 million,according to U.S. financial data. How effective the campaign to limit terrorist finance has been is a matter of controversy. U.S. officials regard the effort as a vital adjunct to the overall fight against terrorism. They claim thatasset seizures to date have constricted the funds of al Qaeda and other terrorist groups. A TreasuryDepartment fact sheet of September 2002 noted: "Our war on terror is working--both here in theUnited States and overseas. ï¿½ Al Qaeda and other terrorist organizations are suffering financiallyas a result of our actions. Potential donors are being more cautious about giving money toorganizations where they fear the money might wind up in the hands of terrorists. In addition, greaterregulatory scrutiny over financial systems around the world in the future may identify those whowould support terrorist groups or activities." (9) Others have expressed skepticism about the campaign. As a recent report by a U.N. Security Council monitoring group observes, "Al Qaeda continues to have access to considerable financialand other resources." As noted above, reports indicate that less than 20 percent of the reported $121million total in blocked terrorist assets have been frozen since mid-January 2002, which suggests thatthe campaign is yielding sharply diminishing returns. "Government officials have indicated that ithas proved extremely difficult to identify these additional funds and resources," the U.N. reportconcludes. (10) The difficulty may be attributed to various factors. Some observers claim that al Qaeda is relying increasingly on non-bank mechanisms to move and store funds, such as converting assetsto untraceable commodities, including gold and diamonds, or moving funds via informal valuetransfer ("hawala") systems that leave virtually no paper trail. Alternatively, al Qaeda may haveacquired greater sophistication in laundering funds. Bin Laden himself remarked to a Pakistanijournalist shortly after the September 11 attacks that his financial backers "are as aware of the cracksinside the Western financial system as they are of the lines of their hands." (11) Additionally, the evident fragmentation of terrorist finances poses significant challenges for law enforcement. Many small terrorist cells are virtually self-sustaining, deriving income from legitimatebusinesses or from assorted small criminal scams. (12) In such cases, there is not much of a money trailto follow. Moreover, terrorist operations tend to be cheap; a U.S. government report notes "therelatively modest funds needed to undertake them elude all but the most concentrated oversight." (13) Apparently the September 11 attacks, which cost an estimated $500,000, required a strategic infusionof funding from outside (much of it reportedly from a terror support network in the United ArabEmirates). (14) Yet the highly destructive 1993World Trade Center bombing, according to its"mastermind" Ramzi Yousef, cost less than $20,000. Reportedly, the conspirators were able to fundthe operation themselves from criminal activities such as check and credit card fraud, and throughdonations raised from a local charity. (15) A related concern centers on the level of international cooperation in disrupting terror financing. Some of the wellsprings of financial support for terrorism, especially sources in Middle Easterncountries, reportedly have been little affected by the post-September 11 crackdown. A report by theCouncil on Foreign Relations released in October 2002 states, "For years, individuals and charitiesbased in Saudi Arabia have been the most important sources of funds for al Qaeda, and for yearsSaudi officials have turned a blind eye to this problem." (16) U.S. officials publicly state that they arepleased with Saudi cooperation, but it is widely believed that some Saudi donors continue to financeterror. (17) A July 2002 report by the RoyalCanadian Mounted Police states that in Saudi Arabia aloneindividuals continue to donate $1 to $2 million a month to bin Laden through mosques and otherfundraising avenues that also perform legitimate charity work. (18) Saudi performance in freezingassets seems to be improving; between late October and late November 2002 the amount of fundsblocked by the kingdom reportedly increased more than tenfold, but whether this enforcement actionhas significantly curbed the flow of funds to terrorists is uncertain. Washington can continue to tryto pressure the Saudis, but for overarching strategic reasons-U.S.-Saudi military ties and worlddependence on Saudi oil-U.S. leverage in the situation or the readiness to use it is limited. Another controversial topic concerns the scope of the U.S.-led campaign. U.S. designations under Executive Order 13224 target international terrorism broadly and include numerous terroristentities that have little or no association with al Qaeda. Yet the international community has not yetadopted a unified definition of who is a terrorist and what constitutes terrorist activity. The universaladage, "One man's terrorist is another man's freedom fighter," has particular relevance here. Forinstance, the Convention on Terrorism of the Organization of the Islamic States says that "peoples'struggles aimed at liberation and self-determination shall not be considered a terrorist crime." (19) HAMAS and Hezbollah are excluded under this definition. Moreover, the European Union has notincluded Hezbollah on its freeze list but only designated the military wing of HAMAS (HAMAS Izzal Din al Qassem) for sanctions purposes. (20) TheU.N. list is limited to entities linked to al Qaedaand the Taliban. In the view of some, differences with European and Middle Eastern states overdesignations of terrorists could detract from the international fight against al Qaeda. Most controversial of all, perhaps, have been the U.S. freezing orders against Islamic charities and other nongovernmental organizations (NGOs). Certain charities allegedly serving as conduitsfor terrorist funds also support legitimate humanitarian causes. One targeted organization--the HolyLand Foundation for Relief and Development (HLFRD)--disbursed approximately $6 million in2000, mostly to Palestinian refugee families in Jordan, Lebanon, and Israel, according to its annualreport. (21) (HLFRD is the largest Islamic charityin the United States.) The government claims theHLFRD funds flow to the civilian "Dawa" infrastructure of HAMAS, which manages broad-basedcharitable activities for needy families, but also provides support for families of suicide bombers,some with HAMAS connections. (Also, other international donors may support the same causes. One allegedly HAMAS-controlled entity that the HLFRD financed--the al Razi hospital in the WestBank--also reportedly received assistance from the U.S. Agency for International Development aswell as the UAE's Red Crescent Society. (22) ) Furthermore, the government's policy, has beendescribed as having created the impression that America is intolerant of a religious minority. Givingalms to the less fortunate is a central tenet of Islam and charities are seen as performing an importantrole in this respect. As the director of the Muslim Affairs Council notes, "The administration policyhas interfered with a basic pillar or tenet of Islam: zakat or almsgiving ï¿½ In this respect therestriction on Muslim charities is an issue of religious freedom." (23) The above discussion raises a number of significant questions with respect to U.S. counterterrorism policy and efforts to combat terrorist finance. First, based on the evidence, whatconclusions are to be drawn about current patterns and objectives of terrorist financing? Second,have freezing orders and related measures significantly impacted al Qaeda's ability to raise,accumulate, and transfer funds? Third, does the current U.S. approach carry higher costs thanrewards, and are other aspects of policy--such as dismantling terror networks and tracing andundermining their leadership--likely to yield better results? Fourth, can the fight against terrorfinance be made more effective, less disruptive, and more compatible with the policies of foreignnations? These questions will be addressed in the discussion that follows. Terrorists and criminals generate and manipulate money for different ends and in somewhat different ways. Viewed in the simplest terms, terrorists' regional or global financial networks aredesigned to serve predominantly non-financial goals--for example, seeking political influence orlegitimacy, or disseminating an ideology. Criminals, by contrast, are concerned primarily withamassing vast quantities of wealth and with concealing the fruits of their crimes. The distinctionshould not be overdrawn, because both terrorists and criminals engage in activity that could be called"political"--such as bankrolling political campaigns, issuing communications through the media,and sponsoring social projects in poor neighborhoods. Criminals occasionally turn to terrortactics--the Medellin cartel's bombing campaign in Colombian cities at the end of the 1980s is acase in point--and like terrorists, they have at times sought to negotiate amnesty arrangements withgovernments. Yet what criminals seek ultimately is protection in the broadest sense--a favorableand secure environment for the conduct of illicit enterprises. Terrorists' agendas usually are broadlygauged, aiming at liberation or self-determination of a group, redistribution of material power andwealth, or (in the case of bin Laden) fulfilling a radical religious vision. (24) Admittedly, the motivesof terrorists and criminals are sometimes intertwined; some criminals may harbor exalted politicalambitions and some terrorists may behave functionally as bandits. In addition, terrorists tend to finance their operations differently than criminals. Terrorists are known to engage in criminal activity such as robbery, fraud, drug running, and counterfeiting,especially at the individual cell level; yet unlike criminals they rely on contributions for a significantportion of their overall funding. "...the most important source of al Qaeda's money is its continuingfundraising efforts," notes the above-mentioned Council on Foreign Relations report. (25) Diversionof funds from charities and other NGOs plays an important role in this process, although somedonors convey funds to al Qaeda directly. Donors to charities may or may not be aware that someof their money will go to support al Qaeda operations or those of other terrorist groups. Terroristsare said to practice "reverse" money laundering: While criminals seek to obscure the origin ofillicitly-generated cash, terrorists harness ostensibly clean funds for violent and illicit purposes. Additionally, some terrorist organizations rely on sympathetic states for infusions of money, weapons, and training. Examples in the Middle East include the Lebanese Hezbollah and Palestiniannationalist organizations such as HAMAS, although such groups also maintain their own fundraisingmechanisms. (26) Iran currently appears to be theprincipal external sponsor of these entities. Bycontrast, profit-motivated criminals do not ordinarily receive government sponsorship or recognition,although governments might unofficially tolerate their activities (perhaps seeing no reasonablealternative). (27) Terrorist and criminal financing have features in common. Both have employed a range of bank and non-bank transactions to store and transfer funds. Yet in the post-September 11 climate,terrorists may feel especially pressured to move their organizations outside the formal financialsystem. Certainly the freezing of $121 million in terrorist funds, including more than $50 millionin al Qaeda-related accounts, represents a disincentive to using banks. It is possible that trade inhigh-value commodities such as gold and diamonds and reliance on underground banking systems(to be discussed in more detail below) will play a dominant role in terror finance for the foreseeablefuture. General Principles. Al Qaeda financing can be divided into two basic categories: One is more or less centrally-directed funding which supportssystem maintenance activities (recruitment of adherents, training and logistics, proselytizing and thelike) as well as coordination of significant terror activities. These derive mainly from businesscommitments and contributions from Arab supporters, though trade in drugs and commodities mayprovide an additional funding stream. A second category relates to the decentralized day-to-dayoperations of individual cells. Many of these are self-supporting from petty crime or various oddjobs and minor businesses. (28) Al Qaeda's total annual budget is a mystery. The U.N. Monitoring Group report referred to earlier estimates that wealthy individual donors contribute up to $16 million annually. The totalcentrally managed portion is said to be under $50 million a year, but little known evidence exists toback up these figures. (29) Key Sources. Osama bin Laden, son of a Saudi construction magnate, allegedly inherited a fortune that different estimates put at from $25 to $30million to $250 to $300 million. The money reportedly has been distributed in investments and bankaccounts in countries around the globe. The U.N. Monitoring Group report similarly places the sizeof bin Laden's business portfolio at $30 million to $300 million, with income from the portfoliohelping to finance al Qaeda. (30) Among bin Laden's first business ventures was the establishment of a network of companies in the Sudan, among them a trading firm, a construction company, an agricultural production andexport company, and a furniture-making concern. According to the U.S. State Department, binLaden also invested $50 million in shares of a Sudanese bank, the al Shamal Islamic bank. Accountsdiffer regarding the profitability of these ventures. In any case, bin Laden was expelled from theSudan in 1996, under pressure from the United States and Egypt, and was forced to sell his businessinterests there. According to the U.N. Monitoring Report, bin Laden's current portfolio includesinvestments in Mauritius, Singapore, Malaysia, the Philippines, and Panama, as well as bankaccounts in Hong Kong, London, Dubai (UAE), Malaysia, and Vienna and "hundreds of millionsof dollars" secured in real estate in Europe and elsewhere. Such assets reportedly are held in thename of intermediaries and no further details are available. (31) Direct contributions from wealthy Arab benefactors and funds siphoned from Islamic charities are said to represent the mainstay of al Qaeda's global financial network. As noted, contributors mayor may not be aware that their money will be directed to al Qaeda's violent ends. "Knowing" donorsmay sympathize with terrorists' causes, but other motivations also may play a role. (32) For instance,it is widely reported that Arab businessmen paid al Qaeda operatives extortion money to forestallattacks on their business interests throughout the Middle East. Similarly, an al Qaeda-connectedgroup in the Philippines--Abu Sayyaf--is known to extort "revolutionary taxes" from localresidents, businessmen, and white collar workers. (33) The protection theme is a subject of a recent $1 trillion lawsuit brought by the families of the victims of the September 11 attacks against "financial sponsors of terror" in Saudi Arabia andelsewhere. (34) The plaintiffs allege, for example,that following the Khobar Towers bombing inDharan in June 1996 (which killed 19 U.S. military personnel and wounded 515 persons, U.S. andSaudi) that a group of prominent Saudis met in Paris where they "conspired" to pay off al Qaeda andbin Laden. The payments were "to ensure that al Qaeda would never attack inside the borders of theSaudi kingdom again." The plaintiffs also assert that a member of the Saudi royal family brokeredan agreement in Kandahar, Afghanistan, in 1998 to "provide aid and generous financial assistance"to the Taliban in return for guarantees that bin Laden and his followers would not attack the Saudigovernment. The veracity of these allegations, however, has yet to be established (the suit iscurrently before the U.S. District Court). (35) Also, various Islamic charities and related nonprofit organizations allegedly are used by the bin Laden network to finance and recruit terrorists. The United States has designated 12 terror-linkedcharities, including 3 U.S.-based ones, under Executive Order 13224; some of them also are namedin the U.N. Security Council 1390 list. (36) Mediaaccounts, congressional testimony by experts, andother sources have named other charities in addition to the ones already listed. According to oneexpert on terror finance, at least 20 NGOs have been infiltrated and coopted by bin Laden and hisfollowers. (37) Reports suggest varying patterns of involvement. Some entire charities allegedly are tainted. They do "a small amount of humanitarian work and raise a lot of money for equipment andweapons," in the words of one U.S. official. (38) TheU.S.-based Benevolence International Foundation,the leader of which was recently indicted by a U.S. court, allegedly provided organizational coverfor al Qaeda operatives and funneled money to al Qaeda-influenced relief organizations abroad. (39) Perhaps a more typical pattern is for al Qaeda to infiltrate local branches of apparently legitimateinternational charities. For example, the Peshawar (Pakistan) office of the Kuwait-based Revival ofIslamic Heritage Society allegedly "padded the number of orphans it claimed to care for by providingnames of orphans that did not exist or who had died. Funds sent for the purpose of caring fornon-existent or dead orphans was instead diverted to al Qaeda terrorists." (40) A Philippine branchoffice of a large Saudi charity, the International Islamic Relief Organization, allegedly suppliedfunding and weapons for two al Qaeda-linked groups: Abu Sayyaf and the Moro Liberation Front.Similarly, the United States and Saudi Arabia have jointly designated and frozen the assets of theSaudi and Bosnian offices of a multinational charity, al Haramain, for alleged links to al Qaeda.Some observers believe that the headquarters of al Haramain in Riyadh also has to some degreesupported al Qaeda, but the United States so far has not chosen to make that case. Other possible sources of strategic funding for the al Qaeda network can be cited. One terror financial expert says that "The al Qaeda network received millions of dollars per annum through theproduction and distribution of opium, which was smuggled through neighboring Central Asian statesor transported to distributor networks in East Africa. (41) However, some disagreement exists on thispoint. persuasive evidence exists that the Taliban benefitted from the trade; a U.N. Committee ofExperts Report estimated that the Taliban received between $15 million and $27 million per yearfrom taxes on opium production in the late 1990s, before banning such production in 2000. (42) Someexperts believe, however, that al Qaeda itself benefitted little from the traffic, which is said to behighly organized and resistant to penetration by outsiders. (43) Drugs may play a role in al Qaeda'sfinancing (as they do for many terrorist organizations) but their overall importance is uncertain. Trading in precious stones also appears to have played a role in al Qaeda's financing. For instance, the Washington Post , citing Western intelligence officials and other informed sources,claims that bin Laden's network "reaped millions of dollars in the past three years from the illicitsale of diamonds moved by rebels in Sierra Leone." (44) According to the Post , a top bin Laden advisornamed Abdullah Ahmed Abdullah, also one of the FBI's most wanted terrorists, initiated contactswith a diamond dealer representing Sierra Leone's Revolutionary United Front (RUF) in Liberia inSeptember 1998. Negotiations reportedly resulted in an agreement to buy uncut diamonds from theRUF on a regular basis; and Al Qaeda commissioned professional diamond traders to transport thestones to Europe and other destinations, where they were sold for sizable profits. (45) Another revenuesource appears to have been tanzanite, a valuable purple-brown crystal (it turns blue when heated)that is found only in northeastern Tanzania. In this cell, a key player appears to have been Wadial-Hage, reputedly a professional gem trader and former personal secretary of Osama bin Laden.(Al-Hage is now serving a life sentence for his role in the 1998 embassy bombings in Africa.)According to the Wall Street Journal , two al Qaeda companies--Tanzanite King and BlackGiant--exported quantities of uncut stones from Kenya to Hong Kong. How much al Qaeda earnedfrom these operations and whether the network is still in the tanzanite business are not known withcertainty. (46) Funds destined for the overall purposes of al Qaeda (recruitment, training, proselytizing, and the like) can be distinguished, at least conceptually, from funds generated by al Qaeda's largelycompartmentalized cells for their own financial support. Such cells, which reportedly exist in at least40 countries, engage in both legitimate small business activities and criminal ones. For instance,according to FBI documents, a Madrid al Qaeda cell ran a home repair company that providedmasonry, plastering, and electrical services, as well as an enterprise that restored and resolddilapidated vehicles. The cell's activities also included a criminal repertoire--credit card anddocument fraud, as well as street crimes such as home burglary and car theft. A Singapore-Malaysiaal Qaeda cell sold medical supplies and computer software but also engaged in bank robberies,violent assaults, and kidnappings. A few cells appear to generate significant revenues--beyond those needed for self-maintenance. These funds may revert to the organization as a whole. An Algerian al Qaeda cell detected in Britainin 1997 reportedly raised some $200,000 in 6 months. Yet the money was transferred out of Britainto banks in the Middle East and Pakistan and the cell members hardly lived in luxury. In al Qaeda'smost expensive operation, the September 11 attacks, hijackers reportedly transferred more than$25,000 in unspent funds back to unnamed terror financiers in the UAR. (47) Moving and Storing Value. Al Qaeda, like most illegal organizations, has relied on both conventional and unconventional means of moving andstoring funds. Prior to September 11, it appears, al Qaeda relied extensively on commercial banks,shell banks, front companies, NGOs, money exchange firms, and various financial service businessesto move funds for their global operations. The FBI has tracked $90,000 in wire transfers from theUAE to New York and Florida bank accounts of the September 11 hijackers. (48) Al Barakaat, afinancial and telecommunications conglomerate with offices in at least 40 countries around theworld, reportedly was channeling several million dollars a year to and from al Qaeda until thecompany's funds were frozen by the United States and the international community. (49) This pre-September 11 financial network has largely been disrupted, probably compelling al Qaeda to depend increasingly on an informal or alternative way of manipulating and transferringfunds. Several characteristic methods have come to light since the September 11 attacks andapparently predated them. One of those methods is the conversion of assets to commodities: The Washington Post reports that "al Qaeda operatives long before September 11 began shifting money out of bank accounts thatcould be traced and into untraceable gold and precious stones such as diamonds, tanzanite, andsapphires." (50) An article in the LondonObserver claims that al Qaeda struck deals in Africa fordiamonds worth more than $20 million in the months before the attacks. (51) Diamonds, it should be noted, are a particularly attractive commodity for smuggling operatives. "They don't set off alarms at airports, they can't be sniffed by dogs, they are easy to hide, and arehighly convertible to cash," notes a U.S. official. (52) Also, diamonds have a high value-to-weight ratio:a pound of average quality rough diamonds is valued at approximately $225,000. A pound of $100bills is worth in the neighborhood of $45,000, and a pound of gold, at $300 per ounce, is worth$4,800. (53) Reports also have surfaced of large gold shipments, allegedly controlled by al Qaeda and the Taliban, between Palestine and Sudan, apparently transiting Iran and the UAE. The Washington Post,citing European, Palestinian, and U.S. investigators, says that boxes of gold, usually disguised asother products, were taken from Nairobi to either Iran or Dubai and from there mixed with othergoods and flown by chartered airplanes to Khartoum. The Post refers to different reports that thegold represented stored profits from opium and heroin trafficking or remnants of Osama bin Laden'spersonal fortune liberated in the early 1990s. (54) A second alternative way of transmitting value between locations is through underground banking networks. Viewed in the most basic terms, underground banking, called by different termssuch as hawala, hundi, or black market peso exchange, is a way of sending money cheaply andanonymously across borders without physical transport or electronic transfer of funds. Thetransaction is essentially paperless. It works as follows. Money brokers (hawaladars) in one countryreceive cash from a client with no questions asked. For example, the client might be a cab driver inNew York who wants to send $5,000 to his brother in Karachi. The hawaladar alerts a correspondentbroker in Karachi by telephone, fax, or e-mail, who dispenses $5,000 (less fees and commissions)to the brother. Neither the sender nor the recipient needs to identify themselves; the latter only needsto provide a prearranged code, such as a sequence of numbers and letters, to complete thetransaction. At some other point, clients in another country may send an equivalent amount back tothe United States in the same fashion. Over time, the transactions are netted out and no currencyactually crosses national borders. (55) Thesenetworks can be used by terrorists although they wereoriginally conceived, and continue to serve, as financial exchange meechanisms largely involvingimmigrant workers. Similar principles underlie a money laundering system called the black market peso exchange (BMPE), used predominantly by Colombian drug dealers to reintegrate drug profit into their homeeconomies. In a typical BMPE transaction, a Colombian cocaine exporter sells cocaine in the UnitedStates for dollars and then sells the dollars to a Colombian black market peso broker's agent in theUnited States. The broker then deposits the agreed-on equivalent of Colombian pesos (minuscommissions) into the exporter's bank account in Colombia. In this fashion, no currency crosses theU.S. and Colombian borders. The broker may then resell the dollars to a Colombian importer whouses them to purchase U.S. goods that then are shipped or smuggled back into Colombia. (56) Tens of billions of dollars a year are said to move through such informal value transfer systems. Officials in Pakistan, for example, estimate that at least $7 billion enters that country through hawalachannels each year, substantially more than enters through banks. The black market peso exchangeis documented as the "largest known money laundering system in the Westernhemisphere"--representing up to $5 billion annually to Colombia. U.S. officials admit to havingvery little luck tracking movements of funds through these informal systems, which may explain whyefforts to break the terrorist financial chain have been decreasingly productive of late. (57) Yet another technique for laundering money used by terrorists is trade-based fraud, especially fictitious invoicing of exports or imports. Some hawaladars may balance their accounts this way. Inthe example given above, the New York broker might repay his counterpart in Karachi by sendinghim $20,000 worth of computer peripherals, but only invoicing him for $15,000. Such schemes mayhave played a role in moving funds to terrorists, although this is speculation. For instance, U.S. tradedata in 2000 suggest that there has been price manipulation of U.S. exports of honey to Persian Gulfstates. The December 9, 2002 study showed that in that year, for U.S. exports of approximately390,000 kilograms to UAE, Yemen, Saudi Arabia, and Kuwait, importers in these countries paid anaverage of 35 percent over the U.S. per kilogram export price ($1.91), yielding excess funds of$257,000. Whether these funds were channeled to U.S.-based terrorists is not publicly known;however, two U.S. honey companies--the al-Nur Honey Press Shop and the al-Shifa Honey Pressfor Industry and Commerce--appear on the list of terrorist groups and entities designated by theUnited States. (58) The United States has pursued a comprehensive strategy for combating terrorist financing in the wake of the September 11 attacks. Reduced to its essentials, the strategy comprises twointerrelated objectives: The first is to locate, isolate, and freeze terrorist assets, both in the UnitedStates and globally. As already noted, the United States and the international community havefrozen $121 million in terrorist-related accounts since the attacks. A second is to disrupt terrorists'financial infrastructures--specifically, their formal and underground methods for transferring fundsacross borders and between cells, "whether through banks, businesses, hawalas, subverted charities,and innumerable other means." (59) Freeze ordersand other enforcement activities have effectivelyshut down some banks, financial companies, trading firms, and NGOs involved in manipulating andchanneling funds for al Qaeda. A critical underlying component of this strategy has been to enlistinternational cooperation in disrupting terrorists' finances. A Treasury Department report notes,"International alliances against terrorism are crucial because the overwhelming majority of terrorists'assets, cash flow, and evidence lies outside our borders." (60) Partial success has been recorded on thisfront, although problems remain, as will be discussed. Important organizational and regulatory initiatives have accompanied the implementation of strategy. New institutional arrangements and new powers granted by the president and Congress havefacilitated U.S. enforcement actions against terrorist financing. These will be summarized brieflybelow. On the organizational front, the new inter-agency task force Operation Green Quest and the Terrorist Financing Operations Section (TFOS)--headed respectively by the U.S. Customs Serviceand the Federal Bureau of Investigation--have enforcement responsibilities vis a vis terroristfinance. TFOS investigates the financial linkages and support of known terrorist cells, while GreenQuest tries to establish terrorist connections to ongoing investigations of criminal financing. Inpractice, however, the missions and activities of these entities reportedly overlap significantly. (61) Another interagency entity, the Foreign Terrorist Asset Targeting Group, now housed in the CIA'sCounterterrorism Center, analyzes and evaluates intelligence information on terrorist financial flows. Additionally, the Treasury Department has set up a Terrorist Tracking Task Force, the diplomatic arm of Treasury's enforcement effort, which works with foreign governments in blockingterrorists' access to funds. Within the State Department, a new Counterterrorism Finance Unit, underthe Office of Counterterrorism, has been established to oversee international information-sharing andtechnical assistance programs relating to terrorist finance. Also, existing anti-crime entities haveacquired new missions. For example, much of the U.S. and international architecture designed tocombat criminal money laundering--for instance, Treasury's Financial Crimes EnforcementNetwork, DEA's Financial Intelligence Unit, INL, and the 31-nation Financial Action TaskForce--focuses increasingly on specific issues and problems relating to terrorist finance. TheInternal Revenue Service's Tax Exempt and Government Entities Operating Division, whichoversees nonprofit entities, will now investigate "suspect charities of all stripes that provide financialand material support for terrorist groups." (62) Finally, an overarching entity has been establishedwithin the National Security Council, the Policy Coordination Committee on Terrorist Financing,to provide government-wide coordination of financial aspects of the counterterrorism effort. A related priority has been to strengthen the legal-regulatory basis for combating terrorist finance. An important step was the President's Executive Order 13224 of September 24, 2001, whichexpanded the U.S. government's power to freeze terrorism-related assets. The order included in theclass of targeted groups not just terrorists themselves (previous executive orders had imposedsanctions on the Taliban and on terrorists who disrupt the Middle East peace process) (63) but also onall those who provided financial or material support or who were "associated with" designatedterrorist groups. As noted, 250 persons and entities have been designated under the order, many ofthem falling into the category of financiers of terrorism. Other significant measures were mandated by Congress in Title III of the USA PATRIOT Act of October 25, 2001, entitled "The International Money Laundering Abatement and Anti-TerroristFinancing Act of 2001." The Act both cast a wider regulatory net over U.S. financial institutions andrefocused the existing anti-money-laundering regime on the problem of terror financing. The Actmandated increased record-keeping, report filing, and internal policing requirements for a wide rangeof financial institutions--including such previously unregulated sectors as hedge funds, commoditiesbrokers, and commercial loan and finance companies. It prohibited or restricted access to the U.S.financial system by certain categories of foreign banks, including offshore banks, so-called shellbanks, and banks in unregulated jurisdictions. Much of the legislation seemed particularly relevantto criminal money laundering. Several provisions, though, seemed especially designed to disruptterrorist financial networks. For example, Section 326 of the USA PATRIOT Act stipulates that the "Secretary of the Treasury shall prescribe regulations setting forth minimum standards" for verifying the identity ofcustomers, including foreign nationals, opening accounts at U.S. financial institutions. The standardswould include checking the name of the applicant against lists of known or suspected terroristsprovided to the financial institution by a U.S. government agency. Section 328 calls on the Secretary,in consultation with the Attorney General and the Secretary of State, to encourage foreigngovernments to require that all wire transfer instructions sent to the United States include the nameof the originators. Conceivably, such a provision could help authorities track terrorist donors, suchas those who financed the September 11 attacks. Section 330 concerns "International Cooperationin Investigation of Money Laundering, Financial Crime, and Financing of Terrorist Groups." Essentially, it empowers relevant U.S. agencies to conclude agreements with foreign financialsupervisors on two points: to ensure that foreign banks maintain records of terrorists' accounts andtransactions and to "establish a mechanism" whereby those records can be made available to U.S.officials. Other sections of the Act (359 and 373) extend the financial regulatory net to encompassall persons engaged in transmission of funds, including "informal money transfer systems." Underthese provisions, hawaladars or the equivalent would be required to register, obtain licenses, and filesuspicious activity reports (SARS). Finally, a provision of the Act criminalizes bulk cash smugglinginto or out of the United States. Such smuggling, defined as an undeclared movement of more than$10,000 in monetary instruments across U.S. borders, is described as "one of the most reliablewarning signs of drug trafficking, terrorism, money laundering" and similar crimes. (64) The United States also sought to internationalize various regulatory requirements vis a vis terrorist finance, and to some degree the international community consented. On September 28, theU.N. Security Council passed Resolution (UNSCR) 1373, which required member states tocriminalize terrorist financing and to deny terrorists safe harbor. UNSCR 1390 of January 10, 2002,obliged states to "freeze without delay" funds, financial assets, and other economic resources of alQaeda and Taliban related entities. A consolidated list of such entities, mandated by UNSCR 1390and by previous UNSCR resolutions (1267 and 1333), formed the basis of freezing actions. Inaddition, regional groupings such as the European Union and even individual countries establishedtheir own lists. Also, states were encouraged to focus on specific indicators of terrorist money laundering that might be distinguishable from classic money laundering. For example, the 31-member FinancialAction Task Force (FATF), the world's preeminent multilateral anti-money laundering body, hasrefocused its activities to some extent on the terrorist threat. At its October 2001 plenum inWashington, D.C., FATF adopted a special recommendation as a "basic framework" to detect andsuppress the financing of terrorist acts. The most important of the related recommendations includedfreezing and confiscation of terrorist assets, reporting of suspicious transactions related to terrorism,registration of persons or legal entities engaged in informal value transfer systems, documentationof originators of wire transfers, and strengthened oversight of NGOs that might act as conduits forterrorist funds. Similarly, the Asia-Pacific Group issued its own recommendation on AlternativeRemittance and Underground Banking Systems, calling for enhanced regulatory oversight. As partof this effort, the United States participated in a worldwide hawala conference held in the UAE,attended by 58 countries, in May 2002; this culminated in the May 16 "Abu Dhabi Declaration onHawala," expressing concern about the lack of "transparency and accountability in the hawala systemand calling on countries to increase government supervision to prevent abuse of the system bycriminal elements." (65) The U.S.-led effort to sever terrorism's financial lifelines has received mixed reviews to date. Bush administration officials claim that the effort has disrupted at least the centrally-managedportion of al Qaeda's funding, which has been linked largely to the formal banking system. "AlQaeda's stipends to followers are drying up and people are leaving al Qaeda. Donors have been sentthe message that they will be burned if they contribute," says one administration expert on moneylaundering. Nevertheless, some experts believe that the funds seized internationally since September11, 2001, represents only a small fraction of the funds and resources believed to be still available toal Qaeda and the Taliban. (66) Some reports suggestthat al Qaeda may have converted a significantportion of its assets into commodities such as gold and diamonds some months prior to the attacks.Also, some observers point out that the financial needs of al Qaeda have been reduced with thecollapse of the Taliban government and the destruction of most of their training camps inAfghanistan, leaving funds available for other activities. According to the U.N. monitoring report,these may include "a stepped-up indoctrination and recruitment program that provides support torelated fundamentalist organizations, schools, and social organizations." (67) Furthermore, key elements of the al Qaeda organization may still be in place and capable of directing terror operations--October 2002 attacks on a French oil tanker in Yemen and a destructivenightclub blast in Bali as well as the bombing of an Israeli tourist hotel in Mombasa, Kenya havebeen linked in varying degrees to al Qaeda or local affiliates. Additionally, the network's topstrategists Osama bin Laden and Ayman al-Zawahiri apparently have successfully escaped detectionby the authorities. The future direction and odds of success of the campaign against terrorist finance also are uncertain. From a purely financial standpoint, the campaign is yielding diminishing returns, with thebulk of the freezing actions having occurred in the three-month period between September 11, 2001and mid-January 2002. Operation Green Quest reportedly seized $19 million (to October 2002) insmuggled cash and other monetary instruments, of which $11 million is "Middle Eastern related,"yet Green Quest has not determined or is not prepared to acknowledge that any of these funds arelinked to terrorist groups. (68) Certain limiting factors in the campaign already appear evident. One relates to the regulatory burden imposed on U.S. financial institutions. The sheer volume of paperwork required of U.S.financial institutions to comply with anti-money laundering provisions of the Bank Secrecy Act (PL91-508 as amended) and the USA PATRIOT Act (PL 107-56) is enormous. In FY 2001, some12,600,000 currency transaction reports (CTRs), required for transactions above $10,000, and182,000 suspicious activity reports (SARs) were filed with the Treasury Department. (69) Separatingout financial activity of serious criminals, including terrorists, from the more than 12 millionstandard reports filed annually is a task of Herculean proportions. Terrorists can enter the UnitedStates, set up bank accounts, draw on them, and consummate their operations long before theirnefarious plans come to light. One of the September 11 terrorists, Mohammed Atta, had been thesubject of a SAR filed by his bank in connection with a transfer of $69,985 wired into his accountin September 2000 from the UAE. Yet this report was just one of the 153,500 SARs filed that year,and was not distinguishable from those related to other suspected financial crimes. (70) In addition, most terrorists' financial transactions, unlike those of major criminals, tend to be small--falling below the $10,000 threshold that requires notification of the U.S. authorities. Finally,the ability of financial institutions to fully implement enhanced security and due diligenceprocedures itself may be questionable. Such procedures are costly and time-consuming, and someinstitutions may lack the required resources. For such reasons, increased financial regulations andpaperwork might not represent an effective way to stop terrorist finances and the acts that result fromthem. Al Qaeda's adaptiveness in the face of increased law enforcement pressure also is cause for concern. As noted, al Qaeda transferred a portion of its exposed assets into untraceable preciouscommodities (gold, diamonds, and precious stones) even before the September 11 attacks, possiblyas early as 1998 when the United States and some European governments initiated certain freezingactions against the Taliban. Such commodities are small and easy to store and transport. Moreover,they retain their value over time and can be introduced in small quantities in the market withoutattracting attention. (71) One area of U.S. nationalmoney laundering strategy is to investigate the linksbetween precious stones and commodity trading and the funding of terrorist groups; however, thisis an extremely complex task offering uncertain payoffs at this stage. (72) Also significant is evidence that nontraditional money movement systems such as hawala play an increasing role in the terror financial chain. As the U.S. monitoring report notes, al Qaedamembers "will likely use the hawala system to circumvent the regular banking system and possibledetection via Suspicious Transaction Reports." (73) The USA PATRIOT Act, as noted, requireshawala-type businesses to register and to file SARs, but whether those engaged in illegal moneytransactions will do so is a matter of speculation. "That's like saying the corner bookie must registerwith the FBI," says one former U.S. federal prosecutor. (74) As of mid-2002, according to one report,only about 10,000 of an estimated 250,000 money service businesses in the United States hadregistered under the new regulations. (75) Also, theU.S. enforcement record against undergroundbanking systems has been extremely modest. For instance, an intensive U.S.-Colombianinvestigation of the black market peso exchange, which reportedly represents up to $5 billion dollarsannually to Colombia, resulted in seizure of only $8 million in cash as well as some quantities ofdrugs and firearms. (76) The new legal tools under the PATRIOT Act will increase risks for illegal money remitters, but some observers contend that the most likely result could be an increase in the commission theycharge their customers. Putting them out of business or even disrupting them significantly wouldrequire refined targeting of ethnic communities where they operate and extensive undercoverinvestigations; and the results, some argue, might not justify the societal costs or forestall terroristattacks. (77) Also problematic from a law enforcement perspective is al Qaeda's relatively fragmented structure, comprising numerous supporting cells spread over many different countries. Al Qaeda may have further decentralized its operations as a defensive measure since the September 11 attacks. Thepossibility exists that the network could survive in some fashion, even if central sources of fundingare reduced or cut off. U.S. counterterrorism expert Steve Emerson stated in recent Congressionaltestimony, referring to a fishing company managed by an al Qaeda cell in Kenya in 1998: "Thisindependent business structure is a particularly troubling development, because it heralds thelikelihood of terrorist cells operating independently from any foreign financial benefactor, raisingthe lion's share of their assets from otherwise legitimate, nondescript commercial entities." (78) Therelated implication is that law enforcement agencies must spread their resources across a vast numberof low value targets in the hope of discovering a terrorist connection. This may well be happeningin the United States. An August 2001 Washington Post article reported that U.S. authorities areinvestigating more than 500 mostly Muslim and Arab small businesses to determine whether theyare dispatching money raised through commercial activity to terrorist groups overseas. Such activityincluded a potpourri of petty crimes: "skimming the profits of drug sales, stealing and reselling babyformula, illegally redeeming huge quantities of grocery coupons, collecting fraudulent welfarepayments, swiping credit card numbers, and hawking unlicenced t-shirts." (79) Finally, some observers question whether the international campaign against terrorist finance has significantly weakened al Qaeda's main fundraising structure, reportedly centered in SaudiArabia and other Persian Gulf states. Many details of U.S. cooperation with Gulf states in thecampaign are not in the public domain. (For domestic political reasons, Gulf states have beenreluctant to disclose what kinds of assistance they have provided to or accepted from the UnitedStates in this sphere.) Nevertheless, there are signs that cooperation is sometimes halting andincomplete. Major donors in the Middle East still reportedly are funneling millions of dollarsannually to al Qaeda. According to some observers, large international charities based in SaudiArabia with histories of alleged links to Islamic terrorism have not been significantly affected by thefreeze campaign. The United States and Saudi Arabia have jointly designated one such entity--thegovernment-supported al Haramain Islamic Foundation--but the designation was limited to alHaramain's Bosnian and Somali branches. (80) Atthe same time, Saudi officials have publicly rejectedcriticism that the kingdom has not done enough in the global war against terrorism, saying thatdetractors were helping Osama bin Laden by driving a wedge between the United States and SaudiArabia. (81) Al Haramain seems to illustrate the limits of U.S.-Saudi cooperation in fighting terrorist finance. In August 2002, Bosnian authorities lifted a freeze on al Haramain's bank accounts that hadbeen imposed following the joint U.S.-Saudi designation in March and also renewed theFoundation's license to operate in Bosnia. Some experts believe that pressure from Saudi sourceswas behind these moves. (82) Saudi newspapersreported in September that al Haramain was expandingits operations in both Bosnia and Somalia and that it had opened a $530,000 Islamic center inSarajevo. Additionally, there are recent news reports that the Foundation's support for terrorism mayhave extended well beyond Bosnia and Somalia to encompass combat operations by rebel groupsin Chechnya as well as activities of Indonesian militants affiliated with al Qaeda. (83) Saudi intransigence and U.S. timidity in dealing with it are widely viewed in the United States as major obstacles to progress in the war against terror, despite repeated official Saudi denials. Asone U.S. analyst notes, "The U.S. has failed to present a coherent political strategy aimed atdelegitimizing the ideology of Islamic terrorism and undermining terrorists' sources of support. Andit is becoming increasingly clear that the reason for this failure is Washington's unwillingness to riska rupture with Saudi Arabia." Yet the domestic political context constrains Saudis' freedom of actionin suppressing the funding of Islamic militants, including terrorist groups. As the above-mentionedCouncil on Foreign Relations report notes, "It may well be the case that if Saudi Arabia and othernations in the region were to move quickly to share sensitive financial information with the UnitedStates, regulate or close down Islamic banks, incarcerate prominent Saudi citizens or render themto international authorities, audit Islamic charities, and investigate the hawala system--just a fewof the steps that nation would have to take--it would be putting its current system of governance atsignificant political risk. Successors to the current regime could easily be drawn from the veryelements in their societies that the United States is seeking to suppress." (84) Information presented in this report suggests that, while the current campaign against terroristfinance reportedly has diminished al Qaeda's ability to recruit and sustain allegiances, significantfunds still appear to be available to the organization. Efforts to further regulate and introducetransparency into the global financial system are welcome steps; yet they will not necessarily reduceterrorists' striking capacity because most of the proposed measures cannot with certainty separateout terrorists from other types of lawbreakers. The plethora of reporting requirements creates a sortof "needle-in-the-haystack" problem for the authorities. Al Qaeda's evident ability--documentedeven before the September 11 attacks--to exploit non-bank mechanisms of moving and storingvalue, as well as its structure of decentralized self-supporting cells represent additional constraintson law enforcement. Finally, in the view of many observers, the amount of cooperation againstterrorist financing that can be expected from Saudi Arabia and other Gulf states, where support ofPalestinian "freedom fighters" and opposition to U.S. and Isreali policies in that region has gone onfor decades, is problematic. Investigation of terrorists' finances can be a useful tool for identifying linkages among terrorist cells and possibly major donor networks. Analyses of records confiscated by Green Quest and TFOSmight contribute more to the anti-terror fight than the actual freezing of assets, which so far has beenmodest. These collateral benefits are difficult to assess because much of the relevant information remains in the classified realm. Also the Treasury Department announced in November 2002 thatit was offering a reward of up to $5 million for information "leading to the dismantlement of anysystem used to finance a terrorist organization." (85) Much larger rewards ($25 million) have beenissued also for the capture of al Qaeda leaders Osama bin Laden and his aide Ayman al-Zawahiri,but with no result. In general, the potential of these investigative tools remains to be developed.Terrorists, like criminals, can work through labyrinths of intermediaries, create false trails, andexploit Internet money transfers and new payment technologies to disguise the source and ownershipof their illicit proceeds. Overall, although U.S. financial actions against terrorism have produced significant tangible successes, whether measured in terms of immobilization of funds or of knowledge gained aboutterrorist structures, the full impact of those actions is uncertain. The Bush administration's 2002National Money Laundering Strategy promises to "apply the lessons we have learned from thefederal government's effort against money laundering to attack the scourge of terrorism." Yet suchefforts have made limited headway against money laundering operations such as the black marketpeso exchange that recycles billions of dollars in illegal proceeds, mainly from the drug trade. Terrorists' multitudinous small transactions, often camouflaged as legitimate business or socialactivities, may prove even more difficult for financial investigators to track and shut down. Furthermore, the campaign against terrorist finance has provoked controversy on various religious, public policy, and humanitarian grounds. The new antiterror standards have been portrayedas selectively anti-Islamic. Indeed, the 12 charities designated under Executive Order 12334 allappear to be associated with Islamic causes. Some observers speculate that the U.S. image abroadhas suffered as a result of the freezing of charities' funds. One U.S. Muslim spokesperson agrees,"In an ideal setting, American Muslim charities serve a national security interest by promoting apositive image of America throughout the Muslim world. Unfortunately, the view that America'sMuslims are a harassed or persecuted minority is gaining ground overseas, partly because of theblockage of the Muslim charities." (86) A related issue concerns the Bush administration's definition of the terrorist enemy, which, as noted, clearly diverges from that of European and (especially) Middle Eastern states. The broad U.S.designation of Islamic militant groups for freezing purposes is said to have deepened the sense ofambivalence and unease in the entire Arab region. According to one account, "Countries such asSaudi Arabia, Egypt, Jordan, and Syria have urged Bush to focus narrowly on blocking off binLaden's financial network rather than simultaneously targeting other terrorist groups." (87) In this view,Washington's simultaneously broad and unilateralist approach to terrorism detracts from theinternational coalition against al Qaeda, diminishing the chances that Arab governments will crackdown on its major supporters. Other possible dysfunctions of the campaign relate to the interruption of assistance flows. For instance, the crux of the government's case for closing the Holy Land Foundation was that theFoundation's projects in the West Bank and Gaza allowed HAMAS to amass popular support "bydistributing charity to people who then associated this social outreach with HAMAS." (88) Yet thebenefits of cutting funds to HAMAS-controlled entities in this case can be weighed against thepotential human costs. The Foundation's programs and services have "directly improved the livesof more than 500,000 people," (89) according to its2000 Annual Report. (The fact that otherinternational donors, according to the U.S. Agency for International Development, supported aHAMAS-built hospital funded by Holy Land underscores the dilemma associated with charitablegiving in this war-torn region.) In sum, while charities and other financial entities may move money to terrorists, U.S. efforts to shut off this flow have caused controversy. In the view of some observers, closing down entireenterprises that fill social needs in poor countries in order to keep some funds out of terrorists'hands carries excessively high political and diplomatic costs. No simple solutions may exist to thisapparent conflict. However, various "damage control" measures have been proposed to increasetransparency of charities' operations and reduce their vulnerability to freezing actions. These includerequiring charities to list their donors, to specify exactly how their funds are used, to reveal thenames of their directors, and to disclose financial links to other charitable organizations. Anotherproposal is to treat charities under existing legislation (the 1970 Bank Secrecy Act and the 2001 USAPATRIOT Act) as financial institutions subject to money laundering risk; charities would then berequired to submit Suspicious Activity Reports, establish internal audit procedures, and submit tofederal examiners like, say, banks, insurance companies, and hedge funds. (90) More regulatory oversight might afford officials the chance to indict and prosecute individuals (or branches) within charities that are disbursing funds to terrorists, while preserving the financialsituation of the organization as a whole. The United States has proposed to other countries, includingSaudi Arabia, that they set up government bodies to better monitor and control charities, so the ideaseems to be gaining currency. Saudi Arabia itself has announced plans to set up such a governmentagency. (91) To be sure, wealthy donors who wantto support al Qaeda terror bombers need not usecharities as conduits for their funds. (92) Yetincreasing regulatory scrutiny could both diminishcharities' role in terrorist finance and allow legitimate funding of projects to proceed, which are theprincipal points at issue here. Recently, the Treasury Department issued "voluntary best practices"guidelines for charities in response to requests from American Muslim communities who reportedreductions in charitable giving and apprehensions among charitable donors as a consequence of Treasury's blocking actions; whether these guidelines will provide sufficient protection to charities,though, remains to be seen. (93) A more difficult problem is reconciling the different U.S. and Middle Eastern conceptions of what constitutes terrorist activity. The more encompassing U.S. definition, which reflects U.S.policy in the Israeli-Palestinian conflict as well as widespread domestic abhorrence of violencedirected against civilians, clearly is at odds with that of much of the Islamic world. (94) The ratheregregious fund-raising campaigns in Persian Gulf states in support of families of Palestinian"martyrs," including suicide bombers, epitomizes these conflicting perceptions. A possible U.S.strategy in this situation would be to pursue the campaign against terror finance on different levels,publicly asserting opposition to terrorism in any form while privately seeking agreement with SaudiArabia and other involved states on ways to curb flows of funds to al Qaeda. Even with a limiteddiplomatic agenda, though, obtaining meaningful cooperation against terror may prove to be anuphill battle. (95)

Summary: The U.S.-led international campaign to deprive terrorists of funding has so far produced mixed results. Though more than $120 million in terrorists' accounts reportedly has been blocked sinceSeptember 11, 2001, less than 20 percent of this total has been frozen in the past 11 months. Theal Qaeda network increasingly is shifting to non-bank methods of moving and storing value and isrelying on a decentralized structure of largely self-financing cells; moreover, Middle Eastern donorsapparently continue to provide funds to al Qaeda and other terrorist groups. In addition, thecampaign has aroused controversy on various political, religious and humanitarian grounds and isviewed in some quarters as broadly anti-Islamic. How the crackdown on terror finance should beprioritized and integrated with a comprehensive global struggle against terrorism thus becomes anissue of considerable significance for U.S. policymakers and for Congress.